Responding Parties in adjudication will often consider that they have been ambushed by a Referral Notice which contains a large amount of information and relates to a complex dispute.
A Responding Party may seek to avoid an Adjudication Decision where there has been a breach of natural justice due to insufficient time to respond to all allegations raised.
This issue was considered by the Technology and Construction Court (TCC) in the case of Home Group Ltd v MPS Housing Ltd [25.07.23].
Home Group Ltd (Home Group) claimed termination losses allegedly caused by MPS Housing Ltd’s (MPS) repudiatory breach of a JCT Measured Term Contract (the Contract).
Under the terms of the Contract, MPS had been carrying out maintenance and repair works to Home Group’s properties in South-East England. On 11 May 2022, MPS purported to terminate the Contract. Home Group argued that this was in repudiatory breach and subsequently, initiated adjudication proceedings against MPS. On 25 November 2022, the adjudicator found in favour of Home Group, namely that MPS was liable for breaches of contract arising from wrongful termination.
On 23 December 2022, after the first adjudication decision, Home Group sought to recover sums in respect of the wrongful termination from MPS with no supporting documents or analysis. However, it should be noted the Final Account had by this stage been issued by the Contract Administrator.
There then followed interparty correspondence between the parties with Home Group making further disclosure of quantum documents and an invitation to conduct inspection at their offices. This culminated with Home Group providing a draft expert report on quantum on a without prejudice basis in February 2023. MPS asked for further time to provide a formal response, namely by 19 May 2023.
This was rejected by Home Group who issued further adjudication proceedings against MPS in relation to the quantum of the claim and to recover Home Group’s losses (the Adjudication).
On 17 March 2023, Home Group’s Referral Notice in the Adjudication included a quantum expert report (the same version provided to MPS prior to the adjudication) of 155 pages, with 76 appendices, which comprised 202 files in 11 sub-folders, amounting to 338 megabytes of data and a further 2,325 files in 327 sub-folders and five factual witness statements (which amounted to 88 pages, with hundreds of exhibited pages sitting behind).
MPS had 19 days (or 13 working days) to produce its response to the Referral. MPS claimed that this amount of time was an inadequate period of time as it was unable to properly digest the large amounts of material in the allocated time. MPS further argued that this was a breach of natural justice which would lead to a material difference in the adjudication outcome and this would make any Decision unenforceable.
The Adjudicator decided in favour of Home Group and rejected MPS’ arguments regarding breach of natural justice. Home Group then issued enforcement proceedings and MPS sought to resist enforcement on various grounds including breach of natural justice given the size, complexity and time pressure of responding to the Referral.
Mr Justice Constable agreed with Home Group, ordered summary enforcement of the Adjudication Decision and reviewed the authorities on complexity and time-pressure, which “had enjoyed little success”. He summarised the legal position as follows:
- Adjudication decisions must still be enforced even if they contain errors of procedure, fact or law.
- An adjudication decision will not be enforced if it is reached in breach of natural justice and the breach is material, in that it has led to a material difference in the outcome. However, the Court should examine such defences with a degree of scepticism.
- Both complexity and constraint of time to respond are inherent in the process of adjudication, and are no bar in themselves to adjudication enforcement. Whilst it is conceivable that a combination of the two might give rise to a valid challenge, in circumstances where the Adjudicator has given proper consideration at each stage to these issues and concluded that he or she can render a decision which delivers broad justice between the parties, the Court will be extremely reticent to conclude otherwise.
- In cases involving significant amounts of data, an adjudicator is entitled to proceed by way of spot checks and/or sampling. The assessment of how this should be carried out is a matter of substantive determination by the adjudicator and an argument that the adjudicator has erred in his or her approach, absent some particular and material related transgression of natural justice, will not give rise to a valid basis to challenge enforcement. It would, even if correct, merely be an error like any other error which will not ordinarily affect enforcement.
The judge noted that, despite the volume of paperwork, this claim was more straightforward than many final accounts and the quantity of information was no basis for a valid challenge.
The judge added “it should have been "actively engaged in analysing [it]" from February 2023, at the latest. Despite that, MPS was able to produce a comprehensive response, to identify significant areas of dispute and advance arguments about deficiencies in Home Group’s claims. There was no evidence the adjudicator had breached the rules of natural justice, rather he approached the evidence in a thorough way.
This case highlights the difficulties in raising jurisdiction defences to resist the enforcement of an adjudication decision due to the size and complexity of the issues and materials in adjudication.
The judge was concerned that MPS’s position was "strategically driven in an attempt to create a jurisdictional challenge that no dispute had crystallised" and that it was "setting up its jurisdictional challenge" at a time when it could have been working on the material supporting the Home Group’s claim for losses.
The decision demonstrates that such a strategy had an expensive outcome since the adjudicator's decision was enforced. Accordingly, parties will need to balance raising any jurisdiction decisions and dedicating sufficient time against responding to the evidence put forward.
This case is also a warning to parties that seek to raise jurisdiction arguments, having been provided with the material (in question) months in advance and proposals on how to deal with the issues in a claim.