In these Part 8 proceedings, Stellite Construction Ltd (“Stellite”) sought declarations that an adjudicator’s decision was unenforceable on the basis that the adjudicator had breached natural justice and acted outside of jurisdiction.
Stellite engaged Vascroft Contractors Ltd (“Vascroft”) to construct the shell and core of a substantial house in Hampstead for a contract sum of £5,070,845.79. The contract between the parties incorporated the terms of the JCT Standard Building Contract Without Quantities 2011 and accordingly contained a term which entitled Stellite to liquidated damages in the event that the works were delayed past practical completion.
The completion of the works was delayed and Stellite claimed liquidated damages under the contract. When Vascroft refused to pay, the dispute was referred to adjudication and the adjudicator made the following findings:
- Time for completion had been set at large;
- No liquidated damages were therefore due to Stellite; and
- The reasonable time for completion was by 5 March 2016.
Challenge 1: Breach of Natural Justice
Stellite contended that the adjudicator had breached natural justice on the basis that he had come to the finding that time had been set at large without allowing either party to comment on the issue. Carr J placed heavy reliance on a passage from the decision of Edwards-Stuart J in Roe Brickwork Ltd v Wates Construction Ltd,which stated:
“There is no rule that a judge, arbitrator or adjudicator must decide a case only by accepting the submissions of one party or the other. An adjudicator can reach a decision on a point of importance on the material before him on a basis for which neither party has contended, provided that the parties are aware of the relevant material and that the issues to which it gave rise had been fairly canvassed before the adjudicator. It is not unknown for a party to avoid raising an argument on one aspect of its case if that would involve making an assertion or concession that could be very damaging to another aspect of its case."
The question of whether the adjudicator had breached natural justice would therefore turn on the facts, and in particular the extent to which each side had been able to “fairly canvass” the issue before the adjudicator.
Carr J found that both sides had been given ample opportunity to canvass the issue. The fact that each side had approached the case from a slightly different angle would not mean that the adjudicator’s decision was in breach of natural justice, particularly where the cases relied on by the adjudicator were those same cases placed before him by the parties:
“When one traces the Adjudicator's reasoning through in this way, and takes account of the fact that the question of whether time was at large, acts of prevention and the effects of the Phase 2 Works were all before the Adjudicator as identified above, it can be seen that there has been no breach of natural justice.
This is not a case where the Adjudicator was relying on a new authority or line of authorities, let alone some external information, fact or expertise, or some expertise peculiar to himself, which he did not share with the parties. Rather he was applying ventilated law to the material before him in circumstances where, as he put it, the parties had, to their common knowledge and understanding, approached the issues on the facts from "slightly different angles".”
Accordingly, the first ground of challenge failed.
Challenge 2: Outside of Jurisdiction
Stellite further sought to argue that the adjudicator had acted outside of jurisdiction by determining a reasonable time for completion, when this was entirely outside of the scope of a claim for liquidated damages. As ever, the ambit of the adjudicator’s jurisdiction would be determined by reference to the nature, scope and extent of the dispute identified in the Notice of Adjudication: Penten Group Ltd v Spartafield Ltd. After rehearsing the applicable principles concerning the enquiry the courts must undertake in order determine whether an adjudicator’s decision ventures beyond the parameters of the dispute referred to him, Carr J found that the adjudicator had exceeded jurisdiction in this case:
“The scope and nature of the Adjudicator's findings so far as relevant to Issue 2 are clear and unambiguous: having found time to be at large, he went on to consider that Vascroft's obligation was to complete the Works in a reasonable period, being no later than 5th March 2016. This could only be relevant to a claim for un-liquidated damages and only arose because of the finding that time was at large.
The Adjudicator's reasoning may have been the logical next step, given his finding that time was at large. But it is clear in my judgment that in proceeding to consider the issue, he exceeded his jurisdiction.” (underlined emphasis supplied)
Accordingly, Carr J gave a declaration that the adjudicator acted outside his jurisdiction in holding that a reasonable time for completion was 5th March 2016. That part of the adjudicator’s decision was therefore severed from the rest of the decision, which would otherwise survive.
[For more information, please refer to the case judgment.]