The recent decision in Premier Modular Ltd v Maidstone and Tunbridge Wells NHS Trust has generated considerable discussion amongst adjudication practitioners, particularly those interested in the boundaries of natural justice and the extent to which an adjudicator may rely upon their own reasoning.
Much has already been written about the specific facts of the case and the adjudicator’s approach. However, what struck me when reading the judgment was that it may represent something slightly different from the authorities that are usually cited whenever allegations of an adjudicator going off on a “frolic of his own” are raised.
The phrase itself has become deeply embedded within adjudication jurisprudence. Whilst it is not a formal legal test, it is commonly used to describe situations where an adjudicator reaches a decision based upon a point, argument, contractual provision or methodology that neither party has advanced and upon which neither party has had a proper opportunity to comment.
The courts have repeatedly emphasised that adjudicators are entitled to think independently. Indeed, adjudicators are appointed precisely because they are expected to bring their own expertise and judgment to bear on a dispute. They are not simply referees choosing between competing submissions. Equally, however, there is a fundamental requirement of procedural fairness. Parties must understand the case they have to meet and must have an opportunity to address the issues that may ultimately determine the outcome.
That balance has been considered in a number of important authorities over the last two decades.
Cantillon v Urvasco – The Foundation
Any discussion of natural justice in adjudication usually begins with Cantillon Ltd v Urvasco Ltd.
In that case, Akenhead J recognised the need to strike a balance between fairness and the policy objectives underpinning statutory adjudication. Adjudication is intended to be a fast, interim dispute resolution mechanism. It is not litigation and it is not arbitration. The court therefore made it clear that not every procedural irregularity or error would justify refusing enforcement.
However, the judgment also recognised that there are limits. Where an adjudicator determines an issue that has not been referred, or where the parties have not had a fair opportunity to address a material point upon which the decision is based, a breach of natural justice may arise.
Importantly, the court stressed that any such breach must be material. The question is not whether the adjudicator made a mistake, but whether the parties were deprived of a fair opportunity to address an issue that may have affected the outcome.
Those principles continue to underpin virtually every natural justice challenge seen in the TCC today.
Primus Build – The Practical Guidance
The next significant step came in Primus Build Ltd v Pompey Centre Ltd.
What makes Primus Build particularly important is that it deals with a practical reality of adjudication. Experienced adjudicators frequently identify points that neither party has considered. Construction disputes are often technically complex, and adjudicators inevitably bring their own experience to the process.
The court accepted that there is nothing inherently wrong with an adjudicator identifying a point that has not been raised by the parties. In many cases, it may even be beneficial. The difficulty arises when the adjudicator decides the dispute on the basis of that point without first giving the parties an opportunity to comment.
Akenhead J’s observations are frequently cited because they provide what many regard as the solution to the problem. If an adjudicator identifies a potentially significant issue that has not been addressed by the parties, the safest course is to raise it and invite submissions.
In effect, Primus Build provides a procedural roadmap designed to avoid precisely the type of natural justice challenge that succeeded in later cases.
ABB v BAM Nuttall – The Classic Example
Perhaps the clearest example of an adjudicator crossing the line is found in ABB Ltd v BAM Nuttall Ltd.
The dispute concerned whether the parties had reached a binding agreement in relation to additional works. During the adjudication, neither party relied upon a bespoke contractual provision requiring amendments to be in writing and signed by both parties. The clause simply did not form part of either party’s case.
The adjudicator, however, identified the provision himself and treated it as a significant part of the reasoning supporting his conclusion.
The issue was not that the adjudicator had misunderstood the contract. Nor was it that the clause was irrelevant. On the contrary, the clause was potentially important. The problem was that the adjudicator never alerted the parties to the fact that he considered the clause to be significant.
As a result, neither party had the opportunity to explain the clause, argue about its effect, or address whether it should influence the outcome of the dispute.
When the matter reached the TCC, Akenhead J concluded that this amounted to a material breach of natural justice. The parties first became aware of the importance attached to the clause when they received the decision itself.
In many respects, ABB has become the textbook example of an adjudicator deciding a dispute on the basis of a point that exists only in the adjudicator’s own reasoning process.
CJP Builders and Herbosch-Kiere
Similar themes emerged in both CJP Builders Ltd v William Verry Ltd and Herbosch-Kiere Ltd v Dover Harbour Board.
Although the factual circumstances differed, both cases involved adjudicators adopting reasoning or methodologies that had not been advanced by either party. In each instance, the concern was not whether the adjudicator’s reasoning was technically correct. The court was concerned with the fact that the parties had never been given the opportunity to engage with that reasoning before it became decisive.
These cases reinforce an important point that is sometimes overlooked. Natural justice is not primarily concerned with the correctness of the outcome. It is concerned with the fairness of the process by which that outcome is reached.
An adjudicator may ultimately arrive at the right answer. However, if the parties were denied a fair opportunity to address the reasoning that produced that answer, enforcement may still be vulnerable.
Why Premier Modular May Be Different
This is where Premier Modular becomes particularly interesting.
When one examines the earlier authorities, a common thread quickly emerges. In ABB, the adjudicator did not raise the point. In CJP Builders, the parties were not given an opportunity to address the reasoning that ultimately became decisive. Similar concerns arose in Herbosch-Kiere.
Premier Modular appears to present a different scenario.
From the judgment, it appears that the adjudicator recognised the issue, raised it with the parties and invited submissions. On one view, that is exactly what Primus Build says an adjudicator should do. It is the procedural safeguard that the courts have repeatedly identified as the means of avoiding unfairness.
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- If that analysis is correct, the question becomes significantly more nuanced.
- Is it sufficient for an adjudicator simply to identify the issue and invite submissions
- Or does procedural fairness require something more?
Must the parties not only be invited to comment, but also understand the significance of the point and the manner in which it may ultimately influence the decision. These are not necessarily the same thing.
A party may respond to a question posed by an adjudicator without appreciating that the issue has become central to the adjudicator’s reasoning. Equally, an adjudicator’s reasoning may develop after receiving submissions in a manner that neither party anticipated.
Whether that occurred in Premier Modular will no doubt continue to be debated.
What is clear, however, is that the case appears to move the discussion beyond the traditional ABB-style scenario where the adjudicator simply says nothing.
A Question for Practitioners
For many years, the authorities have focused on a relatively straightforward proposition: an adjudicator should not decide a dispute on a basis that the parties have not had an opportunity to address.
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- Premier Modular may raise a more difficult question.
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- What happens when the adjudicator does raise the issue?
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- What happens when submissions are invited and received?
At what point, if any, can an adjudicator still stray beyond the bounds of procedural fairness despite following the guidance that Primus Build appears to endorse?
I’d be interested to hear the views of adjudicators, construction lawyers, claims consultants and experts on this.
Do you consider that once an adjudicator has identified a point and invited submissions, the requirements of natural justice have generally been satisfied?
Or do you think there remains a risk that an adjudicator can still cross the line, even after consultation, if the reasoning adopted in the final decision goes beyond what the parties understood they were being asked to address?