Practical Law

What happens when a dispute is referred to adjudication and the responding party argues “no dispute” because the only evidence of a dispute – the parties’ correspondence – has been marked without prejudice? Can a dispute crystallise if the only evidence of it is privileged?

In RWE Npower v Alstom Power, the court said yes. It held that:

• An adjudicator may look at without prejudice material to establish whether there was a dispute that could be referred to adjudication.
• Privilege attached to the content of the without prejudice material but it did not, on the facts of the case, extend to the fact that the exchanges had taken place.

This is good news for adjudicators. It confirms we will not breach the rules of natural justice in such circumstances.

However, there was a slight sting in the tail. The court added that the adjudicator would breach the rules of natural justice if he took into account privileged material that contained:

“…anything which was potentially disadvantageous to [the objecting party’s] pleaded case. An offer to settle on certain terms or a concession made for negotiating purposes would obviously fall into this category.”

In a previous blog post, I considered an earlier, unreported TCC decision: Specialist Ceiling Services Northern Ltd v ZVI Construction (UK) Ltd, 20 February 2004). In that case, the court had recognised that adjudicators are generally commercially aware and held that, provided the adjudicator could put the without prejudice material out of his mind, then he could proceed with the adjudication; if not, then he should resign.

What am I to take from these two decisions?

I think adjudicators need to tread carefully, but have these decisions in mind when they are considering a challenge to their jurisdiction and are faced with without prejudice material.

It is likely that an adjudicator will not breach the rules of natural justice, even if he sees offers to settle or concessions, provided he disregards them when he makes his decision. (And we know that adjudicators have discretion to disregard evidence as they see fit. I wrote about that last week.)

How can the parties help the adjudicator, if there is a “no dispute” argument like this?

If the responding party raises a “no dispute” argument, the parties should both think carefully about how they present their evidence to the adjudicator. I have no doubt that adjudicators are more than capable of disregarding without prejudice material when they make their decisions, but why run the risk of a court deciding otherwise on enforcement?

If one follows the logic of RWE Npower, I think that parties need do little more than present the adjudicator with the relevant without prejudice material with any offers or concessions redacted. It may not take a party long to do this; it will enable the adjudicator to see that there is a dispute that has crystallised; and will save everyone the time and cost of a failed challenge on enforcement.