Court rules no breach of natural justice for time constraints in adjudication  

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Authored by: Justin Yuen

In Home Group Ltd v MPS Housing Ltd [2023] EWHC 1946 (TCC), England’s Technology and Construction Court granted Home Group’s application for summary enforcement of an adjudication decision (Decision), whereby MPS was ordered to pay it approximately £6.5 million. The court rejected MPS’s argument that there had been a breach of natural justice in the adjudication in that the Referral to adjudication included a large volume of quantum expert reports and witness statements, which it had inadequate time to digest and respond to. It said that both complexity and constraints of time to respond are inherent in the process of adjudication, and are no bar in themselves to adjudication enforcement. Whilst conceivable that a combination of the two might give rise to a valid challenge, in circumstances where the Adjudicator has given proper consideration at each stage to these issues and concluded that he or she can render a decision which delivers broad justice between the parties, the court will be extremely reticent to conclude otherwise.

Background

Home Group claimed termination losses said to have been caused by MPS’s repudiatory breach of a JCT Measured Term Contract, under which MPS had been carrying out maintenance and repair works to Home Group’s properties, comprising of a high volume of individual work items, each of which had a relatively low value.  MPS purported to terminate the Contract. Home Group did not accept that MPS was entitled to terminate the Contract and asserted that MPS’s purported termination was a repudiation of the Contract, which Home Group accepted.  The validity of the termination was referred to the first adjudication, in which the adjudicator determined that MPS’s purported termination was invalid, and that MPS had repudiated the Contract.  The second adjudication was commenced in order to recover Home Group’s losses.  That second Referral to adjudication included a large volume of quantum expert reports and witness statements with hundreds of exhibits. MPS had 19 days (13 working days) to produce a response to the Referral, which MPS claimed was an inadequate amount of time.  MPS contended that it was unable to properly digest and respond to the material served with the Referral and that this was a breach of natural justice which had led to a material difference in the outcome, and that as such, the Decision was unenforceable.  MPS did not contend that the dispute was incapable of adjudication per se. Rather, it contended that Home Group should simply have provided MPS with a greater opportunity to understand the claim, whether in advance of the Notice of Adjudication or by agreeing to an extended timetable in the adjudication.

The Law

The court referred to the relevant law as derived from the case authorities as follows:

• Adjudication decisions must be enforced, even if they contain errors of procedure, fact or law.

• An adjudication decision will not be enforced if it is reached in breach of natural justice and the breach is material, in that it has led to a material difference in the outcome. However, the court should examine such defences with a degree of scepticism.

• The mere fact that an adjudication is concerned with a large or complex dispute does not itself make it unsuitable for adjudication. Size/complexity will not of itself be sufficient to found a complaint based on a breach of natural justice.

• What matters is whether, notwithstanding the size or complexity of the dispute, the adjudicator had: (i) sufficiently appreciated the nature of any issue referred to him before giving a decision on that issue, including the submissions of each party; and (ii) was satisfied that he could do broad justice between the parties.

• If the adjudicator felt able to reach a decision within the time limit then a court, when considering whether or not that conclusion was outside the rules of natural justice, would consider the basis on which the adjudicator reached that conclusion.

• If the allegation is that the adjudicator failed to have sufficient regard to the material provided by one party, the court will consider that by reference to the nature of the material; the timing of the provision of that material; and the opportunities available to the parties, both before and during the adjudication, to address the subject matter of that material.

• The court must look to wider considerations when considering whether, on the facts of any particular case, a breach of natural justice may have occurred by reason of an ability of a party to fairly put its case.

• Arguments based upon time constraints impacting the ability to respond fairly have enjoyed little success. Merely pointing to a large quantity of material, some of which is seen for the first time in the adjudication itself (such as the expert reports) is not of itself sufficient.

• In cases involving significant amounts of data, an adjudicator driven by the contraints of time, is entitled to proceed by way of spot checks and/or sampling, even though this approach might not be adopted in due course by the court or arbitrator.  The assessment of how this should be carried out is a matter of substantive determination by the adjudicator and an argument that the adjudicator has erred in his or her approach, absent some particular and material related transgression of natural justice, will not give rise to a valid basis to challenge enforcement. It would, even if correct, merely be an error like any other error, which will not ordinarily affect enforcement.

Court’s decision

The court rejected MPS submission that, whether by reason of the volume of material, constraints of time, and access to material, and whether taken separately or in aggregate, there had been any, or any material, breach of natural justice

The court said that notwithstanding the significant number of low value items requiring determination, it was in reality a vanilla final account, which was only different from most in that the claim was brought by the employer against the contractor, following the latter’s repudiatory breach, rather than the other way around and was, in many ways, significantly more straightforward than many “kitchen sink” final account adjudications involving not just a money claim, but complex disputes relating to extensions of time and requiring chronological investigation of the lifespan of a construction project and critical path analysis.

The court pointed out that there had been no delay on Home Group’s part in bringing the claim. The Notice of Adjudication followed the service of the Contractor’s Final Account which recorded the significant sums considered to be owed to Home Group, and was brought promptly after the first adjudication on the question of termination as a matter of principle.  On the assumption that the Decision was broadly correct, Home Group had incurred considerable sums and was, until payment, considerably out of pocket.

The court concluded that the Adjudicator in this case had correctly kept under review the question of his ability to do broad justice between the parties, notwithstanding the substantial quantity of material he had been presented with. Having determined that he could, the court would be extremely slow to interfere with that conclusion.

Comments

It is understood that in the forthcoming Security of Payment Legislation (SOPL) in Hong Kong, the respondent will only have 20 working days for responding to the claimant’s submission and the adjudicator will only have 55 working days to deliver his/her decision, unless it is extended by agreement of the parties.  To maximize its chance of success in the adjudication, an unscrupulous claimant may spend a long time to prepare its claim in great detail before commencing the adjudication.  In such case, the respondent will be disadvantaged, given that it is difficult to challenge an unfavourable decision, as explained in the above judgment of the Court in England.  The respondent may only hope that the adjudicator will decline to make any decision due to the complexity of the case. How often the adjudicator will be willing to do that in practice, will have to be seen after the SOPL is implemented.

Key Contacts

Justin Yuen

Partner | Litigation and Dispute Resolution

Email or call +852 2825 9734