Stepping Over the Line - A Tale of Alleged Misrepresentation, Wasted Time and Money

Clients often ask me, "How do we win in adjudication?" My response to such a question is always on a similar theme………………

Ø  Make sure that the dispute has actually crystallised

 

Ø  Make sure you have good representation

 

Ø  Prepare well by drafting the Referral Notice before you finalise the Notice of Adjudication  

 

Ø  Make sure you serve the Notice of Adjudication on your opponent before applying

to the correct Adjudicator Nominating Body (ANB) for the appointment of an adjudicator

 

Ø  Pray that the ANB appoints an adjudicator that knows what he or she is doing.

 

It is this last point that this article is concerned with. Can you influence which adjudicator the ANB will appoint?

 

The major adjudication panels take care to ensure that all their panel adjudicators are well trained, experienced, familiar with the latest legal developments and so on. With this criteria satisfied you would wonder why a party would want to try and steer an ANB to appoint a particular adjudicator or, more importantly, avoid appointing a particular adjudicator. But people are people and it is always tempting for a party to try and tip the odds in its favour and, if it can, seek an appointment of an adjudicator who is known to it and to try and stay away from adjudicators it might have had a negative result from in the past.

 

The RICS is the biggest and busiest ANB in the UK and on its application form appear a number of questions that an applicant is invited to answer. One of these questions says...Are there any adjudicators who would have a conflict of interest in this case?

 

It is no secret that party representatives have often answered this question in the past by listing adjudicators who they would wish to avoid, for whatever reason, regardless of whether the named adjudicators would have a conflict or not. They do this in the hope of improving the odds of securing a home win for their client.

 

All that is about to change as a result of a case called Eurocom Limited v Siemens Plc [2014] EWHC 3710 (TCC), which is likely to put a stop to this practice for all time. The judgement contains important guidance on the limits to which parties may go to in order to control the appointment of an adjudicator by an ANB.

 

Background

 

In 2011 Siemens acted as main contractor to install communication systems on the London Underground. Siemens engaged Eurocom as sub-contractor to install part of the works. In 2012 Siemens terminated Eurocoms employment and Eurocom referred the ensuing dispute to adjudication. The adjudicator, Mr Molloy, decided against Eurocom, but that is not the end of the story.

 

In 2013 Eurocom started a second adjudication. Eurocoms representative, Knowles, applied to the RICS for the nomination of an adjudicator.  The RICS application form contained the question Are there any adjudicators who would have a conflict of interest in this case?.  Knowles answered that question by naming a number of people, including the adjudicator from the first adjudication. Siemens did not see the application form and a new adjudicator, Mr Bingham, was appointed.

 

Mr Bingham decided against Siemens' and ordered it to pay Eurocom £1.6m. Siemens refused and Eurocom applied to the Technology and Construction Court for enforcement of Mr Bingham's decision. As part of its preparation to defend the enforcement proceedings, Siemens obtained a copy of Eurocoms application form to the RICS for the adjudicators nomination and became aware that Knowles had listed a number of adjudicators, including Mr Molloy, as being conflicted. Siemens contacted the list of "conflicted adjudicators" only to find that they were not in fact conflicted.

 

Siemens resisted enforcement of Mr Bingham's decision on a number of grounds, including that the adjudicator was invalidly appointed. Siemens argued that the information in the RICS application form amounted to a misrepresentation which went to the foundationof the adjudicators jurisdiction.

 

Eurocom denied this, arguing that an ANB does not make a substantive decision affecting the rights and liabilities of the parties. It said that the person who completed the form was answering the question Are there any adjudicators who would have a conflict of interest in this case?largely as a means of saying which adjudicators, based on past experience, he would not send a referral document to. This was in effect an adjudicator rejection list, which would save time and money that would otherwise be spent allowing notices of adjudication to lapse before re-applying for alternative adjudicators. As Eurocom pointed out, such adjudicator shoppingwas allowed following the 2011 case of Lanes Group plc v Galliford Try Infrastructure Limited which I have written about in previous articles.

 

The judgement

 

The court decided that there was a very strong prima facie case that the person who had completed the application form had deliberately or recklessly answered the question Are there any adjudicators who would have a conflict in this case?falsely. Therefore a fraudulent misrepresentation had been made to the RICS as the ANB.

 

The court concluded that without such a misrepresentation by Eurocom's representative, Mr Molloy would likely have been nominated again, based on the RICSs policy of nominating previous adjudicators to save time and costs. Additionally, other adjudicators were wrongly eliminated which improperly limitedthe pool of possible adjudicators to the dispute.

 

The court stated that, where a party makes a material fraudulent misrepresentation to an independent party which is exercising a discretion, the exercise of that discretion will be invalidated. Further, there is an implied term that a party applying for the nomination of an adjudicator should not act dishonestly. That includes not subverting the system of nomination by making a false misrepresentation. Such a misrepresentation would invalidate the process of the adjudicators appointment and make it a nullity. Accordingly the adjudicator did not have jurisdiction and the award was unenforceable.

 

Summary

 

When applying to an ANB for the appointment of an adjudicator, it is good practice to let the ANB know if a previous adjudicator has been appointed in an earlier dispute between the same parties on the same contract but, above all else, answer all the questions posed truthfully and don't be tempted to try and subvert the process.

 

A false misrepresentation made in the appointment process can result in the appointed adjudicator lacking jurisdiction, rendering any decision unenforceable and wasting substantial amounts of time and money.

Peter Vinden

Peter is an experienced professional in the construction industry with particular expertise in quantity surveying and the commercial management of contracting organisations. 

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