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TCC’s useful reminder of limits of natural justice challenges to adjudicators’ decisions

I acknowledge that the Ukraine crisis is at the forefront of our minds at the moment and I confess it feels somewhat strange to be writing a blog about a construction dispute, which pales into insignificance in comparison. However, I appreciate that you will have clicked on this blog to read about a TCC adjudication enforcement case, and so I will do my best to do it justice.

The case in question is Bilton and Johnson (Building) Co Ltd v Three Rivers Property Investments Ltd, which was heard by Mr Jason Coppell QC (sitting as a deputy High Court judge). I admit that the case doesn’t tell us anything new about the law of adjudication, but it is a useful reminder of the limits of natural justice challenges to adjudicators’ decisions, as well as the fact that whether an adjudicator’s findings are correct as a matter of law is not material to whether their decision should be enforced.

Bilton and Johnson (Building) Co Ltd v Three Rivers Property Investments Ltd

This is a case about (among other things) the completion date of refurbishment works carried out by Bilton and Johnson (Building) Co Ltd (the contractor) on an industrial estate in Thame, Oxfordshire under a JCT Design and Build Contract, 2016 Edition.

The parties’ dispute was referred to adjudication and, in September 2021, the adjudicator decided that the contractor was entitled to an extension of time and that the sum of £230,000 odd (that had been deducted by way of liquidated damages) should be repaid to it.

Three Rivers Property Investments Ltd (the employer) did not pay the sum the adjudicator awarded and so the contractor commenced enforcement proceedings. In those proceedings, the employer raised two challenges:

  • The adjudicator’s conclusions on when the parties’ contract was formed breached the rules of natural justice.
  • The adjudicator’s failure to address its rectification defence meant he had taken a restrictive view of his own jurisdiction.

The natural justice challenge

The judge rejected the employer’s natural justice challenge in the strongest terms, stating that:

“… the Adjudicator’s precise reasoning – that the parties had entered into the Original Contract first and then the Signed Contract – does not appear to have been put forward by either party does not come close to establishing that there was a breach of natural justice.”

The judge made it clear that the employer had had a full opportunity to make submissions as to which contractual terms applied and why, and did not suffer any unfairness. He then applied the helpful distinction Coulson J (as he was then) drew in Primus Build Ltd v Pompey Centre Ltd, and explained that this was plainly a case where the adjudicator’s reasoning was derived from, rather than expressly set out in, the parties’ submissions (and so did not have to be put to the parties in advance of his decision). It was not a case where the adjudicator had derived a new and different basis for the contractor’s claims and had not put that new case to the employer.

I think that it’s important for parties and their representatives to take heed of the judge’s comments, particularly when an unsuccessful party is deciding whether to resist enforcement of an adjudicator’s decision. Simply because an adjudicator has reached a finding that is not expressly based on the parties’ submissions, it does not automatically follow that the adjudicator will have breached the rules of natural justice. Provided the adjudicator’s conclusion was derived from the parties’ submissions, then it is unlikely there will be a breach of natural justice (perhaps this is the answer to the question posed at the end of my last blog post?). This may make parties and their representatives uneasy, but it makes commercial sense given that adjudication is (as we’re always told) a rough and ready (and speedy) process of dispute resolution that is temporarily binding.

The position can also be contrasted with more extreme examples of adjudicators reaching decisions that were not derived from the parties’ submissions, otherwise known as the adjudicator going off on a frolic of their own. For example, in ABB Ltd v Bam Nuttall Ltd, where the adjudicator’s decision turned on a clause in the contract the parties had not referred to. As Akenhead J put it:

“There can be no doubt in my view that the adjudicator failed to comply with the rules of natural justice in that he clearly had regard to Clause 11.1A in circumstances in which it is common ground that this clause was not relied upon or even referred to by the parties from start to finish of the adjudication and that the adjudicator did not raise it with the parties before he published his decision.”

The jurisdiction challenge

The judge said that the employer’s complaint that the adjudicator failed to determine its rectification defence:

“… proceeds from the unpromising starting point that the Adjudicator’s decision contains a section entitled ‘Rectification’ which spans 21 paragraphs and more than four pages in total.”

You can probably guess where this one is going…

After setting out the adjudicator’s findings, the judge said that it was unarguable that the adjudicator failed to address the rectification defence or did so in a manner that was unfair to the employer. The judge also made the point that:

“Whether or not the Adjudicator’s reasoning in rejecting the rectification defence was correct as a matter of law is not material to whether his Decision should be enforced. Only a deliberate failure on the Adjudicator’s part to address the rectification defence could avail the Defendant (see Pilon, cited in §10 above); manifestly there was no such failure….”

I think this is another useful reminder to parties and their representatives. Simply because the adjudicator’s conclusions may be wrong as a matter of law (and I am not suggesting that is the position here), it does not give rise to an entitlement to challenge the adjudicator’s decision.

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