Adjudicator's Decision Upheld Despite Natural Justice Challenges

The court enforced a true value adjudication decision despite the defendant's natural justice challenges. The court found that even if a breach of natural justice was proven, it would be insufficient to overturn the decision.

This case is a reminder of the high bar required for successful natural justice challenges and the court's circumspect attitude to challenges to adjudication decisions.

The facts

In October 2023, VMA Services Limited (VMA) and Project One London Limited (POL) entered into a contract, incorporating the JCT Design and Build Sub-Contract Agreement Conditions 2016.

VMA issued a payment application for a total of £106,434.88, representing the value of the work completed to the date of the payment application. No valid payment notice or pay less notice was submitted. POL referred the matter to adjudication.

The adjudicator determined VMA's payment application was a Notified Sum, which had to be paid before POL's true value adjudication could proceed. Following VMA's successful enforcement proceedings, POL complied with the award against it and then raised true value adjudication proceedings. The second adjudicator found in POL's favour, requiring VMA to repay the sum of £102,656.67.

The challenge

VMA challenged the decision in the second adjudication, arguing the adjudicator had breached the rules of natural justice. VMA's natural justice arguments were that the adjudicator:

• Considered an argument that had not been raised by either party.
• Failed to take account of undisputed evidence.
• Applied a blanket and arbitrary reduction.

Consideration of an argument that had not been raised

This dispute was in the context of a defective air conditioning unit.

The adjudicator had to value the work completed in respect of the unit and, in determining the value, the adjudicator provided reasons for his decision. VMA contested the valuation because a section of the reasons read "subject to adjustment to reflect the possibility of defects in the pipework". VMA argued the adjudicator had gone on a "frolic", as defects in the pipework had not been raised by either party.

The court disagreed, noting that the adjudicator had elsewhere found some pipework that was likely defective, therefore this was a fair way of deciding the matter given the context. The adjudicator's consideration of potential defects in the pipework, was fundamental to the valuation. The parties had ample opportunity to address the issue, no unfairness was present, and no breach of natural justice had occurred.

Failure to apply undisputed evidence

VMA argued the adjudicator failed to take account of undisputed evidence in relation to the water tank, instead substituting his own estimated valuation. The court acknowledged the adjudicator may have misinterpreted relevant evidence but held that this would be an error of law or fact, which is not a ground to overturn enforcement.

The court also clarified that there would need to be a deliberate and intentional failure to consider evidence to amount to a legitimate challenge, or an inadvertent failure in an extraordinary case. This demonstrates the high bar required to overturn an adjudicator's decision based on a natural justice challenge.

A blanket and arbitrary reduction

VMA referred the court to the adjudicator's use of the word "arbitrary" in support of its argument that the adjudicator was simply guessing when it came to including reductions to certain items.

The court was satisfied with the calculation of the reductions, acknowledging the adjudicator's task was to provide the best approximate valuation possible in a short space of time. The court emphasised VMA's right to challenge the assessment in due course in arbitration or litigation proceedings, but required the award to be complied with in the meantime.

Materiality

Having rejected all three challenges, the court went on to emphasise that even if the challenges had succeeded in principle, they could not be upheld unless they were material to the outcome, i.e. that they went "to the heart of the dispute". The court did not consider any of VMA's challenges met this criterion.

Key takeaways

This decision serves as a reminder that while adjudication is an "(intentionally) rough and ready process", the courts are hesitant to overturn a decision unless there is a compelling reason to do so.

The courts require a high bar to engage with natural justice challenges and aggrieved parties should not use them frivolously to attempt to justify a review of an adjudicator's decision.

This article was co-authored by Ruaridh Brown.

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