Natural justice in adjudication


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Introduction

The Technology and Construction Court (TCC) recently issued a reminder that adjudication is not the ‘Wild West’ of dispute resolution. Giving judgment in Beumer v Vinci [2016] EWHC 2283 (TCC), Fraser J recapped that adjudicators must comply with the requirements of natural justice.

The requirements of natural justice are commonly expressed as two separate rights, namely:

  • The right to a fair hearing. This goes to a party’s right to put its case, and to respond to the case made against it.
  • The right to be heard by an impartial tribunal. This goes to the matter of bias and apparent bias on the part of a tribunal.

It is, however, only where there has been a breach of natural justice that is material, and more than peripheral, that the courts will decline to enforce an adjudicator’s decision. More often than not, the courts find that this threshold is not met.

However, recent case reports indicate an upswing in the popularity of natural justice arguments in enforcement proceedings. Perhaps the courts’ decisions in the now well-known construction cases Cofely Ltd v Anthony Bingham and Knowles Ltd [2016] EWHC 240 (Comm) and Paice and Springhall v MJ Harding Contractors [2015] EWHC 661 (TCC) (both of which concerned the apparent bias of the tribunal) have encouraged dissatisfied parties to try their hand at such arguments.

Two more recent cases, Beumer v Vinci (Beumer), and Paice and Springhall v Harding [2016] EWHC B22 (TCC) (Paice) illustrate situations which fall on either side of the material breach test.

Beumer

Vinci subcontracted with Beumer to provide a baggage handling system at Gatwick Airport. Beumer in turn engaged a sub-subcontractor, Daifuku Logan Limited (Logan) to carry out a part of those works.

Disputes broke out on both the upstream and downstream contracts. In March 2016, Beumer commenced adjudication against both Vinci and Logan. The same adjudicator, Dr Cyril Chern, was appointed adjudicator in both adjudications.

In the adjudication between Vinci and Beumer (BVII), neither Dr Chern nor Beumer disclosed to Vinci that Dr Chern was also acting in the adjudication between Beumer and Logan (BLII).

Dr Chern issued a decision in BVII in June 2016, granting relief in favour of Beumer.  Beumer commenced enforcement proceedings.

By the time of the enforcement proceedings, Vinci had discovered that Dr Chern was appointed in BVII. Vinci argued that Dr Chern’s decision in BVII should not be enforced, because his failure to disclose his involvement in BLII amounted to a breach of the rules of natural justice. Furthermore, it argued that Beumer had advanced factually inconsistent cases in both adjudications.

The TCC agreed that Beumer had advanced inconsistent cases in the two adjudications. Fraser J stated that he took a ‘dim view’ of the propriety of such behaviour. The TCC decided further that Dr Chern should have disclosed his involvement in BLII to Vinci.

As to the consequences of these findings, the TCC found that the requirements of natural justice had been breached as follows:

  • Vinci’s right to a fair trial was compromised: it was deprived of the chance to seek disclosure of potentially relevant materials in BLII and to make submissions on them.
  • Vinci’s right to a fair hearing before an impartial tribunal was also compromised. Given Dr Chern’s failure to disclose his involvement in BLII, an informed and fair-minded observer would have concluded that there was a real possibility of bias (even if Dr Chern had not exhibited actual bias, it was enough that there was apparent bias).

Thus, the court said that there was ‘something of substance’ to Vinci’s allegations. It declined to enforce Dr Chern’s decision, on the basis that the rules of natural justice had been breached.

Paice

This case arose from the fifth and most recent adjudication between the employers, Paice and Springhall, and the contractor, Harding. Broadly, the ongoing disputes between the parties relate to the determination of a termination account.

By way of background, Mr Linnett, the adjudicator in the fifth adjudication, had provided a reference for Mr Sliwinski, the adjudicator in the fourth adjudication, as part of disciplinary proceedings against Mr Sliwinski (connected with the earlier adjudications). Mr Linnett had not disclosed this upon his appointment in the fifth adjudication.

Harding’s solicitor had known this for some months. Two days before Mr Linnett’s decision was due, Harding’s solicitor sent Mr Linnett a series of emails, questioning Mr Linnett about his role in the disciplinary proceedings, and how this might affect his views of Harding in the fifth adjudication. Mr Linnett denied that the reference he had provided touched upon any matters in the current proceedings. He eventually refused to answer further questions.

After Mr Linnett issued his decision, Harding alleged a breach of natural justice, arguing in enforcement proceedings that Mr Linnett should have disclosed that he had been asked to provide a reference for Mr Sliwinski.

The TCC did not accept that there had been any breach of the rules of natural justice. It stated that Mr Linnett did not have an obligation to disclose that he had provided a character reference for Mr Sliwinski.

Regarding any suggestion of apparent bias, the court doubted that Mr Linnett’s view of Mr Sliwinski could reasonably be considered to impact on the exercise that he was required to carry out in the fifth adjudication. Furthermore, it noted that Mr Linnett had not been defensive or misleading when questioned by Harding’s solicitor. Thus, the circumstances of this case were far removed from those in Cofely v Bingham.

The TCC also doubted the materiality of the alleged breach: Harding’s solicitor had not raised the matter of Mr Linnett’s involvement in the disciplinary proceedings until relatively late in the adjudication, despite knowing of the matter for some time. That tended to suggest that Harding did not consider the matter to be significant.

Conclusion

Natural justice arguments may, for now, appear to be more popular with parties to adjudication; but there is no reason to believe that the court is any more disposed to these arguments than it has been in the past. Beumer and Paice demonstrate that it remains the case that any alleged breach must be material, and more than peripheral, if enforcement is to be successfully resisted.

For parties to adjudication who may have concerns about potential breaches of natural justice, the following practices are suggested:

  • If you are the referring party, comply fully with the application process required by the relevant adjudicator nominating body (including identifying potentially conflicted adjudicators etc.). If you are the responding party, consider asking the referring party or the nominating body for a copy of the referring party’s application.
  • Avoid unilateral communications with the adjudicator.
  • Where you consider that a question of natural justice has arisen in an adjudication, raise this with the adjudicator and the other party as early as possible, and carefully reserve your position.
  • If you know of related adjudication proceedings involving the other party, or perhaps the adjudicator, consider raising queries or applying for disclosure of relevant materials (but be wary of raising queries which may be unreasonable, or are simply ‘fishing expeditions’).
  • As for parties at the stage of entering construction contracts, you might consider whether the use of panel adjudicators and consolidation provisions (i.e. provisions allowing related adjudications on a project to be ‘joined’) may at least mitigate against the risk of inconsistent adjudication decisions.

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