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Reminder that it’s hard to succeed with fraud allegations in adjudication

A few weeks ago I was finishing a paper on fraud, which was based on a SCL talk that I’d given a little while before. Some of you may have been there. I have to confess that it is a lot easier blogging than it is writing one of those papers: the word count is a killer! Anyway, I digress. The reason I’ve mentioned my paper is because, just as I was getting to the end of it, Alexander Nissen QC’s judgment in BM Services Inc Ltd v Greyline Builders Ltd became available and fraud was a key issue in the enforcement proceedings that he dealt with.

I thought I’d better take a look and share my thoughts on what I think is a good example of the courts applying established guidance in cases of fraud and adjudication. Think cases like SG South v King’s Head Cirencester, Speymill Contracts v Baskind, GPS Marine v Ringway and, most recently, Gosvenor v Aygun, which all tell us that there is a difference between an issue that was or could have been decided in the adjudication, and an issue raised for the first time in enforcement proceedings.

There is also some interesting stuff in there about adjudicators’ fees and it is, I think, a good example of the TCC’s continuing supporting for adjudication.

BM Services Inc Ltd v Greyline Builders Ltd

The facts are relatively straightforward.

In January 2018, the adjudicator reached a decision in BM’s favour. Greyline did not pay and the matter ultimately ended up in the TCC (where the claim was for £138,000 plus interest, VAT and legal fees). The judgment doesn’t explain the delay to December 2018, or why the adjudicator brought separate proceedings to recover his fees from both parties.

However, during the adjudication, Greyline had raised allegations of fraud. It was concerned that one of BM’s directors had colluded with someone at Mears, which led to an overvaluation of BM’s account. These allegations were raised in the rejoinder.

The issue on enforcement was whether the adjudicator dealt with the fraud allegations as ones that went to his jurisdiction (they appeared under a heading “Jurisdiction”), or whether he also dealt with them on their merits. After reviewing the adjudicator’s decision, the judge concluded that the adjudicator did both:

  • He decided that the allegations did not deprive him of jurisdiction.
  • He went on to decide the dispute, taking the fraud allegations into account on a number of occasions.

I thought it was interesting that, in support of its argument that the adjudicator did not consider the fraud allegations, Greyline tried to make something of the “standard rubric paragraph” that adjudicators like to include in their decisions. The judge didn’t think much of this argument:

“What the adjudicator is doing here is saying that he will refer to the main aspects which have been submitted to him which he considers to be relevant. From that one can take it that if something has not been referred to at all within his decision, then he did not regard it as a main aspect of the matter. Conversely, if he has referred to it, then he does consider it to be a main aspect of the matter which was canvassed before him.”

The judge noted that the fact that the adjudicator did not list allegations of fraud may well have because “the issues he listed are those raised by the pleadings”, namely repudiation and valuation and that:

“Fraud in this context is merely a piece of evidence that goes to the question of whether documents to be used in the valuation process can be regarded as having been genuinely prepared; it is not an independent cause of action, or an independent defence.”

It’s a tough one for an adjudicator. On the one hand, an adjudicator needs to include some form of wording (otherwise parties will accuse him of not considering everything and being in breach of the rules of natural justice) but, if the chosen wording is too formulaic, then its arguably of little weight. Either way, it reinforces the point that adjudicators should not be judged by the same standards as a High Court judge who is rendering a public/precedent type document. It is also worth remembering that adjudicators’ decisions are private, temporarily binding things… and can you imagine the “floodgate” type arguments that would follow, if this sort of argument was allowed to succeed? That would hardly be in keeping with adjudication’s pay now, argue later policy.

Adjudicator’s fees

The fees issue also caught my eye. The adjudicator had decided that the defendant should be liable for his fees (£16,252.50 including VAT). It seems that he sued the parties when his fees went unpaid and the claimant paid the bill (or, at least £16,000 plus the court fee). This meant that, on enforcement, a slightly smaller sum was due than the adjudicator had awarded. The judge noted that although the adjudicator’s terms provided that if one party “paid more than their share, then the other party shall reimburse the appropriate amount forthwith”, he could not summarily enforce a sum that was greater than the sum “which the claimant has itself been liable to pay”.

It may have been a technicality, but it was good to see that the judge did not allow this to get in the way of awarding the claimant the fees it had already paid. However, perhaps enforcing parties should think carefully about how they draft their pleadings when they are looking to enforce and have already paid the adjudicator’s fees (because the resisting party hasn’t), otherwise they may fall foul of this particular technicality.

The gambler in me (with a little g)

I don’t know about you, but when I read a judgment, I always enjoy trying to guess where the judgment is going without jumping to the end. I always think it spoils the fun when the answer/finding precedes the reasons (a bit like the old fashioned arbitration award where reasons were in a separate document).

I think the gambler in me would have backed enforcement when reading paragraph 9.

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