Contract – Dispute – Award of damages – Whether adjudicator acting outside jurisdiction – Whether adjudicator breaching rules of natural justice – Whether multiple disputes being severable – Claim allowed
By a contract dated 1 August 2005, the defendant engaged the claimant to carry out works on two London buildings. The contract was in the JCT standard form of building contract (Private Without Quantities 1998 ed), which contained the standard adjudication clause.
Disputes arose between the parties concerning the claimant’s entitlement to extensions of time and, in particular, to two claims, one for 16 weeks and the other for 13 weeks, together with related loss and expense. A dispute encompassing those claims was submitted to an adjudicator. Following the exchange of written submissions and evidence and two meetings, he produced his decision, which, against a much higher claim, awarded the claimant £391,565.60 plus VAT. Of this, on analysis, around one-fifth related to the 13-week claim.
The defendant refused to pay and the claimant brought proceedings to enforce the adjudication decision. Issues arose relating to natural justice, jurisdiction and the possible severability, or separable enforceability, of parts of the decision. The defendant argued that the adjudicator had had no jurisdiction and had failed to follow the rules of natural justice when dealing with the prolongation costs relating to the 13-week claim. It said that, since the claimant had expressly claimed for a particular 13-week period and for the specific preliminary-type costs said to have been incurred during that period, the adjudicator had no jurisdiction to award, and should not have allowed, costs for a different and later period, at least without giving the defendant the opportunity to adduce evidence and argument that the costs during that later period were significantly less than in the earlier period.
Held: The claim was allowed.
Courts, adjudicators and arbitrators should not adopt an over-legalistic analysis of a dispute between parties. The dispute claim or assertion had to be determined in broad terms and was not necessarily defined or limited by the evidence or submissions adduced prior to the referral. One had to look at the essential claim and the fact that it had been challenged rather than the precise grounds upon which it had been rejected. It was open to a defendant to raise any defence when it was referred to adjudication or arbitration and the claimant was not limited to the arguments put forward before the dispute had crystallised. The adjudicator or arbitrator then had to resolve the dispute considering all the arguments, evidence and other material before him: AMEC Civil Engineering Ltd v Secretary of State for Transport [2005] EWCA Civ 291; [2005] 1 WLR 2339 and Collins (Contractors) Ltd v Baltic Quay Management (1994) Ltd [2004] EWCA Civ 1757 applied, Edmund Nuttall Ltd v RG Carter Ltd [2002] EWHC 400 (TCC); [2002] BLR 312 not followed.
The adjudicator had to establish a material breach of natural justice in adjudication cases. A breach would be material where the adjudicator failed to bring to the attention of the parties a point or issue upon which they should be given the opportunity to comment because it was either decisive or of potential importance to the outcome of the resolution of the dispute and was not peripheral or irrelevant. That was a question of degree to be assessed by the judge. If either party had argued a particular point and the other did not challenge it, the rules of natural justice would not have been breached. If the adjudicator had jurisdiction to address the issue, it was for the parties to submit such evidence as they saw fit to address the realistic permutations thereof: Discain Project Services Ltd v Opecprime Development Ltd (Bias) [2001] BLR 285 and Balfour Beatty Construction Ltd v Lambeth London Borough Council [2002] EWHC 597 (Ch); [2002] BLR 288 applied.
In the present case, the adjudicator’s decision would stand. He had been asked to do something that was within his jurisdiction, which extended to addressing the consequences of the defendant’s defences. He had not misled the parties as to what he was going to do and had assessed what was due to the claimant on the evidence and argument before him. He was entitled to investigate the facts and evidence as presented.
Per curiam: If the decision properly addressed more than one dispute or difference, a successful jurisdictional challenge to that part of the decision that dealt with one such dispute would not undermine the validity and enforceability of the others. However, if the decision, as drafted, was not severable in practice or if the breach of the rules of natural justice was so severe or all-pervading that the remainder of the decision would be tainted, the decision would not be enforced.
Mark Raeside QC (instructed by Wheelers, of Guildford) appeared for the claimant; Sean Brannigan (instructed by Fenwick Elliot LLP) appeared for the defendant.
Eileen O’Grady, barrister
