UK: Latest judgment illustrating the limited scope for challenging an adjudicator's decision

It is well established that the courts will not review the merits of an adjudicator's decision and will only set aside such a decision in the relatively rare cases where it is found that:

• the adjudicator had no jurisdiction to make the decision (including because the decision made did not determine the dispute that had been referred to the adjudicator); or
• there was a serious breach of the rules of natural justice (including the right to a fair hearing, by an impartial decision-maker).

As has been recognised in numerous judgments, any other approach would undermine the purpose of the adjudication regime, which is to provide a swift and binding (albeit provisional) resolution to a dispute and prevent ongoing argument/appeals de-railing contracts.

In a recent decision, the Scottish Court of Sessions rejected various challenges to an adjudicator's decision which alleged that the adjudicator (i)  did not have jurisdiction to make the decision he did because he had adopted an overly restrictive review of his task by failing to entertain a relevant line of defence; and (ii) had unfairly failed to give the parties an opportunity to comment on factors taken into account in the decision.

The decision is a good illustration of the courts being astute to reject parties' attempts to challenge the merits of adjudicators' decisions by seeking to shoehorn the complaint into one of the above available grounds for challenge.

Bouygues E & S Contracting UK Ltd v Vital Energi Utilities Ltd [2014] CSOH 115.

The adjudication in question was in the context of a contractor / subcontractor dispute regarding the supply and installation of parts for a combined heat, power and community energy system. The contractor had made various allegations of poor workmanship and delays and had ultimately terminated the subcontract.  A preliminary adjudication had determined that the termination was justified.  In the adjudication under challenge, the adjudicator, an experienced QC, had rejected a damages claim for delay but awarded the contractor approximately £1.6million as monies due in respect of the cost of completion of the subcontract works, pursuant to a condition in the subcontract ('condition 57').

The subcontractor's challenge was based on three separate grounds.

Ground 1

In his determination, the adjudicator had recorded his interpretation of condition 57 as being that it entitled the contractor to recovery of all the expenditure required to complete the subcontract works, rather than only any expenditure caused by the subcontractor's breach of contract.  He observed that it was therefore unnecessary to enquire into whether there had been any breach (in the form of defective workmanship) and the existence of a causal link between such breach and any particular element of expenditure.

The subcontractor contended that that was a fundamental error of law and that, by failing to consider the defence regarding poor workmanship (ie that the contractor had failed to prove this), he had adopted such a restrictive view of his task that he was not determining the dispute referred to him.

The court agreed with the adjudicator's interpretation of condition 57 but, more importantly, noted that the key point was that there was no basis to say the adjudicator had failed to entertain the defence. It distinguished this from earlier cases where the court had intervened because an adjudicator had completely ignored a relevant defence.  That was not the case here - the adjudicator had entertained the defence (re defective workmanship) but had effectively rejected it because, on his construction of condition 57, it was not relevant.  The complaint was effectively as to the merits of that decision and therefore not proper grounds for challenge.

Ground 2

As the adjudicator did not have engineering expertise, he had obtained from a consulting engineer an assessment of whether, on their face, the numerous invoices claimed related to matters that were required to be carried out to complete or rectify the subcontract works. The adjudicator accepted the consultant's advice, based on a sample of 10% of the invoices,  that they did.

The court rejected the subcontractor's complaint that the reliance on the 10% sample constituted a manifest unfairness to it and that the adjudicator should have sought details of  (and allowed the subcontractor to comment on) the process for selecting the sample.  The court noted that the sample had in fact been the subject of both parties' experts' reports and also that the subcontractor had taken an opportunity to respond to the consultant's advice about the invoices.  This was clearly different to previous cases where an adjudicator's decision had been quashed because it was based on material that had not been presented to him by the parties and amounted to him 'going off on a frolic of his own'.

The court concluded that this was, again, essentially a complaint as to the merits of the adjudicator's determination  -  specifically, his decision that the consultant's advice was adequate support for his finding.  While the subcontractor might not agree with that decision, there was nothing manifestly unfair in the way it was reached and it was therefore not challengeable.

Ground 3

In deciding to accept the engineering consultant's advice regarding the sample invoices, the adjudicator had stated 'In my experience of similar disputes in court, the court may resolve the issues by consideration of sample of invoices/claims etc. I consider that such an approach is all the more acceptable in the context of adjudication.'

The court rejected a submission that natural justice required that the parties should have been given the opportunity to comment on the adjudicator's intention to rely on his own experience in this regard.   The knowledge/experience that the adjudicator was relying on (regarding the courts' use of  such sampling exercises) did not amount to undisclosed personal knowledge of matters relevant to the dispute, of the sort that had been found in previous cases to amount to the introduction of new matters.   This was not a case of an adjudicator adding to the evidence.   Although not stated, it is likely that the court was again influenced in this regard by the fact that the subcontractor was aware of the consultant's use of the sample and had had the opportunity to express its views on that.

Comment

The court's decision illustrates the strict approach consistently taken by the courts to attempts to challenge adjudicators' decisions, in support of the purpose of the adjudication regime.  In particular, it highlights the limited scope for challenges based on an alleged failure to entertain a relevant line of defence  - a court will need to be satisfied that the adjudicator completely ignored the defence, as distinct from having reaching a view that the defence was not relevant.

Jan O’Neill

Professional Support Lawyer,
Dispute Resolution, London
Email
+44 20746 62202