Scottish court reviews the applicability of natural justice to an adjudicator's decision

An adjudicator's decision will only rarely be challengeable on the ground of inadequate reasons. It would have to be shown that the reasons were so incoherent that the reasonable reader could not make sense of them. Likewise the decision cannot be criticised if the adjudicator has asked himself the right question but has given the wrong answer: PIHL UK v Ramboll [2012] CSOH 139.

Facts

In this Scottish case there had been a series of adjudications between the parties.  Prior to the adjudication in question, an earlier adjudication had decided that the Contractor was not entitled to payment by the Employer of an invoice by reason of the agreed payment mechanism which that adjudicator held to apply.  He said that the parties had agreed to staged payments and the stage in question was still in progress, so that the time for payment for it had not arrived.  The Employer then instituted a further adjudication claiming that there had been a substantial overpayment in the light of the earlier decision.  The Employer said that he had no option but to pay a previous invoice leading to the overpayment because he had failed to issue a valid notice of withholding.  However, the Employer submitted that the Adjudicator could now direct repayment and pointed to Rupert Morgan [2004] to the effect that if a party is overpaid on an interim certificate, the matter can be put right in subsequent certificates or by way of adjudication.

The adjudicator ordered the repayment.  On enforcement proceedings, the Contractor contended that the Adjudicator's award could be challenged on the basis of inadequate reasoning.  He said that the adjudicator did not disclose why the Contractor's arguments had been rejected and had not identified the basis of the obligation to make repayment nor explained why the ordered sum was appropriate.

Decision

The Court concluded that there was no merit in this attack on the validity of the adjudicator's decision.  Adjudicators' decisions should not be subject to "overly analytical or critical scrutiny".  A challenge can only succeed if reasons were so incoherent that it is impossible for the reasonable reader to make sense of them – Diamond [2004].  In fact the Court held that the adjudicator had properly relied on Rupert Morgan.  The Adjudicator's method of calculation of the amount of the overpayment was also clear and relied on the outcome of the earlier adjudication. In any event, where the correct question had been asked, the decision cannot be challenged, even if the adjudicator answered the question incorrectly. 

This case demonstrates the limited grounds available for challenges to adjudicators' decisions and, in particular, that any challenge is very unlikely to succeed where the adjudicator has asked himself the right question, no matter what his conclusion.