Consequences of an adjudicator disregarding the agreed facts

The losing party in an adjudication often looks for a way to avoid enforcement of a decision in court. A breach of natural justice may provide such a defence. When can it be used?

What is natural justice?

The rules for natural justice can essentially be split into two rights:-

1. The right to a fair hearing. Each party to a dispute should be able to put forward its case, and have the opportunity to respond to the case made against it;
2. The right to be heard by an impartial tribunal to avoid any bias, or apparent bias.

However, adjudication is a rough and ready process. The courts have said that not every breach of natural justice will justify non-enforcement of an adjudicator’s decision. The breach must be material. The relevant principles are set out in Cantillon Limited v Urvasco Limited [2008] EHWC 282.

In the recent decision of Corebuild Limited v Mr Tom Cleaver and Another [2019] EWHC 2170 (TCC), the defendant sought to resist the enforcement of an adjudicator’s decision, arguing there had been a material breach of the rules of natural justice.

Background

Mr Cleaver and Ms Osmolska (the “defendants”) employed Corebuild Limited (“Corebuild”) to build an extension to their house.  The parties entered into a JCT 2016 Intermediate Form with Contractor’s Design. 

The project did not go smoothly. On 22 June 2018, the contract administrator determined that Corebuild was not proceeding with the works regularly and diligently.  It issued a default notice under clause 8.4.2 of the contract, stating that if the default was not remedied within 14 days Corebuild’s employment would be terminated.

In the contract administrator’s opinion, the default had not been remedied within the 14 days.  It notified the defendants that the default had continued and the defendants subsequently terminated the contract on 13 July 2018.

Corebuild was aggrieved by the termination.  It commenced an adjudication. The adjudicator found that the defendants had incorrectly terminated the contract, thereby putting themselves in repudiatory breach (a breach serious enough to allow Corebuild to terminate).  Corebuild was awarded £80,023.82.  The defendants did not pay, so Corebuild sought to enforce the decision in court.

Enforcement

At enforcement, one of the grounds upon which the defendants resisted enforcement related to the adjudicator’s reasoning as to why a repudiatory breach had occurred. The defendants specifically argued that: 

“…the adjudicator rejected the defendants’ submission as to whether wrongful termination was repudiatory on the basis of a point which was unargued and which the defendants had no opportunity to address…”

In the adjudication, the defendants had relied on the decision of the House of Lords in Woodar Investment Development Ltd –v- Wimpey Construction UK Ltd [1980] 1WLR 277. They had argued that even if they had been wrong to terminate the contract, this could not amount to a repudiatory breach as they had terminated the contract in good faith, based on the advice of their contract administrator. 

Corebuild did not dispute the fact of the defendants’ reliance upon the contract administrator’s advice. However, itsaid that such reliance made no difference as a matter of law i.e. that the defendants were still in breach. 

There was, therefore, no dispute between the parties that the defendants had acted on the contract administrator’s advice. The issue was whether that gave the defendants a defence in law.

The adjudicator, however, decided that that the defendants had not relied on the advice of their contract administrator at all. He, therefore, determined the question of repudiation against the defendants, not on the basis advanced by Corebuild, but on the basis of a factual finding. This finding had not been pleaded by either party, nor did the adjudicator seek the parties’ positions on it.  The defendants, therefore, were not given the opportunity to defend themselves.  This, the judge held, was a material breach of natural justice.  His decision was, therefore, unenforceable.

Comment

As may be seen, it is not simply enough to argue that a breach of natural justice has occurred. Such a breach must be material.  In the case of Corebuild the decision was founded upon such a breach, so the decision could not stand.