We reported last year on a selection of cases on adjudication enforcement where parties have sought (some successfully and others not) to avoid enforcement of the adjudication decision on jurisdictional grounds - where an adjudicator acts without, or in excess of, his jurisdiction or where he is in serious breach of the rules of natural justice.
This is a flourishing area of litigation with parties seeking to push the boundaries of the court's robust approach to adjudication enforcement. Below we summarise four relevant decisions from this year, where the claimant sought to resist enforcement of the adjudication decision on the basis that the adjudicator had breached the rules of natural justice. In the first two decisions the claimants were successful; in the following two cases they were not.
To recap, pursuant to the rules of natural justice, each party has the right to a fair hearing before an impartial tribunal, failing which an adjudicator's decision will not be enforceable. Breaches of natural justice by the adjudicator may include procedural irregularity, failing to act impartially or the existence of bias or apparent bias.
Where a breach was established
In a Scottish decision (Scottish decisions are not binding on English courts but are persuasive), Highlands and Islands Authority Ltd v Shetland Islands Council, the adjudicator breached the rules of natural justice by asking a barrister for confirmation of a legal issue and failing to inform the parties that he had done so. The parties were therefore prevented from making relevant submissions to the adjudicator creating "an opportunity for injustice to be done". It was irrelevant that the barrister had agreed with the adjudicator's view and that the advice was oral and free of charge. Consequently, the adjudicator's decision was invalidated and rendered unenforceable.
There may also be a breach of the rules of natural justice where the adjudicator goes on a "frolic of his own". This occurred in Herbosh-Kiere Marine Contractors Ltd v Dover Harbour Board, where the adjudicator chose a particular method to assess what was due under a final account. Not only had neither party in the adjudication used that particular method but they had also not been given the chance to comment on the assessment method used.
The judge said that the adjudicator had "'gone off on a frolic of his own' in using a method of assessment which neither party argued and which he did not put to the parties". Calculations based on the adjudicator's method had resulted in a financial windfall to Herbosh. Interestingly, this was a contractual adjudication (agreed by the parties as set out in their contract) rather than a statutory adjudication under the Construction Act, but the principles of natural justice apply equally.
Where a breach was not established
In Berry Piling Systems Ltd v Sheer Projects Ltd, Berry, the subcontractor, sought to enforce an adjudication decision on the basis that the adjudicator reached a conclusion about Sheer's counterclaim. This was made wholly or partly on the basis of an argument raised for the first time by the adjudicator in the decision itself.
The adjudicator had watched a video supplied by Sheer, the respondent contractor supplied with its response and upon which the adjudicator commented in his decision. The adjudicator's decision noted that: "Having watched the video with the Response of the flow of water through the piles I note that it was significant at one particular leak. There appears to be no reason why that water could not have been directed to a storage tank from which it could be pumped away without flooding the excavations or developing (sic) Sheer's work."
Sheer argued that the point made by the adjudicator had not been raised with the parties and was one on which he based his decision (at least in part). The adjudicator should have raised the point with the parties as it was material and his failure to do so was a breach of natural justice.
The judge decided that although it was not necessary for the adjudicator to watch the video, he had already reached his conclusions before viewing it and therefore the video did not impact on his decision. The adjudicator was simply making the point that even if the leakage had been the contractual responsibility of Berry, any potential delay resulting from it could have been avoided by directing the water to a storage tank.
However, in the light of the conclusions that he had already reached this was irrelevant. The judge said that Sheer's claim for delay had failed because the adjudicator concluded it had not provided any proper analysis of the delays and, in consequence, it had not proved that matters for which Berry was contractually responsible, had caused critical delay to the works.
In another Scottish decision, Pihl UK Ltd v Ramboll UK Ltd, the court rejected an enforcement challenge based on the fact that the adjudicator had given inadequate reasons for his decision. In very rare circumstances an adjudicator may breach the rules of natural justice where his reasoning is incoherent, unintelligible or prejudicial, for example.
An adjudicator is not required pursuant to the Construction Act or the Scheme for Construction Contracts (England and Wales) Regulations 1998 (Scheme for Construction Contracts) to give reasons for his decision. However, he may be required to do so pursuant to an agreement between the parties, or because the chosen adjudication procedure requires it. In reality, the vast majority of adjudicators give reasons because they are requested to do so.
There are obvious advantages to the parties to the adjudication, as well as the adjudicator, in producing a reasoned decision. A reasoned decision assists the adjudicator by giving structure to the decision and ensuring he has covered key documents and the parties' submissions, as well as an analysis of the law and the evidence produced to him. The reasons will also be helpful to the parties in understanding the adjudicator's logic and deciding in most cases, whether or not to pursue the dispute to litigation or arbitration.