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TCC offers guidance on threshold for granting injunction to prevent adjudication proceedings22 October 2024

The recent case of Beck Interiors Ltd v Eros Limited [2024] EWHC 2084 (TCC) deals with adjudication in construction contracts and the right to apply for an Injunction to prevent adjudication proceedings.

In a recent decision, the Technology and Construction Court (“TCC”) considered an application by Beck Interiors Ltd (“Beck”) for an injunction to prevent Eros Limited (“Eros”) from issuing any notice of adjudication against Beck and to withdraw existing notices of adjudication. The application was refused and the court provided guidance on the threshold for granting an injunction to prevent adjudication proceedings.

"The court will not consider the weakness of a claim brought in adjudication when considering whether to restrain that adjudication from proceeding."

Implications of the decision on construction projects

This decision highlights the importance of considering the statutory regime and authorities on adjudication when seeking an injunction to prevent adjudication proceedings. Parties to a construction contract should be aware that the court will only intervene in rare cases, where the adjudicator clearly lacks jurisdiction, or where it is unreasonable and oppressive to pursue the adjudication.

Parties should also be aware that the court will only consider the merits of the adjudications themselves in exceptional circumstances. In most cases, the court will not consider the weakness of a claim brought in adjudication when considering whether to restrain that adjudication from proceeding. In short:

  • the threshold for obtaining an injunction to prevent adjudication is high, requiring clear and compelling evidence of unreasonableness or oppression;
  • adjudications are intended to proceed expeditiously and parties should be prepared to address multiple disputes simultaneously if necessary; and
  • procedural fairness concerns in adjudications should be initially addressed within the adjudication process itself, with courts serving as a forum for challenging enforcement if breaches of natural justice occur.

Background of the case

Beck and Eros were parties to a design and build contract for a development project. The contract contained provision for adjudication and Eros commenced multiple adjudications. Beck sought an injunction to prevent Eros from issuing further notices of adjudication, arguing it was unreasonable and oppressive for Eros to pursue multiple adjudications simultaneously.

The adjudications and the injunction application

Eros initiated four separate adjudications within a short 13-day period, based on a variety of claims, which Beck argued to be weak. In summary, the adjudications sought payment relating to £3.6m in alleged increased pre-opening costs, £6.35m regarding the true valuation of a payment notice, £8.6min alleged liquidated damages and £15.8m for alleged delayed and lost sales.

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Key contacts

"The court refused the application for an injunction, finding that Eros' approach in each individual adjudication was not unconscionable, unreasonable or oppressive."

The court considered the statutory regime and authorities on the right to refer a dispute to adjudication under the Housing Grants Construction and Regeneration Act 1996 (“HGRA 1996”). The court noted that the HGRA 1996 confers a commercial advantage on the referring party, which must be taken into account when considering an injunction application.

The court also considered the authorities on when the court will intervene in an ongoing adjudication. The court noted that it will only intervene in rare cases, where the adjudicator clearly lacks jurisdiction, or where it is unreasonable and oppressive to pursue the adjudication.

Beck argued that the adjudications were oppressive and unreasonable considering their timing. Beck sought an injunction against Eros to restrain them from issuing further notices without first obtaining permission from an authorised TCC Judge.

Eros argued that they maintained their right to adjudicate at any time.

The right to Adjudicate

Housing Grants, Construction and Regeneration Act 1996: the general principle is that parties have a statutory right to adjudicate ‘at any time’. The potential of dealing with multiple adjudications was part of the right to adjudicate.

The court’s decision

The court refused the application for an injunction, finding that Eros’ approach in each individual adjudication was not unconscionable, unreasonable or oppressive. The court recognised that the commencement of the adjudications was spread over a short period and Eros was largely content to agree to the timetables proposed by the adjudicators or requested by Beck.

The court also found that Beck knew what its defences were in the adjudications and that the adjudicators had determined timetables that they considered fair to Beck in putting forward its case. The court noted that if Beck considered that there had been a breach of natural justice, it could raise this in resisting enforcement.

Threshold for granting an injunction

The court provided guidance on the threshold for granting an injunction to prevent adjudication proceedings. The court noted that the test is whether the applicant will suffer irremediable prejudice if the injunction is not granted. However, in this case, the court found that decisions in adjudication are temporarily binding and Beck has a remedy in court proceedings or in defence of enforcement proceedings.

Conclusion

This decision provides guidance on the threshold for granting an injunction to prevent adjudication proceedings. Parties to a construction contract should be aware of the importance of considering the statutory regime and authorities on adjudication when seeking an injunction and that the court will only intervene in rare cases.

Associate Megan Parry also contributed to this article.

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