Want an enforceable decision? Just ask the parties

In adjudication, like any dispute resolution process, there are winners and losers.  A losing party will inevitably ask: do I have to pay up?  Not infrequently, this question will be accompanied by a list of perceived failings in the adjudicator’s reasoning, with the suggestion that a different outcome would inevitably have been reached if only the adjudicator had given the parties the chance to correct misunderstandings or errors before issuing the decision.  It is in this context that parties and their advisers will often find themselves scrutinising both the decision and the procedure followed to get there, to see if there is any basis on which enforcement can be resisted.

It has been clear for many years, in both the English and Scottish Courts, that policy points firmly towards enforcement of adjudicators’ decisions in most cases.  Adjudication practitioners are familiar with the key phrases – the need to have the right answer “has been subordinated to the need to have an answer quickly”, and “scrabbling around” for reasons to avoid enforcement is firmly discouraged1 . Faced with this weight of authority, even where the adjudicator has demonstrably got matters wrong, in most cases the only available approach for a losing party is to pay up, and seek to have its day in court or arbitration if so minded via proceedings for final determination (an opportunity which, ultimately, few take up).  

Despite that general approach, two recent cases highlight a potentially fertile area of challenge, and a matter which adjudicators and parties should have at the forefront of their minds when conducting adjudication: the possibility of a breach of natural justice based on a failure by the adjudicator to consult the parties on a material issue in advance of issuing a decision.  What are the circumstances in which an adjudicator is required to raise matters with the parties before reaching a decision?  Do the recent cases of Van Oord UK Limited v Dragados UK Limited and Liverpool City Council v Vital Infrastructure Asset Management (Viam) Limited suggest an increasing willingness of the Courts to refuse enforcement in such circumstances?  And if so, what are the implications for parties involved in conducting adjudication?

The existing case law

The generally robust approach of the Courts to enforcement of adjudication awards, as described above, has been established for many years.  Despite the initial suggestion that “procedural errors” could not invalidate an adjudicator’s decision2 , it has been clear for over twenty years that the rules of natural justice apply to adjudication, and that decisions will not be enforced if those rules are not followed.3

The rules of natural justice are generally understood to have two principal aspects, as summarised by Dyson LJ (as he then was), in Amec v Whitefriars4 :

"The common law rules of natural justice or procedural fairness are twofold. First, the person affected has the right to prior notice and an effective opportunity to make representations before a decision is made. Secondly, the person affected has the right to an unbiased tribunal". 

We focus here on the first of these aspects, which concern the procedure followed by the adjudicator, and specifically on the circumstances in which the adjudicator is required to consult with the parties prior to reaching a decision.

In the majority of cases, of course, there is no requirement for an adjudicator to consult the parties in advance on the reasoning he intends to adopt.  The adjudicator is perfectly entitled to (and usually does) reach a decision on the basis of the parties’ competing submissions and the information and evidence supplied, without any need to invite views on the rationale for the decision in advance.  As stated by Edwards-Stuart J in Roe Brickwork v Wates Construction5 :

“…there is no rule that a judge, arbitrator or adjudicator must decide a case only by accepting the submissions of one party or the other”.

However, it has long been established that there are scenarios in which the rules of natural justice require the adjudicator to give the parties an opportunity to comment on his/her proposed reasoning prior to the issue of the decision, where he proposes to depart from the submissions made.  As explained by Akenhead J in Cantillon v Urvasco6 :

“Breaches of the rules will be material in cases where the adjudicator has failed to bring to the attention of the parties a point or issue which they ought to be given the opportunity to comment upon if it is one which is either decisive or of considerable potential importance to the outcome of the resolution of the dispute and is not peripheral or irrelevant.”

As Akenhead J went on to clarify in that case, the assessment of whether an issue is of decisive or considerable potential importance involves a question of degree which must ultimately be assessed by the Judge; and a breach of natural justice of this nature would arise:

“only if the adjudicator goes off on a frolic of his own, that is wishing to decide a case upon a factual or legal basis which has not been argued or put forward by either side, without giving the parties an opportunity to comment or, where relevant put in further evidence.” 

Examples of scenarios in which the Courts have found that a breach of natural justice has arisen based on the adjudicator’s failure to consult the parties prior to issue of a decision include:

(i)    Where the adjudicator decides the dispute on the basis of legal arguments not made before him/her – e.g. ABB v Bam Nuttall7 where the adjudicator relied on a provision of the contract not previously referred to by either party, nor ever raised by the adjudicator prior to his decision; or Corebuild v Cleaver 8 where the adjudicator decided a point that had not been argued by the contractor nor canvassed with the parties;

(ii)    Where the adjudicator has relied on their own personal knowledge and experience to add to the evidence put forward by the parties – as in Carillion Utility Services Ltd v SP Power Systems Ltd9 where the adjudicator applied commercial rates based on his own experience in calculating the sum due, in the absence of any evidence as to rates;

(iii)    Where the adjudicator has obtained input from third parties and not allowed the parties the opportunity to comment – for instance, Balfour Beatty Construction Ltd v London Borough of Lambeth10 where the adjudicator commissioned and relied on programming analysis, thereby making good deficiencies in the contractor’s case, without allowing the parties the opportunity to comment on the methodology adopted.

It is clear though that such cases remain the exception rather than the rule.  The Courts are more than alive to the possibility that parties may seek to exploit this line of argument as an unmeritorious basis for resisting enforcement, as Coulson explains:

“…all too often, a party who is aggrieved at the result in an adjudication, particularly where the adjudicator arrives at his decision by taking elements of all the submissions and arriving at a result which is not precisely that canvassed by either side, dresses up their complaint as an alleged failure on the part of the adjudicator to consult the parties before publishing his decision.  Such an approach is very rarely successful.”11

It is against this background that we consider two recent cases decided in the last few months, one in Scotland and one in England, where enforcement was refused on the basis of a failure by the adjudicator to consult the parties prior to reaching their decision.

Van Oord UK Limited v Dragados UK Limited12

This Scottish case relates to a subcontract between Van Oord and Dragados for the carrying out of dredging and other works on the Aberdeen Harbour Expansion Project. The subcontract was an amended NEC3 Engineering and Construction Subcontract. 

Van Oord commenced adjudication proceedings claiming that it was entitled to an extension of time and delay costs beyond its Subcontract Completion Date of 31 July 2019, as a result of a number of compensation events.  Amongst other matters, Van Oord relied on delays to piling works, which it claimed had caused its works to be critically delayed from 2 August 2019 onwards. This particular claim was predicated on a compensation event notification issued (CEN 48) on 20 September 2019. Dragados argued that the causes of delay to Van Oord’s works lay with Van Oord. 

There was no agreed baseline programme against which to assess critical delay and the parties’ experts both selected different baselines and reached different conclusions about where the critical path lay. In his decision, the adjudicator selected the March 2019 programme, which neither party had put forward – and which both experts had given reasons for rejecting – as the baseline programme. He concluded that delays to Dragados’s piling works had caused critical delay to Van Oord’s works, but did not accept the approach of Van Oord’s expert, and instead adopted the windows analysis and delay periods of Dragados’s expert.  In his decision, he found that the date on which CE48 began to cause critical delay was 31 July 2019, two days earlier than the date put forward by Van Oord, and a date which had never been contended for by either party.

In so doing, the adjudicator did not take account of the seven-week time bar for compensation event notifications in the contract. Van Oord had notified the relevant compensation event on 20 September 2019, which was seven weeks from 2 August 2019. So, if Van Oord had been delayed by the event from 31 July 2019 as the Adjudicator found they had, Dragados could argue that their compensation event notification was out of time. However, since neither party had suggested that piling works had caused delay from a date earlier then 2 August 2019, and this was not put to the parties by the Adjudicator, Dragados lost the opportunity to make that argument, which would (if successful) have been a complete defence to the claim based on that compensation event. 

Van Oord argued that the adjudicator had taken an intermediate position between the cases advanced by the parties, which he was entitled to do, citing Miller Construction (UK) Limited v Building Design Partnership Ltd13 . It also contended that a time bar argument would not have been successful. 

The enforcement proceedings came before the Scottish Court of Session which refused enforcement of the adjudicator’s decision. Having reviewed the relevant case law, the court concluded that:

“The common theme is that the procedure adopted by the adjudicator must be fair. That is the acid test: where an adjudicator has departed from the four corners of the submissions made by the parties, was it fair not to seek further submissions? If the issues have been fairly canvassed, or if the adjudicator has simply adopted an intermediate position, fairness will not require that the parties be given an opportunity to make further submissions. Conversely, if the adjudicator proposes a novel approach on a significant issue which has not been canvassed, fairness will point in the opposite direction”. 

The court did not accept Van Oord’s submission that the adjudicator had adopted an intermediate position between the parties; in Miller, the adjudicator had been held to have decided the issue put to him. Here, by not giving the parties the opportunity to comment on his selection of both a programme advanced by neither party and an earlier commencement date for the critical compensation event, the adjudicator’s actions were in a “different sphere” to those of the adjudicator in Miller and “afforded the opportunity for injustice to be done”

The court also accepted Dragados’ position that it did not need to show that the time bar defence would have succeeded, only that the choice of a critical date not advanced by Van Oord was a material issue on which the parties should have been given an opportunity to comment, and which could have altered the outcome.

Liverpool City Council v Vital Infrastructure Asset Management (Viam) Ltd (In Administration) 14

In this English case, the adjudicator had been faced with a difficulty due to the way in which one of the parties had advanced its case, and it was his attempt to deal with that situation which ultimately led to his decision being unenforceable.  The original dispute related to the maintenance of fencing for highway works and the associated costs. There was a framework agreement and a call-off contract, and LCC sought to argue various jurisdictional points to resist enforcement, and the ground that the adjudicator had decided the dispute on a question not referred to him and the decision was therefore a nullity (which the TCC considered was more appropriately framed as a natural justice challenge on procedural grounds). 

The adjudicator incorrectly assumed that LCC had conceded there was a typographical error in a schedule of rates, and found that the ‘error’ should be amended. LCC’s case was that it had made no such concession, but also that Vital had not contended that there was an error and the adjudicator had not identified this as an issue for him to decide. The court agreed. LCC was not given fair notice that the adjudicator was considering the point or given the opportunity to make submissions on it. 

The court held at paragraph 57 of the judgment that:

“In my judgment these were fundamental departures from the obligation to follow a fair procedure. Indeed, in proceeding in this way [the Adjudicator] departed in a significant way from the approach he had spelled out in his email of 20 May 2021. He has not, in his supplemental observations, been able to explain in any way which I regard as convincing on what basis he considered that he was entitled to reach the decision he did without allowing LCC the opportunity to address him on the point. He has not been able to suggest that these departures from natural justice have had no practical adverse effect upon LCC. Indeed, it is apparent that LCC has lost the opportunity to have the substantive arguments which it did put forward determined by him and there is no suggestion or obvious basis for my concluding that these arguments were incontrovertibly misconceived."

This indicates that the TCC would have reached a different view had the arguments which had been ignored by the Adjudicator been hopeless, and that the key factor driving the court’s decision was the same as that in the Van Oord case; that the breach of natural justice had a ‘practical adverse effect’ on LCC.  Similarly, the approach of the Scottish court was that it did not matter whether or not the argument that Dragados lost the opportunity to make would have succeeded or not – the potential materiality of the argument it was deprived of the opportunity to make was the driver for the conclusion that the Adjudicator’s decision was unenforceable.

This in line with comments in previous case law, such as in Corebuild v Cleaver, where the Court confirmed that it was not generally necessary in enforcement proceedings for the Court to conclude that the arguments they would have raised (had the adjudicator canvassed their views) would have succeeded:

“generally, it is sufficient for a party to show that the substance of the point with which they were deprived of the opportunity to engage with was properly arguable i.e. it had reasonable prospects of success”.

What are the implications for adjudicators and parties?

It bears repeating that success in resisting enforcement of an adjudicator’s decision remains rare, since adjudicators have considerable leeway in decision-making given the time constraints of the process. In practical terms, even where grounds to do so might potentially exist, resisting enforcement is often of limited utility as a remedy: the best a successful challenge can achieve is to cast aside the decision. This means that unless parties are prepared to leave it there or to negotiate a settlement, a further adjudication is likely to be raised on the same issues, involving additional cost and uncertainty for the parties. 

The point reinforced by the recent decisions explained above is that, where an adjudicator proposes to depart in a significant and material respect from the arguments and evidence advanced by the parties, and in particular where this would result in expanding the scope of the claim made beyond that advanced by the referring party, an opportunity should be given to the parties to address the issue. The adjudicator otherwise risks crossing the line between making legitimate use of his or her experience in reaching a decision not contended for by the parties, and taking a novel approach without fair notice. If in doubt as to whether that line may be crossed, the best course for an adjudicator is likely to be to give parties an opportunity to comment.

The means by which this should be done will depend on the circumstances, but possible practical steps that might assist include:

  • Allowing for the possibility that the parties’ views may need to be sought when considering timetabling at the outset, and allowing an adequate period for the adjudicator to reach his or her decision with this in mind
  • Adjudicators will need to have sufficiently advanced their decision-making process in advance of the deadline for issue, so that any new issues or arguments are identified in sufficient time to allow for the parties’ comments to be sought
  • When seeking views from the parties, adjudicators must also be careful not to cross the line described in Lanes Group plc v Galliford Try Infrastructure Limited15 between the giving of a preliminary view for the parties’ comments in advance of the decision, which is acceptable, and the reaching of a final decision prematurely, which is not
  • Where the most convenient forum for any novel points or preliminary views to be discussed is in a meeting or conference call, it is likely to be in all parties’ interests for a clear agenda to be circulated in advance highlighting the points that the adjudicator wishes to raise, and a clear note of the meeting to be taken and circulated, or at least for the matters discussed to be clearly noted in the decision, so that there is a record of the matters canvassed.

Ultimately, notwithstanding the cases discussed above, it will remain unusual for a scenario to arise which requires the adjudicator to consult the parties before issuing a decision.  In the small number of cases where the need does arise, these court decisions provide helpful further guidance for adjudicators in ensuring that such issues are identified and that the necessary steps can be taken to address them with the parties, so that the decision, once issued, is enforceable.

Robbie Leckie, Partner, CMS
Frances Garratt, Senior Associate, CMS

  • 1Carillion Construction Limited v Devonport Royal Dockyard Limited [2005] EWCA Civ 1358
  • 2Macob v Morrison [1999] BLR 93
  • 3Discain Project Services v Opecprime Developments Ltd [2001] BLR 287
  • 4Amec v Whitefriars, [2004] EWCA Civ 1418
  • 5[2013] EWHC 3417 (TCC)
  • 6[2008] EWHC 282 (TCC)
  • 7[2013] EWHC 1983 (TCC)
  • 8[2019] EWHC 2170 (TCC)
  • 92012 SLT 119
  • 10[2002] EWHC 597 (TCC)
  • 11Coulson on Construction Adjudication, paragraph 13.73
  • 12[2022] CSOH 30
  • 132014 CSOH 80
  • 14[2022] EWHC 1235 (TCC)
  • 15[2011] EWCA Civ 1617