Practical Law

The keen-eyed among you will note that this is the third post in a row where I have talked about adjudication enforcement cases in which natural justice issues have arisen either directly or indirectly.

I promise that I haven’t got some strange fetish for such matters. Nor do I think that such challenges are necessarily de rigueur amongst aggrieved parties. Rather, I think it’s just that, like buses, we don’t get any cases for a while that deal with a point (here that is natural justice), and then three come along at once.

In the finale to this trilogy of posts, I want to discuss the very interesting Scottish case of Van Oord UK Ltd v Dragados UK Ltd. Lord Braid’s judgment makes for a jolly good read because, not only is it very well written and refreshingly brief, but it also concerns one of the cornerstones of the natural justice challenge war chest, namely what happens when the adjudicator reaches their decision on a basis not canvassed with the parties. The origins of such challenges can be traced back 20 years (which is positively ancient when it comes to adjudication jurisprudence) to cases such as Balfour Beatty Construction Ltd v Lambeth LBC.

Van Oord UK Ltd v Dragados UK Ltd

This is a case about a sub-contract for the “dredging of silts, sands, gravel and glacial till”, works forming part of the Aberdeen harbour expansion project, which Van Oord UK Ltd (the sub-contractor) entered into with Dragados UK Ltd (the main contractor). We’ve seen these parties in court before over this project. Last time they were arguing over liability for works omitted from the sub-contract, although I think this is the first time we’ve seen one of the parties’ seven adjudications end up in enforcement proceedings.

We are concerned with adjudication number six, which was all about the sub-contractor’s claim for an extension of time (EOT) and prolongation costs related to four compensation events, including CEN 048 (Delayed Access to Open Quay Work) and CEN 055 (Late Delivery of Remaining Caissons), method-related charges and certain “weather compensation events”.

In September 2021, the adjudicator issued his decision, awarding the sub-contractor an EOT and prolongation costs for CEN 048 (but not CEN 055 or the two other compensation events). He also awarded the weather compensation events and the method-related charges.

When the sub-contractor sought to enforce the adjudicator’s decision, among other things, the main contractor argued that the decision was vitiated by a breach of the rules of natural justice in relation to CEN 048. This was because:

“… the adjudicator selected as a baseline a programme which not only was not contended for by either expert, but which both experts had given reasons for rejecting; and he made an award to the pursuer based upon a critical date – 31 July 2019 – which was two days earlier than the date of 2 August 2019 proposed by the pursuer for CEN 048. Neither the date of 31 July 2019, nor the consequences of selecting it as the critical date, was canvassed with the parties.”

Ultimately, the judge agreed and the enforcement proceedings failed entirely.

Was there an opportunity afforded for injustice to be done?

I imagine that the parties got a bit of a shock when they read the adjudicator’s decision and his findings that, not only was the baseline programme the 15 March 2019 programme (which had been expressly rejected by both parties’ delay experts), but also that the critical date of CEN 048 was 31 July 2019, two days earlier than the sub-contractor had proposed.

The judge was clear that fairness demanded that the adjudicator should have given the parties an opportunity to address him on those issues, particularly so that the parties could have dealt with the consequences of that critical date. This was particularly relevant to the main contractor who argued that it would have advanced a time bar argument under clause 61.3 because CEN 048 would have been issued more than seven weeks after the critical date of 31 July 2019.  The judge reminded us of the words of Lord President Clyde (in Barrs v British Wool Marketing Board):

“The test is not ‘Has an unjust result been reached? but ‘Was there an opportunity afforded for injustice to be done?’ If there was such an opportunity, the decision cannot stand.”

Adjudicator’s frolic

This is a stark example of where an adjudicator has gone off on a frolic, just as it was in ABB Ltd v Bam Nuttall Ltd (as I mentioned in my last post). As Lord Braid acknowledged (at paragraph 23), it is not always easy to identify where an adjudicator has overstepped the mark:

“The line between an adjudicator going off on a frolic of their own, on the one hand, and, on the other, making legitimate use of their experience to analyse material which has been lodged, and commented on by parties, before reaching a decision not contended for by either party, is not always an easy one to draw, particularly when it is remembered that an adjudication decision reached by an adjudicator who has embarked upon the latter exercise will be enforced by the courts even if wrong.”

Standing back for a moment, some may ask why an adjudicator would ever consider deciding a dispute on a different basis to that put forward by the parties. After all, parties have usually made comprehensive submissions and adjudicators should decide between the cases set out in those submissions: they are not acting as expert determiners who often have scope to decide a case on a different basis to that advanced by parties.

However, in reality there will often be instances where adjudicators make findings that differ to varying degrees from the cases put forward by parties. This is usually as a result of different findings of fact on multiple sub-issues, for example an adjudicator might find that the length of an extension of time due is somewhere in between the parties’ assessments. Erring on the side of caution every time and putting multiple points to the parties could arguably lead to overkill, and adjudicators need to exercise sound judgement as to when parties should be approached.

In a nutshell, I think that the approach adjudicators should adopt was neatly summarised by Coulson J (as he was then) in Primus Build Ltd v Pompey Centre Ltd and another, where he said that:

“An adjudicator cannot, and is not required to, consult the parties on every element of his thinking leading up to a decision, even if some elements of his reasoning may be derived from, rather than expressly set out in, the parties’ submissions. But where, as here, an adjudicator considers that the referring party’s claims as made cannot be sustained, yet he himself identifies a possible alternative way in which a claim of some sort could be advanced, he will normally be obliged to raise that point with the parties in advance of his decision.”

At the time, Matt said that it was a case all adjudicators should take note of. That still rings true today.