What steps can an adjudicator take to safeguard a decision against a challenge for breach of the rules of natural justice? When will a court refuse to enforce an award on natural justice grounds? And should adjudicators even be under a duty to comply with the rules of natural justice?
These are all topics that were debated at the Adjudication Society’s annual conference last week.
Should adjudicators be under a duty to comply with rules of natural justice?
As originally conceived, adjudication was intended to be “rough justice“. A quick means of provisionally resolving disputes in ongoing projects to keep the cash flowing. Beyond the broad duty to act “impartially” (section 108(2)(e), Construction Act 1996), adjudicators are (unlike arbitrators) not under any statutory duty to act fairly, or to adopt fair procedures. They operate in a much tighter timescale and their decisions are of course only binding unless or until the dispute is determined in court or arbitration.
The panellists on the “Dragon’s Den” morning panel session mooted whether, as a matter of principle, adjudicators should be obliged to comply with the rules of natural justice. This issue was also much discussed in the workshop sessions in the afternoon, where one of the workshops posed the question, “What is natural justice?”.
Regardless of what Parliament might originally have intended, the courts have consistently held that adjudicators are under a duty to comply with the rules of natural justice (AMEC Capital Projects Ltd v Whitefriars City Estates Ltd; Cantillon Ltd v Urvasco Ltd). This duty requires them not only to act impartially but also to adopt fair procedures and to give proper consideration to both parties’ arguments and submissions.
Safeguarding awards against natural justice challenges
The workshops considered recent TCC decisions on challenges to enforcement of adjudicators’ awards on grounds of breach of natural justice. While it remains relatively rare for the courts to refuse enforcement of an award on such grounds, the case-law provides useful pointers to assist adjudicators in preventing their decisions being vulnerable to challenge on natural justice grounds.
Determining the dispute on an uncanvassed “third way”
The consensus was that adjudicators should think carefully before communicating their provisional views on an issue or dispute to the parties for comment (as in Galliford Try Rail v Lanes Group). From a practical perspective, such a step could prolong the proceedings and increase costs, as the parties would undoubtedly serve further submissions, and may seek to adduce additional evidence.
However, the situation would be different if there is a potentially decisive argument that occurs to the adjudicator, but that neither party has run. In that case, before determining the dispute on that basis, the adjudicator should first raise this argument with the parties and invite submissions. This would avoid the kind of challenge that succeeded in Balfour Beatty v Lambeth and, more recently, in ABB Ltd v BAM Nuttall Ltd. (In ABB v BAM, in his decision, the adjudicator relied on a clause in the sub-contract that neither party had referred to or relied on, and that he had not raised with the parties for their comment. The TCC held that this was a failure in the process and a material breach of the rules of natural justice.)
At the conference, there was discussion in the workshops about whether ABB v BAM would have been decided differently if one or both of the parties had been unrepresented by lawyers, and the parties had been looking to the adjudicator to make sense of the contractual issues in the case.
An adjudicator is entitled to apply his own experience and knowledge in determining the dispute (as acknowledged in Farrelly (M&E) Building Services v Byrne Brothers, where the adjudicator’s particular expertise in NEC contracts was one of the reasons he was appointed). But adjudicators should exercise caution before deviating from the approaches advocated by the parties, and should canvas the parties’ views if considering matters not advanced by them.
One adjudicator who participated in the workshops expressed the view that, in appropriate cases, holding a hearing would flush out these sorts of difficulties, as the adjudicator can pose pertinent questions to the parties or their representatives.
Considering all submissions and arguments
Although it was held in KNN Coburn LLP v GD City Holdings Ltd that an inadvertent failure to consider one of a number of issues in the rejoinder did not render a decision unenforceable, the workshops generally thought it sensible for adjudicators to identify, and comment upon, all of the main points argued by the parties to prevent the decision from being vulnerable to challenge.
Previous adjudicators’ decisions
The workshops also discussed the circumstances in which an adjudicator could, or should, take account of a previous adjudicator’s decision in light of the decision in Arcadis UK Ltd v May & Baker Ltd (t/a Sanofi).
A previous decision on a dispute arising under the same contract or the same project may be persuasive or germane. It may even be binding on the parties if it determined a contractual issue that arises equally in the second adjudication on the same contract.
Where there are successive adjudications under a single contract, and a party draws an adjudicator’s attention to a previous decision on a dispute arising under that contract, the second adjudicator should be astute to review that decision to ensure the dispute referred to him is not in substance the same dispute that was previously adjudicated upon. This had actually happened to a participant in one of the workshop sessions. Issues determined by the first adjudicator had been “re-packaged” in the referral to the second adjudicator, but they amounted in essence to the same dispute.
Cautionary tales
The discussions in the plenary and break-out sessions of the conference demonstrated that, although they rarely succeed, challenges in the courts to adjudicators’ decisions on natural justice grounds provide invaluable guidance and important cautionary tales for adjudicators.
