A frolic of his own: adjudicator's decision breaches the principles of natural justice

The decisions of adjudicators are generally enforced by the courts. However, where an adjudicator has breached the principles of natural justice, enforcement will be refused. The application of the principles of natural justice to the process of adjudication has recently been addressed in the Court of Session in the case of Van Oord UK Limited v Dragados UK Limited [2022] CSOH 30.

Background

Dragados UK Limited ("Dragados") was appointed as the main contractor for the Aberdeen Harbour Expansion Project. In turn, Dragados entered into a sub-contract with Van Oord UK Limited ("Van Oord") in terms of which Van Oord was to carry out the "dredging of silts, sands, gravel and glacial till". In March 2020, Dragados served on Van Oord a notice of termination of the sub-contract. Following this, various disputes arose between the parties with seven separate adjudications taking place. It is the decision of the adjudicator in the sixth adjudication that was challenged on the grounds of a breach of natural justice.

The dispute

In the sixth adjudication, Van Oord claimed that it was entitled to an extension of time and prolongation costs in respect of certain compensation events. Van Oord claimed that the delay was a result of Dragados' delay in carrying out piling works. This was disputed by Dragados, and it was claimed that the delays were caused by Van Oord not commencing revetment works on time.

The issue at hand was that no baseline programme had been agreed to assess critical delay, despite various programmes being prepared throughout the duration of the sub-contract. Both parties provided expert opinions and those experts disagreed as to which of those programmes should be used as the baseline. However, both experts disregarded a programme which had been prepared in March 2019.

In the event, the adjudicator selected the March 2019 programme as the baseline (the programme which had been rejected by both experts). By doing so, the adjudicator found in favour of Van Oord and made an award based upon a date of 31 July 2019, a date which was not put forward by either party. Neither the selected date, nor the consequences of selecting it, was canvassed with either party during the adjudication.

Dragados argued that the adjudicator's decision should not be enforced as it breached the principles of natural justice. In its argument, Dragados asserted that the adjudicator was not entitled to adopt 31 July 2019 as a date without first giving the parties an opportunity to address him. Dragados stated that had it had this opportunity, they would have made submissions to the effect that the compensation event was time-barred as it had not been notified within seven weeks of Van Oord becoming aware of the event, as required by the sub-contract. As a result, Dragados submitted that it would have had a complete defence to the compensation event claim and the adjudicator "had gone off on a frolic of his own".

It was Van Oord's position that the adjudicator was entitled to adopt an intermediate position between the parties' respective cases. It also argued that Dragados would not have been successful in pursuing a time bar argument as it had been aware of the issue and it did not matter that the wrong argument had been advanced.

The Court's decision

The Court found in favour of Dragados and held that the adjudicator's decision could not be enforced as it breached the principles of natural justice. In the judgment, Lord Braid noted that the line between an adjudicator going off on a frolic of their own and making legitimate use of their experience to analyse material and reach a decision, was not always an easy one to draw.

However, the Court stated that the adjudicator's procedure must be fair and that is the acid test. The Court concluded that it would be fair to seek further submissions if the adjudicator's decision takes a different approach on a significant issue which has not been canvassed by the parties. Therefore, by adopting the March 2019 programme and not seeking further submissions, the adjudicator did not adopt an intermediate position and deprived the parties of a fair opportunity to comment.

In the Court's final remarks, it was noted that "an opportunity was afforded for injustice to be done" through the actions of the adjudicator.

Key takeaways

Lord Braid reiterated the principle that "the courts will in general summarily enforce decisions of adjudicators", citing Carrillion Construction Ltd v Devonport Royal Dockyard Ltd [2005] EWCA Civ 1358.

However, this case serves as an important reminder as to the limits of procedural fairness in adjudication. It provides some comfort to parties that should the adjudicator proceed on a basis not put to them there is a possibility that the decision will not be enforced.