The case of Rich vs Poor

Construction disputes usually involve companies that are regarded as being able to afford lawyers and other professionals to conduct their case in whatever forms of dispute resolution their construction dispute is concerned with.

This is a misconception, particularly in adjudications where speed is of the essence and costs are usually irrecoverable, even by a successful party after an unmeritorious case has been dismissed by the adjudicator. The costs that are involved in conducting a case in an adjudication are often out of all proportion to the sums at stake, and as a result many parties cannot afford to appear with lawyers or claims consultants. What can be done?

The desperate headmaster

A good case in point is Buxton Building Contractors Ltd vs Governors of Durand Primary School. The contractor’s claim was for no more than about £30,000. It was based on an interim certificate and the adjudicator considered that the school had no defence. However, the school had a cross-claim for defective work, which it had asserted for some months before the interim certificate had been issued and which it continued to assert after its issue. Moreover, the interim certificate had no contractual status. The school was in a parlous financial position and the governors could not afford lawyers or, indeed, to pay the sum certified. Its case was presented to the adjudicator by the headmaster who also appeared for it in the enforcement proceedings.

His view that the adjudicator’s decision should not be paid amounted to this: the school had a good cross-claim, it was presented to the adjudicator as a defence but the adjudicator rejected it without considering it. The defence was not shut out by the interim certificate because the certificate was invalid, and there was a sufficient, albeit unusually worded, withholding notice. However, none of these defences were considered by the adjudicator, even though they were to be found within the material referred to him.

The decision was not enforced because the adjudicator had exceeded his jurisdiction in not even considering the governors’ defences or, if he did consider them and had ruled against them, in not explaining what he had done in his reasons. It is clear that the governors’ defences were not put forward with the clarity and cogency that they would have received in the hands of a professional advocate, and the adjudicator clearly thought that he had no duty to address them in any detail – or at all.

However, given the unrepresented nature of the governors’ case, the adjudicator should have raised these defences clearly in any pre-decision communication with the represented party and invited the contractor’s representative to address them directly. This failure led to an unfair proceedings and an unenforceable decision.

McLibel and human rights

The case highlights the difficulties facing a court or tribunal in determining a dispute involving “litigants in person”, or “lips” as they are known in the county courts and the Court of Appeal. About one-third of all applications for permission to appeal are conducted by lips and a huge number of cases in the county courts and magistrates’ courts are similarly conducted.

In such cases, the legally represented opponent has a limited duty to ensure that the tribunal is not misled and has all relevant authorities drawn to its attention. This duty extends to professionally qualified representatives, such as claims consultants and quantity surveyors, in an adjudication. But any further assistance must be provided, if at all, by the tribunal or by the state.

This duty on a state or a tribunal to ensure that unrepresented litigants are provided with appropriate legal assistance is shown up by the recent decision of the European Court of Human Rights in Strasbourg in the McDonald’s libel case.

In that example, McDonald’s, the international fast-food chain, was ill-advised enough to sue two protesters who had assisted in publishing libellous literature about its food, advertising and employment practices. It finally succeeded after the longest civil trial in English history in obtaining relatively modest libel damages. The defendants conducted their own defence.

Their complaint was that, without legal aid, which is unavailable to litigants in defamation cases, they were deprived of a fair trial. The Strasbourg court held that a state that allowed a large multinational company to sue individuals of modest means in libel had a duty to provide, in cases where the issues were complex and their resolution would involve expertise and resources, a means whereby the poorer party could conduct its case. Such means had not been available to the defendants and they were awarded relatively modest damages and costs as a result.

The case of Rich vs Poor

Now revisit the governors’ case in Buxton. They could not afford legal representation in an adjudication in which they were compelled to take part. They had no wish to get involved but they had no option because the state had provided a right to their contractor to refer disputes to adjudication. This right is mandatory: a defendant cannot contract out and the principle of or voluntary agreement to arbitrate, does not apply as it does in an arbitration.

The European court held that a state that allowed a multinational to sue individuals of modest means in libel had a duty to provide a means whereby the poorer party could conduct its case

Why should that party be deprived of legal representation in what, even for £30,000, is a complex procedure with an uncertain outcome? Losing that sum would have had a devastating impact on the school’s budget and finances, yet the school had no means of professionally asserting what appeared to be a good defence.

In such a situation, it is arguable that the state should provide legal aid – even to companies and school governors – to present meritorious defences in a compulsory state-created dispute resolution procedure. Moreover, the bar on recovery of costs that is the norm in most adjudication rules of procedure might be unlawful in cases where a party cannot afford either to instruct lawyers directly or by means of a conditional fee.

What’s the solution?

There are three approaches. First, consideration should be given to modifying the absolute bar on an adjudicator awarding costs to the successful party. That bar inhibits the presentation and defence of meritorious cases in a tribunal where expertise is at a premium, yet a party, whether corporate, individual or a non-incorporated body such as a committee, cannot afford to be represented. A contingency fee arrangement is hard to obtain for a defendant at the best of times and is even less readily available in adjudications, given the rules that forbid an award of costs.

A second approach must be a state-sponsored one. Since the state has sponsored compulsory adjudication, it should also provide the means for those unable to afford representation to present their case or to defend themselves, particularly given the state-sponsored denial of a costs award in favour of the winner.

Of course, it is pie in the sky to expect the state to provide a legal aid scheme but its absence will no doubt provide a new defence for impecunious and unsuccessful defendants to an adjudication enforcement on the grounds of procedural unfairness. McDonald’s may well soon be making an appearance in construction adjudications.

The third approach is for adjudicators to be trained in the techniques that are used by county court judges, and by most tribunal chairmen in the employment, social security and immigration fields when faced with a “lip”. Such techniques seek to balance the duty to be fair to all parties with its countervailing duty to assist an unrepresented party to present its case and to challenge and probe its opponent’s case.

In an extreme case, the adjudicator might have to decline to proceed on the grounds that the issues are too complex for resolution and decision in a 28-day procedure where one party is, and the other is not, professionally represented. In less extreme cases, the adjudicator will need to devise strategies that encourage the unrepresented party to develop its case. These strategies must cope with the problem that untrained parties often have considerable difficulties presenting their cases on paper, lack the skill to sift through documents to ascertain the relevant from the irrelevant and lack the expertise to question or probe witnesses and arguments.

A word of advice for adjudicators

All that is no doubt eloquent and to the point you may be saying, but how does the well-tuned adjudicator strike that difficult balance? He does not, as the judge in a criminal trial in Mauritius did with an unrepresented defendant, fiercely cross-examine him in the guise of “getting his defence before the jury”. That case was recently reviewed by the Privy Council, which upheld the conviction but reprimanded the judge for cross-examining the defendant in such a way as to be appearing to side with the prosecution (Jahree vs The State of Mauritius). Against that, too much assistance by the tribunal in suggesting lines of argument that the unrepresented party had not thought of, or was unable to articulate clearly, runs the risk of the opposing party concluding that the adjudicator acted in an unfair manner.

What the adjudicator can and should do when faced with a “lip” would take a week of discussion and training. Perhaps, as a starter, adjudication bodies should consider issuing guidance to parties and to adjudicators in how to manage and conduct an adjudication when one or both parties are unrepresented or impecunious.

Moreover, the professional bodies of those professionals who regularly appear as advocates and representatives in adjudications should consider issuing guidance to members on their duties when appearing against a “lip”. The “lip”, like the poor, will always be with us and the system should learn to accommodate them.

His Honour Judge Thornton is a judge of the Technology and Construction Court