REUTERS | Charles Platiau

“Adjudication is not the Wild West of dispute resolution”

For the keen-eyed among you, you will recognise where I have borrowed this week’s title from. For those who are none the wiser, it comes from Fraser J’s judgment in Beumer Group UK Ltd v Vinci Construction UK Ltd  (at paragraph 22). He wasn’t referring to the “wicky wicky wild wild wild west” immortalised by Will Smith, but rather to adjudication being a “formal dispute resolution forum with certain basic requirements of fairness”. Those basic requirements of fairness arise from the rules of natural justice and were central to the court’s judgment.

Beumer Group UK Ltd v Vinci Construction UK Ltd

It is necessary to mention the facts briefly, if only to introduce all the parties and to explain why the same adjudicator was acting in more than one adjudication at the same time:

  • Gatwick Airport Ltd (the employer) employed Vinci Construction UK Ltd (the contractor) to carry out works at the airport’s south terminal. The (disputed) contract sum was in the region of £30 million.
  • Vinci entered into a sub-contract with Beumer Group UK Ltd (the sub-contractor) for Beumer to carry out works to the baggage handling system. Beumer also entered into a sub-sub-contract with Daifuku Logan Ltd (the sub-sub-contractor).
  • The parties used an NEC3 ECC contract and sub-contract, and disputes were to be dealt with by Option W2. Dr Cyril Chern was named as one of three potential adjudicators in both the main contract and the sub-contract.
  • In March 2016, Vinci issued three instructions to Beumer and a dispute arose over whether these instructions were Compensation Events under the sub-contract.
  • On 18 March 2016, Beumer referred two disputes to adjudication:
    • the dispute with Vinci over the three instructions (adjudication BVII); and
    • a dispute with Logan over Logan’s alleged failure to complete its works by certain dates. This included a claim for liquidated damages (adjudication BLII).

Adjudication appointments

Dr Chern was appointed as the adjudicator in both March 2016 adjudications. He had also been the adjudicator in two previous adjudications, one in February 2015 between Vinci and Beumer (adjudication BVI) and an earlier one between Beumer and Logan (adjudication BLI).

Neither Dr Chern nor Beumer advised Vinci of Dr Chern’s involvement in adjudication BLII. Vinci also did not know about adjudication BLI until July 2016.

The judgment doesn’t tell us the outcome of adjudication BLII, but we know that in adjudication BVII, Dr Chern decided that the three instructions were Compensation Events and granted the declaratory relief Beumer sought. The matter ended up in the TCC in a dispute over liability for his fees, which Vinci refused to reimburse Beumer for.

Natural justice breaches

I think the various aspects of Vinci’s defence can be grouped under the two limbs of natural justice (at least for the purposes of this blog):

  • A party’s entitlement to present its case and to meet the case against it. Essentially, by not knowing about adjudication BLII, Vinci said it was deprived of the right to see the submissions in that adjudication (or even to be able to ask to see them). This was particularly relevant given Beumer advanced factually inconsistent cases in adjudications BVII and BLII.
  • A right to a fair hearing by an impartial tribunal. The adjudicator’s failure to disclose his appointment in a simultaneous adjudication (BLII) went to the question of bias (actual or apparent).

Fraser J concluded that there was a breach of the rules of natural justice and that it was “plainly material”, such that the adjudicator’s decision was not enforced. In doing so, he also concluded that:

  • Beumer’s cases in the two adjudications were “wholly inconsistent” and said the court took a “very dim view of the propriety of [such] behaviour”.
  • Vinci should have been informed about adjudication BLII and that, in the absence of an adjudicator’s decision, it should have been provided with material from it.

Increase in requests for disclosure

Fraser J stated that it was appropriate for there to be disclosure of the relevant materials setting out Beumer’s inconsistent case, whether that was an earlier adjudicator’s decision or submissions in adjudication BLII, because:

“…the disputes were so closely connected and the issues so similar.”

However, he also noted that it will be a matter of fact and degree in any case whether this applies.

I think that this finding will have the biggest impact going forward because we might well see an increase in parties requesting disclosure, and such requests are likely to have the greatest impact on main contractors who are involved in adjudications upstream (against employers) and downstream (against sub-contractors).

For example, in adjudications between main contractors and sub-contractors, we might see requests for the adjudicator to order the main contractor to disclose any submissions and/or decisions obtained in adjudications conducted under the main contract, where the main contractor has sought payment and/or an extension of time, and which may be relevant to the sub-contract in question. Sub-contractors might argue that the disputes are “so closely connected and the issues so similar” to justify disclosure and, while Beumer v Vinci involved the same adjudicator, it is arguable that the principle would apply even where different adjudicators were appointed under the sub-contract and the main contract.

It is also worth noting that an adjudicator often has an express power to order a party to provide relevant documents. For example, under:

However, in my view, Beumer v Vinci does not mean these powers should allow parties to go on unwarranted fishing expeditions in the hope that some useful evidence can be obtained.

One question that the judgment leaves open is whether, in such circumstances, the main contractor could release details of any adjudication under the main contract without the employer’s permission.

The adjudicator’s lack of disclosure

I think that all adjudicators should take note of Fraser J’s conclusion that Dr Chern should have disclosed to Vinci that he was acting as the adjudicator in adjudication BLII. There is an obvious risk that failing to disclose such involvement will lead to a finding of apparent bias.

I think that this was best summed up by Fraser J’s analogy with adjudicators having unilateral conversations with parties:

“If unilateral telephone calls are strongly discouraged (if not verging on prohibited) due to the appearance of potential unfairness, it is very difficult, if not in my judgment impossible, for an adjudicator to be permitted to conduct another adjudication involving one of the same parties at the same time without disclosing that to the other party.”

He went on:

“Conducting that other adjudication may not only involve telephone conversations, but will undoubtedly involve the receipt of communications including submissions, and may involve a hearing. If all that takes place secretly, in the sense that the other party does not know it is even taking place, then that runs an obvious risk in my judgment of leading the fair minded and informed observer to conclude that there was a real possibility of bias. All of this can be avoided by disclosing the existence of the appointment at the earliest opportunity.”

Confidentiality is one issue that wasn’t touched on in the judgment. Could Beumer have objected to disclosure on the grounds that both adjudications were confidential and it was not up to Dr Chern to have declared his involvement to Vinci?

I suspect Fraser J would have given any such argument short shrift because the significance of Dr Chern’s appointment in both adjudications would clearly have taken precedence over any concerns as to confidentiality. In any event, it would not have been an issue if Beumer had not been running inconsistent cases in the two adjudications.

As I said in my last blog, adjudicators really do need to err on the side of caution, and it would be sensible for them to adopt the principle that, if there is any doubt as to whether an involvement constitutes a conflict of interest, this should be disclosed.

And back to Will Smith:

“Going straight to the Wild Wild West
We going straight to the Wild Wild West…”

MCMS Ltd Jonathan Cope

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