ABB Ltd v Bam Nuttall Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Akenhead |
| Judgment Date | 12 July 2013 |
| Neutral Citation | [2013] EWHC 1983 (TCC) |
| Docket Number | Case No: HT-13171 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 12 July 2013 |
[2013] EWHC 1983 (TCC)
Mr Justice Akenhead
Case No: HT-13171
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Anneliese Day QC (instructed by Stephenson Harwood LLP) for the Claimant
Marcus Taverner QC and Richard Coplin (instructed by Systech Solicitors) for the Defendant
Hearing date: 28 June 2013
Introduction
This case raises issues about the enforceability of an adjudicator's decision and in particular about alleged material breaches of the rules of natural justice. It is common ground that the adjudicator referred to a particular clause of the contract which neither party argued let alone mentioned to him and which he did not refer to the parties before issuing his decision.
The Law
The Law relating to the need for adjudicators to observe the basic rules of natural justice is now well established. For instance, in Carillion Construction Ltd v Devonport Royal Dockyard Limited [2005] EWCA 1358 Lord Justice Chadwick reviewed the judge's legal conclusions at Paragraph 52:
"Before addressing those submissions the judge set out the legal principles which he was to apply. He examined a number of authorities, including five decisions of this Court – Bouygues (UK) Limited v Dahl-Jensen (UK) Limited [2001] All ER Comm 1041, [2000] BLR 522, C&B Scene Concept Design Limited v Isobars Limited [2002] BLR 93, Levolux AT Limited v Ferson Contractors Limited [2003]EWCA Civ 11, 86 Con LR 98, Pegram Shopfitters Limited v Tally Weijl (UK) Limitedhttp://www.bailii.org/ew/cases/EWCA/Civ/2003/1750.html [2003] EWCA Civ 1750, http://www.bailii.org/ew/cases/EWCA/Civ/2003/1750.html [2004] 1 All ER 818 and Amec Capital Projects Limited v Whitefriars City Estates Limitedhttp://www.bailii.org/ew/cases/EWCA/Civ/2004/1418.html [2004] EWCA Civ 1418, [2005] BLR 1. At paragraph 80 of his judgment he stated the general principles to be derived from those authorities and from two decisions in the Technology and Construction Court – Discain Project Services Limited v Opecprime Development Limited [2000] BLR 402 and Balfour Beatty Construction Limited v Lambeth London Borough Councilhttp://www.bailii.org/ew/cases/EWHC/TCC/2002/597.html[2002] BLR 288:
"1. The adjudication procedure does not involve the final determination of anybody's rights (unless all the parties so wish).
2. The Court of Appeal has repeatedly emphasised that adjudicators' decisions must be enforced, even if they result from errors of procedure, fact or law: see Bouygues, C&B Scene and Levolux;
3. Where an adjudicator has acted in excess of his jurisdiction or in serious breach of the rules of natural justice, the court will not enforce his decision: see Discain, Balfour Beatty and Pegram Shopfitters.
4. Judges must be astute to examine technical defences with a degree of scepticism consonant with the policy of the 1996 Act. Errors of law, fact or procedure by an adjudicator must be examined critically before the Court accepts that such errors constitute excess of jurisdiction or serious breaches of the rules of natural justice: see Pegram Shopfitters and Amec."
We do not understand there to be any challenge to those general principles. They are fully supported by the authorities, as the judge demonstrated in his judgment."
He went on later in his judgment to counsel caution in relation to challenges to the enforceability of adjudicators' decisions:
"85. The objective which underlies the Act and the statutory scheme requires the courts to respect and enforce the adjudicator's decision unless it is plain that the question which he has decided was not the question referred to him or the manner in which he has gone about his task is obviously unfair. It should be only in rare circumstances that the courts will interfere with the decision of an adjudicator. The courts should give no encouragement to the approach adopted by DML in the present case; which (contrary to DML's outline submissions, to which we have referred in paragraph 66 of this judgment) may, indeed, aptly be described as "simply scrabbling around to find some argument, however tenuous, to resist payment".
86. It is only too easy in a complex case for a party who is dissatisfied with the decision of an adjudicator to comb through the adjudicator's reasons and identify points upon which to present a challenge under the labels "excess of jurisdiction" or "breach of natural justice". It must be kept in mind that the majority of adjudicators are not chosen for their expertise as lawyers. Their skills are as likely (if not more likely) to lie in other disciplines. The task of the adjudicator is not to act as arbitrator or judge. The time constraints within which he is expected to operate are proof of that. The task of the adjudicator is to find an interim solution which meets the needs of the case. Parliament may be taken to have recognised that, in the absence of an interim solution, the contractor (or sub-contractor) or his sub-contractors will be driven into insolvency through a wrongful withholding of payments properly due. The statutory scheme provides a means of meeting the legitimate cash-flow requirements of contractors and their subcontractors. The need to have the "right" answer has been subordinated to the need to have an answer quickly. The scheme was not enacted in order to provide definitive answers to complex questions. Indeed, it may be open to doubt whether Parliament contemplated that disputes involving difficult questions of law would be referred to adjudication under the statutory scheme; or whether such disputes are suitable for adjudication under the scheme. We have every sympathy for an adjudicator faced with the need to reach a decision in a case like the present."
In Cantillon Ltd v Urvasco Ltd [2008] BLR 250, this Court considered a number of the previous cases stating:
"57. From this and other cases, I conclude as follows in relation to breaches of natural justice in adjudication cases:
(a) It must first be established that the Adjudicator failed to apply the rules of natural justice;
(b) Any breach of the rules must be more than peripheral; they must be material breaches;
(c) 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.
(d) Whether the issue is decisive or of considerable potential importance or is peripheral or irrelevant obviously involves a question of degree which must be assessed by any judge in a case such as this.
(e) It is 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, that the type of breach of the rules of natural justice with which the case of Balfour Beatty Construction Company Ltd -v The Camden Borough of Lambeth was concerned comes into play. It follows that, if either party has argued a particular point and the other party does not come back on the point, there is no breach of the rules of natural justice in relation thereto."
The Cantillon case was one in which the Court found that there was no material breach of the rules of natural justice. The TCC decision in Herbosch-Kiere Marine Contractors Ltd v Dover Harbour Board [2012] EWHC 84 (TCC) involved a finding that there was a material breach:
"33. In essence, and doubtless for what he believed were good and sensible reasons, the adjudicator has gone off "on a frolic of his own" in using a method of assessment which neither party argued and which he did not put to the parties. In some cases, this may not be sufficient to prevent enforcement of the decision where the "frolic" makes no material difference to the outcome of the decision. Thus, an adjudicator who refers to a legal authority which neither party relied upon, may have his or her decision enforced nonetheless if the application of that legal authority obviously makes no difference to the outcome. The breach of the rules of natural justice has to be material. Here, for the reasons indicated above, the breach is material and has or has apparently led to a very substantial financial difference in favour of HKM but necessarily against the interests of DHB."
The reference in the Cantillon case to a breach of the rules being material where the adjudicator has not, prior to his or her decision, identified to the parties a point or issue "which is either decisive or of considerable potential importance to the outcome of the resolution of the dispute and is not peripheral or irrelevant" should not be treated as requiring statutory or contractual rules of interpretation to construe what was meant in the decision. If the adjudicator relies upon such a point or issue (either of fact or of law) and his whole decision stems from his finding on that point or issue, it will be decisive. A point or issue might well be of considerable potential importance to the outcome if it is not decisive of the whole decision but if it goes to important parts of the decision. Even if an adjudicator's breach of the rules of natural justice relates only to a material or actual or potentially important part of the decision, that can be enough to lead to the decision becoming wholly unenforceable essentially because the parties (or at least the losing party) and the Court can have no confidence in the fairness of the decision making process.
The Facts
ABB Ltd ("ABB") was...
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