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Walker and the burden of proof: where are we after Aspect?

Just over a year ago, I wrote a piece for this blog considering where the burden of proof lay if an adjudicator’s decision was challenged in subsequent litigation. If the adjudicator had, for example, decided that a contractor was entitled to additional payment for a claimed variation, would the employer have to disprove that entitlement, or would the contractor have to prove it in litigation once a challenge was instituted? The orthodox position had always been thought to be the latter, but obiter comments by Gloster LJ in Walker Construction v Quayside Homes suggesting that the former was correct had considerably muddied the waters.

Now, of course, we have the Supreme Court’s decision in Aspect v HigginsI thought I would re-visit my earlier blog to see where we are in light of that decision, and whether the position is any clearer. While those who were hoping that Aspect would address this important issue directly will be disappointed, I do think that any attempt to use an adjudicator’s decision to reverse the burden of proof is, notwithstanding Gloster LJ’s comments, ultimately unlikely to be successful.

Specific observations by the Supreme Court on Walker

Walker did receive brief mention in the Supreme Court’s judgment, with the court noting that:

“[a] differently constituted Court of Appeal in [Walker v Quayside] indicated, obiter, that it would follow the decision of Akenhead J in the present case, without having had drawn to its attention the present Court of Appeal’s decision, given during the interlude between submissions and judgment in the Walker case. It follows from the present judgment that the obiter observations in the Walker case were wrong and must be overruled, and that the present appeal should be dismissed.”

On the face of it, while this passage obviously sweeps up any indications in Walker that, contrary to the Court of Appeal and Supreme Court decisions in Aspect, there was no implied term entitling the paying party to repayment if the decision transpired to be wrong, I think it would be a stretch to argue that all of Gloster LJ’s obiter observations, including those in relation to the subsequent burden of proof, have been overruled.

Indeed, there is not necessarily anything inconsistent in principle between the actual findings of the Court of Appeal and Supreme Court in Aspect and Gloster LJ’s comments as to the incidence of the burden of proof. At heart, her Ladyship was simply addressing the analytical difficulty of a claimant being able to recover money without having proved that the payment made was not properly due (that is, that the adjudicator’s decision was wrong).

That problem is acutely apparent in the implied term analysis favoured by the Supreme Court. If there is an implied term that the paying party is entitled to recover its money if the dispute is subsequently decided in its favour, then if proceedings were issued and no evidence led by either party, would it not be difficult to escape the conclusion that an entitlement to repayment had not been established?

The implied term approach in Aspect

In my earlier blog, I suggested that whether or not that was the case would depend on the wording of the implied term, and whether or not establishing that the adjudicator’s decision was wrong formed a necessary ingredient of the cause of action. We now have some clarity from Aspect as to what the implied term will be, namely that:

“…Aspect must have a directly enforceable right to recover any overpayment to which the adjudicator’s decision can be shown to have led, once there has been a final determination of the dispute.”

This formulation, coupled with some of the Supreme Court’s other comments does, I think, sow the seeds for the orthodox approach (that the adjudicator’s decision does not switch the burden of proof) to take root in future.

Importantly, a distinction seems to be drawn between the cause of action that is established once the dispute has been determined (if the adjudicator’s decision transpires to be wrong), and the determination of the dispute itself. As Lord Mance said:

“At a cash flow level, Higgins remains entitled to the payment unless and until the outcome of legal proceedings… leads to a contrary conclusion. But at the deeper level of the substantive dispute between the parties, the parties have rights and liabilities, which may differ from those identified by the adjudication decision, and on which the party making a payment under an adjudication decision must be entitled to rely in legal proceedings… in order to make good a claim to repayment on some basis.

In finally determining the dispute between Aspect and Higgins, for the purpose of deciding whether Higgins should repay all or any part of the £658,017 received, the court must be able to look at the whole dispute. Higgins will not be confined to the points which the adjudicator in his or her reasons decided in its favour… That follows from the fact that the adjudicator’s actual reasoning has no legal or evidential weight. All that matters is that a payment was ordered and made, the justification for which can and must now be determined finally by the court.”

To my mind, this is really a re-statement of what was always thought to be the correct position. The court will determine the parties’ underlying rights and obligations (that is, determine the dispute afresh) and if, once these have been determined, they differ from those which the adjudicator found to exist, the adjudicator’s decision will be shown to have resulted in a recoverable over-payment. In other words, the dispute will be determined as if the adjudicator’s decision had never been made, and the right to re-payment (if any) will simply be a by-product of that determination.

That being the case, it is not difficult to see that a party that asserts an entitlement within the underlying dispute, but which calls no evidence in support of that entitlement, is unlikely to get very far (just as would have been the case when the dispute was initially determined in adjudication). While this analysis may give rise to some interesting pleading conundrums (and arguments as to which party should be pleading their case first), it would not move the burden of proof and give the adjudicator’s decision a status which, for all the reasons set out in my previous blog, it does not merit.

Conclusion

It is unfortunate that the Supreme Court did not deal head on with Gloster LJ’s comments on burden of proof. At some point, someone will no doubt latch onto those comments to argue the point in a subsequent case. Nevertheless, not only is any such argument likely to be unattractive on a practical level, but I think Aspect has made it substantially more difficult in principle too.

Keating Chambers David Sheard

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