Can an adjudicator order disclosure in adjudication proceedings? How far reaching are an adjudicator’s powers and do you have to comply? Natalie Warren examines in this article.
Essential Living (Greenwich) Limited v Conneely Facades Limited [2024] EWHC 2629 (TCC), is a case which has been directly relevant to matters in adjudications the Tudor Rose team has recently been involved with. It provides food for thought on the way the adjudication process has and continues to evolve. The case shines a light on the use of evidence in adjudication (more of that coming soon).
This case should be noted by all who might seek to make challenges on the basis of natural justice and potentially try to resist enforcement in the TCC.
This enforcement action arose out of an adjudication referred in February 2024 by Essential. Essential claimed that Conneely’s Corium brick slip cladding system was defectively designed and installed. They therefore sought approximately £1 million in associated costs. Conneely denied liability and argued that the alleged issues arose from the work of other contractors.
Conneely further argued that Essential was attempting to claim costs addressed in a previous adjudication decision involving another contractor.
Conneely applied to the adjudicator to order disclosure of previous adjudication materials. The materials were between Essential and another contractor on the project and decided by a different adjudicator. Conneely argued that the other adjudication would show that the defective cladding was the result of breach or breaches of contract by others and solve any allegation of the double recovery of costs.
The adjudicator dismissed Conneely’s request for disclosure. He noted that the previous adjudication materials predated the appearance of the defects at issue by many months. As such, they were irrelevant to the present dispute. This was because the package of works undertaken by Conneely and the other contractor involved in the previous adjudication were completely different.
The adjudicator was not persuaded that any payments made to Essential in the previous adjudication could concern the defects at issue in the current adjudication. The adjudicator considered the suggestion of double recovery was “fanciful”[1].
Importantly, the adjudicator asked if there was specific information which Conneely considered demonstrated the issue and which only Essential had access to. If such information existed, then that could be commented upon in the response to the Referral and could be addressed further by the adjudicator in the list of issues he was developing.
Conneely made a number of further submissions throughout the remainder of the adjudication. These included a more focussed request for disclosure which was partly agreed to by the adjudicator. He directed that if Essential had any material demonstrating defective works by the other contractor (in the previous adjudication) had affected Conneely’s work at issue in the current adjudication, it should present it.
The Adjudication Decision
The adjudicator issued his decision on 19 April 2024 which the court considered in detail and held was “a very full and careful document.[2]”
Essential sought summary judgment to enforce the adjudicator’s decision. Conneely resisted enforcement on the basis that a fair-minded and informed observer would conclude that there was a real possibility that the adjudicator was biased[3]. It was their assertion that the adjudicator reached a decision in breach of natural justice that predetermined the outcome of the adjudication when the application for disclosure was denied.
An allegation of a breach of natural justice is one of a very limited number of grounds a court may use to refuse enforcement of an adjudicator’s decision.
In summary, the court rejected the natural justice challenge for several reasons:
- The adjudicator’s ruling on disclosure of 20 February 2024 was not in breach of the rules of natural justice. The parties had every opportunity to address him. The adjudicator was not convinced of the merits of the application and was quite entitled to describe Conneely’s position in this regard as “fanciful”;
- There were no obstacles preventing Conneely from pursuing the previous adjudication materials, and the causation and double recovery points, throughout the adjudication;
- If there were a breach of the rules of natural justice, it did not make a material difference to the outcome. It was Conneely who, in fact, abandoned its arguments in respect of double recovery;
- Conneely was unable to highlight where it considered the adjudicator had decided against them in the adjudication.
Additionally, an important point arose for any party making a ‘natural justice’ argument and potentially considering relying on it at enforcement:
Essential argued that even if there was any natural justice objection, the payment of the adjudicator’s fee without any formal reservation of its position, amounted to a waiver. In short, payment of an adjudicator’s fees by a losing party may be considered an acceptance that the decision as valid. Conneely should, the court held, have expressly reserved its position when it paid the adjudicator’s fees.
The court noted that whilst Conneely had waived its position in respect of natural justice however, that it should do nothing to undermine the policy that an adjudicator should always be paid.
Essential was awarded summary judgment and the court considered costs on an indemnity basis (where costs are assessed in favour of the receiving party). This was because Conneely’s arguments were “unmeritorious” and delayed the payment of sums due to Essential. This in turn took up court time and more so that it was “wholly inappropriate” for Conneely to attack the conduct of an experienced adjudicator. [4]
Commentary
The importance of this case is threefold:
Firstly, that disclosure can be requested in adjudication at all is an indicator that adjudication as a process has evolved and changed significantly from the process originally envisaged. However, parties should remember the constraints of the adjudication process as a quasi-legal process and any disclosure will be limited. In this case the limit being an adjudicator requesting (rather than ordering or compelling) a party to the adjudication to disclose information within its possession.
It may be open to an adjudicator to draw inferences from a party’s failure to provide something which either proves or disproves a point in issue. However, it remains difficult, if not impossible, to see how an adjudicator could require or compel disclosure of documents relating to other adjudications involving other parties and different adjudicators.
Secondly, a party should expressly restate any natural justice challenges it has previously raised on making payment of an adjudicator’s fees if it intends to rely on a challenge to resist enforcement. Otherwise a party may have waived its objections.
So, in short, restate your objection and make payment of the adjudicator’s fees. Genuine challenges based on natural justice remain one of a very limited number of reasons that the courts may not enforce an adjudicator’s decision. Accordingly, challenges based on a breach of natural justice should not be made frivolously, or without genuine belief, in order to scare or bully an adjudicator or spuriously raised in order put in place artificial grounds upon which to try and resist enforcement.
Thirdly, regardless of the restatement of any natural justice-based challenge, adjudicators should be paid. There are very few situations in which the court will sanction non-payment of an adjudicator which reinforces just how important and effective the adjudication process is to the industry.
For more support with adjudication or any of the issues raised in this article, get in touch today.
[1] Paragraph 12 of the decision
[2] Paragraph 18 of the decision
[3] This is the test to be applied: Hellow v Secretary of State for the Home Department [2008] 1WLR 2416, paras 2 and 3 of Lor Hope’s speech; Resolution Chemicals v Lundbeck [2014] 1WLR 1943, paras 35, 36
[4] Paragraph 29 of the decision
