Beumer Group UK Ltd v Vinci Construction UK Ltd [2016] EWHC 2283 (TCC)

Judgment date: 13 September 2016

The case concerns the use of a single adjudicator for disputes across multiple contract tiers.

The court held that:

1. A contractor involved in an adjudication should have been informed by the adjudicator about a simultaneous adjudication which involved the same adjudicator and the other party and should have been provided with material from that adjudication as the disputes were closely connected and the issues were similar.
2. The adjudicator should have disclosed his appointment in the simultaneous adjudication. Adjudicators are acting as impartial tribunals and although involvement in other adjudications does not of itself constitute a conflict of interest, that involvement should be disclose.

Technology and Construction Court, Mr Justice Fraser

Background

This case concerned the enforcement of an adjudicator’s decision sought by the claimant sub-contractor against the defendant main contractor who resisted enforcement by alleging breach of natural justice and a risk that the fair minded and informed observer would conclude there was a real possibility of bias.

In November 2012, Gatwick Airport Ltd engaged Vinci Construction UK Ltd (the defendant contractor) to undertake certain works at Gatwick Airport’s South Terminal and ‘Pier 1 - Phase 2’. Those works included a baggage handling system, which the defendant sub-contracted to Beumer Group UK Ltd (the claimant sub-contractor). Effectively, the claimant (“Beumar”) was engaged by the defendant (“Vinci”) to deliver the entire baggage handling system works, which included a tilt-tray sorter; the value of the sub-contract works was in the region of approximately £30 million.

The main contract was based on the NEC 3 Engineering and Construction Contract, Option A and the sub-contract on the NEC 3 Engineering and Construction Sub-Contract, Option A. Clause W2 was the relevant option chosen by the parties in respect of dispute resolution. Both contracts listed the same panel of three adjudicators to decide any disputes under the main contract and subcontract respectively.

The sub-contractor further sub-contracted certain parts of the sub-contract works to Daifuku Logan Ltd (“Logan”). Logan's sub-sub-contract works comprised the tilt-tray sorter.

Beumer and Vinci, and also Logan and Beumer, each found themselves in dispute with their respective contracting parties about aspects of the sub-contract works, and the sub-sub-contract works, respectively as follows.

In March 2016, a dispute arose between Vinci and Beumar concerning three instructions that had been issued by the Vinci and, specifically, whether they constituted ‘Compensation Events’ (as defined in NEC3) which entitled the claimant sub-contractor to extensions of time. A Dr Chern was appointed as Adjudicator; on 17 June 2016, he issued his decision in favour of Beumar. The Adjudicator also ordered that his fees be paid by Beumar and reimbursed by Vinci. Vinci did not reimburse the Adjudicator's fees and Beumar started enforcement proceedings; this happened to be the second adjudication between the main contractor and sub-contractor and was referred to, by the Court, as “BVII”.

In parallel to BVII, the sub-contractor commenced an adjudication against its sub-sub-contractor on the same day. Beumar claimed liquidated damages from Logan in relation to the same delay for which it was seeking an extension of time in BVII. This adjudication also happened to be the second adjudication between Beumar and Logan and was referred to, by the Court, as “BLII”. The same Dr Chern was also appointed as Adjudicator in BLII, as he had previously been appointed by the parties in their first adjudication by reference to the list of adjudicators in the main contract and sub-contract.

Vinci was not made aware of BLII and Dr Chern’s involvement in it until after the decision in BVII.

Issues

Vinci resisted enforcement of the decision in BVII on the basis that the Adjudicator’s simultaneous appointment in BLII gave rise to breaches of a natural justice.

Vinci claimed that:

1. the Adjudicator would, from BLII, have acquired background knowledge of matters relevant to its dispute with Beumer (in BVII) of which Vinci was not aware; as a result, Vinci had been given no opportunity to consider that information and was denied a proper right to respond;
2. Beumar had advanced factually inconsistent arguments in BVII and BLII, claiming that the works were completed on time (as against Vinci in BVII) whilst claiming they were late (as against Logan in BLII); and
3. it should have been given the opportunity to rely on Beumar’s position in BLII in support of its own position in BVII.

Beumar argued that:

1. neither Beumar nor the Adjudicator was under an obligation to inform Vinci about BLII (or the subject matter or content of that adjudication) and there was no right to see documents from that adjudication;
2. there had been no breach of the rules of natural justice (and, alternatively, if there was a breach, it was not material); and
3. the two cases it advanced in the two adjudications were not factually inconsistent (and, even if they were, no consequences flowed from that).

Decision

• After considering the relevant authorities on the matter, the Court determined [para 21] that there was a clear breach of natural justice: “… the two cases advanced by Beumer in each of the adjudications were clearly factually inconsistent.”
• The Court reviewed Beumar's claims in each of the two adjudications and concluded [para 20] that the cases being advanced by Beumar in BVII and BLII “ … were an attempt to work around what, in my judgment, is a stark and inexplicable adoption of two entirely different factual cases advanced by the same party at the same time, albeit in different adjudications. A central element of the dispute between Beumer and Vinci in BV II concerned delay, and this encompassed or included consideration of the date upon which the works had (or had not) achieved the condition of AOR, a stage in the works important in the contractual analysis of completion. … However, it is clear that the adjudicator was being told by Beumer in BV II that the works had reached that condition on 16 December 2015. The same adjudicator was being told by Beumer in BL II that the works had not reached that condition, even by April 2016.” The breach of natural justice was plainly material; the dispute in BVII was central to considerations of delay, and delay was central to considerations of whether instructions were indeed Compensation Events.
• In rejecting Beumar’s argument that no consequences flowed from these findings, the Court noted [para 22] that adjudication that adjudication “ … for all its time pressures and characteristics concerning enforceability, is still a formal dispute resolution forum with certain basic requirements of fairness…” and “ … although adjudication proceedings are confidential, decisions by adjudicators are enforced by the High Court and there are certain rules and requirements for the conduct of such proceedings. Adjudication is not the Wild West of dispute resolution.”
• Specifically, the judge condemned [para 25] Beumar’s approach: “I take a very dim view of the propriety of behaviour where Party A says in one set of adjudication proceedings with Party B “the works were complete on 16 December 2015” and, in relation to the very same works (or at least a sub-set of the works) on the very same project states in another set of adjudication proceedings with Party C “the works are not yet complete, you are liable to pay liquidated damages”. They are wholly inconsistent. The correct legal characterisation of that behaviour was not touched upon by either party before me, but I seriously doubt, for example, that a director of a company could sign a statement of truth in two sets of legal proceedings in such circumstances saying such quite different things on the same point. That alone should provide obvious direction to the industry of the type of behaviour that this constitutes.”
• The Court held that [para 34] Vinci should have been informed about adjudication BLII and should have been provided with material from that adjudication in the absence of an adjudicator's decision (as the decision had yet to occur). This was because the disputes were closely connected and the issues were similar. As a consequence, Vinci lost the opportunity to present part of its case. This was especially relevant given that Beumar was advancing factually inconsistent cases in the two adjudications. The Court noted, in passing, that had BLII been decided in advance of BVII, disclosure of the Adjudicator’s decision in BLII would have been required to ensure the fairness of the Adjudicator’s appointment in BVII.
• The Court cited Amec v Whitefriars, Paice and Springall v MJ Harding Contractors [2015] EWHC 661 (TCC) [2015] BLR 345 and Discain Project Services Ltd v Opecprime Developments Ltd (No.1) [2000] BLR 402 when confirming that adjudicators should not only act, but be seen to act, fairly.
• The Court noted [para 29] that Rule 3 of The Chartered Institute of Arbitrators Code of Professional and Ethical Conduct for Members requires members, both before and throughout the dispute resolution process, to disclose all interests, relationships and matters likely to affect the member's independence or impartiality or which might reasonably be perceived as likely to do so. It then mentioned that this rule was quoted in Cofely Ltd v (1) Anthony Bingham (2) Knowles Ltd [2016] EWHC (Comm) [2016] BLR 187 (which concerned a successful application to remove an arbitrator). Specifically, the judge went on to say: “Adjudicators are not arbitrators, but in my judgment are governed broadly by the same principles so far as disclosure is concerned. Indeed, paragraph [33] of Cofely refers to the case of Eurocom Ltd v Siemens plc [2014] EWHC 3710 (TCC) [2015] BLR 1 which was a case concerning adjudication. Adjudicators are acting as impartial tribunals and although involvement in other adjudications does not of itself constitute a conflict of interest, that involvement should be disclosed.”
• Accordingly, the Adjudicator’s decision was not enforced.

For the full judgment, see: http://www.bailii.org/ew/cases/EWHC/TCC/2016/2283.html