The adjudicator was not in breach of the rules of natural justice on the day before his decision was due to be issued by denying the employer the chance to respond to information and to provide additional evidence
 

BELL BUILDING PROJECTS LTD v ARNOLD CLARK AUTOMOBILES LTD

The adjudicator was not in breach of the rules of natural justice on the day before his decision was due to be issued by denying the employer the chance to respond to information and to provide additional evidence

 

Lord Tyre held that the adjudicator was not, as alleged by the employer, in breach of the rules of natural justice by his actions on the day before his decision was due to be (and was) issued of (i) denying it a fair or meaningful opportunity to present its response to the information supplied by the contractor in support of its loss and expense claim and (ii) requesting from it additional vouching for its contra charge claim for defects despite it having already provided supporting material and the adjudicator not having any proper opportunity to consider any material that might have been provided before the issue of his decision.

 

The delayed receipt by the employer’s solicitors of the material prepared by the contractor’s solicitors in support of its loss and expense claim when the employer had turned down the opportunity of inspecting the contractor’s records at its offices was unfortunate but did not create either actual injustice or an opportunity for injustice to arise because (i) The adjudicator informed the parties that he only intended to look at staff costs (ii) That was a modest exercise consisting of checking sums claimed as loss and expense against staff salary records, which did not require expert QS input (iii) The employer was accordingly made aware, prior to receipt of the four folders of vouching material, that only a very limited task had to be undertaken (iv) The time afforded to the employer to comment on the relevant material was adequate for what the adjudicator reasonably described as an easy process and (v) The employer chose neither to engage in that process nor to respond to the adjudicator’s suggestion of a further extension of time.

 

As to the employer’s contra-charge claim for rectification works: (i) It was not the adjudicator’s obligation to request documents vouching this claim (ii) Instead it was the employer’s responsibility when submitting its claim to include the necessary vouching (iii) The adjudicator allowed the employer a short time to produce the substantiation that he regarded as necessary and suggested once again to the parties that it would be sensible to agree a further short extension of time to allow the employer to provide the information requested and (iv) There was force in the contractor’s criticism that the employer’s defence of an alleged breach of the rules of natural justice was in substance an attack on the merits of the decision as to whether adequate vouching of payments to sub-contractors had been supplied.  

 

THE FULL TEXT OF LORD TYRE’S OPINION

 

Introduction

[1] In August 2015, the pursuer (“BBP”) contracted with the defender (“ACL”) to design, supply and erect a new car showroom at Alexandra Parade, Glasgow.  Work commenced in June 2015 and continued until 4 March 2016 when ACL terminated the contract.  The parties’ dispute was referred to adjudication and on 22 June 2016 the adjudicator (Ms Lindy Patterson QC) decided that ACL had been in repudiatory breach of contract and that that breach of contract had been accepted by BBP, bringing the contract to an end on 8 March 2016.  BBP sought payment of damages from ACL; the sum claimed to be due was disputed by ACL.  This too was referred for adjudication.  On 26 September 2016, in response to a request in terms of the parties’ contract by the pursuer to the Royal Institution of Chartered Surveyors, Mr LCB Bunton was appointed as adjudicator. 

 

[2] On 30 September 2016, BBP referred the dispute to the adjudicator.  The Scheme for Construction Contracts (Scotland) applied.  The deadline for production of the adjudicator’s decision was initially 30 October 2016; this was subsequently extended by agreement to 11 November, then to 18 November, and finally to 21 November.  ACL submitted a written response on 7 October, BBP submitted a reply on 24 October, and ACL a rejoinder on 11 November.  The adjudicator issued his decision on 21 November.  He found BBP entitled to payment of the sum of £1,010,323.08.  In this action BBP sues for payment of that sum.  ACL’s response is that the adjudicator’s decision should be reduced ope exceptionis on the ground that it was arrived at in breach of the rules of natural justice.  The action came before me for a debate, it being agreed that the case could be disposed of without the need for proof.

 

The contentious issues

 

[3] The adjudication was complex, with a large number of disputed matters.  A considerable volume of documentary material was submitted to the adjudicator.  By Monday 14 November 2016, two of the remaining outstanding issues were:

 

(i) BBP’s claim for loss and expense, consisting mainly of staff costs, said to have been incurred as a result of various delays for which ACL was responsible; and

 

(ii) a contra-charge claimed by ACL in respect of the cost of works carried out by the contractor instructed to complete the building in order to rectify defective work by BBP.

 

[4] In his decision dated 21 November 2016, the adjudicator found BBP entitled to the sum of £28,751.09 in respect of the loss and expense claim, and rejected ACL’s contra-charge claim.  In the present proceedings, ACL contend that in respect of these two issues the adjudicator denied it a fair opportunity to present its case or to respond to the case made by BBP.  As these two elements are not severable, the whole decision falls to be reduced.  BBP contend that there was no breach of natural justice or, alternatively, if there was, that only these two elements are affected and decree should be granted for the balance of the sum sued for.

 

Chronology: The Final 10 Days of the Adjudication

 

[5] Voluminous email correspondence took place between the parties and the adjudicator during the period between 12 and 21 November 2016.  This correspondence was examined in detail during the debate; I shall try for the most part to summarise it. 

 

[6] On Saturday 12 November the adjudicator identified certain matters with regard to which he required no further submissions or comments, but indicated various concerns that he had with BBP’s loss and expense claim.  On Sunday 13 November, he noted that he planned to look at ACL’s rectification works claim the following day.  On Monday 14 November he stated that he was now working on the rectification works claim and proposed a discussion on principles with the parties’ solicitors.  At 18.46 on that day, BBP’s agent, Pinsent Masons (“PM”) emailed BBP’s comments on ACL’s rejoinder to the adjudicator.  One of BBP’s general comments was

 

“The Adjudicator can, if he wishes, visit our offices to confirm that payment has been made for all the loss and/or expense incurred and claimed – as this can be verified with our Financial Controller (name) and our accounting software/bank records…”

 

An offer to visit BBP’s premises to inspect vouching of BBP staff hourly rates had previously been made on 12 October, in response to a query from the adjudicator.

 

[7] On Tuesday 15 November, a conference call took place and the extension of time to 21 November for the adjudicator’s decision was agreed.  The adjudicator offered a meeting to discuss the rectification works issue.  On Wednesday 16 November (at 10.00 am) PM reiterated the offer to attend BBP’s premises to review the financial records vouching the loss and expense claim.  At 10.21 the adjudicator replied, noting that he had indicated the previous day that he would visit BBP’s premises to look at costs, and that ACL would wish to have its advisers involved in his discussions.  At 16.40 the adjudicator confirmed that the final issues to be dealt with were the rectification works and the loss and expense claim.  He considered that a discussion of the rectification works was necessary: BBP had criticised ACL’s claim and ACL needed to respond.  He continued:

 

“In relation to the Loss and Expense, I need to visit BBP’s offices to see figures demonstrated.  ACL is free to attend and to go through the same exercise.  This is a perfectly normal process for me to go through.”

 

The adjudicator observed that if he went through this process, the date of his decision would require to be extended from Monday 21 November for a few days, but concluded that if an extension was not agreed, he would seek clarification of some issues in writing and conclude the matter on Monday 21 November.  PM responded at 18.51 offering times for a telephone call the following day and enquiring when the adjudicator would visit BBP’s offices.  At 20.29, the adjudicator noted that if ACL did not wish to participate in a discussion of rectification works, he would issue questions rather than have a discussion with one side.  He went on:

 

“The same applies to any inspection of records.  It would be unfair of me to attend BBP’s offices without ACL being present.  I observe the principles of natural justice.”

 

[8] On Thursday 17 November, a response to the adjudicator’s emails came not from ACL’s agents, Brodies, but directly from ACL’s in-house legal counsel, Mr Jamie Millar.  Mr Millar expressed serious concern that the adjudicator was proposing to visit BBP’s offices and that he was “in effect building BBP’s case for them”.  Mr Millar further stated his understanding from Brodies that the adjudicator appeared to have already made up his mind about the rectification works, and that ACL did not believe that the process had been fair.  In another email at 13.42, Mr Millar stated:

 

“We believe that you have already made up your mind and are simply trying to avoid the allegation that you are following an unfair process, which in our view you are.

 

We are advised by our legal advisors that it is highly unusual for an adjudicator to drive to one party’s offices to seek out evidence that the party is not prepared to disclose.  That leads us to the view that there is bias.”

 

The adjudicator responded at 15.01 that he was satisfied that he had carried out a fair, balanced and interrogative process so far, and would continue to do so.  He reminded parties that he had said the previous night that he would not attend BBP’s offices without ACL being present.  At 18.55, Brodies re-entered the email correspondence, enquiring what the agenda would be for a meeting on loss and expense and rectification costs, and reserving ACL’s position on agreeing to an extension of time.  At 19.16 PM sent the adjudicator BBP’s narrative on the rectification works.  At 19.28 the adjudicator invited Brodies to respond.  He noted that he was awaiting a response from BBP to questions regarding loss and expense.

 

[9] At 07.06 on Friday 18 November, PM sent a lengthy email to the adjudicator commenting on the proposed further extension of time.  As regards loss and expense, PM criticised ACL’s refusal to agree to the adjudicator’s visit to BBP’s premises and stated that BBP would now produce an extract from its cost ledger to vouch the costs claimed.  As to rectification costs, PM considered that the extent of information available to the adjudicator was sufficient to allow him to make a decision.  At 16.20 the adjudicator noted that he would be working over the weekend and requested contacts on each side.  At 17.46, PM advised that the extract from its cost ledger was almost complete, and comprised four lever arch folders that replicated all costs/invoices identified in an appendix to the referral notice, supplemented by new explanatory information.  Documents in hard copy were to be delivered by courier to Brodies’ offices between 7.30 and 8 pm and to the adjudicator between 9 and 9.30 pm.  An electronic copy would also be sent.  Brodies responded at 18.36 objecting to the submission of four lever arch folders of information on Friday night with the decision due on Monday, and requesting the adjudicator’s confirmation that it would be rejected.  The adjudicator’s response at 19.07 was that the situation had arisen due to ACL’s objection to a visit to BBP’s offices.  The adjudicator’s understanding was that what was being provided was proof of salaries and payment of invoices.  He commented that he had “three full days to look at this as does ACL”.  He noted that he was still awaiting comments on the rectification works from ACL.  Brodies’ reply at 19.15 was that the situation had arisen because BBP had not previously submitted the required information, and that their client was being prejudiced.  A response by PM at 20.34 included a link to a dropbox containing the information in the four folders, though not the documents vouching staff costs that had been sent on an accompanying memory stick.  At 21.01, the adjudicator stated:

 

“In relation to the folders, due to arrive this evening, nothing has arrived yet.  I only require to look at confirmation of salary costs for now.  That should not take too long.  If I consider that further information requires to be looked at then I will advise in the morning.”

 

[10] In the meantime a hitch had occurred in the delivery of the vouching material to Brodies.  It appears that the courier arrived at the building containing Brodies’ offices, to be told (erroneously) by a receptionist employed by the building management that there was no-one in Brodies’ offices and that delivery could not therefore be effected.   

 

[11] The material did, however, reach the adjudicator.  The following morning (Saturday 19 November) at 08.41, the adjudicator suggested that both parties should consider a 24 hour extension to allow them to review the documents received from one another the previous night.  He noted however that he himself had no difficulty in considering what had been submitted.  At 13.55 the adjudicator sent an email “essentially for ACL” seeking answers to five questions of detail concerning the rectification works.  Brodies sent a holding response at 15.23, noting “for information” that they had not received any folders the previous night.  The adjudicator replied, observing that if ACL considered themselves disadvantaged by this, now was the time to say so.  Brodies’ response was “We were disadvantaged last night given the timescales.  We are more disadvantaged today”.  At 16.52 Brodies reiterated their objection in principle to the material (1658 pages) sent by PM on Friday night being considered by the adjudicator, and indicated that their expert quantity surveyor, Mr Hickey, would not be able to respond meaningfully due to family commitments.  In response, the adjudicator explained that the purpose of the files was to demonstrate to him that costs claimed by BBP had been paid, and expressed the view that it was quite a simple cross check.  At 17.22, PM sent another lengthy email blaming ACL for any disadvantage suffered by it.  Brodies responded (17.29) that the adjudicator’s mind seemed already to be made up, that ACL could not properly make a submission, and that the process was unfair.  A series of mutually recriminatory emails from PM and Brodies followed which appear to have been largely ignored by the adjudicator (paragraph 407 of his Decision).  Instead, at 21.38 he noted that he still awaited ACL’s response to BBP’s categorisation of the rectification works, and indicated that he would not consider any communications received after 3 pm the following day.

 

[12] By email timed at 10.56 on Sunday 20 November, PM sent Brodies and the adjudicator a copy of a document containing the staff costs information that had been on the memory stick sent with the four folders but not sent to the dropbox on Friday.  At 11.34, the adjudicator observed:

 

“The Adjudicator confirms that the file of staff costs validates the staff costs claimed in the Referral, Folder 1 of 6.  The weekly charge is correct.  ACL can easily check this.”

 

Brodies replied that Mr Hickey was in Perth without access to a computer and that ACL could not therefore respond.  The adjudicator responded:

 

“I suggest that a highly qualified lawyer can look at the information on staff costs, and can see that this supports the amounts claimed by BBP for weekly costs, which are shown in Folder 1 of 6, Appendix 5, and so can your expert Mr McDonald.  Mr Hickey can do this in the morning if it cannot be done today.  Nonetheless I think my judgement can be trusted.  The costs in the above folders are supported by the staff costs.”

 

Brodies replied “Your response will be relied upon”.

 

[13] The focus of attention then shifted to ACL’s contra claim for rectification costs.  At 12.35, the adjudicator noted that he had not been provided with proof of payment of various subcontractors engaged by the main contractor, Chas Smith.  He stated that he would require to see a copy of the signed final account with each subcontractor, and verification of payment.  He observed “I appreciate this is Sunday, but this information should be provided as soon as possible”, and noted that he still awaited evidence of what ACL had paid to Chas Smith in respect of the rectification works.  At 13.32, Brodies sent a response by Mr Hickey (who appears after all to have been in contact) to one of the adjudicator’s questions regarding the Chas Smith account.  At 13.46 they provided a substantive response to the five questions in the adjudicator’s email sent on Saturday at 13.55, with a schedule attached detailing the subcontractor works and costs thereof.  At 15.15, the adjudicator summarised his three outstanding concerns “with 24 hours to go”.  These were (i) vouching of certain costs in the main contractor’s account; (ii) subcontractor vouching showing how and what was done and what had been paid; and (iii) ACL’s position on one matter (lifts) where the adjudicator considered that BBP’s comments had not been answered.  At 19.39 the adjudicator sought comment from ACL on a further matter.

 

[14] On Monday 21 November, being the date when his decision was to be issued, the adjudicator suggested at 07.56 that an extension of time to 5pm on Wednesday 23 November appeared sensible, to enable ACL to provide information in relation to the rectification works, and for BBP and himself to consider it.  At 09.38, Brodies sent a transcript from Chas Smith’s account , observing that “This demonstrates verification of payment for the subcontractors”, as requested in the adjudicator’s email at 12.35 the previous day.  At 10.38, PM offered to agree an extension of time to 5 pm on Tuesday 22 November, if the adjudicator still considered it to be required.  At 11.02, Brodies responded to the adjudicator’s email at 19.39 the previous evening but did not comment on the suggested extension of time.  At 11.19, PM confirmed BBP’s agreement to an extension to 5 pm on Wednesday.  The adjudicator, however, sent an email at 11.26 stating:

 

“I continue to be under bombardment.  The parties are not giving me enough time as requested.  If both sides do not agree to the extension I have requested [two days], by noon today, I will write to the Managing Directors of BBP and ACL to tell them I am resigning, and I will tell them why.

 

I have been more than tolerant in relation to the masses of submissions and emails that I have received.  I am not prepared to issue a Decision I am not completely comfortable with because I have not been given adequate time to complete my task.

 

Please provide me with the contact email addresses of the Managing Director of Arnold Clark Ltd and Mr Martin Bell.”

 

[15] At 11.28, Brodies noted that they had provided certification of sums paid by ACL to Chas Smith and queried the need to provide documentation at subcontractor level.  They reiterated their position that the request for such documentation was coming too late in the process and was not necessary.  At 12.50, PM sent another long email reminding the adjudicator of his duties and insisting, in absence of any agreement by ACL to an extension of time, that he issue his decision that day.  At 14.07, the adjudicator asked ACL to confirm whether they were making any further submissions in relation to the information he had requested to support the rectification costs and, if so, when he would receive them.  Brodies responded:

 

“We have relayed your request for further documents to our client but given the lack of adequate notice we cannot be sure if any further documents can be provided today.  You have the printout from Chas Smith’s system showing payments made to subcontractors.  Notwithstanding that this is irrelevant, that same level of evidence seems to have satisfied you in relation to BBP’s loss & expense claim.  Pending any further documents we consider that Arnold Clark have proved that they have paid Chas Smith for the rectification works.  We cannot see why you are insisting upon seeing subcontractor final accounts which our client has no entitlement to.”

 

At 14.31, the adjudicator explained that his timetabling concerns had been predicated upon ACL submitting vouching of costs claimed by Chas Smith and of amounts paid to subcontractors.  He sought confirmation that ACL had nothing else to submit, in which case his concerns would go away.  Brodies replied at 14.46, adhering to their position on additional vouching and expressing the view that the adjudicator’s decision would not be fair or enforceable.  It appears that no further information or submissions were provided by either party, and the adjudicator proceeded to complete and issue his decision.

  The Adjudicator’s Decision

 

[16] The adjudicator awarded BBP an aggregate sum of £1,010,323.08 against a claimed sum of £1,424,133.84, including a sum of £28,751.09 for loss and expense against a claimed sum of £289,491.42.  The loss and expense claim was dealt with at paragraphs 334 to 352 of the adjudicator’s decision and the arithmetic is set out in Appendix II to the Decision.  The sum awarded consists largely of the salary costs of four members of staff.  In relation to the vouching of these costs, the adjudicator observed (paragraph 352):

 

“In relation to the charges for Mr [name] and Mr [name] they had submitted a weekly rate of their cost and this information I was able to validate from a computer stick provided to me on Friday 18 November 2016.  It was a very simple exercise to analyse BBP’s internal accounting systems to confirm that the weekly rates charged were perfectly valid.”

 

[17] The adjudicator rejected ACL’s claim for deduction of rectification costs.  His reasons are given at paragraphs 371 to 394 of the Decision.  At paragraph 371 the adjudicator noted:

 

“This particular matter was considered towards the end of this lengthy Adjudication process and it attracted not only a number of submissions during the early stages of the Adjudication but a flurry of further submissions right at the end, and two days before the issue of this Decision.  Nonetheless, I have been able to give the whole issue my detailed consideration…”

 

At paragraph 388, the adjudicator remarked:

 

“The rectification costs were included within a final account agreed between Chas Smith and ACL.  It struck me that the whole process had been well managed and controlled.  My main issue was that the schedule of works did not have any build up to costs nor any vouching of payment to the various subcontractors engaged by Chas Smith.  One day prior to my Decision, I requested this information which was not provided for reasons best known to ACL.”

 

The adjudicator then set out some detailed criticisms of certain of the items claimed.  In many (but not all) cases the criticism was that the claim had not been substantiated.  That this was the main reason for rejection of ACL’s contra-charge was confirmed at paragraph 394:

 

“However the fundamental issue here is that ACL did not provide the basic information to substantiate the costs claimed.  As to why there was resistance to this towards the end of this Adjudication, I do not know.  In my opinion BBP were required by me to substantiate costs which they did and I as Adjudicator need to be consistent.  I therefore do not propose to deduct the rectification costs from any sums due to BBP.”

Argument for the Defender

 

[18] On behalf of ACL it was submitted that the adjudicator had acted in breach of natural justice in reaching his decision in relation to BBP’s loss and expense claim and ACL’s contra-charge defence.  It was well established that the rules of natural justice applied to the adjudication process.  Each party to the dispute had to be given a fair opportunity to present its case.  That included a reasonable opportunity to consider and respond to material produced by the other party. 

 

[19] With regard to the loss and expense claim, the adjudicator had failed to afford ACL any meaningful opportunity to present a response to the information supplied by BBP at the very end of the process.  There had been no good reason for BBP not to produce this material much earlier: the adjudicator had asked for it as early as 12 October.  ACL did not get access to it until the day (a Sunday) before the adjudicator was due to issue his decision.

 

[20] In respect of ACL’s contra-charge, the adjudicator had failed to address it in any proper fashion.  He had, for no apparent reason, left his request for additional vouching until the day before his decision was to be issued, by which time he was aware that he did not have a proper opportunity to consider any material produced in response to his request.  ACL had earlier provided vouching and, given the adjudicator’s silence on this point, had no reason to think that it should be providing anything else.  The adjudicator’s approach was indicative of his having failed to give due consideration to material that he already had, and of his being unable to deal with matters to a sensible timescale.

 

Argument for the Pursuer

 

[21] On behalf of BBP it was submitted that there was no unfairness in the adjudicator’s treatment of either issue.  Adjudication was a speedy method of resolution of construction disputes on a provisional basis.  The provision of material at a late stage by a party was not of itself a breach of natural justice.  In the case of a defence, it was sufficient for the adjudicator to consider its substance rather than every aspect of the evidence.  Allegations of breach of natural justice should be examined critically by the court to avoid undermining the purpose of adjudication.  Any breach had to be substantial and relevant.

 

[22] As regards the loss and expense claim, ACL had sought to contrive a situation in which it could complain that it had been unfairly treated.  ACL delayed in responding to PM’s proposal of a visit to BBP’s premises, which would have been entirely proper.  The suggestion of bias was unfounded and mischievous.  Brodies delayed in advising the adjudicator and PM that the couriered material had not been received.  They had been made aware on Friday evening that the adjudicator was looking only at staff costs.  No reason had been advanced as to why ACL could not comment on this material on 20 or 21 November, or why it did not in fact comment.  ACL did not accede to the adjudicator’s request for a 2 day extension of time.  In any event it had not been demonstrated that any unfairness to BBP resulted in substantial prejudice.

 

[23] In respect of ACL’s contra-charge, the question was whether the adjudicator was satisfied, in the face of ACL’s failure to agree an extension of time, that he could do broad justice between the parties without infringing the rules of natural justice.  It was plain that he was indeed satisfied: he had taken the view that an extension was unnecessary because of the limited information supplied by ACL.  There had been no obligation on the adjudicator to make the request that he did on Sunday 20 November.  He would have been entitled to make his decision on the basis of the parties’ submissions.  ACL’s challenge was in effect an attempt to attack the decision on its merits.

Adjudication and the Rules of Natural Justice

 

[24] The law regarding the application of the rules of natural justice to adjudication proceedings was not in dispute.  It is well established that although adjudication has features which distinguish it from both litigation and arbitration, the procedure adopted by an adjudicator must be compliant with the principles of natural justice.  The application of those principles to adjudication was described in nine propositions set out at paragraph 20 of the opinion of Lord Drummond Young in Costain Ltd v Strathclyde Builders Ltd 2004 SLT 102.  The following are especially relevant to the circumstances of the present case:

 

“1. The general principle, stated in cases such as Inland Revenue v Barrs [1961 SC (HL) 22], is that each party must be given a fair opportunity to present its case.  That is the overriding principle, and everything else is subservient to it.

 

  1. Subject to that overriding principle, together with any express provisions in the parties’ contract, procedure is entirely under the control of the adjudicator.

 

  1. In considering what is fair, it is important to bear in mind that adjudications are conducted according to strict time limits; consequently the time that is given to a party to comment on any particular matter may be severely restricted to ensure that overall time limits are met. …

 

  1. …  If the contentions of either party contain material that is not touched upon in the contentions of the other party, it may be desirable to ensure that that other party is given an opportunity, however short, to comment on the additional material.”

 

These propositions emphasise that it is a feature of adjudication that the restricted period available to the adjudicator for production of a decision may result in very short times being given to parties to respond to requests for information or to documents produced or submissions made by the other side.

 

[25] In The Dorchester Hotel Ltd v Vivid Interiors Ltd [2009] EWHC 70 (TCC), Coulson J observed (paragraph 20):

 

“…  A Court has to approach an alleged breach of the rules of natural justice in an adjudication with a certain amount of scepticism.  The concepts of natural justice which are so familiar to lawyers are not always easy to reconcile with the swift and summary nature of the adjudication process; and in the event of a clash between the two, the starting point must be to give priority to the rough and ready adjudication process.”

 

I regard that observation as affording helpful guidance, but I also bear in mind two further considerations, namely (i) that although adjudications may be reopened at the conclusion of the contract by arbitration or litigation, they generally are not, so the possibility of reopening does not constitute a justification for diluting the application of the rules of natural justice (Costain Ltd at paragraph 21);  and (ii) that the question for the court is not whether actual injustice has been demonstrated but rather whether an opportunity arose for injustice to be done (Costain Ltd at paragraph 23, under reference to Barrs v British Wool Marketing Board 1957 SC 72 at 82).

 

Decision

[26] In my opinion neither of the matters complained of by the defender constituted a breach of the rules of natural justice.  I address each in turn.

 

BBP’s loss and expense claim

 

[27] This was a complex adjudication in which the adjudicator required to consider and give his decision on a number of issues.  Three extensions of time were agreed, and it is not suggested by either party that the adjudicator was not doing his best to complete the task given to him within the restricted period allowed.  It is obvious that some matters will inevitably have to be left to be dealt with close to the deadline for the issuing of the decision, and it is unsurprising that adequacy of vouching may be the last to be dealt with, after decisions on the merits of a claim have been taken.  In the present case, the adjudicator had two matters still to address with a week to go, one of which was the loss and expense claim.  At that stage, BBP’s offer to address the adjudicator’s concerns by means of a visit to their premises to inspect the vouching had been on the table for some time, awaiting his attention.  I see no good reason why BBP should have taken any alternative action during that period.  When the adjudicator indicated his wish to take up that offer, with representatives of ACL in attendance, objection was received from ACL.  It is now accepted on behalf of ACL that the course of action proposed by the adjudicator was within the powers conferred upon him by paragraph 13 of the Scheme, and, contrary to the position adopted by ACL in email correspondence, that an accompanied visit to BBP’s premises was not of itself unfair or a demonstration of bias.  In my view ACL’s refusal to participate in such a visit, thereby preventing it from taking place, was unreasonable and a major contributory factor to the matter of vouching having to be addressed by all concerned during the weekend prior to the deadline for the adjudicator’s decision. 

 

[28] The delayed receipt by Brodies of the material prepared by PM in lieu of a visit was unfortunate but did not, in my view, create either actual injustice or an opportunity for injustice to arise.  The critical point is that parties were informed by the adjudicator’s email at 21.01 on Friday 18 November that unless he advised otherwise, he only intended to look at staff costs.  As the adjudicator pointed out, that was a modest exercise consisting of checking sums claimed as loss and expense by BBP against staff salary records.  ACL and their advisers were accordingly made aware, prior to receipt of the four folders of vouching material, that only a very limited task had to be undertaken.  Nor was it a task requiring expert QS input.  In my opinion the time afforded to ACL to comment on the relevant material after its receipt in electronic form at 10.56 on Sunday 20 November was adequate for what the adjudicator reasonably described as an easy process.  ACL and their advisers chose neither to engage in that process nor to respond to the adjudicator’s suggestion of a further extension of time, and cannot now complain of unfairness.

 

ACL’s contra-charge for rectification works

 

[29] ACL’s rectification works contra-charge claim was the other issue left by the adjudicator to be addressed and determined towards the end of the adjudication period.  Again he adopted the reasonable approach of dealing with the merits of the various aspects of the claim before turning to satisfy himself that the expenditure had been adequately vouched.  He started work on this section of his decision on Monday 14 November, and listed principles, method of valuation, and interrogation of alleged defects as issues to discuss during a telephone call at 17.00.  On several occasions between Wednesday 16 and Friday 18 November the adjudicator noted that he had not received a response from ACL to criticisms of its claim submitted by BBP.  By Saturday 19 November he had begun to turn his attention to vouching and was seeking substantiation of various items of the claim.  That process continued on Sunday 20 November when the adjudicator requested sight of the sub-contractors’ final accounts and proof of payment, and noted that he still had not seen proof of payment to the main contractor. 

 

[30] There was, in my opinion, no obligation incumbent upon the adjudicator to request these documents.  It was the responsibility of ACL when submitting its claim for a contra-charge to include the necessary vouching, and it would not in my view have been a breach of natural justice for the adjudicator to refuse to allow the contra-charge on the ground that it was inadequately vouched without affording an opportunity to provide further proof.  As it was, he allowed ACL a short time to produce the substantiation that he regarded as necessary.  He also, early on the morning of 21 November, suggested once again to parties that it would be sensible to agree a further short extension of time, inter alia to allow ACL to provide the information requested.  In response, Brodies provided a transcript from the contractor’s account which, they considered, provided the substantiation required.  Their position by the afternoon of 21 November was that further vouching was unnecessary.  Although they also expressed the view that the request regarding subcontractor payments had come too late, they did not respond to the adjudicator’s suggestion of a two-day extension of time.  In these circumstances, it seems to me that there is force in the pursuer’s criticism that the defence is in substance an attack on the merits of the decision, in respect that the defender disagreed with the adjudicator as to whether adequate vouching of payments to sub-contractors had been supplied.  That is not a matter which is reviewable by this court, and it does not amount to a breach of the rules of natural justice.  In so far as the defender’s complaint on 21 November was based to any extent upon lack of adequate time to respond, it is not persuasive to maintain that position while at the same time failing to respond to the adjudicator’s suggestion of a short extension of time to which the other party had indicated a willingness to agree.

 

[31] I do not accept that the adjudicator is open to criticism for leaving this matter until the last minute and then, as counsel for the defender put it, holding the parties hostage to rolling extensions of time.  Something had to be done last and, given the size of the adjudicator’s task, it was highly likely that if the matter left to last gave rise to questions, they would have to be addressed within a very short time.  In the event ACL was able to respond, and its complaint, in substance, was that the adjudicator ought to have been satisfied by the response.  His decision to proceed to deal with, and to reject, the claim on grounds inter alia of inadequate substantiation was not therefore, in my view, a breach of the rules of natural justice.

 

Severability

[32] The pursuer had a fall back argument, presented on the hypothesis that the adjudicator was held to have breached the principles of natural justice in one or both of the ways complained of by the defender, that the vitiated part of his decision could be severed and decree granted for payment of the balance.  On the view that I have taken it is unnecessary to address this argument but I shall express my views briefly. 

 

[33] On behalf of the pursuer it was submitted that severance was competent and had, for example, been effected in Ardmore Construction Ltd v Taylor Woodrow Construction Ltd [2006]  CSOH 3, where the Lord Ordinary (Clarke) reduced ope exceptionis a part of the adjudicator’s decision dealing with the pursuer’s overtime claim.  In Cantillon Ltd v Urvasco Ltd [2008] EWHC 282 (TCC), Akenhead J had expressed the following view (para 63):

 

“… (c) If the decision properly addresses more than one dispute or difference, a successful jurisdictional challenge on that part of the decision which deals with one such dispute or difference will not undermine the validity and enforceability of that part of the decision which deals with the other(s).

 

(d) The same in logic must apply to the case where there is a non-compliance with the rules of natural justice which only affects the disposal of one dispute or difference…

 

(e) There is a proviso to (c) and (d) above which is that, if the decision as drafted is simply not severable in practice, for instance on the wording, or if the breach of the rules of natural justice is so severe or all pervading that the remainder of the decision is tainted, the decision will not be enforced.

 

(f) In all cases where there is a decision on one dispute or difference, and the adjudicator acts, materially, in excess of jurisdiction or in in breach of the rules of natural justice, the decision will not be enforced by the Court.”

 

In the present case, the adjudicator had had to deal with several disputes.  It was possible to identify the breakdown of the sums awarded by the adjudicator.  The amount awarded for loss and expense was £28,751.09, and the disallowed claim for rectification works had been in the sum of £217,588.89.  It was possible to deduct either or both of these amounts from the sum sued for, and grant decree for the balance.

 

[34] The defender contended that in the circumstances of the present case, severance would be contrary to authority.  This was a single dispute leading to the award of a single sum.  It accordingly fell within Akenhead J’s subparagraph (f) in Cantillon (above).  The parties had contracted to be bound by the adjudicator’s determination of that dispute, not a part of his decision or his decision as rewritten by the court.  The adjudicator’s decision contained no discussion of the sum claimed in ACL’s contra-charge; nor was it clear how this issue could be severed from the rest of the decision as a matter of fact. 

 

[35] As Lord Hodge noted in Carillion Utility Services Ltd v SP Power Systems Ltd [2011] CSOH 139 (paragraph 39), the case law has set its face against allowing the severance of parts of a decision in one dispute.  The competency of severance does not appear to have been at issue in Ardmore Construction.  The present case is, in my view, a single dispute case, albeit there were a number of separate issues within the dispute that had to be determined by the adjudicator.  Had I been persuaded that either or both of the defender’s complaints amounted to a breach of the rules of natural justice, I would not have been minded to attempt to sever part of the decision as unenforceable and otherwise grant decree.  With regard to ACL’s contra-charge in particular, this would in effect have amounted to admitting the whole of the claim, in circumstances where it is far from clear that the adjudicator would have done so even if he had found it to be fully vouched.  To deduct either amount from the adjudicator’s award would, in my view, have been to re-write the decision which, according to the preponderance of authority, is not permissible.

 

Disposal

[36] In the absence of a relevant defence based on breach of natural justice, I shall sustain the pursuer’s pleas in law, repel the defender’s first, second and third pleas, and grant decree in terms of the first conclusion.