Natural justice in adjudication

It is now well established that the courts will refuse to enforce an adjudicator's decision if the manner in which he has gone about his task is obviously unfair[1].  Whilst the courts have deplored attempts to comb through adjudicators' reasons to find flimsy grounds on which to present a challenge, there will be cases where a challenge is justified.  A recent dispute in the UK Technology and Construction Court was such a case:  ABB v Bam Nuttall [2013] EWHC 1983. 

The claimant was a main contractor who had engaged the defendant subcontractor on a cabling project.  The defendant had referred to adjudication a dispute in relation to an alleged agreement concerning survey and design work and the evaluation thereof.  The adjudicator's decision referred to a clause of the contract on which neither party had relied and the claimant subsequently issued proceedings under Part 8 of the CPR for a declaration that the decision was invalid as being reached in breach of the principles of natural justice.  The defendant sought summary judgment of the adjudicator's decision.  

The Court reminded itself that it is not a ground for refusal of enforcement of an adjudicator's decision that he may have got things wrong as a matter of fact or law.  However, the adjudicator's reliance on the relevant clause was clearly a failure to comply with the rules of natural justice.  The adjudicator should have raised this with the parties and invited their comment, argument or even evidence.  

However, that is not the end of the story as the Court then needed to consider whether the clause in question played a part in the adjudicator's decision making process.  On the facts, it was clear that the adjudicator had taken the relevant clause into account in deciding that the parties did not reach a binding agreement on the scope of a lump sum figure.  Therefore, it was material to his decision.  As the breach of the rules of natural justice was, at least, of considerable potential importance to the outcome of the dispute (possibly even decisive), it could not be regarded as peripheral or irrelevant. 

The Court therefore granted the claimant's application for a declaration and refused to order enforcement of the adjudicator's decision.  

A case in which a successful challenge is mounted on the grounds of failure to observe the rules of natural justice will still be rare.  To succeed on such a contention, it must be clear that the failure was material to the decision and not irrelevant to the outcome.  The failure itself must also be clearly demonstrated.