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When the adjudicator gets it wrong

I recently read a paper by Edwards-Stuart J, published by the SCL. He called it “When the adjudicator gets it horribly wrong” and discussed what options, such as CPR Part 8, are available to parties when an adjudicator makes a “fundamental mistake”. Edwards-Stuart J cited three examples of adjudicator mistakes:

  • Adopting an incorrect method of calculation.
  • Attributing a sum of money to the wrong party.
  • Leaving something out of the calculations.

I was still pondering his words and the nature of these “fundamental mistakes” when, a few days later, I read Edwards-Stuart J’s judgment in Urang v Century and Eclipse. Among other things, this judgment was concerned with an alleged mistake by the same adjudicator in two separate adjudications. The three parties involved (same referring party (Urang), different responding parties (Century and Eclipse)) had agreed to have matters heard together as the issues were almost identical.

Urang v Century and Eclipse

Essentially, in both cases, Urang, had not been paid the “sum due” on an interim certificate (spookily both numbered 10) and the responding parties had not served a valid withholding notice.

Urang referred both disputes to adjudication in June 2010 and Mr Pontin was appointed as the adjudicator in each. Both responding parties raised counterclaims, alleging defects, loss of revenue, and claiming liquidated and ascertained damages. The adjudicator decided both disputes in favour of Urang and, in each case, decided that he could not consider the counterclaim because they were matters that were:

“properly the subject of a Withholding Notice. Absent such a Notice, I am unable to assess a value therefor in this adjudication.”

Enforcement proceedings

As the responding parties failed to pay the sums awarded by the adjudicator, Urang started enforcement proceedings and the matter came before Edwards-Stuart J. One of the questions that he had to decide was whether the adjudicator had acted contrary to the rules of natural justice by excluding the counterclaim.

On the facts he decided not. He decided that the adjudicator had asked himself the correct question (could the counterclaim be used a defence to Urang’s claim), even though he got the answer wrong.

What is interesting is that in the paragraphs that precede this decision (paragraphs 28 and 29), Edwards-Stuart J sets out the fact that the need for a withholding notice is limited to “sums stated as due in interim valuations” and not other claims (whether under the contract or in damages). Thus, the adjudicator was wrong to reach the decision he did (namely that there should have been a withholding notice) but, because he asked himself the right question, that was OK.

I wonder how this decision sits with other cases where the adjudicator failed to consider a party’s defence or counterclaim? Cases like Pilon v Bryer and PC Harrington v Tyroddy, which deal with an adjudicator’s jurisdiction, were not referred to in the judgment, but I discussed them (and other Scottish cases) just a few weeks ago. At the time I said:

“As an adjudicator, it is important to ensure that your decision covers all the issues that have been referred to you. If you overlook a submission or part of the evidence (intentionally or inadvertently), then not only are you in danger of breaching the rules of natural justice, but you are providing ammunition for your decision to be challenged in enforcement proceedings. As Akenhead J said (in PC Harrington), it doesn’t matter that the adjudicator honestly believed the final account issues fell outside his jurisdiction, his ‘honest view was wrong’ and he ‘committed a breach of natural justice’.”

Confused? I am.

2 thoughts on “When the adjudicator gets it wrong

  1. As Matt rightly pointed out last week, sixty days is a long time without a reported enforcement decision! One reason for this might be that after a decade of enforcement cases there aren’t that many issues left to decide. Some issues, however, seem to keep cropping up.

    I think that what, at first blush, appears to be a conflict between the decision in Urang and the decisions in Pilon and PC Harrington isn’t actually that difficult to reconcile. The principle that if an adjudicator asks himself the right question but comes to the wrong answer then his decision will still be enforceable dates back to the decision in Bouyges -v- Dahl Jensen, some 11 years ago. As long as the adjudicator confines himself to the correct issues his decision should be enforceable even where he or she comes to the wrong conclusion, however perverse that might be. In Urang the judge observed that a timely and valid withholding notice is required to challenge a claim for payment of a certified sum, whereas such a notice is not required to raise (for example) an abatement defence against a claim for payment of sums which have simply been applied for. In Urang the adjudicator applied his mind to this issue, but came to the wrong conclusion. That is not the same thing as an adjudicator failing to consider aspects of the defences, as happened in Pilon and PC Harrington.

    That said, in one of my cases GPS Marine Contractors Limited v Ringway Infrastructure Services Limited, which came before the TCC in February 2010 Ramsey J found that an adjudicator’s refusal to admit a Rejoinder and therefore to consider part of the Responding Party’s case, for which no permission had been sought and which had been served just two days before the decision was due, did not amount to a breach of the rules of natural justice.

    I think the reason this issue keeps coming before the court is that it will always be a question of fact and degree, in each case, whether or not an adjudicator has failed to do something that he should have. This should not be confused with an adjudicator doing something that he or she should have, although perhaps wrongly!

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