The SCL recently published a paper by HHJ David Grant, which he had presented earlier this year to a bunch of arbitrator and construction law types in Derby. The paper “Some pitfalls for adjudicators to avoid”, with its self-explanatory title, continued the themes of Coulson J’s talk “The perfect adjudicator’s decision“, which was given in May to a similar bunch of people, and which I wrote about at the time.
Both papers addressed the authors’ views on how, if adjudicators can get simple things right, their decisions are more likely to be enforceable and less susceptible to challenge on grounds of breaches of natural justice.
One aspect of HHJ David Grant’s paper caught my attention – the section on an adjudicator disclosing previous involvement with the parties. He refers to Edwards-Stuart J’s judgment in Fileturn Ltd v Royal Garden Hotel Ltd, and states that the obvious lesson from that judgment is for adjudicators to disclose. (I commented on this judgment at the time.)
HHJ David Grant goes on to comment that the judgment in Fileturn can be contrasted with his own judgment in Andrew Wallace v Noon [2009] BLR 158 (TCC). I wasn’t familiar with this earlier decision, so took the opportunity to review it. He wasn’t wrong. The facts (and judgment) in that case surprised me.
Allegations of bias in Andrew Wallace v Noon
In short, the adjudicator was appointed via an application to the RIBA. Nothing unusual there. However, during the adjudication, Mr Noon (the responding party) became aware of two relevant facts concerning the adjudicator and Andrew Wallace Ltd (the referring party):
- That the adjudicator had conducted a mediation with the referring party just days before he had been appointed in this dispute.
- The adjudicator had also been involved in an adjudication with the referring party some three years earlier.
Neither event had been disclosed by the adjudicator and, quite properly, questions were asked. The adjudicator sought to explain himself, but the referring party remained dissatisfied with the answers he gave. Eventually the matter came before the court, with the responding party resisting enforcement of the adjudicator’s decision, alleging the adjudicator was biased.
Was the adjudicator biased?
Unsurprisingly, the judgment sets out the law and the test in Re Medicaments:
“Whether those circumstances would lead a fair-minded and informed observer to conclude that there was a real possibility or a real danger… that the tribunal was biased.”
The question for the court was whether, if the test in Re Medicaments was applied to the facts, the adjudicator’s involvement in the mediation (with its unrelated subject matter) would lead a fair-minded and informed observer to think he was biased.
The court said no. It gave a number of reasons, including the fact that the adjudicator had professional qualifications, including FRICS, FCIArb and that he was a chartered arbitrator. All of these were said to be relevant. The court also decided that the adjudicator had no personal knowledge of the parties and had been appointed by RIBA, not selected by the parties.
If in doubt disclose, its best practice
I’m not sure whether I should be surprised by the professional qualifications point or not. It isn’t the first time adjudicators have been called “professionals” (see Edwards-Stuart J in Fileturn) but arguably, as an adjudicator/arbitrator, one needs to be aware of the duty to disclose relevant associations and previous appointments. (See my blog on this.)
Therefore, I was surprised that the adjudicator didn’t disclose these two events. It is arguable that the earlier adjudication was irrelevant, but to conduct a mediation with one of the parties just days before an appointment as an adjudicator, and not mention it at all at the time of the appointment appears odd to me. We all know that there are parties (and their advisors) out there who are out looking for ways to trip an adjudicator up, and it seems unnecessary to give them such ammunition.
As HHJ David Grant says “when in doubt, disclose”. I would modify that slightly “even if not in doubt, still disclose!”
Matt’s advice to adjudicators is common sense. Always disclose to an ANB even when you personally are in no doubt as to your impartiality.
At RICS we encourage (actually insist that) adjudicators disclose any and all matters within their knowledge, which could be seen to be in any way relevant to the nomination. This includes past involvements with any of the parties or their representatives.
A purpose of disclosing is to help inform RICS’s decision on whether or not to nominate a particular adjudicator. As an ANB RICS often receives representations from the parties which concern the type of adjudicator to be appointed and the nature of involvements which they believe should preclude a nomination.
RICS does not have to accept a party’s representations about alleged conflicts of interest, and we will always make our own enquiries before deciding whether to appoint a particular adjudicator. Frankly, I would expect RICS to normally nominate an adjudicator who had recently acted as a mediator in a case involving one or both parties, unless there were other matters which would influence our decision otherwise, such as he had a major falling out with a party representative during the mediation.
One of the things we want to avoid is, having received representations made by the parties, being put on the back foot after a nomination by having to deal with an allegation that we simply ignored them.
I recall an adjudication I was involved in a few years ago (a dispute under an unamended JCT Contract) where the other side’s solicitors made representations to the RICS as to who would be a good adjudicator for the dispute. Needless to say they did not tell us they had made those representations. The RICS accepted the representations without consulting us and appointed the adjudicator suggested.
The adjudicator’s decision was, in our view, at odds with the facts and the law. We later found out he was a regular speaker at events organised by the other side’s solicitors and had a close relationship with them. Whilst I doubt this relationship influenced his decision, it did leave a bad taste in the mouth of my client. It also underlined to me the importance of naming a panel of adjudicators in all construction contracts. Given the amounts often at stake in adjudication it is vital that the selection of the adjudicator is not left to the vagaries of a nominating body.
One thing that has probably changed since Marc Hanson’s adjudication a few years back is that RICS now makes it a condition of any application that we reserve the right to copy the application form and supporting documents to the non-applicant. The intention is to try and overcome issues around applicants suggesting or objecting to adjudicators without informing the other side
Parties are generally free to agree the identity of their adjudicator, though in my experience the dynamics of disputes means they often cannot agree much at all. I appreciate there can be a comfortable feeling attached to naming adjudicators in contracts, but who can say that, when a dispute arises, a named adjudicator will be able or willing to act?
The selection of an adjudicator by a nominating body like RICS is thus intended to be a default mechanism. It is inconceivable RICS would knowingly nominate an adjudicator who we knew had a conflict of interest, and we make thorough checks to ensure there is no perception that an adjudiator has an interest in the outcome of dispute. An adjudicator who takes on a nomination without revealing a potential conflict runs a very real risk of never being nominated again. But, in my view, the mere fact of a professional relationship with solicitors and surveyors who act for parties in construction disputes does not create a conflict of interest. There needs to be more to a relationship if it is to fail an objective test for impartiality.
RICS nominates around 1,000 adjudicators per year, and it is no exaggeration to say that in nearly every case parties make representations about the person to be appointed. Suggestions and objections come from both parties, though it is fair to say that most are made by referring party.
When RICS receives a request to appoint an adjudicator we have 5 calendar days in which to source someone who is suitably qualified and impartial, is willing and prepared to act within the time limits set out in contract or regulations, and communicate his/her identity to the referring party. Sadly, this doesn’t give us time to engage in a discussion with the parties about each other’s representations.
I have heard it argued that, when a party suggests a name of an adjudicator to a nominating body, then that adjudicator should be automatically precluded from nomination. I think some nominating bodies may even adopt this strategy. The problem with this is that it opens up the possiblity of parties manipulating the nomination process and making sure any adjudicators they don’t want nominated are excluded, simply by suggesting them. RICS policy is to retain our discretion as to who we nominate. Whilst we will normally consider representations we won’t be bound by them.
At a practical level, when a party suggests a name it often explains why, e.g “this adjudicator has recently undertaken an adjudication on the same contract and his nomination will save time and costs”. But even if no explanation is given, a suggested adjudicator will not be automatically precluded and may still be nominated as long as RICS has made its own checks and is satisfied he is appropriately qualified to deal with the dispute and is not conflicted. I should perhaps finish by saying that RICS will often nominate an adjudicator who is not on a list of suggestions made the referring party.