There has been much comment in the pages of Building about whether an adjudicator must be independent of the parties to meet the obligation of impartiality and how the human rights legislation will affect the adjudication process. Now that we have the court's first guidance on these issues, we might have expected the picture to become clearer. In fact, all the decisions to date conflict significantly with each other.
Does adjudication serve natural justice? The first difficulty is whether there is a relationship between the obligation for an adjudicator to be impartial and principles of natural justice. In the case of Woods Hardwick Ltd vs Chiltern Air Conditioning, His Honour Judge Thornton commented in relation to natural justice that, "I need not consider these difficult matters in this judgment …".
His reasoning was understandable given the facts of that case. The adjudicator had, in two substantive respects, breached his obligations under the government's Scheme for Construction Contracts. First, the adjudicator failed to share information with one of the parties which he had obtained from the other party and he took legal advice without notifying the parties. Second, in producing a witness statement supporting one of the parties in the enforcement proceedings, he gave the impression that he was not impartial.
It is clear from this decision that adjudicators must first and foremost abide by the rules governing the conduct of the adjudication process. However, the question of whether natural justice applies to adjudication was left unanswered.
That issue was addressed in Discain Project Services Ltd vs Opecprime Development Ltd. Again, the statutory scheme applied to the adjudication. His Honour Judge Bowsher commented that the "scheme makes regard for the rules in natural justice more, rather than less, important". In closing his judgment, he said: "I have been writing about the rules of natural justice. The same principles will apply when the Human Rights Act 1998 comes into force." In the Discain case, the breach of natural justice consisted of private correspondence and communications between one party and the adjudicator, the existence and substance of which had not been conveyed to the other party. This led the judge to conclude: "I find it distasteful and I cannot bring myself to enforce an adjudication … arrived at in that way." There are differences in these approaches. In Woods, the adjudication award was not enforced because of breaches of the scheme. Issues of natural justice were expressly not considered. In Discain, again an award made under the scheme was not enforced. But the judge considered the rules of natural justice important and held that, as the award was reached in breach of natural justice, it would not be enforced by the court.
There was, however, a striking similarity in both decisions. In Discain, Judge Bowsher said the system created by the Construction Act "can only be made to work in practice if some breaches of the rules of natural justice, which have no demonstrable consequence are disregarded". Similarly in Woods, the judge commented: "There will be occasions when an adjudicator's departure from those rules is insignificant and not such as to preclude enforcement." From the final words in the Discain judgment, we might consider that human rights legislation is likely to draw these different elements into a comprehensive whole. However, a mere 21 days later, the judgment in Elanay Contracts Ltd vs Vestry had the reverse effect. In that case, Article 6 of the European Convention on Human Rights was raised in relation to the right to be afforded a reasonable opportunity to present one's case.
Defying convention His Honour Judge Richard Havery considered the convention did not apply, first because adjudications are not carried out in public and second, and more significantly, because an adjudication decision is provisional and can be set aside by subsequent arbitration or litigation.
Hence, the suggestion made in Discain that human rights legislation would effectively implement concepts of natural justice into adjudication was not borne out in Vestry. Leave to appeal was given, but it remains to be seen whether the defendant will consider it worth pursuing the matter. Certainly the defendant's will to appeal will have been weakened because it was refused a stay of execution on the basis that such a stay would drive a coach and horses through the provisions of the act.
Consistency in the law is often sought and rarely obtained. Perhaps the series of decisions noted simply reflect that fact. What is clear is that adjudicators must ensure that they operate in accordance with the rules of adjudication. In the meantime, parties to adjudication disputes must expect minor breaches of natural justice as part of the process. Judging what is and is not minor will, of course, be a difficult process in itself.
It is not only the adjudicator who has to tread carefully. In Shepherd Construction vs Mecright, a party was severely criticised for not bringing a pre-existing settlement agreement to the adjudicator's attention. The court's guidance for parties to adjudication was "… one expects a party seeking adjudication to present its case in full, not to hold anything back and to be open and honest in its presentation".
Adjudication may be rough justice, but that does not excuse the participants from conducting themselves properly.
Approach with caution
James Bessey is a partner in Hammond Suddards Edge, Birmingham. He can be contacted on 0121-222 3507.