… and in this article Laurence Cobb and Tom Wrzesien look at a case where the claim was that he didn't look at it at all. The verdict in both was the same
There has been growing concern in the industry that adjudication is being hijacked by technical challenges to the enforcement of decisions. The recent case of Kier Regional Ltd vs City and General (Holborn) Ltd shows that the court is keen to address this concern and to get adjudication back on track.
City and General employed Kier Regional to refurbish the former patent office library in London. A number of disputes arose, and these were referred to five adjudications. This case concerned Kier's application to the court to enforce one of the decisions, which related to the payment of loss and expense.
The arguments used by City and General in its defence will be familiar to those that have had to deal with contested enforcement proceedings:
- The adjudicator had no jurisdiction, as there was no prior dispute
- The adjudicator wrongly relied upon alleged statements attributed to a representative of City and General in a previous adjudication
- The adjudicator breached the rules of natural justice by excluding expert reports submitted by City and General in relation to loss and expense.
The adjudicator excluded the reports because they were produced after the adjudication had begun, and were not before the contract administrator when he made the relevant valuation. The adjudicator said he should decide the issue based on the circumstances known to the contract administrator at the time of the valuation and, on that analysis, the reports were irrelevant. City and General argued that the reports addressed relevant issues on loss and expense, and that the adjudicator's failure to consider them was a plain case of breach of the rules of natural justice.
Although the court found there was force in City and General's argument that the adjudicator should have taken the reports into account, it held that the failure to do so did not invalidate the decision. The judge said that the adjudicator had considered the arguments advanced by City and General and, at worst, the decision to disregard the expert evidence was an error of law, not a breach of natural justice.
The judge relied on the decision of the court of Appeal in Carillion vs Royal Devonport Dockyard, which decided that "if the adjudicator declined to consider evidence which he considered irrelevant, this is not a breach of natural justice". He also confirmed that, to the extent that the earlier decision in Buxton Building Contractors Limited vs Governors of Durand Primary School was inconsistent with this, it was overruled. This will be a relief to many, who considered that the Buxton case opened the doors to technical challenges based on natural justice arguments.
So what does this mean in practice? The court has shown that it is ready, willing and able to uphold the adjudication process, and will not allow technical legal arguments to stand in its way. Adjudicators can now take charge of the process and decide whether or not to admit evidence, without fear that whenever evidence is excluded, their decisions will be challenged.
As to whether it is the end of the line for challenges based on breaches of natural justice, the answer has to be no. The rules of natural justice still apply to adjudication. However, only in the plainest cases will a breach invalidate a decision.
Although this is bad news for anyone trying to circumvent adjudicators' decisions, it is good news for adjudication and for the industry. The DTI, in its proposals for amending the Construction Act, said that unnecessary legal challenges were perceived as a disincentive to referring disputes to adjudication. It seems that the court is listening to the industry and that it wants to make adjudication work. To use the words of the Court of Appeal in the Carillion case, it will give no encouragement to an approach that can be described as "simply scrabbling around to find some argument, however tenuous, to resist payment".
Laurence Cobb is a partner and Tom Wrzesien is a solicitor in the construction team at law firm Taylor Wessing, which represented Kier in this case