Adjudicators and natural justice: Van Oord v Dragados: Case Summary

Justin Mendelle summarises a recent adjudication case, Van Oord v Dragados.

The decision from Scotland from the Outer House Court of Session in Van Oord (the pursuer) v Dragados (the defender) considers whether there was a breach of natural justice when the adjudicator reached his decision. A breach of natural justice can take many forms – for instance, each party must be given a fair opportunity to present its case, any new or original interpretations by the adjudicator should be canvassed with the parties and an adjudicator should not decide a point on a factual or legal basis that has not been presented by either party. The critical point when considering potential breaches of natural justice is not if an unjust result has been reached but if there was an opportunity afforded for injustice to be done. If there was, then the decision cannot stand. In this case, it was found that there was an opportunity afforded for injustice to be done, in that the parties, and in particular the defender, were not given the opportunity to comment on key dates advanced by the adjudicator.

Facts/Issues

In the adjudication, Van Oord sought an entitlement to additional time and money said to arise under two compensation events under an NEC contract, namely CEN 048 (Delayed Access to Open Quarry Works) and CEN 055 (Late Delivery of Remaining Caissons). The court was tasked with determining whether the adjudicator’s decision in relation to CEN 048 was enforceable. The pursuer’s argument in relation to CEN 048 was that they were denied access to carry out the open quay excavation works ‘by reason of the defender’s lack of progress in carrying out piling works and that this had caused critical delay from the 2nd August 2019 to the subcontract completion date of 31st July 2019.’

The defender disputed the cause of the delayed access being its piling works and maintained instead that it was the pursuer’s failure to commence, and thereafter to complete the revetment works that was the actual cause of delay.

Whilst the parties agreed on the need for a baseline programme, there was a dispute as to which baseline should be used. The pursuers favoured a baseline from October 2018, whereas the defenders preferred the April 2019 programme. Both parties were in agreement that the March 2019 programme should not be used. It was however the March 2019 programme that the adjudicator decided was the appropriate baseline. Having chosen this baseline, the adjudicator favoured the pursuer’s case, stating it was the defender’s failure to progress the piling works which had caused critical delay. The adjudicator then, for reasons which are quoted as ‘not entirely clear’ in the judgement, found the critical date of CEN 048 was 31 July 2019. This meant the adjudicator not only chose a baseline programme which was explicitly rejected by both parties but also chose a critical date which was 2 days earlier than the date suggested by the pursuer. Neither the baseline programme, nor the critical date, were canvassed with the parties and it is this fact which is the crux of the judgement.

The defender argued that the adjudicator’s failure to canvass the relevant dates with the parties and the subsequent lack of opportunity to address him on the dates lead to a material breach of natural justice, in that it prevented them the chance to present a time bar argument. The defence submitted the adjudicator had ‘gone off on a frolic of his own’ and they had ‘no inkling’ that those dates would be considered, let alone settled upon. The pursuer disputed this position, arguing that not only were parties given an opportunity to address the adjudicator on his findings, but also that adjudicators have ‘significant leeway’ and thus are entitled to take an intermediate position.

Judgement

The judgement itself focuses around the ‘common theme… that the procedure adopted by the adjudicator must be fair’. The key question is whether the adjudicator did indeed adopt an intermediate decision, or if he adopted a novel approach on a significant issue, whilst depriving the parties of the opportunity to state their views.

The Court found that it was the adoption of a new, and earlier, critical date, which takes the case into a novel sphere. The adjudicator, having settled on a different baseline, and then on an earlier critical date, was required, in the interests of fairness, to allow the parties a further opportunity to address him on those facts. This would have allowed the defender an opportunity to explore a time-bar argument; as noted above, it is irrelevant as to whether this argument would have succeeded; the breach was the fact that the defender was deprived of the opportunity of exploring it. As a result, the judge found there had been a breach of natural justice and subsequently that the adjudicator’s decision could not stand.
Comment

It is difficult for parties to challenge adjudicators’ decisions, especially on grounds of natural justice. This decision does provide a ground to do so – of particular importance is that adjudicators need to balance their capability of reaching an independent decision with the requirements not to go out on a frolic of their own. As always with decisions from Scotland, they are persuasive rather than binding on the English courts; however, the reasoning in this case is, we believe, likely to be followed if similar facts arose in an English case.

Justin Mendelle is a Senior Partner and Head of Construction at Sharpe Pritchard LLP.

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