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Wednesbury unreasonableness test in adjudication

Hardly a month goes by where I don’t have an English or Scottish judgment to consider on this blog, where one party is seeking to enforce an adjudicator’s decision, the other party is resisting, in its defence raising a jurisdictional challenge or arguing there has been some breach or other of the rules of natural justice. So it was in SW Global v Morris & Spottiswood, which was heard by Lord Hodge just before the new year.

SW Global v Morris & Spottiswood

Stirling Castle was in need of a touch of TLC and Morris & Spottiswood (M&S) was employed as the main contractor to carry out the building work. In turn, it employed a sub-contractor, SW.

As so often happens, things did not go smoothly (or swiftly) and SW claimed for prolongation costs and loss and expense. The second adjudicator (Mr Bell) allowed a period of 46 weeks for the prolongation costs and awarded SW about £73,000 for loss and expense.

A to Z of jurisdictional challenges

In the enforcement proceedings that followed, M&S raised a number of grounds of challenge. To all intents and purposes, it looks like an A to Z of jurisdictional challenges:

  • There was a breach of the rules of natural justice when the adjudicator decided certain clauses of the main contract were incorporated into the sub-contract, contrary to the parties’ submissions.
  • The adjudicator showed apparent bias when he used his own knowledge and experience to fill the holes on a particular aspect of SW’s case.
  • The adjudicator “failed to exhaust his remit”, in other words, he failed to address certain issues before him.
  • There was an instance of acting ultra vires when the adjudicator followed the previous adjudicator’s decision on what was a reasonable time to complete the sub-contract works.
  • The adjudicator’s decision included contradictions, and he had acted irrationally and inconsistently. The adjudicator’s decision lacked adequate reasons.

Lord Hodge rejected them all, with reasons.

Wednesbury unreasonableness test

Despite the breadth of challenges raised, I was particularly taken by M&S’s suggestion that the adjudicator’s decision was so unreasonable that it may be open to a judicial review challenge on Wednesbury grounds. Even M&S’s own counsel accepted that it was an unusual argument, and that an adjudicator is allowed to make “glaringly obvious errors of law and fact within his jurisdiction”.

Here, M&S argued that the adjudicator had contradicted himself in his decision. He had also acted irrationally and inconsistently. These were all grounds for review.

It’s a long time since I’ve seen anyone raise the Wednesbury test in adjudication enforcement (see, for example, Shimizu Europe Ltd v Automajor Ltd back in 2002). That may be because judicial review of an adjudicator’s decision is something that is only available in the Scottish courts (because of the process of challenging decisions there). It may also reflect the way the law on jurisdictional challenges has developed, with as many doors closed by the courts as possible over the years.

Ballast plc v The Burrell Company

One of the leading Scottish authorities on challenging an adjudicator’s decision is Ballast plc v The Burrell Company (Construction Management), where Lord Reed considered the possibility of using the Wednesbury test. He concluded that, while it may be relevant, the question was really whether the adjudicator had given a decision that was a nullity. It would be a nullity if the adjudicator had:

  • No jurisdiction to decide the dispute.
  • Acted unfairly in the procedure.
  • Erred in law in a way that led to him failing to exercise his jurisdiction or acting beyond his jurisdiction.

In SW Global v M&S, Lord Hodge considered Lord Reed’s judgment. He also looked at the test of irrationality, as set out by Lord Diplock in CCSU v Minister for the Civil Service [1985] 1 AC 374.  Lord Hodge noted a court needs more to intervene when a decision containing legal or factual errors will not be overturned. He concluded that, on the facts, M&S’s complaints about Mr Bell did not reach that standard.

Until the next time

It is still unusual to find arguments that appear only rarely in the law reports in adjudication enforcement cases. I will look forward to the next novel arguments of 2013.

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