John Sisk & Son Limited v Duro Felguera UK Limited [2016] EWHC 81 (TCC)

Judgment date: 25 January 2016

The court held that the adjudicator had not breached the rules of natural justice and had not wrongfully delegated parts of his decision-making role to a third party.

Technology and Construction Court (“TCC”), Mr Justice Edwards-Stuart

Background

This was an application for enforcement of an adjudicator’s decision by John Sisk & Son Limited (the claimant) that was resisted by Duro Felguera UK Limited (the defendant) on the grounds that there had been a breach of natural justice and/or wrongful delegation of the adjudicator’s decision-making function.

The claimant was engaged by the defendant to carry out civil works at a combined cycle power plant (worth around £36 million).

A dispute arose between the parties in relation to the proportion of concrete work the claimant had carried out under the contract and how much this should cost. The matter was referred to adjudication on 25 July 2015.

The defendant raised a number of challenges to the Adjudicator's jurisdiction. Its Response to the Referral Notice began with a section headed “Overview”. The first paragraph of this raised the objection that the dispute referred by the claimant arose out of more than one contract (the “threshold” jurisdiction). In the ensuing paragraphs, the defendant set out four reasons why the claimant’s claims were bound to fail (which the Adjudicator described as the “internal” jurisdiction).

The challenges raised by the defendant generated a certain amount of correspondence between the Adjudicator and the parties. On 11 August, the Adjudicator wrote to both parties advising them that he rejected all of the defendant's jurisdictional challenges, that he was not intending to resign and that he intended to continue with the adjudication. The correspondence continued.

The Adjudicator met with the parties on 1 and 3 September to discuss liability and quantum issues and thereafter invited further submissions on matters arising out of the meetings and set a timetable for these to be provided and exchanged.

The Adjudicator issued his decision on 9 October and awarded the claimant a sum in excess of £10 million. In his decision, he dealt with each one of the internal jurisdictional challenges; his conclusions were consistent with those in his 11 August letter, although he stated that he had taken account of the parties’ submissions since then and pointed out that he had raised at least one of the issues at the 1 September meeting.

Issues

The defendant resisted the claimant’s application and submitted that:

(a) there was a real danger that the Adjudicator had approached certain issues with a closed mind and reached a final decision on a number of legal issues without giving the defendant an opportunity to address new arguments put forward by the claimant in the referral;

(b) the Adjudicator had delegated, or at least had appeared to have delegated, certain parts of his decision making role to a third party, without notifying the parties of this or seeking their consent to that course of action; and

(c) the Adjudicator purported to rectify or amend the contract in circumstances where neither party had submitted that it should be rectified and without giving the parties any notice of his intention to take that approach.

The claimant submitted that that Adjudicator did have jurisdiction and did not wrongfully delegate his decision-making role.

In relation to the defendant’s contention that the Adjudicator had purported to rectify or amend the contract, it was the case that the parties were in dispute over the way in which the contract between them (a re-measurement contract) provided for payment for the placing of concrete (standard mix as well as reinforced/ structural concrete) as well as its supply/provision. This part of the defendant’s challenge was based on a document called the Materials Take Off document, which formed part of the contract and, specifically, Chapter05 of it (entitled “in situ concrete”). The Adjudicator’s decision on the matter [paras 71 and 72] had used the words “to correct” when determining which approach he was to accept; this formed the basis for the defendant’s contention.

Decision

The Court held [para 80] that the defendant’s challenge to the Adjudicator’s decision failed on every ground and the claimant was entitled to summary judgment, as claimed, together with the appropriate interest. The Adjudicator had not breached the rules of natural justice and had not wrongfully delegated parts of his decision-making role to the third party.

Natural Justice

Both parties agreed [para 26] that the issue for the court to determine was “whether a fair-minded and informed observer, having considered all the facts, would conclude that there was a real possibility of predetermination.”

In relation to what is meant by predetermination, the Court cited [para 26] Beatson J in R on the application of Persimmon Homes Ltd v Vale of Glamorgan Council [2010] EWHC 535 (Admin): “Predetermination is the surrender by a decision-maker of its judgment by having a closed mind and failing to apply it to the task. In a case of apparent bias, the decision-maker may have in fact applied its mind quite properly to the matter but a reasonable observer would consider that there was a real danger of bias on its part. Bias is concerned with appearances whereas predetermination is concerned with what has in fact happened."

The Court looked in detail at the events and facts during the Adjudication process and concluded that the Adjudicator did not indicate, at any stage, that he would not accept further submissions on the same points. In fact, the Adjudicator specifically welcomed in writing, further submissions from both parties and the defendant had every opportunity to raise any further issues that it wished to.

The Court held that there was no predetermination and there had been no breach of natural justice: “The adjudicator described the conclusions that he reached in his letter of 11 August 2015 as being a 'non-binding opinion'. The purpose of reaching those conclusions was for him to determine whether or not he had jurisdiction to continue the referral. He decided that he did. At no stage did he indicate that he would not entertain further submissions on the same points. Indeed, it seems that he did so, both at the meeting held on 1 September 2015 and in the submissions that he directed the parties to make thereafter.” [para 35]

Wrongful Delegation

In relation to the defendant’s contention that the Adjudicator had delegated, or at least had appeared to have delegated, parts of his decision making role to a third party, the Court then proceeded to consider the role played by a Mr Chris Hutchinson.

The Court noted that Mr Hutchinson was an accredited quantity surveyor with about 25 years’ experience in the construction industry and also a lawyer, but not an adjudicator (although he had acted as a party representative in adjudications): “He practices as a self-employed consultant” [para 39]. Mr Hutchinson had been engaged to assist with reviewing various submissions of the parties, compiling them into "like items" so that the Adjudicator could consider them as a whole and assisting with other tasks such as checking the Adjudicator's calculations and proofing documents.

The Court dismissed the defendant’s claim in relation to the appointment of Mr Hutchinson and that the Adjudicator’s failure to notify the parties that he intended to appoint the third party was a breach of natural justice. It concluded that there had not been any wrongful delegation of the Adjudicator’s decision-making role and the Adjudicator had adequately advised the parties of the third party’s role in the engagement, and [para 55] that such role was limited to being a “data handler and manipulator and a general administrative assistant”.

The Court commented [para 61] that the Adjudicator had to assimilate information in 20 lever arch files within the short timescale of the adjudication, a task which would have been very difficult and almost impossible: “Without the assistance of someone who could assemble and manipulate the data in a manner that made the figures in a manageable way, the Adjudicator’s task would have been almost insuperable.”

The Court also queried [para 61] why the defendant waited more two months since meeting Mr Hutchinson (September 2015) before raising the question of Mr Hutchinson’s involvement in the adjudication: “It seems extraordinary that no one in Duro’s camp asked about his role unless, of course, it had been explained at the outset of the meeting on 3 September 2015 as the Adjudicator has described.”

Contract rectification

• The Court rejected the defendant’s argument that the Adjudicator had purported to rectify or amend the contract, with the judge saying [paras 72 and 74]:
  • “Although the Adjudicator used the verb “to correct” at paragraph 8.12, in my view he was doing no more than adopting Sisk’s case, which was to use the rate in item 5.05 in the absence of any other rate for the provision of concrete. He was filling the gap in the table in the way that Sisk had asked him to. Both parties had approached the issue as a matter of construction of the contract and in my view that is what the Adjudicator did also.”
  • “In my judgment, the Adjudicator did no more than accept the case advanced by Sisk, which had been addressed by Duro in its submissions: this was something that he was entitled to do in the light of the way in which the arguments had been presented to him. Duro had every opportunity to meet the case being advanced by Sisk which it understood perfectly well. There was no breach of natural justice.”

For the full judgment, see: http://www.bailii.org/ew/cases/EWHC/TCC/2016/81.html