The issue, which goes to the root of how adjudication should be conducted, is the extent to which an adjudicator must act judicially and comply with the rules of natural justice.
This question arose in the first court case involving enforcement of an adjudicator's decision, Macob vs Morrison, when Mr Justice Dyson, the senior judge in the Technology and Construction Court, dismissed the argument that an adjudicator's decision should not be enforced because it failed to comply with natural justice.
He commented that statutory adjudication was undoubtedly rough justice and unfair, but concluded that parliament must have known what it was doing in legislating for it, and so the duty of the court was to give effect to that intention.
Judge Dyson adopted a similarly robust approach in the well-known case of Bouygues vs Dahl-Jensen, when a party sought to resist enforcement on the grounds that the adjudicator had plainly got his arithmetic wrong in calculating the award. Surely, in those circumstances, argued the unfortunate party, it would be wrong to enforce the decision.
Although it was evident from the decision itself that the adjudicator had miscalculated, Judge Dyson rejected the argument, stating that it was not the role of the court in enforcement applications to investigate the rights and wrongs of an adjudicator's decision.
The publication of Judge Dyson's decision prompted strong rumours that when the case came before it, the Court of Appeal would take the judge to task for his robust approach. In some circles, the feeling was that he had gone much too far in supporting an approach that kept judicial intervention in the adjudication process to a minimum, even where the adjudicator had not conducted himself properly or had reached an obviously incorrect decision.
So there was some surprise when the Court of Appeal unanimously upheld not only his decision, but his bold approach.
Judge Bowsher's decision in the Discain case marks a new chapter in this saga, and those who are suspicious of this new form of dispute resolution will no doubt welcome it.
Discain was engaged by Opecprime for the design, manufacture and erection of structural steel balconies at Davy House, in Lyon Road, Harrow. A payment dispute arose. Discain applied to the RICS for the appointment of an adjudicator, and Roy Sutcliffe was appointed.
The adjudication was conducted on the scheme and Sutcliffe handed down his decision, which required Opecprime to pay Discain approximately £55 000, plus VAT.
The very nature of adjudication makes a strict regard for the rules of natural justice all the more important
Opecprime refused to obey Sutcliffe's decision. Discain then instructed its lawyers to commence summary judgment proceedings in the Technology and Construction Court, and Opecprime resisted enforcement on the grounds of jurisdiction and natural justice. The jurisdictional points need not trouble us here: it is the matters that Opecprime described as a breach of natural justice – but which Judge Bowsher characterised as amounting to a danger of bias – that concern us.
Opecprime's complaint was that Discain's representative had on three occasions during the adjudication telephoned Sutcliffe and had conversations with him. During these conversations, they had discussed substantive issues in the adjudication, and also sent three faxes to Sutcliffe – each of which was copied to Opecprime – summarising those conversations and forwarding certain authorities to the adjudicator. Two of the faxes were sent immediately and the third three days after the conversation.
The particular matter Discain's representative and Sutcliffe had discussed was indeed of considerable importance in the adjudication. Discain was challenging the validity of a section 111 withholding notice on the grounds that it had not been sent on Opecprime's own letterhead but on that of another group company. Sutcliffe ultimately found, in Discain's favour, that the notice was invalid as alleged.
When the case came before Judge Bowsher, he made it clear that, as a matter of law, he disagreed with Sutcliffe's conclusion about the validity of the section 111 notice. However, he recognised that the fact he disagreed with Sutcliffe's decision was no reason not to enforce it, so long as he was satisfied that it had been reached in a satisfactory manner.
In examining closely the manner in which Sutcliffe's decision had been reached, Judge Bowsher acknowledged Judge Dyson's view in Macob vs Morrison that a breach of the rules of natural justice is in itself insufficient grounds to resist enforcement.
But the judge then went on to identify two types of breach of natural justice. On the one hand, there are mere procedural errors, which have no demonstrable effect on the outcome of the adjudication, such as the particular breach considered in Macob. On the other hand, there are more significant breaches of the rules of natural justice, such as the one in this case, that obviously can influence the decision.
In the judge's opinion, the very nature of adjudication, in which there is no appeal from an adjudicator's decision on matters of fact or law, makes a strict regard for the rules of natural justice more – not less – important. Had the rules of natural justice been complied with in this case, he considered, Sutcliffe might have reached a different decision.
Although the judge made it clear he was not criticising Sutcliffe's conduct, he considered that what had happened was "distasteful" and said he could not "bring himself" to enforce a decision arrived at in this way.
Many will regret that the decision in this case is not subject to appeal. It raises crucial questions regarding the conduct of adjudications in the future, both for adjudicators themselves and for the parties' representatives. For instance, would it have made a difference had it been the adjudicator who picked up the telephone?
Postscript
Dominic Helps is a partner in solicitor Shadbolt & Co.
