REUTERS | Alex Domanski

Natural justice in adjudication in 2012

When Coulson J came to prepare for the second edition of his book, Coulson on Construction Adjudication (Oxford University Press, 2011), he must have realised just how far the law on natural justice had moved forward in the three years since the first edition was published (in 2007). Instead of just one chapter, the second edition now contains three chapters on natural justice, dealing in turn with general principles, bias (actual and apparent) and the right to a fair hearing (including procedural issues, oral hearings and reasons).

Coulson J explained that it was necessary to have what he calls “a fuller study” of the rules of natural justice because:

“…it has become increasingly common for the losing party in an adjudication to endeavour to avoid the consequences of the adjudicator’s decision by claiming that the decision was reached in breach of the rules of natural justice” (paragraph 11.01).

The last 18 months

The second edition states the law on 1 November 2010 and, in the past 18 months, this area of adjudication jurisprudence has continued to expand, with natural justice challenges seemingly making up the majority of the recent adjudication cases before the TCC. It seems parties are still not accepting adjudicators’ decisions and are coming up with wide-ranging arguments to resist enforcement. This applies both north and south of the border.

As Jackson LJ notes in the preface to the second edition:

“Litigation about adjudication is satellite litigation… This is not a head of expenditure which contractors, sub-contractors or building owners welcome.”

He goes on to hope that parties will use the second edition to:

“…resolve their differences about the jurisdiction of adjudicators, validity of appointment, enforceability of awards and so forth.”

I’m sure many of us echo those sentiments, but until such agreement is forthcoming, here are some of the natural justice “highlights” of the last 18 months.

Considering submissions (or not)

In PC Harrington v Tyroddy, Akenhead J held that by failing to consider aspects of the sub-contractor’s defence, the adjudicator had unwittingly fallen below the standard required to have an enforceable decision. It did not matter that the adjudicator acted honestly, what he did was “manifestly and seriously unfair” to the sub-contractor.

In contrast to PC Harrington v Tyroddy (and earlier cases like Pilon v Bryer), in Urang Commercial v Century Investments, Edwards-Stuart J held that it was not a question of jurisdiction when the adjudicator declined to consider a party’s counterclaim, but rather a case of whether he asked himself the right question (Bouygues v Dahl Jensen). On the facts, the adjudicator did ask the right question, although he got the answer wrong, and so his decisions were enforced (as the adjudicator adopted a very narrow question to ask himself, it was easy for him to rule out all of the counterclaims).

A similar issue arose in NAP Anglia v Sun-Land Developments. Here Edwards-Stuart J held that the adjudicator had not breached the rules of natural justice when, among other things, he allowed the contractor to put in one extra submission, which gave the contractor “both the first and last word”. (Some may argue that there should only ever be three submissions: the referral, response and a reply, which would always give the referring party the “first and last word”.)

Although not quite the same point, in Berry Piling v Sheer Projects, Edwards-Stuart J held that the adjudicator had not breached the rules of natural justice when he watched a video about water leaks and then commented on it in his decision.

Adjudicator using own methodology

It is a fine line between a case where an adjudicator takes into account material that was not before the parties, or where he applies his own knowledge and experience to resolve a particular issue, and one where he uses the material before him and gets the balance just right.

In Hyder Consulting v Carillion Construction, Edwards-Stuart J confirmed there was no breach of the rules of natural justice when the adjudicator adopted a particular methodology in his calculations, which the parties had not commented on.

A similar approach was adopted in Scotland by Lord Ballantyne in Paton and another, Re Judicial Review, where he held that the adjudicator had addressed issues and reached findings that were open to him from the parties’ submissions and their supporting documents. At no point was the adjudicator “going off on a frolic of his own” or applying his knowledge and experience to matters that were not before him. Lord Ballantyne helpfully set out seven principles that apply to questions of natural justice in the context of adjudication in Scotland.

In contrast to Paton, in SGL Carbon Fibres v RBG and Carillion Utility Services v SP Power Systems, the Scottish court took a different view. In both instances (Lord Glennie in Paton and Lord Hodge in Carillion), the court held that the adjudicator used his own knowledge and experience without giving the parties a proper opportunity to comment. Therefore, on both occasions, the adjudicator breached the rules of natural justice and his decision was not enforced.

Informal advice not disclosed to the parties

The position may be clear if the adjudicator uses his own knowledge, but what happens if he informally asks someone else a question? Is that something that he should disclose to the parties?

Lord Menzies said yes in Highlands and Islands Authority v Shetland Islands Council, finding that the advice may have been informal, but it was still legal advice. On the facts, the issue was central to the adjudicator’s task and it affected the majority of the sum he awarded. It certainly was not “peripheral or irrelevant” and the parties should have been given an opportunity to make submissions to him.

Despite being a Scottish decision, shock waves ran through the adjudication world.

Preliminary views documents

At first instance in Lanes Group v Galliford Try Infrastructure, HHJ Waksman QC held the adjudicator was in breach of the rules of natural justice when he served a preliminary views document that was very similar to his final decision in circumstances where the responding party had not served its response.

However, Jackson LJ in the Court of Appeal reversed this judgment, finding that the adjudicator’s decision was not tainted by bias or apparent bias. He also noted that it was a “provisional view, disclosed for the assistance of the parties, not as a final determination”. In this regard, he drew an analogy with judges who often set out their provisional views to the parties at an early stage.

After the intitial shock at HHJ Waksman QC’s judgment, there was a calming of the waters when the Court of Appeal’s judgment was handed down!

Without prejudice material

Although there is no prohibition on it, parties are “encouraged” not to disclose to an adjudicator without prejudice material. This was confirmed in Ellis Building Contractors v Goldstein, where Akenhead J held there was no apparent bias just because the adjudicator had knowledge of a without prejudice letter, even if it was material that he ought not to have seen.

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