WHEN WOULD AN ADJUDIATOR HAVE ACTED IN BREACH OF THE RULES OF NATURAL JUSTICE?
In J&B Hopkins Limited v A&V Building Solution Limited [2023] EWHC 301 (TCC), the key issue before the Court was whether a party could set aside or resist enforcement of an adjudication decision on the ground of breach of natural justice.
The dispute. A&V Building Solution Limited (‘A&V’) and J&B Hopkins Limited (‘J&BH’) were parties to a Sub-Contract under which A&V, as Subcontractor, agreed to carry out plumbing installation works.
On 11 June 2022, A&V commenced an adjudication against J&BH on the basis that J&BH was in breach of the Sub-Contract for a number of reasons.
On 6 July 2022, the Adjudicator issued his decision, in which the Adjudicator:
(a) Determined that A&V had failed to prove any breaches of contract on the part of J&BH; and
(b) Awarded the amount of £82,956.88 to J&BH for the value of the balance of the Sub-Contract.
J&BH subsequently commenced an action against A&V to enforce the amount of £82,956.88 as well as the Adjudicator’s fee of £13,962.00, which A&V resisted.
We pause here to note that an unsuccessful adjudication claimant under the Building and Construction Industry Security of Payment Act 2004 cannot be ordered to pay the adjudication respondent.
Grounds of resisting enforcement. A&V sought to resist the enforcement of the adjudication decision on various grounds. In this blog, we look at 4 of those grounds raised by A&V.
Firstly, A&V argued that clause 7.4 of the Sub-Contract permitted J&BH to bring labour onto the site to carry out works within A&V’s Sub-Contract if A&V failed to respond to a notice complaining of lack of progress. A&V contended that J&BH brought such labour onto site before the expiry of a relevant notice (‘Ground 1’).
Secondly, A&V argued that in March 2021, A&V wrote letters putting forward quotations as required by the variation clause in Clause 8 of the Sub-Contract but received back no instructions to proceed from J&BH. Thus, A&V claimed it was left without instructions on how to proceed (‘Ground 2’).
Thirdly, A&V claimed that J&BH failed to grant extensions of time which should have been granted, and that by preventing A&V having access to an internal paperwork system, J&BH prevented A&V carrying out its works (‘Ground 3’).
Fourthly, A&V made a wider attack on the adjudication decision on the basis that, among other things, as the decision was so riddled with errors, and as the Adjudicator spent comparatively limited time on the adjudication, these showed that the Adjudicator did not perform his duties and there was a denial of natural justice (‘Ground 4’).
Principles in deciding an adjudication enforcement application. Mr Roger ter Haar KC (sitting as a Deputy High Court Judge) agreed with J&BH that the following propositions were to be applied by a court in deciding an adjudication enforcement application (at [34]):
(a) An adjudicator does not need to provide an answer to each and every issue which may be raised in the parties’ submissions;
(b) An inadvertent failure to consider an issue within a dispute will not ordinarily render a decision unenforceable; and
(c) An inadvertent failure by an adjudicator to consider a particular document is, at its highest, a procedural error which does not amount to a breach of the rules of natural justice.
Similar principles apply in Singapore in relation to setting aside an adjudication decision for breach of natural justice. See, e.g., Bintai Kindenko Pte Ltd v Samsung C&T Corp [2018] 2 SLR 532.
The Court’s decision – Ground 1. As to Ground 1, Mr Roger ter Haar KC found that this was “essentially a factual issue” (at [38]), and further, that the Adjudicator had indeed dealt with this issue in his decision, as the Adjudicator had stated that (at [39]):
“With regard to Clause 7.4, I have considered the documentary evidence and witness statements and I can find no breach of Clause 7.4. J&BH notified A&V of its concerns regarding not only the lack of on site labour, but also the reduced hours being worked by A&V's operatives and issued warning notices confirming its intention to supplement A&V's labour, prior to so doing.”
Therefore, as the Adjudicator had considered the points put forward by A&V and rejected them, largely on factual grounds, it was not for the court to judge whether the Adjudicator had reached the correct conclusion on the facts as found by him or on the law.
Hence, Mr Roger Ter Haar KC rejected Ground 1 as a basis for resisting enforcement (at [42]).
The Court’s decision – Ground 2. As to Ground 2, Mr Roger ter Haar KC considered that the Adjudicator had correctly understood that A&V's case was that it sought, but did not receive, explicit instructions in respect of proposed variations, and had dealt with this in the decision (at [47]):
“21.2 Reliance is placed by A&V on its correspondence dated 15/03/21 and 16/03/21, which explicitly requested instructions, which JBH did not provide. Reliance is also placed by A&V upon paragraph 162 item 8 and paragraph 231, of the decision in a previous Adjudication, in support of its assertions. Furthermore A&V asserts that Clause 22 of the Sub-Contract requires a notice to be sent by recorded delivery.
…
21.5 Clearly these are not variations to the Sub-Contract, as envisaged by Clause 8. From the wording of the letter of 16/03/21, it appears to be the case that A&V is of the opinion that it must cease its Works at the conclusion of the 52 week Sub-Contract period, whether, or not, the Works were complete.”
Mr Roger ter Haar KC understood the Adjudicator to be saying that A&V had no continuing obligation to carry on works, in the absence of an express instruction, simply because the original contract period had expired (at [48]).
As this was considered to be the correct position in law, Mr Roger ter Haar KC rejected Ground 2 as a basis for resisting enforcement (at [48]).
The Court’s decision – Ground 3. As to Ground 3, Mr Roger ter Haar KC noted that this ground was made up of two principal points:
(a) firstly that J&BH failed to grant extensions of time which should have been granted; and
(b) secondly that by preventing A&V having access to the internal paperwork system, J&BH prevented A&V carrying out its works.
These allegations had been dealt with in a witness statement from J&BH’s Operations Manager, which was placed before the Adjudicator.
Further, Mr Roger ter Haar KC considered that while the Adjudicator did not expressly refer to the internal paperwork system in his decision, the Adjudicator did make reference to the evidence of J&BH’s Operations Manager and clearly set out his reasoning in respect of extensions of time and what he regarded as being A&V's abandonment of site.
Therefore, Mr Roger ter Haar KC found that while it was unfortunate that there was no mention of the internal paperwork system in the Adjudicator’s decision, the Adjudicator had a clear position before him on J&BH's evidence, which was that A&V had made it clear to J&BH that it was going to stop work (at [58]).
Hence, Mr Roger ter Haar KC stated even if the result may have been different if this dispute was referred to a court or arbitrator, the Adjudicator’s decision was “based upon factual and legal conclusions at which he was entitled to arrive”, and hence there was no breach of the rules of natural justice which would entitle a court to set aside or refuse to enforce the decision (at [59]).
The Court’s decision – Ground 4. As to Ground 4, Mr Roger ter Haar KC considered A&V’s argument amounted to saying that because of the numbers of errors made by the Adjudicator, coupled with the perceived limited time spent on the adjudication, there had been bias and a breach of natural justice on the part of the Adjudicator (at [72]).
Mr Roger ter Haar KC instead found that the Adjudicator had entered into the adjudication process, in the limited timescale afforded to Adjudicators, diligently and thoughtfully. If there were some areas where, with the benefit of hindsight, things might have been done differently, there was nothing in the matters raised before the court which amounted to a breach of natural justice (at [76]).
On this basis, Mr Roger ter Haar KC firmly rejected Ground 4 as a basis for resisting enforcement (at [72]).
Conclusion. When one party is obliged to make payment to the other party in an adjudication, it is not unusual for the first party to attempt to set aside the adjudication decision on the basis of a breach of natural justice by the adjudicator.
However, Mr Roger ter Haar KC’s decision in J&B Hopkins Limited v A&V Building Solution Limited [2023] EWHC 301 (TCC) demonstrates the high threshold required to be met to successfully argue that an adjudicator breached the rules of natural justice, as it is clear that an adjudicator does not need to provide an answer to each and every issue raised by the parties, and the adjudicator is entitled to reject a party’s arguments as long as it can be said that the adjudicator had at least considered those arguments.
As explained by Mr Roger ter Haar KC in his decision as to Ground 4, even if it can be said that a court or arbitral tribunal would have arrived at a different decision to the adjudicator, this by itself is not a basis for setting aside of an adjudication decision on the ground of breach of natural justice.
In this regard, while this is not a decision concerning the Building and Construction Industry Security of Payment Act 2004 (“SOPA”), nonetheless, it is a reminder to parties that (in general) it is difficult to set aside an Adjudication Determination under SOPA. Hence, in the relevant cases, respondents should consider if an adjudication review is the more appropriate forum for challenging the adjudication determination.
Importantly, respondents would do well to ensure that their objections to the claimants’ claims are appropriately set out in the relevant payment responses and raised in an adjudication determination.
This publication is not intended to be, nor should it be taken as, legal advice; it is not a substitute for specific legal advice for specific circumstances. You should not take, nor refrain from taking, actions based on this publication. Chancery Law Corporation is not responsible for, and does not accept any responsibility for, any loss or damage that may arise from any reliance based on this publication.