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As ever more construction disputes are referred to adjudication, the corresponding case law covers an increasingly wide range of issues. Two recent cases raise particular issues.

The case of Galliford (UK) Ltd versus Markel Capital Ltd (12 May 2003) concerned a main contractor, Galliford, who had been successful in an adjudication against his insolvent consulting engineer, Markel. Instead of trying to enforce the adjudication award against the insolvent company, Galliford brought a claim against Markel's insurers claiming that Markel's rights to be indemnified against liability for Galliford's successful claim had transferred to Galliford under the Third Parties (Rights Against Insurers) Act 1930. Galliford claimed that this meant that the insurers were indebted to them for the amount of the adjudication award and adjudicator's fees minus the excess.

Under the 1930 Act, in certain circumstances prescribed by the Act, where a person is insured against liabilities to third parties and that person then becomes insolvent, his rights to an indemnity from the insurer are transferred and vested in the third party to whom he has become liable (section 1).

The insurance policy in question provided for indemnity against 'loss' which was defined as "Markel's legal liability for damages awarded against Markel". It specifically included 'loss' following an adjudicator's award but also provided that Markel may be required to contest any adjudication process.

His Honour Judge Behrens held that liability under the insurance policy was not established until the adjudication award was enforced by a judgment of the court or agreement. He relied on the judgment of Lord Denning in the Court of Appeal in Post Office versus Norwich Union (1967) which concerned a similarly-worded insurance policy. Lord Denning held that liability to the injured person must be established by court judgment, arbitration award or agreement. Judge Behrens held that an adjudication award was not equivalent to any of these. The adjudication award created a contractual obligation on Markel to pay Galliford but not an absolute obligation. In particular, the award would not have been enforced by the court if the adjudicator had exceeded his jurisdiction (Markel had disputed jurisdiction from the start). It would have been open to Markel to challenge the jurisdiction of the adjudicator in summary judgment proceedings to enforce the adjudication award – until such a challenge was determined summarily or otherwise there was no loss under the policy.

  Adjudication awards are binding until finally determined by court proceedings, arbitration or agreement (Section 108(3) Housing Grants, Construction and Regeneration Act 1996), therefore the decision appears harsh. While adjudication awards are open to challenge, court judgments are also subject to appeal.

While the closure of the construction industry at Christmas is a problem, it dos not justify a company being deprived of a substantial sum of money.

Meaning of dispute
In Orange EBS Ltd versus ABB Ltd (22 May 2003), Her Honour Judge Frances Kirkham held that in confirming whether or not a dispute had arisen between the parties to an adjudication, the decision of the Court of Appeal in Halki Shipping Corporation versus Sopex Oils Ltd (1998) was binding so that "there is a dispute once money is claimed unless and until the defence admit that the sum is due and payable". She also followed the decision by His Honour Judge Forbes in Beck Peppiatt Ltd versus Norwest Holst Construction Ltd (20 March 2003) who relied on the test in Sindall versus Solland (June 2001) so that: "For there to be a dispute for the purposes of exercising the statutory right to adjudication it must be clear that a point has emerged from the process of discussion or negotiation that has ended and that there is something which needs to be decided".

Judge Kirkham found that disputes as to various issues in the Orange case had arisen at different times. The most difficult point to determine appeared to be whether or not a dispute had arisen as to Orange's final account. The account was submitted on 2 December 2002. It included a number of claims that had not previously been made known to ABB. The question was whether a dispute about the sums claimed in it had arisen by the time Orange issued its notice to adjudicate on 6 January 2003.

On 12 December ABB's solicitors had written to Orange alleging that there was no dispute because ABB had not had the opportunity to consider Orange's final account. They claimed the closure of the construction industry over Christmas meant they would not have finished looking at the final account until 20 January.

Applying the test in Halki, Judge Kirkham found that since ABB had not admitted the claim, nor paid it, by 6 January, a dispute had arisen. Following the test in Sindall, she concluded that by 6 January sufficient time had elapsed for there to have been a valuation of the account by ABB and for the parties to have discussed and/or negotiated Orange's claim. While she acknowledged that the Christmas holidays were a practical problem, they did not justify a company being deprived of a substantial sum of money. There was no agreement that Orange would hold off until 20 January.