REUTERS | Eduardo Munoz

An adjudicator dealing with all defences, or not

Establishing whether an adjudicator had done his job properly is a difficult area and one that has troubled the courts on many occasions over the years. We have all read judgments following enforcement proceedings where one party alleged the adjudicator breached the rules of natural justice because he failed to consider a particular issue or defence. It is always a question of fact how the case turns out and whether the court enforces the adjudicator’s decision or not.

The issue came up again recently in Stuart-Smith J’s judgment in KNN Colburn v GD City Holdings and also in Akenhead J’s judgment in CG Group v Breyer Group. Jonathan has written about both judgments (see Read all about it: adjudicator didn’t commit a serious breach of the rules of natural justice and Take note of when your adjudication timetable starts). However, he did not specifically address the argument that Stuart-Smith J’s judgment may be in conflict with Akenhead J’s judgment.

Failure to address issues or defences

The principles that apply to whether an adjudicator has failed to address issues or defences were summarised by Coulson J in Pilon Ltd v Breyer Group Ltd:

“The adjudicator must attempt to answer the question referred to him. The question may consist of a number of separate sub-issues. If the adjudicator has endeavoured generally to address those issues in order to answer the question then, whether right or wrong, his decision is enforceable.

If the adjudicator fails to address the question referred to him because he has taken an erroneously restrictive view of his jurisdiction (and has, for example, failed even to consider the defence to the claim or some fundamental element of it), then that may make his decision unenforceable, either on grounds of jurisdiction or natural justice.

… the adjudicator’s failure must be deliberate. If there has simply been an inadvertent failure to consider one of a number of issues embraced by the single dispute that the adjudicator has to decide, then such a failure will not ordinarily render the decision unenforceable.

… any such failure must also be material… In other words, the error must be shown to have had a potentially significant effect on the overall result of the adjudication.”

In some instances, what the adjudicator has (or has not done) will be very clear, in others the lines will be very much blurred.

CG Group and KNN Colburn

In CG Group, Akenhead J rejected both of the main contractor’s arguments and held that the adjudicator’s decision should be enforced. The adjudicator was not in material breach of the rules of natural justice and he did have jurisdiction. In reaching this conclusion, he noted that it was the parties’ submissions and evidence that set the agenda for an adjudicator’s decision and that:

“…adjudicators need only address the factual and legal issues as adumbrated in the exchanged submissions and evidence. They can not be criticised on natural justice grounds if they do that. Jurisdictionally, adjudicators must address the dispute (or question) referred to them but they must also address all defences. Thus, even if the defending party on a payment claim against it raises a set off relating to defects which have never been raised before, the adjudicator needs to address and rule upon it, even if it is simply a rejection on the basis factually that it was never raised before or legally that there was no timeous withholding notice.” (My emphasis.)

In KNN Colburn, Stuart-Smith J enforced the adjudicator’s decision and rejected the contractor’s argument that the adjudicator failed to consider a material line of defence because his decision did not mention something raised in the contractor’s rejoinder. In reaching this conclusion, he noted that:

“…an inadvertent failure to consider one of a number of issues will ‘ordinarily’ not render the decision unenforceable… Since the essence of the adjudication process is that the real dispute between the parties should be resolved, it seems to me that the touchstone should be whether the inadvertent failure means that the adjudicator has not effectively addressed the major issues raised on either side. Clearly, as [22.4] of Pilon makes clear, the failure must be material in the sense of having had a potentially significant effect on the overall result of the adjudication. The burden of showing materiality must rest on [the contractor], which asserts it. When confronted by a reasoned decision, the Court should tend to look for coherent reasoning underpinning the adjudicator’s decision rather than hastening to a conclusion that an omission renders a decision unjust. That said, however, the decision whether an adjudicator has fairly disposed of the dispute that was referred to him will depend upon the facts of each case.” (My emphasis.)

Interestingly, while Stuart-Smith J relied heavily on the judgment in Pilon, Akenhead J did not mention it, looking instead to the judgments in ABB Ltd v Bam Nuttall Ltd and the earlier Court of Appeal judgment in Carillion Construction Ltd v Devonport Royal Dockyard, where the court was interested in the question that was referred to the adjudicator, suggesting that it would only be in rare circumstances that the court would interfere with the adjudicator’s decision.

Are the judgments in conflict?

Is there a conflict between the two judgments?

On the one hand, it is arguable that by not following strictly Akenhead J’s approach that an adjudicator must deal with all defences, Stuart-Smith J has started to water down that requirement. On the other hand, that he was simply saying that a decision does not have to refer to every defence, not that the adjudicator could avoid dealing with those defences (although how you would demonstrate this point escapes me!).

However, it is a fine line and the most obvious conclusion (which I’m sure the courts would adopt) is that the “inadvertent failure” to consider a defence which both Coulson J and Stuart-Smith J refer to is merely an exception to Akenhead J’s view that adjudicators must deal with all defences. Even if the failure to consider a defence is not inadvertent, following Pilon, it still has to result in a material breach of the rules of natural justice for the decision to be unenforceable.

I am sure this is not the last we will hear on this subject and it will be interesting to see how this point is developed further. Perhaps it is apt to end with Chadwick LJ’s words in Carillion, where he said parties should be discouraged from:

“simply scrabbling around to find some argument, however tenuous, to resist payment”.

Leave a Reply

Your email address will not be published. Required fields are marked *