This case provides a good example of an adjudicator being held to be in material breach of the rules of natural justice.
ABB Ltd (ABB) sub-contracted various cabling works to Bam Nuttall Ltd (Bam). The subcontract provided at clause 11.1A that it could only be varied if amendments were expressly recorded in writing by a document expressed to be supplemental to the sub-contract and signed by the parties.
On a survey of the network, Bam found certain designs were non-viable, they notified this as a compensation event and it was agreed that Bam would re-survey and provide alternative quotations.
In December 2010, the parties verbally agreed a sum of £1.5 million for this work; but disagreed as to what this sum related. Bam said the sum related to all design work up to the end of January 2011 with Bam to be paid for further work thereafter; ABB said the sum was for all survey and design work except for additional design work necessary for reasons beyond Bam’s control. Bam referred the dispute over unpaid fees to adjudication.
The adjudicator had regard to clause 11.1A and decided there was no binding agreement on the scope of the £1.5 million and Bam was entitled to various costs.
ABB sought a declaration that the adjudicator’s decision was invalid because he was in material breach of the rules of natural justice due to his reliance on clause 11.1A which had never featured in the submissions between the parties and the adjudicator. In addition, the adjudicator had not raised it with the parties before his decision. Bam applied for summary judgment to enforce the adjudicator’s decision.
The court held the adjudicator had materially failed to comply with the rules of natural justice and ABB was entitled to the declaration it sought and Bam’s application for summary judgment failed.
It was held that the adjudicator had not been asked to consider whether there had been an agreement, but rather what the scope of the agreement had been. A finding that there had been no agreement was contrary to the evidence from both sides. The breach of natural justice had been material because there would have been a very real prospect of success for ABB on the clause 11.1A point if the adjudicator had mentioned it before his decision.
Sarah Strange is an associate in the construction and engineering team at international law firm Taylor Wessing