In a landmark decision, the Technology and Construction Court has refused to enforce an adjudicator's decision because the adjudicator had been invalidly appointed due to misrepresentation by one party on its application to the appointing body. The case of Eurocom v Siemens decided on 7th November identifies a party's duty to act honestly in the process of adjudicator selection.
The parties to the adjudication were a contractor and a subcontractor for works to two London Underground Stations. There had already been one adjudication between them in which a sum had been found, to be due from the subcontractor to the contractor. Subsequently, the subcontractor commenced another adjudication and gave notice that it would be applying to the RICS for appointment of an adjudicator.
The subcontractor submitted a request for nomination. In addressing the question of whether any adjudicators would have a conflict of interest, the subcontractor identified a number of individuals who, should not be appointed, including the previous adjudicator. According to RICS' explanatory notes the form would "automatically be copied to the responding party". In fact, it was not sent to the contractor and RICS appointed an adjudicator who was not identified in the subcontractor's application form.
The adjudicator awarded a substantial sum to the subcontractor. The subcontractor sought to enforce the adjudicator's decision. Shortly before the decision was issued, RICS provided the contractor with a copy of the application form pursuant to a request from the contractor.
The contractor resisted enforcement on the grounds that the nomination process was unfair. The subcontractor served a witness statement stating that the response to the form was "in effect a pre-emptive rejection list", and that the reason for not appointing the previous adjudicator was that "a fresh mind was appropriate". The contractor maintained that following the case of Makers (2008), neither party should "suborn the system of nomination".
The Court concluded that there was a strong argument that the subcontractor's answers on the application form had been given falsely. The subcontractor could not have believed that there was a conflict of interest in relation to the persons listed. The Court also concluded that there was a strong prima facie case that the questions had been deliberately or recklessly answered so as to exclude adjudicators that the subcontractor did not want to be appointed.
It was not necessary to show that the mind of the nominating body was affected by the false application as a fraudulent representation had occurred which had the effect of invalidating the decision. The effect of the false representation had been to improperly limit the "pool" of adjudicators, particularly in relation to the previous adjudicator. Alternatively, there was an implied term that both parties to the contract would act honestly and not suborn or subvert the system of nomination by making a fraudulent representation.
However, the Court held that the process of nomination did not require, as a matter of procedural fairness, that RICS should copy the application form to the other party. The nominating body's function was to make the nomination in a proper manner and it had no obligation to consult the other party.
The Court concluded that a sufficiently strong case had been made out that the nomination of the adjudicator was invalid and the adjudicator was not properly appointed. It therefore refused to enforce the decision on the basis that the contractor had established real prospects of successfully defending the claim.
This is the first time that enforcement of an adjudicator's decision has been refused on the grounds of a flaw in the nomination process. The Court considered that the subcontractor had subverted the nomination process by not limiting his objections to adjudicators which it genuinely believed might have a conflict of interest. Rather, it had used the application form to object to persons it did not want to be appointed. The result is that the adjudicator did not have jurisdiction to make his decision, as the appointment was a nullity.
This decision is of significance both for parties to adjudications and for nominating bodies. For the parties, it shows that objections to adjudicators must be made honestly and not for ulterior motives. It was a matter of particular concern in this case that RICS' usual policy of appointing the same adjudicator for a second dispute was not followed, seemingly as a result of the subcontractor's false representations.
It may be thought somewhat surprising that RICS were not held to have acted unfairly in failing to provide the application form to the contractor, in particular as their own explanatory notes indicated that they would do so. Whilst their action was not held to be unfair, it is likely to be good practice for nominating bodies to act transparently and therefore unilateral correspondence is best avoided.