My last post was a birthday piece, which looked at issues surrounding adjudicators being appointed and getting paid. One area I only briefly touched upon was natural justice (think allegations of bias). There is easily enough material for a series of blogs on the topic, given the range of allegations that can be raised to argue that an adjudicator has breached the rules. However, today I’m looking at just one aspect:
Did the adjudicator breach the rules of natural justice by deciding the dispute on a matter not raised by the parties?
This allegation was raised in Synergy Gas Services Ltd v Northern Gas Heating Ltd.
Synergy Gas Services Ltd v Northern Gas Heating Ltd
This was a dispute over an adjudicator’s decision for just under £75,000, issued in August 2018. Northern Gas was ordered to pay this sum (and the adjudicator’s fees of £11,000) but failed to do so, which meant Synergy issued enforcement proceedings.
By the time of the enforcement hearing earlier this month before Mr Jonathan Acton Davis QC, there had been a part payment, leaving just under £30,000 still due to Synergy. The question was, should the court enforce, or was there any merit in Northern’s challenge and the allegation that the adjudicator breached the rules of natural justice by deciding the dispute on a matter not raised by the parties. (I’ll come back to the part payment point.)
The natural justice allegation was based on the adjudicator’s conclusion that clause 14.4 of the parties’ sub-contract contained a condition precedent:
“[It] imposes strict obligations on Northern prior to recovery of costs incurred from Synergy in respect of alleged defects which occurred during the defects period.
… clause 14.4 notice is a pre-condition to deduction or set-off of any sum for remedial works during the defects liability period.”
In the enforcement proceedings, Northern argued that:
- Synergy did not specifically advance this argument in its referral, reply or surrejoinder.
- It was not a point the adjudicator raised with the parties prior to issuing his decision, so Northern was denied the opportunity to address the point.
- As it was a point that the adjudicator based his decision on “at least in part”, the failure was a material breach of the rules of natural justice, rendering the decision unenforceable.
Approach to allegations of breach of natural justice
The judge began by reviewing the approach to take where breaches of the rules are clear, citing Chadwick LJ in Carillion Construction v Devenport, where he explained the objective is to enforce adjudicators’ decision unless:
“… it is plain that the question which he has decided was not the question referred to him or the matter in which he has gone about his task is obviously unfair. It should be only in rare circumstances that the courts will interfere with the Decision of an Adjudicator.”
Also, that a court should not encourage parties to:
“… [scrabble] around to find some argument, however tenuous, to resist payment… comb through the Adjudicator’s reasons and identify points upon which to present a challenge under the labels ‘excessive jurisdiction’ or ‘breach of natural justice’.”
Also, Fraser J in Beumer Group v Vinci:
“… for breaches of natural justice to be sufficient to justify the Court declining to order Summary Judgment and enforcing an Adjudicator’s Decision, they must be the plainest of cases; the adjudication proceedings must have been obviously unfair. Combing through what has occurred, or concentrating on the fine detail of the material before the Adjudicator, to allege a breach of natural justice, will neither be encouraged nor permitted by the Court.”
He also reminded us of what Akenhead J had to say in CG Group v Breyer Group:
“It should not be the case that the Court should have to carry out a relatively minute examination of all the arguments and contentions put forward by the parties in the Adjudication to seek to determine whether the final permutation in the exact form as found to apply by the Adjudicator (being one of the many open to him or her to find) was or was not specifically highlighted by a party. If the permutation as found is covered by the presented arguments, it should be a rare case for a natural justice breach to be found.”
Applying those principles to the case before him, it is no surprise that the judge reached the conclusion that the adjudicator did not breach the rules of natural justice. He noted that the adjudicator was “plainly of the view” that he should interpret clause 14.4, even if the response or reply did not expressly plead this (which he thought they probably should).
However (and importantly for the parties), he found that the pleadings had to be read with the parties’ Scott Schedule. Apparently, this was “studded” with references to Northern’s failure to give Synergy “any opportunity to inspect or remedy the alleged defects”. In the judge’s view, this was enough to “import the allegation that it was a requirement that they be given that opportunity”, thus (in Akenhead J’s words) “the permutation as found is covered by the presented arguments”. Thus no breach, therefore the decision was enforced.
I suspect there is a thin blue line here and, on another day, with another judge (and slightly different facts), this case could have gone the other way.
As an adjudicator, it is always difficult when you are looking at what the parties allege, and you use your own knowledge and expertise to reach a decision (even if that knowledge involves contract interpretation). It is very easy to criticise adjudicators for this, and yet, as Ramsey J acknowledged in Farrelly v Byrne Brothers, it is precisely because of that prior knowledge that they are appointed in the first place.
An interesting point not raised
Interestingly, the court did not comment on whether, by paying part of the sum the adjudicator awarded, Northern Gas was trying to approbate or reprobate (or blow hot and cold). Perhaps the letter sending the cheque was cleverly worded, such that no admissions were made that could give rise to such an argument.
Parallels with appellate decisions
In some ways, I think it is possible to draw a parallel with the Court of Appeal’s approach in Wheeldon Brothers Waste Ltd v Millennium Insurance. Although the facts are completely different (and no adjudication was involved), the Court of Appeal was being asked to look through the findings of fact and the evaluation of expert evidence that had been made at first instance (coincidentally by Mr Jonathan Acton Davis QC), to see whether that decision should be overturned.
Coulson LJ noted that for a judge’s decision to be overturned on appeal:
“… a finding of fact must be one that no reasonable judge could have reached. In practice, that will usually occur only where there was no evidence at all to support the finding that was made, or the judge plainly misunderstood the evidence in order to arrive at the disputed finding.”
There was a similar high hurdle to overcome for experts’ findings. This led him to give a statement of the applicable principles to apply, including that:
“… because a judgment in the TCC is likely to involve i) detailed findings of fact in an area of specialist expertise (Virgin Management and Skanska) and/or ii) lengthy and interlocking assessments of both factual and expert evidence (Skanska and Thomson) and/or iii) factual minutiae which is difficult or impossible sensibly to reconsider on appeal (Skanska), the Court of Appeal will be reluctant to unpick such a judgment (Thomson), with the inevitable result that obtaining permission to appeal on such matters in a TCC case may be harder than in other, non-specialist types of case (Virgin Management, Skanska and Yorkshire Water).”
Certainly, it isn’t far removed from what the court was being asked and declined to do in Synergy v Northern Gas. Coulson LJ seemed just as reluctant to dig too deeply into the first instance decision as Jonathan Acton Davis QC was with the adjudicator’s decision.
