We need some fog lights

His Honour Judge Toulmin's decision in AWG Construction vs Rockingham Motor Speedway Limited once again raises the issue of the appropriateness of the adjudication process for complex disputes. This is a question that was recently highlighted in the well-publicised London and Amsterdam Properties case (see, for example, 13 February, page 47). I hope this question will also be high on the agenda for the Adjudication Task Group in its forthcoming deliberations as part of the government's review of the working of the Construction Act 1996.

Why has this question developed into such an important and topical issue? In my view this is because adjudication is being used to resolve all sorts of complicated disputes, including those that arise after project completion. In other words, it is being used as a once and for all dispute resolution process.

There are many who believe that this development is undesirable, particularly where disputes involve issues of professional negligence. Indeed, that view appears to be shared by some of the judges sitting in the Technology and Construction Court – as evidenced by His Honour Judge Thornton in the preceding article.

In the AWG case, Rockingham engaged AWG to design and construct a racetrack that included an oval track designed for motor racing. Many millions of pounds changed hands.

When the first major race took place, the event was disrupted when it was discovered that water had seeped into the oval track. Rockingham withheld £2.8m from AWG and began adjudication proceedings in which it alleged that AWG had chosen the wrong material for the sub-base. Accordingly, it claimed, the track was not fit for its obvious purpose or, alternatively, AWG was negligent in its design.

Rockingham's case was vigorously contested by AWG. Rainforests of paper passed backwards and forwards. At a late stage in the proceedings, Rockingham changed its case to allege that the problem was not the nature of the sub-base material but rather the absence of sufficient drainage within it. This shift took place only a few days before the adjudicator's decision was expected. Nevertheless, in finding substantially in favour of Rockingham, the adjudicator relied on the fresh allegations.

Judge Toulmin considered that adjudicators ought not to be confined to considering only the package of issues, facts and arguments referred to them

In reaching his decision, Judge Toulmin was of the opinion that the shift in Rockingham's argument amounted to putting forward a new case. The learned judge considered that neither the adjudicator nor AWG had had sufficient time to respond to or assess it.

In challenging the adjudicator, AWG relied on the controversial decision of His Honour Judge Seymour in Nuttall vs Carter (see 12 April 2002, page 50). Readers may recall that the essence of that decision was that, in any set of circumstances, a dispute referred to an adjudicator comprises the package of facts, issues and arguments debated between the parties during the prior negotiations. Since adjudicators only have the power to consider the matters in disputes referred to them, it follows that if, in reaching their decision, they consider anything outside that package of facts, they will have decided a different dispute to that referred. By acting beyond their jurisdiction in that way, they will be held to have rendered their decision null and void.

This strict technical approach may be fine for simple payment disputes. However, for obvious reasons it can make it extremely difficult for adjudicators and parties alike to deal with more complex cases, where it is unrealistic to expect parties to ventilate all relevant facts, issues and arguments in advance.

Some inroads have already been made into the severity of this principle. For Judge Toulmin, the Nuttall vs Carter approach was "too rigid" and, within certain limits, he considered that adjudicators ought not to be confined to considering only the package of issues, facts and arguments referred to them. That said, he was in no doubt that in the case before him, Rockingham had overstepped the mark and he therefore set aside the adjudicator's decision.