Adjudicator has Jurisdiction to decide on Admissibility of evidence

The Jacques sisters sought an order enforcing an adjudication award made in their favour. The claimants had used their life savings to purchase a property and develop it into flats in order to provide an income. They engaged the defendant contractor, Ensign, to renovate the property for a contract sum of £139,300. The Contract Administrator was Huw Thomas. In a previous adjudication, it had been decided that practical completion had taken place on 3 November 2006, but there were outstanding issues about defects and whether outstanding works had been completed promptly. Mr. Thomas had certified payment of £319,058.56. His services were dispensed with and he was replaced by a Mr. Irvin.

There followed further adjudications between the parties which related to the service of the withholding notice, practical completion, and deductions made from certificate no., 7. The adjudicator in the third and fourth adjudications was Mr. Sutcliffe. In the fourth adjudication, the Jacques submitted that £198,000 of the £300,000 paid to Ensign was repayable because of deficiencies in the works. Mr. Sutcliffe decided that the “fair and reasonable value” of the Contractor's final account was £297,737.86, and ordered Ensign to repay £28,764.15.

This decision had been based on a full investigation, which had included a site visit. He also expressed the view that the removal of Mr. Thomas amounted the Jacques “usurping the power and authority of the Contract Administrator”. The adjudicator attached considerable weight to Mr. Thomas’ witness statement in which he had expressed the view that Ensign’s standard of work had been generally in accordance with that required by the contract.

Adjudication no. 4 was not enforced because Ensign raised a number of jurisdictional issues, including the adjudicator’s failure to address its disruption claim. On 30 July 2009, the parties came to a written agreement that Mr. Sutcliffe’s was void. And not binding upon them. This was reflected in a consent order, which also stated that the Jacques were entitled to adjudicate at any time a dispute concerning the amount to be paid to the Claimant pursuant to a final certificate issued…pursuant clause 4.8 of the JCT Minor Works Contract 2005 with Contractor’s Design.”

The Jacques served a Notice of Adjudication for what was to become adjudication no. 5. Essentially this related to the value of the final account, and included a claim for lost rent and repayment of £187,076.23. What was sought was the value of the works said to have been properly carried out, taking into account such defects. Mr. Paul Jensen was appointed as adjudicator.

Ensign maintained that it was owed £98,786.73, and, in its response, attached considerable importance to the null and void decision of Mr. Sutcliffe, particularly where he had stated that the Jacques’ submission that 60% of the works were defective was “doomed to failure”, and his finding that £298,587.86 represented a fair and reasonable value of the final account. Ensign also complained about the way in which the jurisdiction had involved themselves in Mr. Irwin’s work and “hampered” progress, and alleged that Mr. Irwin and a Mr. Nelson who had also been involved had not been independent, but had used their involvement in the project to generate work for their own company unbeknown to the Jacques. Ensign submitted that there had been no impartiality and that the Jacques’ case was based on lies.

Mr. Jensen wrote to both parties, informing them that he would not be taking into account Mr. Sutcliffe’s decision, which he considered to be irrelevant, but would be basing his decision on his own view of the evidence and submissions. Ensign’s solicitors responded that his failure to even read Mr. Sutcliffe’s decision was a breach of the rules of natural justice, as he would be unable to properly consider its response. Ensign reserved the right to challenge Mr. Jensen’s subsequent decision on that basis.

Mr. Jensen found that Ensign should repay the Jacques £96,868.18. In his reasoned decision, he stated that he had carefully considered all the evidence and submission although not specifically referred to in this Decision”. Ensign paid neither Mr. Jensen’s fees nor the sum awarded to the Jacques, and they commenced the present enforcement proceedings. Ensign resisted enforcement, arguing that Mr. Jensen had breached the rules of natural justice by refusing to read Mr. Sutcliffe’s decision, and, therefore, he could not have considered or addressed the arguments and defences put forward by Ensign by reference to that earlier decision.

Whilst an adjudicator must properly consider all defences properly put forward, it was within his jurisdiction to decide what evidence was admissible, or helpful. If an adjudicator decides that some evidence is inadmissible, then it will rarely amount to a breach of the rules of natural justice even if he has been wrong in fact or law. In almost all natural justice cases, it will be necessary to distinguish between an adjudicator’s failure to consider a substantive issue and an apparent failure to address all aspects of the evidence given in a defence. Given the nature of adjudication and the time scales involved, it is not always possible for an adjudicator weigh up every aspect of evidence, and an adjudicator should not be considered to be guilty of breach of natural justice because he has failed to address each piece of evidence adduced by the parties.

Mr. Jensen had acted within his jurisdiction in not taking into account Mr. Sutcliffe’s decision because it had been within the ambit of his jurisdiction to decide whether or not it was admissible. As the parties had agreed that that decision was null and void, it was not binding upon Mr. Jensen, and it was not an inherent defence in adjudication no. 5. Mr. Jensen’s refusal to take it into account could not be categorised as an adjudicator failing to refusing to consider or address a defence. His decision not to consider a decision which was null and void had not been perverse or irrational. After Mr. Jensen had informed the parties that he would not taken into account Mr. Sutcliffe’s decision, Ensign had had ample time to present further evidence and argument and had done so. Mr. Jensen had also made it clear in his reasoned award that he had taken into account all the evidence and submissions and the content of his decision bore this out.

Because Ensign had raised a prima facie case that the Jacques would not be able to repay the award if required to do so, the court ordered a stay of execution on £60,000 of the award.

Author: Ann Glacki

Date: January 2010

Commentary

Once again an argument relying upon an alleged 'breach of natural justice' has failed. The reliance on natural justice by those seeking to resist enforcement of an adjudicators decision is on the increase, which given the problems of defending enforcement actions is not surprising. For several years jurisdiction has been the main battle ground but that has met with limited success and now there is succession of cases dealing with the scope and nature of natural justice.

In this case M Jensen, ad adjudicator regarded very highly in the industry, decided to exclude a 'decision' which had previously been agreed null and void by the Parties and so questions relating to natural justice and admissibility of evidence were relevant. The Court found, not least because of the nature of adjudication, that providing an Adjudicator's approach to the admissibility of evidence was not 'perverse' or 'irrational' and did not overlap with primary issues to be decided and jurisdiction issues that it was the Adjudicator's decision on admissibility of evidence and would not amount to a breach of natural justice.

For more information please contact Lorne Alway by telephone 01295 275975 or by email on lorne.alway@alway-associates.co.uk

Author: Lorne Alway

Date: March 2010

Ann Glacki

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