Adjudication – Award – Enforcement – Adjudicator making award in favour of claimant in dispute concerning plant hire contract — Defendant challenging jurisdiction of adjudicator — Claimant seeking to enforce adjudicator’s decision – Whether contractor having authority to enter into contract on behalf of defendant — Whether adjudicator acting in breach of natural justice – Application granted
The defendant company was involved in the business of environmental waste management and recycling. The claimant hired out recycling plant and equipment. A dispute arose between them over a three-year hire contract for a high-speed shredder that the claimant contended had been entered into by the defendant for use on its site. The latter maintained that the shredder had been hired on a month-by-month basis and that it had given one month’s notice to terminate the contract and had paid the hire due under the agreement for the actual period of hire.
The claimant instigated adjudication proceedings as provided for under the contract. The defendant challenged the adjudicator’s jurisdiction on the ground that it had no contract with the claimant because the contractor, who was the landfill materials and recycling facilities manager at the site, was not an employed by the defendant and had had no authority to enter into the hire contract. The adjudicator took the view that although the contractor had no actual authority, he had apparent authority to enter into the relevant contract. Accordingly, the adjudicator ruled in favour of the claimant.
The claimant sought to enforce the adjudicator’s decision. However, the defendant argued that since, as it claimed, the contractor had had no authority to enter into the hire contract, the adjudicator had no jurisdiction. Further, the rules of natural justice had been breached because the adjudicator had decided the jurisdictional issue on the basis of a witness statement from the contractor that had not been served on the defendant, which had therefore had no opportunity to respond.
Held: The application was granted.
(1) There was no doubt that the defendant had engaged the contractor to provide services at the site and that the contractor had authority to hire plant. The weekly or monthly charges under the hire contracts were paid by the defendant; by necessary inference its management and directors must have been aware that the contractor had arranged for a significant quantity of plant to be hired and used at the site. There was no evidence that the defendant had informed the claimant that the contractor’s authority was limited to contracts for short hire periods of a few days, a week or a month. There was some evidence that, after the longer-term contracts had been entered into, the defendant had voiced some unrelated concerns about the contractor. However, that did not assist the defendant because that had occurred after the contract in question had been entered into and did not relate to the contractor’s authority. Nothing material would have alerted the claimant to the fact that the contractor did not have authority prior to the signing of the relevant contract thereafter. Accordingly, there was no reasonable prospect of establishing that the contractor did not have appropriate authority to enter into the hire contracts and the defendant had not adduced sufficient evidence before the court to avoid summary judgment.
(2) As regards the alleged breach of natural justice, it first had to be established that the adjudicator had failed to apply the requisite rules. Any breach of those rules had to be more material. Materiality would arise where the adjudicator had failed to bring to the attention of the parties a point or issue that was either decisive or of considerable potential importance to the resolution of the dispute and was not peripheral or irrelevant, and on which the parties should have been given the opportunity to comment. That was a question of degree to be assessed by the judge. It followed that if either party had argued a particular point and the other party did not respond to that point, the rules of natural justice would not be breached: Carillion Construction Ltd v Devonport Royal Dockyard Ltd [2005] EWCA Civ 1358; [2006] BLR 15 and Cantillon Ltd v Urvasco Ltd [2008] EWHC 282 (TCC); [2008] BLR 250 considered.
Even assuming in the defendant’s favour that its solicitor did not receive the contractor’s witness statement, the wholly innocent receipt of that statement by the adjudicator and references to it in his decision did not amount to a material breach of the rules of natural justice on his part. The adjudicator would have had no reason to believe that it had not been copied to and received by the defendant’s solicitor. In any event, he had only a limited regard to what the contractor had to say in that statement, preferring to base his view on jurisdiction on independently supported facts that did not emanate from the statement. In some cases, an adjudicator’s conduct in investigating his jurisdiction might display such a lack of regard for the rules of natural justice that it would undermine any confidence that the court might have in his ability to conduct an adjudication fairly, but that did not arise in the instant case.
Samuel Townend (instructed by Hawkswell Kilvington LLP) appeared for the claimant; Clifford Darton (instructed by Warner Goodman LLP) appeared for the defendant.
Eileen O’Grady, barrister
