Adjudication: inconsistent arguments and natural justice

High Court holds that an adjudicator’s decision should not be enforced where a party had advanced factually inconsistent cases in two separate adjudications relating to the same project.

Implications

Parties engaged in construction and engineering projects are often involved in a claim/dispute in two different directions:

• An upstream dispute with the employer or main contractor.
• A downstream dispute/recovery action with the specialist subcontractors/their supply chain.

This can present difficulties when a party effectively has to fight the same issue on different fronts. In his judgment in this case, Mr Justice Fraser commented that putting forward inconsistent arguments in different sets of proceedings is not to be encouraged.

While the decision highlights the difficulties for the party that is ‘stuck in the middle’, signing statements of truth in pleadings and witness statements should discourage this behaviour. In any event, the risk that inconsistent arguments may be disclosable in another parallel dispute is a risk parties should not take: it will only undermine the position on both fronts.

This case is also a reminder that parties should carefully consider the implications of agreeing to a project adjudicator or joint panel to determine disputes on a project-wide basis. It would be sensible for responding parties to ask adjudicators to confirm whether they have been appointed in previous adjudications involving the referring party.

Background

Vinci was the main contractor employed by Gatwick Airport to undertake a package of works at the airport, including a baggage handling system. Vinci subcontracted this element of the works to Beumer which in turn subcontracted parts of the work to Logan. Both the main contract and the subcontracts were based on an NEC3, option A contract and listed the same panel of adjudicators to decide any disputes under the contracts.

Disputes arose in relation to delay to the works between Vinci and Beumer, and Beumer and Logan. The disputes were referred to separate adjudications at the same time and the same adjudicator was appointed:

• In the adjudication between Vinci and Beumer (the first adjudication), Beumer argued that it had not finished the works late and the adjudicator found in Beumer’s favour.
• In the adjudication between Beumer and Logan (the second adjudication), Beumer argued that Logan had finished late. The adjudicator again found in Beumer’s favour, reaching a contradictory position.

Vinci was not aware of the second adjudication until after the decision had been made. It then resisted enforcement of the decision in the first adjudication.

Decision

Fraser J refused to enforce the decision in the first adjudication.

He referred to the inconsistent arguments raised by Beumer in the two adjudications. He held that the adjudicator ought to have disclosed his involvement in the second adjudication to Vinci and allowed Vinci the opportunity to respond to the arguments advanced by Beumer in the second adjudication. As the adjudicator had not done so, there had been a material breach of natural justice.

Read other items in Construction Brief - December 2016