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Council defeats bid to enforce decision of adjudicator in highways contract dispute

Liverpool City Council has succeeded in the High Court in having an adjudicator’s decision in a dispute on a highways contract declared unenforceable over a question of natural justice.

39 Essex Chambers said the judgment in Liverpool City Council v Vital Infrastructure Asset Management (Viam) Ltd [2022] EWHC 1235 (TCC) considered issues related to jurisdiction, disputes under two contracts, the service and appointment of an adjudicator, the question referred to an adjudicator and natural justice. Vivek Kapoor of 39 Essex Chambers appeared for the council, instructed by David Humphreys of DWF Law.

The court said the adjudicator’s decision was “unenforceable as a matter of law as having been reached in a procedurally unjust manner”. 

His Honour Judge Stephen Davies, sitting as a High Court judge, heard the adjudication had been brought by Vital Infrastructure Asset Management.

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Adjudicator Howard Klein had proceeded with the adjudication in the face of jurisdictional objections raised by the council but decided Liverpool should pay Vital £128,500 and interest for maintenance of temporary fencing for highways works and be responsible for his fees and expenses.

Vital went into administration the day before the decision and Liverpool did not pay the amount decided by the adjudicator.

Liverpool then made an insolvency application seeking permission to bring Part 8 proceedings against Vital for declarations that the adjudicator had no jurisdiction because the dispute arose under two contracts .

Even if the adjudicator did have jurisdiction, Liverpool argued he failed to serve it in the required way and so was not validly appointed and had no jurisdiction and/or the adjudicator decided a question which had not been referred to him, so that his decision was a nullity.

The judge said that having heard arguments on the contract and nullity issues, “I observed that on one view the case being advanced might more properly be seen as a breach of natural justice argument than a nullity argument”.

He allowed Liverpool to advance this since it was closely connected with the nullity issue.

“In summary, my decision is that the claim fails on the two contracts, the notice and the nullity issues but succeeds on the natural justice issue,” HHJ Davies said.

He said the question was whether Mr Klein breached natural justice by finding that Liverpool had agreed there was an error which should be amended in circumstances where, on Liverpool’s case, not only was that not true but it was also something which Vital had never contended for and which the adjudicator had never identified as an issue for his determination.

The judge said the adjudicator did not engage with the fundamental points made by Liverpool where it did address in some detail the proper analysis of Vital's case and the compensation event notice.

HHJ Davies said: “In my judgment these were fundamental departures from the obligation to follow a fair procedure.

“Indeed, in proceeding in this way he departed in a significant way from the approach he had spelled out in his email of 20 May 2021. He has not, in his supplemental observations, been able to explain in any way which I regard as convincing on what basis he considered that he was entitled to reach the decision he did without allowing Liverpool the opportunity to address him on the point.”

The judge said Mr Klein had not been able to suggest that these departures from natural justice had no practical adverse effect on the council’s case and “it is apparent that Liverpool has lost the opportunity to have the substantive arguments which it did put forward determined by him and there is no suggestion or obvious basis for my concluding that these arguments were incontrovertibly misconceived”.

This meant that Liverpool was entitled to a declaration that the decision is unenforceable as a matter of law as having been reached in a procedurally unjust manner and so no money was due from the council to Vital.

Mark Smulian

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