Walker, a civil engineering contractor, was engaged by Quayside, a developer of residential homes, to undertake drainage and highway works under two NEC contracts. As the parties did not make their own contractual provisions for adjudication, the adjudication provisions of the Scheme were incorporated pursuant to the relevant provisions of the HGCRA 1996. At the conclusion of the works, a dispute arose between the parties in respect of the final payment sought by Walker. Quayside had instructed Walker to carry out various remedial works and had withheld parts of the retention and other payments reflecting the costs it considered were incurred in rectifying Walker’s ‘defective’ works.

Walker issued county court proceedings claiming sums due and the full release of the retention. Quayside served a ‘holding’ defence, asserting that the works were defective and a stay of proceedings was agreed in the hope of settlement. Walker then issued a notice of adjudication pursuant to the Scheme in respect of what was essentially the same claim. The adjudicator found that the alleged defects were likely caused by factors for which Walker was not responsible. Accordingly, save for a small amount of retention (withdrawn from the adjudicator following concerns as to his jurisdiction to determine that issue), the adjudicator awarded Walker the amount of its claim which was subsequently paid by Quayside. The withdrawn element of the retention, however, remained outstanding as a claim in the proceedings. Quayside alleged further defects and threatened a claim for damages if Walker did not return to site to remedy them. As Walker did not, Quayside issued a counterclaim which included a claim to recover a sum (almost £9,000) that Quayside believed had been paid to Walker pursuant to the adjudicator’s decision but which had not been certified by the contract administrator and related to Walker correcting its own defects.

Neither party adduced any evidence at trial to support or reject the return of this sum, despite it being a key issue. The trial judge accepted, as a general principle, Quayside’s argument that the court was required to turn the clock back to the position prior to the adjudication and that the adjudicator’s decision did not alter where the burden of proof lay. However, he pointed to an implied term (in any contract to which the HGCRA 1986 applies) that the contractor would repay any money paid by the employer under the terms of the adjudicator’s decision, in respect of which the employer’s liability to pay was not substantiated by the contractor in any subsequent legal proceedings. As this cause of action – i.e. for breach of the implied term, had not been pleaded by Quayside, this aspect of its claim failed.

The Court of Appeal upheld the trial judge’s dismissal of this part of the counterclaim finding that the burden was on Quayside to prove its entitlement to a repayment in respect of its claims for damages consequent upon Walker’s defective work. It failed to do so.

In reaching this conclusion, the Court of Appeal also considered but did not have to deal directly with the interim binding nature of adjudicator’s decisions – i.e. “the more difficult question of the status of the adjudicator’s decision after it has been complied with and payment has been made”. Does an adjudicator’s decision have to be rebutted by the party arguing for a different result or is the dispute to be heard afresh, as if the adjudication had never happened? Previous respectable authorities that considered this point (City Inn Limited v Shepherd Construction Limited [2002] and Coulson on Construction Adjudication (2nd Edn)) held that the burden of proof is unaffected by the adjudicator’s decision. Once subsequent litigation or arbitration has been commenced, a party cannot rely upon an adjudicator’s decision “as having any status whatsoever, let alone one that changes or displaces the ordinary burden of proof”. It would be for that party to properly plead and prove his entitlement in the proceedings.

However, in making obiter comments, Lady Justice Gloster stated that she had “real difficulty” with this analysis. Commenting on City Inn, she pointed out that the defendant in the court proceedings (the successful party in the adjudication) has no reason to bring court proceedings to claim payment as it has already been paid. Further, she interpreted s.108(3) of the HGCRA 1996 in a contrary way to the previous authorities. Because the decision of the adjudicator is binding “until the dispute or difference is finally determined” by the court, she suggested that the onus of proof in City Inn should have rested with the claimant to adduce evidence and prove that the adjudicator’s decision was wrong.

Therefore, although the Court of Appeal in Walker did not expressly reject what had previously been thought of as a settled legal principle, it certainly cast doubt on it going forward.