Sean Gibbs has over 20 years experience in advising parties using statutory adjudication in the construction and engineering industries. In this article he looks at the importance of the first enforcement case and what he would like to see changed to improve the access and benefits adjudication to a wider range of parties.

1. Macob: 20 years on
Macob Civil Engineering v Morrison Construction revisited
ON 12 February 1999 history was made when the
Honourable Mr Justice Dyson (as he was known then) made
the first judgement ever in the United Kingdom concerning
enforcement of an adjudicator’s decision arising from the
statutory adjudication process introduced by the Housing
Grants, Construction and Regeneration Act 1996. The case
will be known by many in the UK, it was Macob Civil
Engineering v Morrison Construction (1999) EWHC
Technology 254 (75 Con LR 101).
In summary, the contractor sought to resist enforcement of an
adjudicator’s decision on the basis of a breach of the rules of
natural justice, and that it was not yet a valid decision as one
party refuted its validity. The court held that an adjudicator’s
decision remained a decision notwithstanding that one party challenged its validity and
could therefore be enforced. The court provided that summary judgment would be the
normal way to enforce an adjudicator’s decision.
Unusually, the claimant Macob sought a mandatory injunction to secure payment but the
court declined and gave a declaration that it should be paid the amount awarded to it by
the adjudicator Eric Mouzer. The court further confirmed that the usual remedy for failure
to pay in accordance with an adjudicator’s decision will be to issue proceedings claiming
the sum due, followed by an application for summary judgment. Had a different decision
been reached by the judge it is very probable that adjudication may not have taken off as
the most common form of dispute resolution in the construction industry in the UK.
The success of the adjudication and payment provisions within the act led to the common
law countries of Australia, New Zealand, Singapore, Malaysia, Mauritius, Ireland and
Canada passing legislation themselves to effect similar change in their own construction
industries. Other countries without statutory adjudication but using contractual
adjudication include Hong Kong and South Africa.
Had counsel for the defendant, Mr Stephen Furst QC, succeeded in his arguments that
enforcement should not be given to a disputed decision of an adjudicator, but that it must
be referred to arbitration under the contract, the use of adjudication as a quick, temporary
means to resolve disputes and maintain cash flow would have been dashed. The
government has monitored the success of the act. Its attempts at amending it by the Local
Democracy, Economic Development and Construction Act 2009 were on the whole an
improvement. I think though that the guidance provided by the numerous court cases over
the last 20 years has been a necessary path for the industry to tread to resolve some aspects
of the poorly drafted elements of the act, scheme and contracts.
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2. Further amendments
I still think that there are further amendments needed to remove the exemptions created by
the act. Firstly, I would allow disputes about construction activities on the sea (UK
territorial waters) to be referred to adjudication. To achieve this s.105 (1) (a) would need
amending and the jurisprudence from the case of Staveley Industries v Odebrect Oil &
Gas Services (2001) (TCC) would no longer apply. The Malaysian adjudication scheme
has managed to cope with this and I cannot see why the UK wouldn’t benefit from this
change.
The Malaysian High Court even allowed an adjudicator’s decision about a floating
production storage and offloading (FPSO) vessel to stand in the case of MIR Valve Sdn
Bhd v TH Heavy Engineering Berhad & Other Cases (2017) 8 CLJ 208. The High Court
decided that works done to the ship to convert it into a floating production storage and
offloading (FPSO) vessel constituted construction work within the meaning of a
construction contract under the Construction Industry Payment and Adjudication Act.
Notwithstanding that the vessel could move around, it was no longer a ship in the sense of
transporting people or goods from one place to another because the main purpose of the
vessel was to serve the gas, oil and petrochemical industry. The court concluded that the
vessel, which was being converted for the oil and gas industry, fell neatly within the scope
of construction work, which includes any gas, oil and petrochemical work.
This turns to my second area for amendment, removing some of the exemptions under
s.105 (2), and in particular the power and process exemptions as they have become known
by many: a. Drilling for, or extraction of, oil or natural gas. b. Extraction (whether by
underground or surface working) of minerals; tunnelling or boring, or construction
of underground works, for this purpose. c. Assembly, installation or demolition of plant or
machinery, or erection or demolition of steelwork for the purposes of supporting or
providing access to plant or machinery, on a site where the primary activity is; (i) nuclear
processing, power generation, or water or effluent treatment, or (ii) the
production, transmission, processing or ulk storage (other than warehousing) of chemicals,
pharmaceuticals, oil, gas, steel or food and drink. These should have never been exempted
in the original act and Lord Justice Coulson has expressed similar views in Severfield
(UK) Ltd v Duro Felguera UK (2015) EWHC 3352 (TCC) at paragraphs 62 and 63:
“Parliament was aware of the difficulties that these exceptions would cause, but justified
them on the grounds that (i) adjudication was seen as some form of ‘punishment’ for the
construction industry from which (ii) the power generation and some other industries
should be exempt, because they had managed their affairs reasonably well in the past. I
consider that both of these underlying assumptions were, and remain, misconceived.”
My third and last amendment would be the removal of the residential occupier exemption
under s.106 (1). Given the issues that arise regularly in this type of contract, I can only see
benefits from a quick informal resolution process being applied. Even for lower value
disputes that can arise in this category, I would submit that adjudication is a better option
than the small claims court.
In conclusion the decision of the Right Honourable Lord Dyson in Macob was a
fundamentally important step in bringing statutory construction adjudication to the
international market, had a different decision been reached it might never have taken off in
the UK or been copied globally.
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3. Sean Sullivan Gibbs MICE FCIOB FRICS FCIArb FCInstCES, Director, Hanscomb
Intercontinental
sean.gibbs@hanscombintercontinental.co.uk www.hanscombintercontinental.com
Sean Sullivan Gibbs is a member of ICES South West & South Wales committee and the Contracts and
Dispute Resolution Panel.
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4. Adjudication
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