Background

Vinci was engaged as main contractor by Gatwick Airport. Vinci appointed Beumer in relation to works on the South Terminal baggage handling system. Beumer in turn appointed Daifuku Logan Ltd (“Logan”) as the sub-sub-contractor.

A dispute arose between Beumer and Vinci and at the same time a dispute arose between Beumer and Logan. Beumer referred both disputes to adjudication and the same adjudicator was appointed. Neither party knew that the same adjudicator was appointed in both adjudications.

Beumer pursued contradictory arguments in the two adjudications. For instance, it sought liquidated damages from Logan on the basis that works did not finish until 12 April 2016. Yet in the adjudication with Vinci, it claimed that works were finished on 19 December 2015.

The adjudicator found against Vinci. Vinci resisted payment and Beumer commenced enforcement proceedings.

Decision

Vinci argued against the adjudicator’s decision on the basis that there had been a breach of natural justice because:

  • the adjudicator had acquired background knowledge from the Logan adjudication
  • Vinci had been given no opportunity to consider or make submissions on that information
  • it was unfair that there had been no disclosure to Vinci of material provided in the Logan dispute which was relevant to the Vinci dispute. This was contrasted with the fact that had the adjudication taken place at a different time, it would have had the opportunity to consider that result. Beumer advanced factually inconsistent cases in both adjudications.

Beumer in response said:

  • there was no obligation to disclose that information and Vinci had no right to see it
  • that the adjudicator had restricted himself to looking at just the material relevant to each dispute and therefore there was no breach of natural justice
  • The Court found in favour of Vinci and determined there was a breach of the rules of natural justice.

Fraser J said there are two limbs to the rules of natural justice: a party should be able to present its case and meet the case against it; and the matter is to be decided by an impartial tribunal.

The threshold to find a breach of natural justice is high, it must be “obviously unfair” and in this case Fraser J thought that this threshold had been passed. As a standard, he pointed out that notwithstanding the time pressures of adjudication; it was still a formal dispute resolution process with basic requirements of fairness; “adjudication is not the wild west of dispute resolution”.

To that end, Fraser J took a dim view of the fact that Beumer had adopted completely contradictory positions in both adjudications on a subject matter that was relevant to both disputes.

He rejected Beumer’s argument that nothing flowed from the inconsistent cases, stating that he did not think it would be possible for “a director of a company could sign a statement of truth in two sets of legal proceedings in such circumstances … This alone should provide obvious direction to the industry to the type of behaviour that this constitutes”.

Turning to the adjudicator. Fraser J said he should have disclosed his appointment.

His failure to do so raised a whole host of issues that either could have been avoided or else dealt with at the time. He referred to the RICS form for requesting an adjudicator, which states:

“Adjudicators are required to disclose involvement or potential conflicts of interest to RICS prior to nomination”. In general terms, the judge placed an adjudicator akin to an arbitrator when considering rule 3 of the professional code of conduct for arbitrators:

“Both before and throughout the dispute resolution process, a member shall disclose all interest, relationships and matters likely to affect the member’s independence or impartiality or which might reasonably be perceived as likely to do so”.

Fraser J referred to a previous case, where Judge Coulson strongly discouraged unilateral phone calls due to potential bias, and said it would be difficult to argue there was not potential bias (at least) in this situation. His conclusion therefore was that “the breach of natural justice was sufficiently material that the decision will not be enforced”.

Where an adjudicator is acting in simultaneous adjudications with related parties his involvement should be disclosed from the outset.