Misrepresentations on nomination form invalidate adjudication
A recent TCC decision has refused to enforce an adjudication decision due to misrepresentations made on an adjudicator nomination form. This is the first time since Eurocom v Siemens in 2014 that such a challenge has been upheld. Genuine conflicts of interests are rare and parties who have genuine concerns over the appropriateness of particular adjudicators should take special care in the way in which such concerns are drawn to the attention of a nominating body.
Eurocom v Siemens: a recap
The first case to consider the effect of misrepresentations made on an adjudicator nomination form was Eurocom v Siemens. Siemens had sought to defend adjudication enforcement proceedings on the basis that Eurocom had made false representations in its application for nomination submitted to RICS. Mr Justice Ramsey concluded that the making of fraudulent representations on such a form would be sufficient to invalidate the adjudication process regardless of whether the nominating body had relied on the representation. The fraud invalidated the application and “it is as if no application had been made.”
In that case, the court determined that that the words used by Eurocom on its application form (“we would advise that the following should not be appointed”) constituted a fraudulent misrepresentation that the adjudicators identified had a conflict of interest, which rendered the application invalid and the appointed adjudicator without jurisdiction. Commenting shortly after the decision (in CSK Electrical Contractors Ltd v Kingwood Electrical Services Ltd), Mr Justice Coulson stated, “there can be no doubt that the facts of Eurocom have shaken public confidence in the adjudication process.”
Although raised in several cases since Eurocom, in no other case has this principle prevented the enforcement of an adjudication decision until a TCC decision last month.
RNJM Ltd v Purpose Social Homes Ltd
RNJM applied to enforce a fifth adjudication decision between itself and Purpose Social ordering payment to RNJM of £132,884.72. Relying on Eurocom, Purpose Social resisted enforcement on the basis of false statements said to be made in RNJM’s application for nomination to RICS.
RNJM’s form had asserted a conflict of interest with a prior adjudicator, Mr Bunker, due to a “Dispute over payment with Referring Party”. Mr Bunker had decided against RNJM in the third and fourth adjudications between the parties and RNJM had not paid Mr Bunker’s fees and expense as ordered. After Mr Bunker threatened legal proceedings, Purpose Social paid the outstanding fees and expenses pursuant to its joint and several liability. Two days later, and having still made no response to Mr Bunker’s demands for payment, RNJM commenced the fifth adjudication and submitted its application for nomination to RICS.
RNJM argued that the steps taken by the adjudicator to recover his fees gave rise to a risk of apparent bias against RNJM. It submitted evidence that RNJM and the person completing the application form held an honest belief that the payment dispute with Mr Bunker was a potential conflict of interest. However, RNJM’s evidence had not addressed various questions raised by Purpose Social as to its state of mind and the nature of the dispute it believed to exist.
The court noted that the “evidence provided by the Claimant is wholly inadequate to establish the nature of and reason for asserting that there was an alleged dispute” and the “fact that the Claimant chose not to answer any questions nor provide any evidence about the nature of the dispute is telling”. As enforcement is by way of summary judgment, Purpose Social had a realistic prospect of establishing fraud and enforcement was refused.
Conclusions and implications
This case serves as a useful reminder of the importance of avoiding misrepresentations on adjudicator nomination forms. As the court noted in this case, “it is only if a potential adjudicator has a clear conflict of interest that the nominating body should be warned” and “even if an adjudicator (in relation to the same dispute) has been challenged successfully on the basis of jurisdiction, if the dispute is re-referred to him, that is not sufficient to give rise to apparent bias”. Parties should therefore be very careful before asserting positively that an adjudicator has a conflict of interest.
On the other hand, similar challenges have failed where a nomination form did not positively assert a conflict of interest but only referred to a “potential” conflict and a view that nomination would be “inappropriate”. For example, in Wordsworth Construction Management Ltd v Inivos Ltd, the TCC suggested that, “to rule that any comments which are not shown to be based on a clear-cut conflict of interest will automatically invalidate the appointment process is going too far and will encourage yet more attempts to avoid valid adjudication awards”. Parties who have genuine concerns over particular adjudicators would therefore be well advised to limit themselves to a statement of the facts, together with an opinion that the appointment of such persons would be inappropriate.
References:
Eurocom v Siemens [2014] EWHC 3710 (TCC)
CSK Electrical Contractors Ltd v Kingwood Electrical Services Ltd [2015] EWHC 667 (TCC)
Wordsworth Construction Management Ltd v Inivos Ltd [2024] EWHC 617 (TCC)
