Practical Law

What happens if, during the adjudication, one party intentionally or accidentally discloses to the adjudicator a settlement offer made by the other party?

The scenario

Let’s say it is the referring party that discloses the settlement offer. The responding party objects, and says the adjudicator may be influenced by the offer when reaching his decision. The responding party invites the adjudicator to resign.

In response, the referring party argues that the settlement offer was made in open negotiations and was not made on a “without prejudice” basis. It also argues that there is no prejudice in the adjudicator knowing what figure the responding party has already put on the value of the dispute; the adjudicator will be able to put it from his mind.

The responding party is not satisfied with these responses, and maintains the adjudicator should resign. It reserves its position to challenge any decision on jurisdictional grounds.

What should the adjudicator do?

The adjudicator could resign but, equally, he may elect to carry on. It is worth remembering that the rules of evidence do not apply in adjudication proceedings. In deciding which course to follow, the adjudicator must weigh up two factors:

• The balance of convenience to the parties of a resignation (that is, is it more cost-effective to continue to act, or to resign and make the parties start again, with another adjudicator).
• The likelihood of a successful challenge to enforcement of his decision on grounds of a breach of natural justice, should he continue to act in the adjudication and find for the referring party.

There is no right or wrong answer. It will come down to the facts of the case and, probably most importantly, the stage at which the settlement offer is disclosed.

Often, the earlier in the proceedings, the easier it is for the adjudicator to resign. As the proceedings continue, the chances are that the adjudicator will have formed a view on the submissions and evidence before him, and will be able to put such things from his mind when reaching his decision.

As the court said in Specialist Ceiling Services Northern Ltd v ZVI Construction (UK) Ltd, (unreported), 20 February 2004, adjudicators are generally commercially aware, will know that offers may be made for sound commercial reasons and do not indicate liability.