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Authored by: Justin Yuen
In AZ v BY  EWHC 2388 (TCC), England’s Technology and Construction Court held that an adjudicator’s decision was unenforceable for apparent bias because in the adjudication, he had considered materials relating to negotiations between the parties, which were protected by without prejudice privilege.
The underlying dispute between the parties related to works to replace the stair core pressurisation systems to a building. An issue in the adjudication was whether the contract between the parties in relation to the works was finalised, which the adjudicator ruled it was. AZ brought proceedings to enforce the adjudicator’s decision in his favour. BY opposed enforcement on the basis that during the adjudication, AZ had deployed material which was protected by without prejudice privilege. The materials in question, consisted of contractual negotiations between the parties and communications in relation to the contract, including an email and note of a meeting between them, in which it was said that BY had conceded at the meeting that AZ’s contractual position was justified.
Without Prejudice Privilege
The Court referred to the law relating to without prejudice privilege, namely:
Were the materials in question privileged?
The court concluded that the nature of the communications taking place in the documents in question were without prejudice and it followed that the particular documents submitted to the adjudicator about which complaint was made were subject to without prejudice privilege. The court noted that the email in question was not being relied on as collateral, and prejudicial, material seeking to undermine the contractual position which BY had adopted. In essence, it was being said that BY had conceded i.e. agreed in the meeting that AZ’s contractual position was justified. Use of without prejudice material, the court said, is not admissible for these purposes. The exception to the without prejudice rule is generally not invoked unless the agreement said to have come into existence is one which has replaced the underlying dispute which was the subject of without prejudice negotiations.
Without Prejudice Communications and Apparent Bias
The court referred to the test as to whether there is apparent bias present, namely whether, on an objective appraisal, the material facts give rise to a legitimate fear that the adjudicator might not have been impartial. The court on any enforcement proceedings should look at all the facts which may support or undermine a charge of bias, whether such facts were known to the adjudicator or not.
The court said that it is the existence of the “question mark” which is being addressed by the objective apparent bias test. Thus, concluding that such a question mark exists does not depend on establishing that the decision was “primarily decided” on the basis of the without prejudice material.
The question of admissibility, the court said, is a question of law and generally, adjudicator’s decisions will be enforced notwithstanding that they contain an error of law. However, an error as to the admissibility of without prejudice material is an error of law that could potentially impact the fairness of the decision-making process in accordance with the rules of natural justice and which can affect the enforceability of the decision. If, therefore, a court concludes (contrary to the determination of the adjudicator) that material was in fact without prejudice and that the test of apparent bias is made out, the decision should not be enforced. This, the court said, accords with the important public policy behind without prejudice communications, and, is consistent with the court’s strong discouragement to parties from deploying “without prejudice” communications in adjudication.
The court concluded that there was apparent bias in this case because the fair-minded and informed observer considering all of the circumstances of this case would conclude that there was a real possibility that, having seen the without prejudice material, the adjudicator was unconsciously biased, since:
This judgment provides a useful summary of the court’s approach in dealing with privileged materials. It also highlights the risks which the party who relies on privileged materials has to take in adjudication (or other arbitration/legal proceedings). If apparent bias is established, any decision of the adjudicator or the arbitrator/court may be unenforceable.
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