UK: Construction Bites: Adjudicators' Conduct - Limits Of Discretion

Last Updated: 18 July 2011
Article by Colin Clelland

Under section 108 (2) of the Housing Grants Construction and Regeneration Act (HGCRA), a construction contract has to allow an adjudicator to take the initiative in ascertaining the facts and the law. Over the years, there have been a number of cases that explore the extent to which an adjudicator can use this power without breaching the rules of natural justice.

This and one other issue of interest was considered in the recent Outer House decision of SGL Carbon Fibres Limited v RBG Limited 2011. That other issue of interest concerns the question as to whether an adjudicator is bound by a previous decision that has been held by the Courts to be unenforceable but has not been formally reduced by way of judicial review proceedings.

Natural Justice Issue

During the course of (albeit late in) the adjudication process the adjudicator informed the parties that he intended to decide certain issues using his own knowledge and experience. An adjudicator is entitled to use his own knowledge and experience when assessing the evidence presented by the parties. However, can an adjudicator use his own knowledge and experience to add to the evidence presented by the parties?

The Court recognised that an adjudicator can use his knowledge and evidence to add to the evidence. The adjudicator has, however, to give the parties an adequate opportunity to comment on any such additional evidence. In this case, the timescales that the adjudicator gave to the parties to comment were wholly unreasonable. More fundamentally, however the adjudicator advised of his proposed approach after evidence from witnesses of fact had been led and failed to give the parties information necessary to allow them to assess and comment on whether the adjudicator's experience was of any relevance to the issues under consideration.

In these circumstances, the Court decided that the adjudicator had breached the rules of natural justice.

Effect of Previous Adjudication Decision

A decision of another adjudicator concerning a dispute between the parties had previously been found by the Court to be unenforceable. That decision had not been formally reduced by way of petition for judicial review. The agreed position of the parties before the Court was that the adjudicator was not entitled to decide the matters decided in the previous adjudication. This is in light of the decision of the Outer House in Vaughan Engineering Limited v Hinkins & Frewin Limited 2003.

As a consequence of this, the adjudicator was persuaded that he had to ignore the decision of the previous adjudicator when assessing the amount of any overpayment that was to be repaid to SGL. The adjudicator, therefore, ignored the effect of sums found by the first adjudicator to be due to RBG over a particular period and made an award in favour of SGL that was £1m greater than it would have been had the relevant sums due to RBG been taken into account.

Lord Glennie was not impressed by the arguments put before him on this issue. His view was that it is nonsensical to consider a decision to be in any sense binding when it had been found to be unenforceable just because it had not been formally reduced. He did not, however, reach his decision on the basis of that view. His decision was that the adjudicator had failed to exercise his jurisdiction in refusing to take account of sums due to RBG.

Even if it is correct that the adjudicator was not entitled to take account of the sums due to RBG because the decision of the previous adjudicator had been found to be unenforceable but not reduced, that does not alter the fact that the adjudicator failed to decide the matters referred to him. Lord Glennie makes it clear that an adjudicator should resign if he concludes that a previous decision of an adjudicator prevents him deciding on the issues that he has to consider to determine the dispute referred.

Comments

The conclusions reached by the Court on natural justice issues come as no great surprise. They do serve to underline to adjudicators how important it is to plan the adjudication process carefully to allow the parties and relevant witnesses to comment on any additional evidence that the adjudicator may be able to add to the process.

What is, perhaps, of greatest interest about this case is the clear and strong message given by Lord Glennie about the effect of a previous decision that has been found to be unenforceable but has not been formally reduced. This decision does not, perhaps, shed the best light on the legal fraternity in Scotland. There is at least a hint that Lord Glennie is frustrated by the way that an adjudicator's job has been made more difficult because legal arguments over procedural niceties have prevailed over the clear intent and purpose of the HGCRA.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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