January 2010
There are various grounds on which an aggrieved party may resist enforcement of an adjudicator’s decision. Whether errors of law or serious procedural unfairness, sometimes referred to as a denial of natural justice, are sufficient grounds will require discussion by reference to the many decisions of the English and Scottish courts.
Natural Justice
In Gillies Ramsay Diamond and others v PJW Enterprises Limited [2004] BLR 131 Lord Justice Gill said an adjudicator must act in accordance with the principles of natural justice, that is, by not fraudulently exceeding his jurisdiction by breaching natural justice or any decision will be rendered ultra vires.
Natural justice falls within two main rules:
- an adjudicator should not have any bias or personal interest in the outcome of the dispute (nemo judex in causa); and
- both sides must be given a fair opportunity to present their case (audi alteram partem).
In relation to the first rule, Glencote Development and Design Co Ltd v Ben Barratt and Sons (Contractors) Ltd [2001] BLR 207 held the question is not whether or not an adjudicator has been biased as a matter of fact, but rather “the circumstances would lead a fair minded and informed observer to conclude that there was a real possibility or real danger, the two being the same, that the tribunal was biased.” The test of bias is not “is the result fair”, but “was there an opportunity afforded for justice to be done?”
In Discain Project Services Ltd v Opecprime Development Ltd [2001] BLR 285 the adjudicator had a telephone conversation with one party which was not fully reported to the other. Bowsher QC J, referring to Lloyd QC J at paragraph [20] in Glencote, found that the adjudicator was not biased but “the facts would lead a fair-minded and informed observer to conclude that there was a real possibility or real danger that he was biased.” However, before granting relief the court must be satisfied that the breach was serious, significant, and substantial to render the decision invalid. The facts in this case did not warrant such relief and enforcement was granted.
The Court of Appeal confirmed this reasoning in AMEC Capital Projects Limited v Whitefriars City Estates Limited, [2005] BLR 1, at paragraphs [20] – [22] which is also authority for the correct approach to be taken where an adjudicator has already dealt with a prior dispute. In Michael John Construction Ltd v Golledge & Ors [2006] EWHC 71 (TCC) Coulson QC J, at paragraphs [65] – [66], referred to the opinion of Dyson J in AMEC later confirmed by the Court of Appeal, stating:
“The mere fact that the adjudicator had already decided an issue was not such as to justify a conclusion of apparent bias. Rather, the question was whether a fair minded observer would conclude that there was a real, as opposed to fanciful, possibility that the adjudicator would approach his task with a closed mind, pre-disposed to reaching the same decision, regardless of the evidence and arguments which might be adduced.”[sic]
In New Zealand a distinction is made between a substantial breach of the rules of natural justice and a simple breach, where either would make the decision of the adjudicator tainted. They are almost identical in the state of New South Wales and Victoria in Australia.
Discain Project and Balfour Beatty was considered in AWG Construction Services Ltd v Rockingham Motor Speedway Ltd [2004] EWHC 888 (TCC) where the referral made no mention of any negligence allegations and the subsequent decision rendered by the adjudicator was ultra vires and breached the principles of natural justice.
In the English case of Project Consultancy Group, Dyson J made it clear that an adjudicator’s decision could not be attacked for failure to follow the rules of natural justice, stating that this was a part of the rough and tumble of adjudication. In direct contradiction, the Scottish case of Homer Burgess Limited v Chirex (Annan) Ltd No 1 [1999] ScotCS 264 did not follow the dicta of Dyson J and reserved its opinion, instead preferring to remit the matter to the adjudicator to modify his decision.
Expanding on the second rule, Lord Reid in Inland Revenue v Barrs [1961] SC HL 22 stated at page [30] that “no tribunal, however informal, can be entitled to reach a decision against any person without giving to him some proper opportunity to put forward his case.”
Section 108(2)(e) and (f) of Part II of the Housing Grants, Construction and Regeneration Act 1996 (‘Act’) and paragraph 12(a) of the Schemes (England & Scotland) expressly provide for the adjudicator to be impartial in ascertaining the facts and the law. Lord Young in Costain v Strathclyde Builders [2003] ScotCS 352 found that in practice, bias and the right to be given a fair hearing are separate principles, although they can overlap. It follows that a decision reached and based (or could be seen to be based) on anything said in a discussion or document(s) provided to the adjudicator by one party and not copied to the other, is in breach of natural justice.
In RSL (South West) v Stansell Ltd [2003] EWHC 1390 (TCC) the adjudicator, with the consent of the parties, engaged a programmer on the condition that any reports provided by the programmer were disclosed to the parties. A copy of the final report, upon which the decision was made, was not provided to the parties. The court held that the parties were entitled to expect a copy of the final report and was essential that the parties could comment on any advice received by the adjudicator. Furthermore, the court found that where part of the decision was tainted by a breach of natural justice, it was not possible to sever that part of the decision from the decision as a whole.
Similarly, enforcement was refused in Costain v Strathclyde Builders [2003] ScotCS 352 because the adjudicator obtained legal advice but failed to give the parties the advice and an opportunity to comment on it before the adjudicator made his determination.
It would not be possible for an adjudicator to determine a dispute where he or she acted as mediator previously in the same dispute. As observed in Glencote, although there might not be actual bias, there is present apparent bias which is enough to render any decision null and unenforceable. In Pring & St Hill Ltd v CJ Hafner [2002] EWHC 1775 (TCC) the court held that this would also extend to an adjudicator who acted as adjudicator in any related disputes between different parties as any previous knowledge of a dispute would have a bearing on future findings and decisions. However, these decisions are in contradiction to AMEC.
In Balfour Beatty Construction Ltd v The London Borough of Lambeth [2002] BLR 288 the court refused to enforce an adjudicator’s decision on the basis that the adjudicator should have advised the parties as to the approach he proposed to take and seek comments on his methodology or alternatives. An adjudicator cannot seek to cure fundamental flaws in a party’s case without first having offered the parties an opportunity to be heard on his approach. In failing to do so, the adjudicator had failed to act fairly and impartially.
In determining whether the adjudicator had breached the principles of procedural fairness or the need to observe the rules of natural justice, Wilcox J in Try Construction Ltd v Eton Town House Group Ltd [2003] EWHC 60 (TCC) expressly referred to views of Lloyd J in Glencote and Balfour Beatty and Dyson J in Macob as leading authorities.
In Bovis Lend Lease Ltd v The Trustees of the London Clinic [2009] EWHC 64 (TCC) Akenhead J, at paragraphs [66] – [67], was of the view that it would be rare in adjudication proceedings for a material breach of the rules of natural justice. Rather, for a party to allege that it has not been given a reasonable opportunity to present its case, defence, evidence or other submissions, such a complaint must be raised during the course of the adjudication, not after. However, there would be cases where the aggrieved party would not know of the unfairness until the adjudicator has made his or her decision.
Unlike jurisdictional challenges, natural justice is a much more fluid concept where any sustained findings thwart the entire adjudication process. However, the volume of decisions before the English and Scottish courts regarding adjudication law is far from settled and is still developing. Although decisions are being roundly and ever-more stridently criticised before the courts, at least for the time being, the courts are demonstrating a marked reluctance to decline to enforce an adjudicator’s decision because of the quality of that decision. What is important is whether or not the adjudicator has answered the right question.
That said, if the court considers that an adjudicator has not addressed all the issues, and all the defences, put before him then the current trend is for that decision not to be enforced.
The contents of this article is intended to provide a general guide to the subject matter and does not constitute legal advice. Ferrer Lawyers always recommend that you obtain legal advice prior to entering into any contract. If you’re having contract issues or require representation for adjudication call (02) 8823 3588 or email us with your enquiry at This email address is being protected from spambots. You need JavaScript enabled to view it. for further information, guidance or assistance.