One of the central issues that has preoccupied the courts has been the application of the rules of natural justice – the role of which is clearly defined in arbitration and litigation – to the adjudication process. This issue is of particular importance, given the "rough justice" of the process and the variable quality of adjudicators. There are quite a number of court decisions now involving adjudicators who have acted unfairly to one of the parties or in such a way as to raise the impression of bias.
It is one thing to find that a decision is unenforceable because the adjudicator has breached the rules of natural justice. It is quite another to say that the process itself is unfair and contrary to natural justice. That was the basis for the human rights challenges to adjudication before His Honour Judge Bowsher, who held that the human rights legislation had no application to adjudication.
It is somewhat surprisingly, therefore, that in the most recent decision on this topic, London & Amsterdam Properties Ltd vs Waterman Partnership, His Honour Judge Wilcox again questioned the suitability of the process for anything other than straightforward contractual disputes and, in doing so, called for parliament to review the legislation.
In truth, the dispute in London & Amsterdam is not typical of the sort of dispute that goes to adjudication. The facts are complicated and the dispute involves allegations of professional negligence. The employer, London & Amsterdam, argued that Waterman's failure to release elements of the steelwork design in a timely fashion had resulted in losses of about £700,000. The adjudicator awarded London & Amsterdam the full amount claimed. Waterman resisted enforcement of the decision on the grounds of natural justice, among others.
The judge’s decision is the clearest expression of the view that adjudication should be confined to small contractual disputes
The most telling finding made by Judge Wilcox was that London & Amsterdam had sought to ambush Waterman through its refusal to disclose information relevant to both causation and quantum until the adjudication was under way. In those circumstances, known as "evidential ambush", there is clear case law that the decision ought not to be enforced.
More controversially, the judge went on to observe that arbitration or litigation is more appropriate than adjudication for resolving complex disputes that involve issues of professional negligence or which involve a "post mortem" where the project is substantially complete. He added that there might well even be cases which, because of their complexity or the conduct of a claimant, are not capable of being adjudicated fairly.
A number of recent court decisions seem to have been moving in the same direction. But this is undoubtedly the clearest expression of the view that adjudication should be confined to small contractual disputes that occur during the lifetime of the project.
Whatever one's personal opinion, the major problem with that view is that it seems to fly in the face of the clear wording of section 108 of the Construction Act, which confers the statutory right to adjudicate in respect of any dispute that arises under a construction contract. It also makes it extremely difficult for parties and their representatives to determine whether adjudication would be appropriate in any case.
Dominic Helps is a partner with Shadbolt & Co.