Case Note by HC121105102518

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									Adjudication and the Principles of Natural Justice: Costain Ltd v Strathclyde Builders Ltd1 and
London & Amsterdam Properties Ltd v Waterman Partnership Ltd2.

by HEW R. DUNDAS

1.        INTRODUCTION

Natural justice is, perhaps, akin to the proverbial elephant in being hard to define precisely but ‘you know it when you
see it’. Whether through the applicable provisions of the Model Law or through the Arbitration Act 1996 ss.33 and 68
(and a limited amount of case law since), the meaning and scope of ‘natural justice’ in arbitration is sufficiently clear not
to give rise to undue difficulties. In other forms of dispute resolution, development of the applicable principles of
natural justice remains in its infancy. A number of recent decisions have pinpointed failures of natural justice but
without laying down any clear general principles; however, two recent complementary decisions, one in the Court of
Session dated 17 December 2003 and one in the TCC dated 18 December 2003 (an extraordinary coincidence), have
been delivered addressing this issue although it was central to the Scottish case and merely one of several key issues
in the English one. In particular, the Scottish judge has set out his view of the meaning of natural justice in adjudication
in a comprehensive manner and, consequently, this article focuses on the Scottish decision with added comment from
                                                                        3 4 5
the English one since both refer substantially to the same authorities .

2.        THE FACTS: COSTAIN

                                 6
In 2001 Costain had contracted with SBL for the construction of 45 flats and other works at 1544 Great Western Road,
Glasgow. Various architect's certificates were issued certifying sums due to Costain but SBL claimed deduction of
liquidated and ascertained damages (LADs) from the sums certified in respect of certificates 20-25. Disputes arose
including one as to SBL's entitlement to make such deductions. Consequently, in May 2003 Costain issued a notice of
adjudication, the parties agreed on an adjudicator and Costain issued a referral notice requesting, inter alia, that the
adjudicator should decide that SBL should repay forthwith the amounts withheld by way of LADs. The adjudicator
issued a reasoned decision on 17 June 2003, that SBL should repay forthwith the full amount withheld as LADs plus
interest and certain costs. Costain sought to enforce the decision in terms of the contract and SBL accepted that it had
no defence save as to breach of natural justice.
The adjudicator had been required to reach his decision by 13 June; by 10 June he had received all of the parties’
respective submissions and he wrote to the parties seeking an extension because he wished "to discuss one point in
particular with [his] appointed legal adviser"; this was granted. The result of the adjudicator's discussions with his legal
adviser was not made known to either SBL or Costain, nor was either told of the terms of those discussions. Neither
party made any request to be told the terms or to see the result. Neither party was invited by the adjudicator to
comment or make submissions upon the advice tendered by the legal adviser, and neither party requested any
opportunity to do so.
SBL contended that the advice given to the adjudicator was material to his decision so that his failure to disclose the
substance of that advice and to invite comments or submissions thereon prior to arriving at his decision had been a
breach of the principles of natural justice (PNJ). The decision might have been influenced by advice that was
erroneous, incomplete, irrelevant or otherwise exceptionable, but upon which the parties had had no opportunity to
comment.

1
          Costain Ltd v Strathclyde Builders Ltd; Outer House; Lord Drummond Young 17 December 2003.
2
          London & Amsterdam Properties Ltd v Waterman Partnership Ltd; [2003] EWHC 3059 [TCC]; HHJ Wilcox
          QC; 18 December 2003
3
          Caveat: part of Lord Drummond Young's analysis proceeds from the starting point that adjudication is a form
          of arbitration, an erroneous notion first propounded by himself in Deko Scotland (next footnote), a decision
          subsequently heavily criticised since its analogising of adjudication and arbitration led to the Housing Grants,
          Construction and Regeneration Act 1996 (HGCRA) being interpreted in accordance with, inter alia, 18th
          century Scots law authorities, a twist of interpretative history which could never have been intended by the
          drafters of the legislation. This erroneous notion has now been robustly rejected by the Inner House of the
          Court of Session (i.e. Court of Appeal) in its decision in Gillies Ramsay Diamond (following footnote),
          delivered precisely one week after judgment in the present case. This article will ignore the subsequently-
          rejected analogy with arbitration.
4
          Deko Scotland Ltd v Edinburgh Royal Joint Venture Ltd 2003 SLT 727, at para 9.
5
          Gillies Ramsay Diamond v PJW Enterprises Ltd Second Division, Inner House, Court of Session 24
          December 2003.
6
          Scottish Building Contract Contractor's Designed Portion Sectional Completion Edition with Quantities
          (January 2002 revision), as amended by the parties.
                                                 1                                                     03:01 05/11/2012
In the enforcement proceedings, Costain argued that no breach of PNJ had occurred although it accepted that they
applied to adjudicators' decisions; the adjudication process was a summary and sometimes a blunt procedure so that
PNJ must apply only so far as the limitations of the procedure permitted. If the decision had been arrived at in a
manner that was basically fair, it should be enforced; application of PNJ would be a question of fact and degree in each
individual case. Further, if the decision had derived from a process which the complainant had not objected to, such
process was basically fair; it was also significant that the adjudicator had treated each party equally. There had been
nothing in the decision or reasons to suggest that he had attributed any significance to the discussions with the legal
adviser. SBL could not point to any reasoning that had not been argued by the parties or put by them. Consequently
the decision was fair. In any event, even if there had been a breach of natural justice it was not substantial and
         7
relevant . Finally, even if there had been a breach of PNJ, SBL had acquiesced in that breach in not responding to the
adjudicator’s fax of 10 June.
SBL responded that it was not necessary to demonstrate actual prejudice, the possibility being sufficient. Further, the
requirements for acquiescence were absent and, consequently, the adjudicator's breach of PNJ was sufficient to
invalidate his decision.

3.          THE FACTS: WATERMAN
Waterman was the structural and civil engineer on L&A’s project to develop a shopping centre in Milton Keynes. L&A
contended that it had suffered losses as a result of Waterman’s failure, through professional negligence, to release
critical elements of design information by set dates therefore causing delays to the steelwork contractor, William Hare
Ltd (Hare), and in turn causing critical delays to the project as a whole; L&A claimed that it had had to pay Hare
£1,324,969 in this regard. Waterman denied liability. On 10 August 2000 L&A wrote to Waterman putting it on notice
that there might be a claim, stating that “we are currently carrying out a detailed review of the impact of your poor
performance on the delays to the project and the consequential losses we have suffered.” On 4 September 2000
Waterman replied, stating, “[we] gave firm commitments to meet the programme on the condition that frozen
information was provided prior to those dates. This fundamental condition was not met …”
On 4 April 2002 L&A wrote to Waterman seeking its help in relation to an adjudication referral by Byrne Brothers, a
formwork sub-contractor; the letter made reference to the referral document and to appendices submitted by Byrne,
such appendices containing a large amount of engineering and other detail, and, in addition, the drawings relied upon
by Byrne were to be furnished to Waterman. The L&A/Byrne dispute was adjudicated by Mr R Juniper.
                                                            8
On 11 June 2002 L&A’s Solicitors wrote to Waterman :
            “We have now completed a detailed review of your performance on the Project. … your practice failed to
            perform … in particular with the express commitments made in regard to the provision of design information.
            In breach of its obligations …. These slippages caused critical delay to the steelwork package … which in
            turn directly delayed … works carried out by Byrne … and other following trades. In order to maintain the
            opening date for the Project …… L&A … acceleration agreements with the works contractors … the
            continuing delays in Waterman’s structural information … [resulted] in substantial delay claims from Hare and
            other following trade contracts. L&A have [paid] … in excess of £6.4 million as a result of such delays
            [excluding Byrne] …… Waterman’s failings caused losses of at least £2.5 million to our client. … We are not
            currently in a position to set out in full L&A’s claim … [re] Byrne. However, we are now in a position to set out
            our client’s claim with regard to the loss incurred [re] Hare.” (emphasis added)
The claim at this date was therefore being presented in the broadest of terms without the particularity that would
enable Waterman to engage and accept or reject the whole or parts of the allegations and thereby formulate a sensible
legal or commercial response.
A second letter on 11 June dealt with the steelwork contract with Hare, stating:
          “£1,889,463 was paid to Hare … the evidence … supports L&A’s contention that these sums were                  paid
as a direct consequence of Waterman’s default. …. Due to the level of detail involved in analysing the losses … due
to your practice’s default, L&A intends to reserve its position on this         claim, and deal with it by way of a separate
adjudication, if necessary.”
Correspondence then ping-ponged backwards and forwards with Waterman repeatedly seeking clarification of the
details of L&A’s claims and L&A providing only general information; typically, Waterman asked (letter of 12 July):
             “… [L&A] alleges that, in breach of its obligations, [Waterman] failed to meet these commitments, issuing
            substantial elements of its design information late or with substantial amounts of information missing. Please
            identify precisely (a) what elements of design information were allegedly issued late (b) on what dates your
            client alleges that those elements were issued (c) when your client alleges they should have been issued (by
7
          Discain Project Services Ltd v Opecprime Development Ltd [2001] BLR 285 was authority for the proposition
          that, if an adjudicator's decision was to be challenged on account of a breach of PNJ, the breach had to be
          substantial and relevant.
8
          All subsequent L&A/Waterman correspondence was between respective solicitors.
                                                 2                                                03:01 05/11/2012
           reference to programmes requirements, etc.) (d) what information was missing (e) the source of our client’s
           obligation to provide such design information.”
L&A’s response was to send five volumes of documents, characterised by Waterman as “just raw and unfiltered data”;
however, on 22 August L&A wrote “We note that you confirm that [you have] much of the documentation you originally
requested in your letter of the 12 July 2002 and that the remainder of your request are in the form of detailed
particulars of claim”. In fact, no such confirmation had been or was given and vital documentation was not served until
the adjudication in relation to the steelwork claim delay was actually under way.
On 3 December 2002 Waterman wrote to L&A in detail, commencing:
           “… [Waterman] cannot accept, modify or object to L&A’s claims until [we are] given the opportunity to
           consider the information, opinions and documents that will form L&A’s case. Otherwise what is a very
           substantial dispute will be subjected to adjudication over a short time period when [Waterman] will be finding
           out for the first time the full case that is being made against [us]. That is not what is intended by the
           adjudication process. If L&A takes this approach we will of course be making appropriate objections.”
and continuing:
           “[Waterman] agrees that Bovis identified dates for the release of construction information … in October 1998.
           [We make] no admissions as to the actual criticality of the information requested and cannot accept or reject
           L&A’s case as to criticality until L&A provides the analysis upon which it relies to claim that the information
           was actually critical. [L&A claims] that [Hare] confirmed that it was able to comply with Bovis’ construction
           programme MK01A dated 4 September 1998 on the condition that the structural design information was
           released in accordance with key information dates. [We have] no knowledge of this as [we were] not part of
           the discussions with Hare. [We have] requested further information in this respect which has been refused by
           L&A. Until that information is provided, [we] cannot accept or reject this part of L&A’s case.”
The correspondence continued in this vein with Waterman continually trying to get specific details of the claims against
it and L&A declining/failing/refusing to produce it.
L&A then sought the appointment of an adjudicator and requested the RICS to appoint Mr Juniper on the basis of his
prior knowledge of the project. Waterman objected because he was a chartered surveyor and the dispute was a
professional negligence claim against a structural engineer. Mr Juniper was duly appointed and made initial directions.
Waterman again objected on six grounds: (i) he might have previous knowledge gained in a previous adjudication
which was confidential; (ii) he was not suitably qualified to make a judgment on the professional negligence of an
engineer; (iii), because he had purported to direct a response when no referral had been made; (iv) the referral notice
                                                                                             9
exceeded 20 single sided A4 pages as provided for in the adjudication agreement ; (v) the time restraints of the
adjudication process prevented Waterman having any reasonable opportunity of meeting L&A’s case; (vi) the
adjudicator’s proposed remuneration terms were not agreed and were inconsistent with paragraph 25 of the Scheme.
                                                   10
Objection (v) leads to the “natural justice” issue .
The adjudicator responded, inter alia, that he had no prior knowledge of any relevance and, as regards (v) merely
noted that there existed a “difference of opinion between the parties as to whether Waterman had been ‘ambushed””.
Waterman reserved its right to object to the submission by L&A of further material by way of reply, which properly
ought to have been submitted with the referral; that reply contained a witness statement by L&A’s quantum expert
exhibiting a considerable body of further evidence, evidence which was available at the time of the referral notice but
had not been served. It was not made available to Waterman before service of a reply. The adjudicator would not rule
upon the acceptability of that additional evidence without L&A being heard, stating “… I will continue to bear in mind
the complaint made in order to avoid any unfairness when considering and weighing the evidence”. Waterman was
therefore in no little difficulty since the adjudicator was clearly minded to accept the additional evidence and because
Waterman was at a disadvantage in dealing with the additional quantum evidence served with the reply without the
assistance of its professional adviser who was not available until two weeks later.
In effect, Waterman’s two years of frustrated attempts to obtain adequate details of the case against it left it seeing the
case for the first time as part of the adjudication process giving it only six days to reply.

4.       THE LAW AND THE DECISION: SCOTLAND
(a)      PNJ and Judicial Supervision The Lord Ordinary held that the case turned on the principles according to
which judicial control may be exercised over adjudicators in Scots law, which were the same as the well-established




9
         L&A had submitted over 1,000 pages.
10
         Space limitations governing this article preclude addressing the other issues in any detail but, in effect,
         Waterman lost 5-0; HHJ Wilcox QC’s analysis of “was there a dispute” at paragraphs 117-149 is of particular
         importance.
                                              3                                               03:01 05/11/2012
                                                  11
rules that govern the judicial control of arbiters . Those rules included application of PNJ, i.e. that the adjudicator
must be impartial and must give each side a fair opportunity to present its case. The fact that a decision was
contractually binding supported the exercise of judicial control, to prevent the enforcement of any decision that was
ultra vires or in breach of PNJ. However, while the strictness of the time limits clearly had to be taken into account
when applying PNJ, it did not render those principles irrelevant or inapplicable. Further, the existence of power to
obtain "such information and advice as he considers necessary on technical and on legal matters subject to giving prior
notice to the parties together with a statement or estimate of the cost involved" did not affect the fundamental basis on
which judicial control was exercised.

(b)        PNJ and the Fair Opportunity to Present a Party's Case Certain minimum standards of conduct were required
from adjudicators, and those standards were found in the well-established PNJ. The existence of bias was not
essential to the principle that parties must be given a fair opportunity to present their respective cases. It was
necessary to examine the manner in which the principle had been formulated and applied in previous decisions: in
                                                                                  12
Scots law, this principle had been affirmed in a number of important authorities . Similar principles had been applied
                                                                                      13
in a case involving a statutory tribunal which determined the valuation of wool , first examining the wool in the
presence of, inter alia, a representative of the producer, then retiring to consider their decision in the presence of the
Wool Board's personnel but excluding the producer's representative. The tribunal’s decision was set aside on the basis
that there had been a possibility of injustice. Although Costain had placed considerable emphasis on the parties having
been treated equally, while equality was clearly material to PNJ, it did not address the second main principle, the
putting of one’s case: it was no answer to say that neither side had been allowed to present its case. The
adjudicator's understanding of the facts or the law or both might be either incorrect or incomplete, and hearing the
parties’ arguments allowed him to evaluate his reasoning critically and correct any errors. If both were prevented, the
result could still be in breach of PNJ.

(c)         Decisions on PNJ and Adjudication                  The application of PNJ to adjudication had been considered in
                                                  14
a number of recent English TCC decisions in all of which it had been accepted that PNJ applied. In particular, in
Balfour Beatty Judge Lloyd QC had asked “Is the adjudicator obliged to inform the parties of the information that he
obtains from his own knowledge and experience or from other sources and the conclusions which he might reach
taking their sources into account?… it is now clear that, in principle, the answer may be: Yes. Whether the answer is
                                                  15
[‘yes’] will depend on the circumstances....” The most recent English authority dealing with the application of PNJ to
                                                                                                 16
adjudicators was the decision of Judge Seymour QC in RSL v Stansell where he had stated that:
            "It is elementary that [PNJ] require that a party… should know what is the case against him and should have
            an opportunity to meet it.... It is essential… for an adjudicator… to give the parties… the chance to comment
            upon any material, from whatever source, including the knowledge or experience of the adjudicator himself,
            to which the adjudicator is minded to attribute significance in reaching his decision".

(d)      Application of PNJ to Adjudication                The general principle, i.e. that each party must be given a fair
opportunity to present its case, was the overriding principle and everything else was subservient to it. Subject thereto,
and to any express provisions in the parties' contract, procedure was entirely in the control of the adjudicator and, in
considering what was fair, it was important that adjudications be conducted according to strict time limits;
consequently the time available for comment on any particular matter might have to be severely restricted. It was also
important that the procedure in adjudication was designed to be simple and informal and the fairness requirement


11
          The erroneous quasi-arbiter theme; the Lord Ordinary commented “I should add that neither party
          challenged the view that the rules governing arbitration were at least of some relevance to adjudication.”
12
          E.g. In Inland Revenue v Barrs, 1961 SC (HL) 22 where Lord Reid stated (p30): "[T]his at least is clear: no
          tribunal, however informal, can be entitled to reach a decision against any person without giving to him some
          proper opportunity to put forward his case”.
13
          Barrs v British Wool Marketing Board, 1957 SC 72; NB the admission in Gilles Ramsay Diamond by Lord
          McFadyen that he had been wrong, in an earlier case, to have categorised an adjudicator as a statutory
          decision-maker.
14
          Including Balfour Beatty Construction Ltd v London Borough of Lambeth [2002] BLR 288, Try Construction
          Ltd v Eton Town House Group Ltd [2003] BLR 286, and RSL (South West) Ltd v Stansell Ltd [2003] EWHC
          1390 (TCC).
15
          Undermining the Lord Ordinary’s Deko-based argument, Judge Lloyd also said “However, the time limits, the
          nature of the process and the ultimately non-binding nature of the decision all mean that the standard
          required in practice is not that which is expected of an arbitrator. Adjudication is closer to arbitration than an
          expert determination, but it is not the same....”
16
          at paragraph 32.
                                                  4                                                    03:01 05/11/2012
should not place any undue burden on either the adjudicator or the parties; all that it will normally require is that each
party should be permitted to comment. The Lord Ordinary sought to draw some general guidelines normally applicable:
       (i) If the referring party makes written contentions in support of its case, the other party must be given an
                                                 17
       opportunity to make similar contentions ; if the contentions of either party contain material that is not touched
       upon in the contentions of the other party, the latter should be given an opportunity, however short, to comment
       on the additional material.
       (ii) An adjudicator is normally given power to use his own knowledge and experience in deciding the question in
                18
       dispute ; if the adjudicator merely applies his own knowledge and experience in assessing the contentions,
       factual and legal, made by the parties, there was no requirement to obtain further comments. If, in contrast, the
       adjudicator uses his own knowledge and experience in such a way as to advance and apply propositions of fact
       or law that have not been considered by the parties, it will normally be appropriate to make those propositions
                                                                                       19
       known to the parties and call for their comments, possibly in a short time scale .
       (iii) An adjudicator may also be given power to require parties to give additional information or to carry out tests,
                                          20
       or to carry out such tests himself ; if such powers were exercised, he should make any additional information or
       the results of any tests known to the parties, and call for comments.
       (iv) An adjudicator may be given power to obtain from other persons such information and advice as he
                                                            21
       considered necessary on technical or legal matters ; if such a power was exercised, the position was similar to
       that outlined in (iii) above.
       (v) No distinction should be drawn between issues of fact and issues of law. An adjudicator will not usually be a
       lawyer and must depend for information and advice about the law on others, whether the parties or his legal
       adviser.

(e)       Does the Breach of PNJ Result in the Possibility of Injustice rather than Actual Injustice?       SBL
                                                                                22
argued from authority that there was no need to demonstrate actual injustice ; this was correct, Black and Barrs being
binding in Scotland. In any event, in practice it would frequently be extremely difficult to discover whether any actual
prejudice had been caused by a breach of PNJ and the mere fact of breach should be a ground for challenge so that
justice could be seen to be done. It was important that confidence in the adjudication process should be maintained
and that required adjudicators to be seen clearly to give parties a fair opportunity to present their arguments.

(f)       Application of PNJ to the Present Case The Lord Ordinary found the application of the foregoing legal
principles to the present facts to be the most difficult part of the present case but, ultimately, concluded that SBL’s
arguments had been sufficient to disclose a breach of PNJ with consequent possible injustice even if no actual injustice
was apparent.

(g)       Must the Breach of PNJ be Substantial?          Costain had argued that challenge by reason of a breach of
PNJ required that breach to be substantial and relevant; it was for the party challenging the decision to establish that
the breach was so. In support of that proposition, counsel referred to Discain v Opecprime where Judge Bowsher QC
had stated: "I stress that an unsuccessful party in a case of this sort must do more than merely assert a breach of the
rules of natural justice to defeat the claim. Any breach proved must be substantial and relevant". The Lord Ordinary
concurred, noting that in Black a clear breach of PNJ had been disregarded because the decision had gone in favour
of the complainant. However, this was not sufficient to overcome the ‘potential prejudice’ issue.

(h)       Acquiescence     Costain also argued that SBL had acquiesced in any breach of PNJ, neither party asking
to be told what was to be discussed between the adjudicator and his legal adviser, and neither party asking for an
opportunity to comment. SBL responded that, for a plea of acquiescence or waiver to succeed, it was necessary that
the pleader should have conducted its affairs differently in reliance on the other party's ‘acquiescent’ conduct; there
was no suggestion of any such act or omission on Costain's part. The Lord Ordinary considered that Costain’s
submission was not directed to acquiescence in the conventional sense but to the question of the fairness of the

17
          NB the express provisions of cl.41A.6.2 of the Scottish Building Contract.
18
          e.g. cl.41A.6.5.1.
19
          Note “normally”; in Checkpoint Ltd v Strathclyde Pension Fund [2003] EWCA Civ 84, an exception was
          upheld by the Court of Appeal.
20
          e.g. cl.41A.6.5.3 and 4.
21
          e.g. cl.41A.6.5.7.
22
          Cf the opinion of Lord President Clyde in Black v John Williams & Co (Wishaw) 1923 SC 510, where
          reference is made to "any possibility of injustice" as the test of whether the court should interfere; likewise, in
          Barrs (fn. 13 above), the test put forward was "Was there an opportunity afforded for injustice to be done?".
                                                 5                                                    03:01 05/11/2012
procedure adopted and that there was some force in this argument. However, PNJ was of the greatest importance
while the significance of a proposed procedure might not be immediately apparent, particularly given the rapid time
limits; consequently, only a clear case of acquiescence could be relevant to the issue of a breach of PNJ. The present
case was not one such.

(i)       Conclusion The Lord Ordinary concluded that SBL had stated a relevant defence to Costain's claim for
summary decree, the latter not satisfying the test therefor, i.e. that the question of law that arose as to the relevancy of
SBL’s arguments admitted a clear and obvious answer in Costain’s favour. In these circumstances, he refused
Costain’s motion for summary decree.

5.         THE LAW AND THE DECISION: ENGLAND
HHJ Wilcox QC considered that L&A’s additional quantum information had been provided towards the very end of the
adjudication only because it was apparent that its case was in trouble without it; the information had formed no part of
the exchange of views between the parties prior to the commencement of the adjudication and none of the supporting
documents and information relating to quantum had been provided to Waterman prior to the service of the referral
notice. The adjudicator did not seem to have appreciated that he ought to have considered whether there were any
grounds on which L&A should be permitted to submit such late evidence.
Although counsel for L&A had submitted that there had been no question of there being an ambush in this case and
that, had L&A stood on its strict rights in the adjudication, the process would have been far shorter, the judge
considered that that contention had failed to recognise that L&A had chosen not to reveal its case as to causation and
quantum until the adjudication had commenced and even then the evidence submitted was incomplete, thereby
necessitating a substantial amount of additional evidence very late in the process. There had clearly been an
evidential ambush and L&A’s decision to have withheld the information requested the previous year had clearly been
deliberate, as had been the decision to serve the extensive additional evidence at the time of the referral.
Counsel further submitted that even if Waterman had been ambushed that was of no relevance: the adjudicator had
made his decision and both the HGCRA, the contract and case law made it clear that it must be complied with. In
response, counsel for Waterman played the “breach of PNJ” card because the adjudicator had based his decision on
materials that Waterman could not have properly dealt with and he could not therefore be considered impartial.
                                                23
Both parties had cited Macob v Morrison where Dyson J had considered two challenges to the validity of the
adjudicator’s decision based on alleged breaches of the rules of natural justice. Judge Wilcox considered this case
                               24
along with Glencot v Barrett where Judge Lloyd had said “It is accepted that the Adjudicator has to conduct the
proceedings in accordance with the rules of natural justice or as fairly as limitations imposed by Parliament permit.” He
                                                                                  25
also considered his own decision in Try Constructions v Eton Town House and other recent authorities (covered
                                                                           26
above in the Scottish section) including Discain v Opecprime (No1) where Judge Bowsher had agreed with the
statement of Judge Lloyd in Glencot and had said that if a court, on a Part 24 application, formed a strong provisional
view that a challenge based on alleged breach of PNJ was hopeless, the resisting defendant would not be able to
show that there was a live triable issue between the parties to defeat the claim, which had a realistic as opposed to a
fanciful prospect of success. Judge Wilcox agreed.
                                          27
Further, In Balfour Beatty v Lambeth , Judge Lloyd had said that the Scheme made regard for the rules of natural
justice more rather than less important; because there was no appeal on fact or law from the adjudicator’s decision, it
was all the more important that the manner in which he reached his decision should be beyond reproach. However,
Judge Wilcox continued, in determining whether a party has been treated fairly or in determining whether an
adjudicator has acted impartially, it was very necessary to bear in mind that the point or issue which was to be brought
to the attention of the parties must be one which was either decisive or of considerable potential importance to the
outcome and not merely peripheral or irrelevant. It had become all the more necessary that, within the rough nature of
the process, decisions were still made in a basically fair manner so that the system itself continued to enjoy the
confidence it had now apparently earned. The provisional nature of the decision also justified ignoring non-material
breaches.
                   28
In RSL v Stansell Judge Seymour had observed:
           “The introduction of systems of adjudication has undoubtedly brought many benefits to the construction
           industry in this country, but at a price. The price, which Parliament and to a large extent the industry have
           considered justified, is that the procedure adopted in the interests of speed is inevitably somewhat rough and

23
          Macob Civil Engineering Ltd v Morrison Construction Ltd [1999] BLR p156.
24
          Glencot Development and Design Company Ltd v Ben Barrett & Son Contractors Ltd [2001] 80 Con LR.
25
          Try Constructions Ltd v Eton Town House Group Ltd [2003] BLR p286.
26
          Discain Projects Services Ltd No.2 2001 BLR.
27
          Balfour Beatty v London Borough of Lambeth [2002] BLR p288.
28
          RSL (SW) Ltd v Stansell Ltd [2003] EWHC 1390.
                                               6                                             03:01 05/11/2012
           ready and carries with it the risk of significant injustice. The risk can be minimised by Adjudicators
           maintaining a firm grasp on the principles of natural justice and applying them without fear or favour. The risk
           is increased if attempts are made to explore the boundaries of the proper scope and function of adjudication
           with a view to commercial advantage”. (emphasis added)
Judge Wilcox agreed with counsel for L&A that mere ambush did not necessarily amount to procedural unfairness, this
depending upon the case. It might be an important part of the context in which the adjudicator was required to operate
and in which his conduct might fall to be judged in the light of the fundamental common law requirements statutorily
underpinned in s108(2)(e) of the Act.
However, the adjudicator had recorded in his decision that Waterman’s quantum expert had “submitted some
comments and raised concerns” but he had nowhere dealt with the question as to whether Waterman had had
sufficient time to answer and rebut the new (and very late) evidence, nor had he found that Waterman had not needed
an extension; he had merely noted that he had not had the power to have granted the extension Waterman sought.
Further, he had referred to the further evidence as ‘additional information’ but, Judge Wilcox considered that had been
new evidence supporting L&A’s existing case on quantum which could and should have been adduced much earlier.
In addition, the adjudicator had found that the Hare settlement was reasonable by relying on the very evidence about
which Waterman had complained and in the absence of the expert quantum evidence which Waterman had not had a
fair opportunity to adduce. The adjudicator did not appear to have appreciated that, in accordance with PNJ, he should
either have excluded L&A’s supplemental evidence, or should have given Waterman a reasonable opportunity to deal
with it; however, under the applicable rules he was precluded from taking the latter course because L&A had declined
to agree to the necessary extension of time. He should therefore have excluded the evidence thereby complying with
the requirement of natural justice but he had not done so; instead he had avoided a decision as to whether or not the
evidence should be admitted and had then based his decision upon that evidence without giving Waterman a proper
opportunity to deal with it. That had been a substantial and relevant breach of natural justice.
                                    29
Judge Wilcox went on to suggest that where a dispute was complex, involving both the evaluation of the activities of
a number of parties over a long period of time and issues of professional negligence and where the project was
substantially complete, resolution of the dispute was best suited to arbitration or litigation. Even where an adjudicator
was prepared to exercise, firmly and impartially, the powers given to him under the Scheme to investigate, control and
manage the hearing of a dispute there might well be cases which because of their complexity and/or the conduct of a
claimant are not susceptible of being adjudicated under the Scheme fairly and thus impartially. Inter alia, the scheme
did not envisage that there should be a provisional resolution of a dispute by an adjudicator at all costs - that would be
far greater an injustice and mischief than that which the Act had been enacted to remedy.
Judge Wilcox concluded that for the purposes of Part 24 Waterman had demonstrated a substantial live and triable
issue as to the adjudicator’s jurisdiction to make the decision which L&A sought to enforce based upon the
adjudicator’s failure to act impartially.

5.        COMMENT
                                                                                                        30
Obviously, readers might reasonably say: as regards Costain, refer to Arbitration Act 1996 s37(1)(b) . But there is no
equivalent of that subsection in the HGCRA and, as the Lord Ordinary correctly observed, the very short timescales
applicable in adjudication limit the opportunities available to the parties to engage in argument. While one's instinctive
reaction to the facts might well have been that the failure of either party to take any interest in the adjudicator’s
discussions with his legal adviser was sufficient to have prevented him from tripping up on PNJ, reliance on instinct in
such an area is, as usual, dangerous. Similarly, as regards Waterman, “it was obvious …” But, to an adjudicator
dealing ‘on the hoof’ and under severe time pressure with a long-planned ambush was it really so obvious ?
Following Costain, there remains a balance to be struck between the adjudicator’s necessary decision-making process
and the necessity to engage the parties, at least to some degree. The judgment is qualified by use of the word
"normally" and does not rule out exceptional circumstances necessitating a different approach. However, any
adjudicators considering themselves to be in such exceptional circumstances would have to be ready to justify such a
position and, if only for prudence’s sake, the Lord Ordinary’s guidelines should be followed.
Following Waterman it is clear that the courts expect adjudicators to take a robust approach to procedural and other
issues, to the extent that, as would have happened in Waterman, L&A’s case would have collapsed for failure of proof
had the adjudicator refused admission of L&A’s new evidence. In such circumstances, the general presumption is that
an arbitrator would admit material clearly of significant relevance to the issues to be decided with consideration of costs
implications to follow; an adjudicator in the 28/42 day time frame does not have that luxury. It may be that


29
         Evidently obiter.
30
         Also Hussman (Europe) Ltd v Al-Ameen Development and Trade Company & Anr [2000] 2 Lloyds Rep 82; in
         this case, the chairman of a tribunal had met the tribunal-appointed expert privately but argued that, since no
         evidence had been taken, s37(1)(b) did not apply; the judge rejected this argument.
                                                7                                                   03:01 05/11/2012
adjudicators have to take a proactive and/or robust approach to extending time for the adjudication so that, as in
Waterman, the “ambush” element is taken away.
Judge Wilcox raises the important discussion point as to whether adjudication is suitable for all construction disputes,
particularly those of professional negligence; prima facie the answer has to be “no” – such disputes are not mere
valuations of certificates but necessarily involve careful consideration of complex issues of law. Further, if a
professional person is to be accused of professional negligence, is it fair and reasonable that such should be dealt with
in 28/42 days? I submit not. Further, one of the key objectives of HGCRA is that it was designed to free up cash flow
in the construction industry but professional negligence claims do not fall into that category.
The question arises as to what extent principles enunciated in either judgment apply to adjudicative processes other
than adjudication itself, most particularly in expert determination. The question of natural justice has arisen in respect
of expert determination and determiners would, I submit, be unwise to stray too far from the guidelines laid down in this
judgment. However, I do not believe that the partial analogy here between adjudication and expert determination can
be taken too far, merely suggesting that determiners should consider this judgment carefully.
Adjudication in Scotland sometimes sits uneasily with that in England: although both are subject to the same statute,
the underlying law differs and, most particularly, it appeared until recently that the scope for judicial review of
                                                                                                            31
adjudicator’s decisions was wider in Scotland but fortunately that gap has been significantly narrowed with the judge
who “caused the problem” effectively admitting that he was wrong. However, Costain and Waterman read to me as
entirely on all fours (even if some of the reasoning differs slightly, reflecting the different legal systems) which is both
correct and necessary.
 In conclusion, I see these judgments as valuable additions to our understanding of the framework governing
adjudication and the conduct of adjudicators.

6.         POSTSCRIPT
                                         32
In his opinion, the Lord Ordinary stated
         “As a practical matter, even if a decision of an adjudicator is [set aside], I consider that he could issue a
         supplementary decision disclosing the terms of the relevant information and advice. Provided that it is clear
         that the matters covered by the information or advice had been adequately canvassed by the parties, the new
         decision could be enforced. Alternatively, if there is any doubt as to whether the matters in question had been
         covered by the parties, the proper course would be to disclose the terms of the information or advice to the
         parties and call for their comments, and subsequently to issue a new decision following consideration of those
         comments.”
It is not all clear how this proposition sits with the provisions of HGCRA since there is no provision equivalent to
Arbitration Act 1996 s.57 and the status of the “new decision” must be open to doubt; however, I read the Lord
Ordinary’s observation as obiter and therefore of no binding (and possibly no persuasive) force.




31
          See fn.5 above.
32
          At paragraph 24.
                                                 8                                                    03:01    05/11/2012

								
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