Jurisdictional challenges on adjudication enforcement proceedings can be many and various. The Court of Appeal has expressed the view that judges should be astute to discern appropriate challenges and that it should only be in rare circumstances that the courts will interfere with the adjudicator’s decision (Carillion Construction v Devonport Royal Dockyard  BLR 15).
The following case addressed the issue of jurisdiction, natural justice and adjudicator bias.
Balfour Beatty Engineering (HY) Limited v Shepherd Construction Limited  EWHC 2218 (TCC)
The sub-contractor was employed by the contractor to carry out mechanical and electrical work on a construction project at Castle Hill Hospital in Hull. The sub-contract works were completed on 10 June 2008, some 16 weeks late. Liquidated damages were deducted and issues arose between the parties as to whether extensions of time were due to the sub-contractor.
The sub-contractor commenced adjudication proceedings in September 2008. The sub-contractor sought an extension of time to 22 September 2008 for delayed access to Block Z which was claimed on a prospective basis (judged as at October 2007). The first adjudicator decided on 4 November 2008 that no extension of time was due for delayed access to Block Z.
The sub-contractor then produced on 23 December 2008 a retrospective delay analysis of the delays encountered when carrying out the sub-contract works. This included delays due to the late access to seven zones (including Block Z). The sub-contractor sought an extension of time to at least 10 June 2008 and served its second notice of adjudication on 9 April 2009.
During the second adjudication, the sub-contractor complained that the contractor had failed to provide disclosure of the main contract files; the contractor argued that the sub-contractor should only be entitled to selective disclosure. The second adjudicator’s response to this was that "It looks good when you make all and everything available … bad when you don’t".
The adjudicator also concluded that the contractor’s expert witness "must have been instructed to ignore" some of the access delays with the result that his expert evidence was "immediately in difficulty".
The second adjudicator awarded the sub-contractor an extension of time and £1.43m in the second adjudication.
The contractor sought to resist the enforcement proceedings on jurisdictional grounds and on the basis that the second adjudicator was biased and otherwise acted in breach of the rules of natural justice.
Did the adjudicator have jurisdiction to decide that late access delays were part of what he was required to decide?
The first issue was whether the dispute referred to the second adjudicator permitted him to decide that the sub-contractor was entitled to an extension of time for delay caused by late access.
The court adopted the principles set out in Cantillon Limited v Urvasco Limited  BLR 250 on the question of whether the second adjudicator had jurisdiction. The court’s view was that:
- Disputes could be broad or narrow. For there to be a dispute there needed to be a claim or assertion which was expressly or impliedly rejected or at least not accepted.
- An extension of time claim could be made on one specific basis. If that claim was disputed that dispute could be referred to adjudication. Similarly, an extension of time claim could be concerned with each and everything which did or did not happen on a specific project and that claim could also be referred to adjudication.
- The sub-contractor, if it had referred the narrow dispute to adjudication, was not barred from the referring the broader dispute to adjudication, subject to one caveat: once the first dispute had been decided by an adjudicator, that dispute could not be referred to adjudication again because it had already been resolved.
- A later adjudicator’s dispute could not override an earlier valid adjudicator’s decision. If the later adjudication decision materially purported to decide something which had already been effectively and validly adjudicated upon then it might be wholly or partly unenforceable.
The court held that on the facts, the second adjudicator had not exceeded his jurisdiction by deciding that an extension of time was due to the sub-contractor. Although the second adjudication related to circumstances surrounding all blocks in all seven access zones (including block Z) the fact that the first adjudicator had decided a claim for an extension of time based on a prospective entitlement in October 2007 by reason of delayed access to Block Z, meant that it was within the second adjudicator’s jurisdiction to include on a retrospective basis the late access to block Z as one of the factors justifying an extension of time.
Did the adjudicator breach the rules of natural justice?
The next issue was whether the second adjudicator had breached the rules of natural justice in making an adverse inference in relation to the non-production of documents by the contractor. The judge reviewed the authorities and derived the following principles:
- It should first be established that the adjudicator failed to apply the rules of natural justice.
- Any breach of the rules should be a material breach.
- A material breach of the rules would include cases where the adjudicator failed to bring to the attention of the parties a point or issue which they ought to have been given the opportunity to comment upon if it was one which was either decisive or of considerable potential importance to the outcome of the dispute, and was not peripheral or irrelevant.
- Whether an issue was decisive or of considerable potential importance or was peripheral or irrelevant involved a question of degree.
- It was only if the adjudicator went off "on a frolic of his own", wishing to decide a case upon a factual or legal basis that had not been argued or put forward by either side without giving the parties the opportunity to comment, that a breach of the rules of natural justice came into play.
- If either party had argued a particular point and the other party did not come back on the point there would be no breach of the rules of natural justice.
The court held that the contractor’s claim was unjustified. Adjudicators were not bound by the rules of evidence applicable to the courts, so an adjudicator was entitled to draw an adverse inference against a party as a result of not producing the documents requested, without being criticised for doing so. In this instance the second adjudicator gave advance notice of the possibility of drawing an adverse inference and could not be criticised for drawing such inference. In this respect the second adjudicator acted fairly.
Did the adjudicator show bias?
The court then addressed the question of bias. There were two types of bias with which the court was concerned: actual or apparent. The test for apparent bias was whether the circumstances would lead a fair minded and informed observer to conclude that there was a real possibility or real danger of bias.
The complaint was really that the adjudicator took against the contractor’s expert witness because the second adjudicator found that the expert was or must be taken to have been instructed by the contractor to ignore some of the access delays and this was harmful to the sub-contractor.
The court held that this did not demonstrate either actual or apparent bias. It was clear from the facts that the expert had not considered the access delays and that it was not an unreasonable inference for the second adjudicator to draw that the expert and the contractor had decided between them that it was unnecessary or inappropriate to consider those delays. The adverse finding or a criticism of a witness’s behaviour in the second adjudicator’s decision did not give rise to a valid charge of bias.
Was the adjudicator’s decision a sufficiently reasoned decision?
The second adjudicator was required to make a reasoned decision. In the court’s own words the decision in this case was "idiosyncratic, in part in shorthand and to a marked extent ungrammatical". The issue was whether the extent and quality of the reasoning was intelligible enough to amount to a reasoned decision.
- The judge reviewed the authorities and derived the following principles, amongst others:
- The decision must be intelligible so that the parties, objectively, knew what the adjudicator had decided and why.
- The fact that the reasons given were wrong in fact or in law or even in terms of emphasis did not give rise to an effective challenge.
- The fact that the adjudicator did not deal with every single argument of fact or law did not mean that the decision was necessarily unreasoned.
- If the reasons were so incoherent that it was impossible for the reasonable reader to make sense of them it was not a reasoned decision.
- Adjudicators’ reasoning was not to be judged too strictly by the standards of judges or arbitrators. Adjudicator’s decisions often have to be reached within a short period of time and by adjudicators who were often not legally qualified.
- Although reasoning in a decision might be repetitive, diffuse or even ambiguous this did not mean that the decision was unreasoned.
The court held that:
- The fact that the second adjudication decision did not reach the standard of an average court judgment did not mean that it was not reasoned.
- It was necessary to see through the poor grammar, unconventional sentence structure and confusing and repetitive words to determine if on the key issues there was some intelligible reasoning.
- The second adjudicator had given sufficient reasoning on the key issue as to whether there was an entitlement to an extension of time. It was not necessary for the court to agree with the reasoning.
- Provided the broad thrust of the reasoning was apparent the court should enforce the decision.
This case illustrates the difficulties of being able successfully to challenge enforcement proceedings. The case neatly summarises the previous authorities and principles involved in relation to the jurisdiction of the adjudicator, breach of natural justice and adjudicator bias.