The Wallis adjudication turned on whether expert evidence was relevant, and whether there was time to investigate it within the 28 day limit. This is how it went
Evidence is not admissible when it is irrelevant. Nor is evidence admissible when it is relevant but contains new allegations, and there is not enough time to answer them. In essence, these circumstances arose in the adjudication between Kier Regional, trading as Wallis, and City & General (Holborn). This goes on quite a lot.
Here are the details. The contract price was £11.5m. Wallis' final account was £30m. The extension of time was 59 weeks. The prolongation claim was £1.4m and the contract administrator awarded £500,000. Wallis called for the adjudicator to referee the administrator's £500,000 certificate.
Charles Ellis was appointed referee and, 28 days later, he said the contract administrator should have awarded £1.3m.
But there was a bumpy bit in the 28 days. The response included two beautifully crafted expert reports. "Won't do," said Wallis. None of this was provided to the contract administrator when he certified the £500,000 and, in any case, Wallis hadn't seen these reports until day seven of the adjudication, which left no time to answer the case put. It was, claimed Wallis, "defence by ambush". The adjudicator agreed. He would not let the new stuff in because these reports "were not before the contract administrator when he evaluated the claim and therefore not relevant to the way in which he prepared his valuation". The adjudicator is being asked to decide if the contract administrator's work, on the information he had at the time, was fair and reasonable. So if the expert reports were starting afresh in the calculation, they are irrelevant to the referee's task.
Now let me explain a little bit of law. When the adjudicator decides on the relevance of a piece of evidence, they are making a decision in law. And when an adjudicator decides law, it is binding until finally decided in litigation or arbitration. Mr Ellis heard arguments about the relevance of the two reports and made a binding decision. Mind you, he might have been wrong if the two reports were reporting on the contract administrator's endeavours. If the reports explained how sound the certificate was, they would be highly relevant. Nevertheless, a decision to refuse to admit is a decision in law; that's that. The short point here is that an adjudicator is properly entitled to boot out evidence or keep it in.
When the adjudicator decides evidence is relevant, he is making a decision in law, and it is binding until litigation
So much for relevance. Wallis had a second complaint, which is a frequent adjudication bump. Even if relevant, Wallis said, the evidence was new and there was no time to investigate the reports, never mind answer the new allegations. This is "defence by ambush". Look, it is not at all unusual
to find that the referral, never mind the defence, contains a wad of new argument and evidence that were never heard by the defendant. The first test to let it in or not is whether it is relevant within the scope of the notice of adjudication. If it is, the second test is whether the new material can be investigated and answered within the 28-day timetable. If it isn't and the parties cannot agree a special timetable to answer it, out it goes.
Harsh? Not really. We just have to get used to taking seriously the threat of an adjudication. It is still ordinary for the payer to be dilatory about a payee's complaint about an underpayment or an undercertified sum. The complaint may be unmerited but that does not mean it can be allowed to gather dust on your desk. There is a real chance that if you don't properly answer forthwith, you will be bumped into adjudication and only then get your act together.
None of that happened in the Wallis case, but it happens elsewhere, all the time. In Wallis, the High Court enforced the referee's award, adding that even if he was wrong to have ousted the two expert reports, it is not a decision that invalidates an adjudication. At worst, there is an error in law and the courts have long since ruled that no error of law voids the referee's decision.
Tony Bingham is a barrister and arbitrator specialising in construction. You can write to him at 3 Paper Buildings, Temple, London EC4 7EY, or email him on firstname.lastname@example.org.