UK adjudication: first case of 2013 on natural justice

The English High Court has ruled that there was nothing improper, in a case involving successive adjudications, for a second adjudicator to look at and have regard to an earlier adjudicator's decision. This did not breach the rules of natural justice: Arcadis v May & Baker [2013] EWHC 87 TCC. Michael Mendelblat, a professional support lawyer in our London contentious construction team, reviews this case.

Facts

There had been two successive adjudications relating to similar facts.  In the first adjudication the contractor had been awarded a substantial sum (which was paid) and an extension of time in relation to the project manager's instructions under an NEC Contract.  The second adjudication related to a different area of the site but very similar issues.  A different adjudicator was appointed and he decided that he was bound by the first adjudicator's decision insofar as it related to the same issues.  However, where different issues were raised, he would not be bound by that decision.

In the event, the second adjudicator found that the works in question had caused critical delay to the completion date and that a further sum was payable to the contractor.  His decision effectively "split the difference" between the figures put forward by the contractor and the employer. 

The employer failed to honour the adjudicator's decision and the contractor commenced enforcement proceedings in the High Court. The defendant employer contended that there had been a failure to comply with the rules of natural justice because the second adjudicator should not have looked at the first adjudicator's decision. 

High Court decision

Akenhead J took a different view holding that there was nothing improper in a second adjudicator looking at and having regard to an earlier adjudicator's decision.  In fact the second adjudicator had decided the issues on their own merits and not by reason of being bound by the first adjudicator's decision.  If he agreed with the first adjudicator, that was not of itself a point of criticism as he was entitled to take the first adjudicator's views into account. The court reviewed the numerous authorities on alleged breaches of the rules of natural justice and noted in particular that in the leading case of Carillion [2006] the Court of Appeal had commented that "the need to have the "right" answer has been subordinated to the need to have an answer quickly".

Quantum

The court also found that there was nothing objectionable in the adjudicator's approach to determining quantum.  Whilst there are cases (for example, Herbosch [2012]) where adjudicators have adopted a method of assessment which neither party argued for, that was not the situation in this case.  In fact the adjudicator had considered both parties' contentions and had chosen between two figures, both of which had an evidential basis.  He had therefore addressed the issues properly. 

The award was ordered to be enforced.

Comment

This case represents a helpful restatement of the natural justice principles applicable to adjudication. In essence, natural justice requires that every party has the right to a fair hearing and to be heard by an impartial tribunal. Breaches of natural justice by an adjudicator may include bias or apparent bias, a failure to act impartially, or procedural irregularity.  This case demonstrates that there is little merit in examining an adjudicator's decision in detail to find minor flaws in reasoning.  Only material breaches of the rules of natural justice will suffice to justify a challenge to the decision on enforcement proceedings. Similarly, arriving at an intermediate position  (ie splitting the difference) did not breach natural justice. Adjudication is ultimately about finding an interim solution that "meets the needs of the case" and therefore breaches of natural justice must be material.