What are the legal guidelines that an adjudicator has to stay within? This frequently asked question just became a little bit clearer thanks to a recent case in the Scottish courts
There is an angle in this Scottish case, Curot Contracts vs Castle Inns (Stirling), that is worth thinking about. It was an adjudicator’s award that ordered Castle to pay Curot the hefty sum of £444k plus VAT. There had been a row about the amount certified in an interim account. It was too low, said the adjudicator. His ruling was binding immediately. Castle was supposed to stump up. But Castle had a quarrel. It took the view that the adjudicator had taken a wrong turn; so, said Castle, the award should fall away. Its reason was “a failure by the adjudicator to understand the law”. That’s what it told the Scottish Court of Session when Curot tried to enforce the award.
Now then, it has long since been true that if the adjudicator accepts an argument about the law that is wrong, then hard luck: the parties are bound by his wrong choice. It’s the same with facts: if the adjudicator accepts one party’s evidence and thereby arrives at a fact, that’s that. You can see that “failure to understand the law” has all the makings of a non-starter.
Ah, but there is more. The gloss on the headline was: “Not just that the adjudicator had erred in law, but that he had effectively ignored the contract and decided the case on the basis of what he perceived to be just and reasonable.” And, said the Scottish lawyers, he is not allowed to do that; he has gone beyond his authority. It is said to be an “excess of jurisdiction”. Cobbler, stick to your last!
Such niceties as ‘the law’ or ‘the evidence’ were to be left for another day, when the lawyer folk would prance around in wigs and gowns and spend squillions on fancy footwork
Let me take you back to 1998 and the day I was tackled by two fellow barristers. Tackled because their take on this new fangled 28-day adjudication malarkey was at odds with mine. “TB,” they said, “you are in cloud-cuckoo land if you think that anyone can decide the rights of the parties under a construction contract in 28 days.” Their view was that adjudication only required some outsider to take a view overall as to the parties’ arguments and come up with something pro-tem that might be “just and reasonable”. So, an old hand in the construction world would listen to the stories, yawn, mutter to himself “I’ve heard it all before” and decide the dispute. Such niceties as “the law” or “the evidence” were to be left for another day when the lawyer folk would prance around in wigs and gowns and spend squillions on fancy footwork. Do believe me when I say there was much talk like that.
And now look again at what these lawyers are saying in Curot vs Castle Inns. They are arguing that it is an absolute no-no to ignore the contract. And in this case, a senior judge agreed. The judgment, the hearing in court, was all about whether the adjudicator applied the contract or not. There isn’t a hint in any of this that adjudication is a process that permits decisions to be made regardless of the contract. Castle was trying to show that the adjudicator had failed to understand that the law required him to apply the contract. Curot spent its time in court arguing that the adjudicator kept within the four corners of the contract. My goodness, how far we have come since 1998.
Seemingly, in his award the adjudicator had to decide, among lots of other things, the meaning of the contractual agreement. He decided it was a fixed-price lump sum job. He then allowed certain items to be valued as variations, notwithstanding Castle saying they were not allowed. He said: “I’m reluctant to construe the contract in this for obvious reasons of reasonableness.” So Castle argued that the adjudicator had decided that the contract was unreasonable because it did not allow variations to be paid. But, it said, the contract is the contract, like it or not.
Castle was trying to show the adjudicator had failed to understand that the law required him to apply the contract
The judge would not buy this. He explained that the adjudicator was rejecting Castle’s argument that by using a form of contract with a fixed lump sum price, the parties intended not to pay up for variations. That produces a wholly uncommercial result. It was an unreasonable interpretation of the parties’ objective intentions in the contract. So the award was good. He had applied the contract.
And one more thing; I happen to know who the adjudicator was. He was very experienced. The very idea of this fellow deciding a dispute outside the contract is wrong. The judge was right.
Tony Bingham is a barrister and arbitrator at 3 Paper Buildings Temple