In recent months, we haven’t seen many challenges to adjudicator’s decisions based on allegations that the adjudicator breached the rules of natural justice, and so it came as a bit of a surprise last week to see two handed-down by the same judge on the same day!
Jefford J has dealt with these cases in her customary detailed manner, leaving no stone unturned. My thoughts on RGB P&C Ltd v Victory House General Partner Ltd and JJ Rhatigan & Co (UK) Ltd v Rosemary Lodge Developments Ltd are as follows.
Before turning to look at the two cases in detail, it is worth mentioning briefly a few of the key cases and there is probably no better place to start than with Carillion Construction Ltd v Devonport Royal Dockyard, where the Court of Appeal established that it is only where an adjudicator acted in serious breach of the rules of natural justice that his decision would not be enforced. Chadwick LJ went on to say that:
“It should be only in rare circumstances that the courts will interfere with the decision of an adjudicator. The courts should give no encouragement to the approach adopted by [Devonport] in the present case; which… may, indeed, aptly be described as ‘simply scrabbling around to find some argument, however tenuous, to resist payment’.
It is only too easy in a complex case for a party who is dissatisfied with the decision of an adjudicator to comb through the adjudicator’s reasons and identify points upon which to present a challenge under the labels ‘excess of jurisdiction’ or ‘breach of natural justice’.”
Akenhead J’s judgment in Cantillon Ltd v Urvasco Ltd is also worth mentioning, as he concluded that the breach must be more than peripheral, it must be material. Further, that the breach will be material if the adjudicator failed to bring to the parties’ attention a point or issue that they ought to have been given an opportunity to comment on if it is either decisive or of considerable importance to the outcome of the dispute, and is not irrelevant or peripheral.
There are a number of ways to show that there has been a material breach. For example, a party can establish that the adjudicator:
- Went off on a frolic of his own (Herbosh-Kiere Marine Contractors Ltd v Dover Harbour Board).
- Undertook his own analysis without giving the parties an opportunity to comment (Balfour Beatty Construction Company Ltd v Lambeth).
- Failed to take into account key aspects of a parties’ case (Pilon Ltd v Breyer Group plc (where there was a deliberate decision not to take into account a defence) and Whyte and Mackay Ltd v Blyth & Blyth Consulting Engineers Ltd (where the adjudicator had made an inadvertent error, which Lord Malcolm said was a significant omission amounting to a breach of natural justice)).
RGB P&C Ltd v Victory House General Partner Ltd
The parties’ dispute involves the refurbishment of Victory House, Leicester Square, London. Work started in June 2014 under a letter of intent and was due to complete in May 2016, although, because of significant delays, practical completion was not achieved until September 2017.
The parties have taken part in four adjudications. This post involves adjudication number four, but I have discussed an earlier one (see here). Last time, it was all about the installation of a transformer, with RGB alleging that the adjudicator had gone off on a frolic of his own. This time around, the adjudication was concerned with RGB’s final account (including its claim for an extension of time and loss and expense), and it was Victory House complaining that the adjudicator had acted in breach of the rules of natural justice because he:
- Undertook his own analysis of the extension of time RGB was entitled to, without any reference to the parties and without giving them the chance to advance their own case on his delay analysis. In other words, it alleged he went off on a frolic of his own.
- Failed to address key aspects of Victory House’s defence in respect of claims made by sub-contractors that were included in RGB’s claim.
Was the adjudicator frolicking?
It is worth starting by looking at Balfour Beatty v Lambeth, as it was decided quite a few years ago and I’m sure many of you reading this will not have been practicing when it was decided!
In that case the adjudicator sought help from a programming expert who adopted a particular method of analysing delay, which was then included by the adjudicator in his decision. The parties had not been given the opportunity to comment on this methodology, and neither was aware of the adjudicator’s approach until they received his decision. HHJ LLoyd QC found that the adjudicator had not acted impartially and therefore declined to enforce his decision.
Victory House argued that the same had occurred in this case, but Jefford J disagreed and concluded that the adjudicator did not adopt a methodology that the parties had no opportunity to comment on:
“What the adjudicator did could not properly be described as adopting a methodology which he had given the parties no opportunity to comment on. He adopted the methodology on which RGB’s case was based but did so, having made decisions which were, in my view, well within his jurisdiction, as to the changes in logic links which Ms Turner had made.”
I think that much of what I said in my 2018 blog about that case not leading to adjudicators going off on a frolic could be applied to this case as well. I’ll leave you to click through, rather than repeating myself here.
Did the adjudicator overlook some issues?
In terms of the sub-contractor claims and whether they were overlooked (as Victory House alleged), Jefford J distinguished between the principles applicable to failing to deal with issues or sub-issues (paragraphs 51-53), with those applicable to failing to address evidence (paragraphs 54-56).
She concluded that:
“… even if the adjudicator inadvertently overlooked either some element of Victory House’s defences or some element of the evidence, this did not render the decision so unfair that it should not be enforced or mean that he did not deal with the dispute referred to him.”
Thus, the adjudicator’s decision was enforced.
JJ Rhatigan & Co (UK) Ltd v Rosemary Lodge Developments Ltd
This judgment very much turns on its facts and concerned the enforcement of an adjudicator’s decision awarding Rhatigan some £1.7 million. Again, the allegation was that the adjudicator had breached the rules of natural justice by failing to take into account the evidence contained in one witness statement and by failing to deal with a key defence, namely that there was no intention on RLD’s part to create legal relations at a meeting where Rhatigan alleged a settlement had been agreed. RLD said this meant the adjudicator had “failed to deal with a potentially determinative matter” and it relied on Lord Malcolm’s judgment in Whyte and Mackay.
Jefford J rejected the challenge and granted summary judgment. In doing so, she accepted that the adjudicator may have overlooked a witness statement, but did not think it was a material breach. The adjudicator’s finding that the parties had reached a binding oral agreement demonstrated that he had considered and expressly concluded that the parties did not need to execute the deed of variation.
Interestingly, she said that because the adjudicator did not err, she did not need to decide whether to follow Whyte and MacKay on whether an inadvertent failure to deal with a key defence might amount to a breach of natural justice, but she did say that:
“… such an inadvertent failure is far more likely to be an error within the adjudicator’s jurisdiction and not a matter that amounts to a breach of natural justice. A comparison may be made with the position where a judge makes such an error. That might be a ground of appeal but it would not normally amount to a breach of natural justice in the conduct of the proceedings.”
Adjudicators’ pro forma wording
The judgment also looks at the standard wording that most adjudicators use in their decisions, wording like the following (which this adjudicator had used):
“I have confined [m]y explanations to the essentials only but nevertheless I have carefully considered all the evidence and submissions although not specifically referred to in this Decision.”
I think what Jefford J says about this wording is the more interesting point coming from this judgment, not least because, as confirmed in the judgment, this paragraph has been referenced in three previous reported cases!
Jefford J confirmed that the fact that a paragraph is a “standard paragraph” did not mean it wasn’t true and accurate. A party ought to be able to take the paragraph (and the adjudicator’s decision) at face value. However, there was always the possibility of a party demonstrating that the adjudicator had not considered all of the evidence, as was the case here with the witness statement. She said there was a real prospect of success on that argument but it was not a material breach because the evidence “was not in any sense crucial”.
So adjudicators need to be aware that simply including such pro forma paragraphs in their decisions is not a “get out of jail card” in circumstances where they’ve failed to take account of all of the evidence.