Sarah Alexander: Adjudicator’s use of third parties



Dentons senior associate, Sarah Alexander, discusses the case of Babcock Marine (Clyde) Ltd v HS Barrier Coatings Ltd [2019] CSOH 110 and its impact on what an adjudicator needs to do if they use other people (like a QS) when preparing their decision.

Sarah Alexander

In December 2019, Scottish Construction Now published an article by Kirsti Olson discussing the case of Dickie & Moore Limited v. The Lauren McLeish Discretionary Trust. That case considered, amongst other issues, whether the adjudicator’s involvement of a pupil in an adjudication amounted to a breach of natural justice. The judge decided that, as the pupil did not give advice and all material decisions had been taken by the adjudicator himself, there was no breach. Dickie is now the subject of an appeal. However, in the meantime, the Court of Session has again been asked to consider the involvement by an adjudicator of a third party in the adjudication process. Lord Doherty’s Opinion in Babcock Marine (Clyde) Limited v. HS Barrier Coatings Limited was released on 27 December 2019.

Background

In December 2014, Babcock engaged HS to carry out re-preservation of shiplift docking cradles at HM Naval Base Clyde (the Contract). The Contract incorporated the NEC3 Short Contract (June 2005) with bespoke amendments. The Contract was a construction contract for the purposes of the Housing Grants, Construction and Regeneration Act 1996.

Babcock was dissatisfied with progress. HS claimed it was entitled to additional payment for compensation events. The parties entered into a settlement agreement in December 2016. This drew a line under all issues to date except one – the extra overcost of treating six larger strongbacks. The sums claimed by HS continued to rise. Babcock terminated the Contract in June 2018.

HS submitted a termination payment application. It was certified at nil. In a first adjudication, Babcock was found not to have served a valid pay less notice. This decision resulted in payment becoming due to HS. Babcock paid, but both parties issued notices of dissatisfaction. This led to a second adjudication regarding the true and proper value of the works as at the date of termination.

The second adjudicator’s appointment

The adjudicator was appointed under the NEC Adjudicator’s Contract April 2013 edition. Clause 2.3 of the Adjudicator’s Contract allowed him to seek help in reaching his decision, but only on certain conditions. Clause 2.3 provided: “After notifying the parties of his intention, the Adjudicator may obtain from others help that he considers necessary in reaching his decision. Before making his decision, the Adjudicator provides the parties with a copy of any information or advice from others and invites their comments on it.

Following his appointment, the adjudicator also provided the parties with a copy of his own terms and conditions. Paragraph 14 stated: “If I require quantity surveying input during the Adjudication I will utilise the resources of Bunton Consulting Partnership. This matter is at my absolute discretion and I will not require the consent of the parties.

Challenge to enforcement

The second adjudicator’s decision was issued in March 2019. It was accompanied by a fee account containing an entry stating “QS assistance – 28 hours @ £95 £2,660.

HS challenged the decision, initially on three grounds. Four weeks before the court hearing, HS added a fourth ground of challenge. They argued that the adjudicator had breached the rules of natural justice by failing to disclose to the parties that a QS had been appointed by him to assist with the decision and by failing to disclose what the nature of the assistance was.

Babcock contacted the adjudicator in an attempt to clarify what involvement the QS actually had. The adjudicator was out of the office at the time. He said that he was not able to recall the specifics, but he offered the following explanation:

I cannot, at this stage … recall exactly what assistance was provided. However, based on my past and extensive experience as an Adjudicator, this would probably involve clerical and administrative assistance, checking that the parties’ submissions contained the documents set out in any inventory, checking the parties’ calculations in relation to variations etc, assisting me in checking if the parties have submitted vouching information in relation to variations etc, double checking figures after my calculations, and populating the Scott Schedule with values I had decided, and assistance in proof reading, a very lengthy and detailed Decision.  

Court of Session decision

Lord Doherty decided that, even if the assistance provided by the QS was merely clerical and administrative, natural justice required that the adjudicator ought to have told the parties that the QS was involved. While detailed disclosure for comment would not have been necessary, the judge said that he thought the adjudicator ought to have indicated (at least in brief, broad terms) just what it was that the QS was doing. Reflecting back on his decision in Dickie, Lord Doherty remarked that: “The test is not ‘Has an unjust result been reached?’ but ‘Was there an opportunity afforded for injustice to be done?’” The judge clarified that non-material breaches of natural justice will not render an adjudicator’s decision unenforceable. The provisional nature of an adjudicator’s decision justifies ignoring non-material breaches.

No witness statements from the adjudicator or the QS were lodged in court. The extent of the QS’s involvement in the second adjudication could not therefore be explored. In the absence of that information, Lord Doherty was of the view that he could not decide if there had been a material breach of natural justice without further inquiry.

Closing thoughts

The adjudicator in this case did not set out to try to mislead the parties. At the outset of his appointment, he told the parties that he might use a QS. He confirmed in his terms and conditions that he did not need consent from the parties to do so. If the parties had a problem with this, they could have raised a concern at the beginning.

Nevertheless, Lord Doherty was still of the view that (even for clerical work) natural justice required the parties to be told of the QS’s involvement and what he was doing.

There is greater potential for trouble in this case if the QS did more than just provide clerical assistance. If the QS provided the adjudicator with help in reaching his decision, the parties were entitled under Clause 2.3 of the Adjudicator’s Contract to be told and to receive details of any information or advice provided for comment. Failure to do so would be a breach of the Adjudicator’s Contract.

Keep an eye out for Lord Doherty’s follow-up Opinion.

Tags: Dentons



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