Although the Scheme for Construction Contracts and the standard contractual schemes do address aspects of the appointment of experts, such provisions often conflict, or are not detailed enough, to resolve the complications that arise. So it was probably inevitable that the use of third party experts would eventually fall for judicial consideration in the context of contested enforcement proceedings.
A recent decision of Judge Seymour in RSL (South West) Ltd vs Stansell Ltd offers valuable guidance on the natural justice implications of seeking assistance from third party experts.
The case arose after Stansell engaged RSL as its steelwork subcontractor on a project in Bristol, and there was a dispute over an extension of time and aspects of the final account. RSL served an adjudication notice and an adjudicator was appointed.
The subcontract between the parties incorporated the DOM/2 conditions of contract. Clause 38a expressly gives the adjudicator the power to obtain advice on legal or technical matters, subject to giving prior notice to both parties together with an estimate of the likely cost.
The adjudicator decided that he required advice from an expert programmer. He gave notice to the parties of his intention to appoint a particular individual and asked them to confirm their agreement. RSL gave its unqualified agreement. However, in confirming Stansell's agreement, its representative said his client should have sight of any report produced by the programmer and an opportunity to comment.
It was clear the adjudicator had relied on a final expert report that neither of the parties had seen
The programmer was appointed and produced an initial report that was circulated to both parties. Broadly, its conclusion was that RSL had failed to prove its case. Stansell, which would no doubt have taken some comfort from the initial report, did not respond. The adjudicator forwarded RSL's comments to the programmer and circulated his response to both parties.
Ultimately, the adjudicator published a decision in which he gave RSL an extension of time coupled with prolongation costs. It was clear from the decision that the adjudicator had placed some reliance on a final report from the programmer that had not been circulated to either party.
Stansell contested RSL's enforcement proceedings arguing that, in reaching his decision, the adjudicator had not only acted in breach of his agreement regarding the appointment of the programmer but also in breach of the rules of natural justice. RSL responded that there had been nothing unfair about the adjudicator's conduct since neither party had been given an opportunity to comment on the final report. Furthermore, there had been insufficient time available in the process for the parties to be given that opportunity. Reliance was also placed on the wording of clause 38a, which gave the adjudicator the power to consult third parties without the obtaining the parties' consent. Accordingly, RSL argued, the terms of any agreement that may have been reached in this regard were immaterial.
In reaching his decision that the adjudicator's decision was invalid, Judge Seymour did have regard to the basis on which Stansell had agreed to the appointment of the expert. It was immaterial that clause 38a did not require the parties' permission. Applying the rules of natural justice, which include the requirement for justice to be seen to be done, the judge concluded that the adjudicator's failure to disclose to the parties the final report was sufficient in itself to render the adjudicator's decision invalid.
Dominic Helps is a partner in Shadbolt & Co.