"It is only too easy in a complex case for a party to comb
through the adjudicator's reasons and identify points upon
which to present a challenge under the labels "excess of
jurisdiction" or "breach of natural justice". So
said Chadwick LJ in Carillion v Devonport [2005] EWCA Civ 1358. On
the other hand, "save in the plainest cases" the judge
went on, such a challenge "is likely to lead to a substantial
waste of time and expense".
A recent decision of the Scottish courts, again involving a
Carillion company (against SP Power Systems), may encourage parties
considering such a move to feel that the odds are now rather more
in their favour.
Background
The case was one of
two which were concerned with a dispute as to how works carried
out by Carillion under a utilities framework agreement should be
valued. The dispute was referred to adjudication and the
adjudicator decided that nearly £3 million was due to
Carillion. SP refused to pay and resisted enforcement on the ground
that the method which the adjudicator had adopted to quantify
Carillion's claim had resulted in a breach of natural
justice.
In SP's view the adjudicator was guilty of two sins:
- First, in the absence of definitive factual information he had based his calculations on assumptions which he had made as to the work content of the very large number of work orders on which the claim was based.
- Second, he had applied to this assumed workscope what he considered to be appropriate commercial rates. In both cases the adjudicator had, the court accepted, arrived at his conclusions by applying his own knowledge and experience, as he was entitled to do. The question was whether his failure to share this thinking with the parties prior to his decision so that they could provide him with their comments amounted to a sufficiently serious breach of natural justice to preclude enforcement of the decision.
Some cases are clear cut. In Balfour Beatty v Lambeth [2002]
EWHC 597 (TCC), for example, the adjudicator relied in deciding on
extensions of time on a delay analysis which he had obtained from a
programming expert without the knowledge of either party.
Similarly, in Primus Build v Pompey [2009] EWHC 1487 (TCC), the
adjudicator, again without prior reference to the parties, had made
use in his decision of figures taken from documents which both
parties had indicated to him were not relevant for this purpose. In
both cases it was held that the failure of the adjudicator to
consult the parties before reaching a decision based on the
material concerned amounted to a breach of natural justice which
rendered his decision invalid.
Here the court exonerated the adjudicator from SP's first
charge. It found that the adjudicator had in effect derived from
the parties' submissions his view of the work content to be
used as the basis for his calculations. He was not therefore
required to give the parties an opportunity to comment on this
reasoning before making his decision.
The rates he then applied to this workscope were, in the
court's view, a different matter. While the court made no
finding as to their reasonableness or otherwise, it held that there
had been no evidence in the adjudication as to these. They were
therefore new to the parties, who were entitled to be made aware of
and to comment on them. As the rates concerned were a significant
element in the decision this failure meant that the decision should
not be enforced.
Comment
This decision has caused widespread comment. While each case
necessarily turns on its own facts, and Scottish decisions have
persuasive rather than binding force in England, a number of
commentators have suggested that the adjudicator was entitled and
indeed required to apply his expertise in such a situation without
a further time-consuming and expensive round of further
submissions. Adjudication represents pragmatic fast track rough
justice and, faced with complex facts and a substantial claim, the
adjudicator made a decision which ought to have been
enforced.
These arguments could be said to reflect the courts' generally
robust approach to enforcement. The fact that disputes are often
(for practical purposes) finally decided by adjudication despite
its provisional character may have had a bearing on what in the
Carillion v SP Power Systems case was certainly a rigorous approach
to issues of natural justice. Whether other courts will follow suit
is currently far from clear.
Reference: Carillion Utility Services Ltd v SP Power
Systems Ltd [2011] CSOH 139
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 29/09/2011.