No: HT-2014-000099
[2015] EWHC 1306 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
7 Rolls Building
Fetter Lane
London
EC4A 1NL
Thursday, 15 January 2015
BEFORE:
HIS HONOUR JUDGE RAESIDE QC
(Sitting as a Deputy Judge of the High Court)
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BETWEEN:
RYDON MAINTENANCE LIMITED
Claimants
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AFFINITY SUTTON HOUSING LIMITED
Defendant
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JESSICA STEPHENS appeared on behalf of the Claimants
NIGEL JONES QC, MICHAEL WHEATER and BRENNA CONROY appeared on behalf of the Defendant
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Judgment
(As approved)
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Thursday, 15 January 2015
THE DEPUTY JUDGE:
1. This is an ex tempore oral judgment which will be in nine parts: 1. Introduction; 2. Application; 3. Responses; 4. Contract; 5. Procedural Facts; 6. Award; 7. Legal Approach; 8. Grounds 1 to 3; 9. Conclusions.
1. Introduction
2. This was a dispute between Rydon Maintenance Limited ("Rydon") and Affinity Sutton Housing Limited ("Affinity Sutton") in respect of a decision of an adjudicator which is being summarily enforced by Rydon against Affinity Sutton. The background in brief to this dispute is that Rydon were engaged by Affinity Sutton to provide works described as "maintenance and minor works to be carried out at Biggin Hill, Chislehurst, St Mary's Cray and St Paul's Cray” pursuant to a standard JCT Measured Term Contract 1998 (as revised) which was made under a deed of 5 October 2000.
3. The initial term was five years and that was extended by an ACA standard form Term Partnering Contract which amended the existing partnering arrangement. The works started in October 2000 and continued until 2012. By November 2011, it became apparent to Rydon that they had not invoiced fully all those claims they had against Affinity Sutton which were, in effect, under this form of contract, a cost plus a percentage of uplifts for overheads and profit.
2. Application
4. On 21 November 2014, a claim form was issued at the TCC in which Rydon claimed more than £300,000 against Affinity Sutton. That contained a statement of truth from Timothy Martin Shutler of the Rydon Group Limited, their head of legal, and had attached to it Particulars of Claim. The Particulars of Claim are settled by counsel for Rydon, Jessica Stephens, and was dated 21 November 2014. The relief sought was fourfold. Firstly, £1,857,006.29, secondly VAT in the sum of £371,401.26, interest from 24 October 2014 in the sum of £71,247.99 and the adjudicator's fees which had been paid by Rydon in the sum of £68,250. It is apparent from the terms of those Particulars of Claim that a dispute is set out, the contractual terms which gave rise to an express right to an adjudication under certain rules, the adjudication itself and the failure by Affinity Sutton to make payment as required by those rules, of a decision published by this adjudicator.
5. Also on 25 November 2014, an application notice was taken out in the TCC by Rydon against Affinity Sutton seeking this relief: an order (1) abridging time; and (2) for summary judgment to enforce an adjudicator's award. It was to be subject to a hearing for three hours. That also contained a truth statement from the same Mr Shutler. Attached were the usual directions for enforcement of an adjudication.
6. In support of that application there was a witness statement from Timothy Martin Shutler, dated 21 November 2014, in which he indicated a crystallised dispute, the refusal by Affinity Sutton to pay, background of the original proceedings and the jurisdictional challenge. Evidence was given of some of the adjudicator's directions and the history of the hearing to some extent and what was sought was enforcement of that decision.
7. Edward-Stuart J in the TCC made a standard order for the purpose of this application on 25 November 2014, in which, among other matters, he made provision for the service of the application form in the usual way, expedited effects of that under CPR 24.4 and a provision for a hearing on 15 January 2014 for 2½ hours, which could be varied at short notice to accommodate the listing requirements of the court. As a result of that order, a witness statement was settled by Sue Cooper, who is a director of property Services for Affinity Sutton and is dated 10 December 2014.
8. Somewhat unusually, the witness statement takes the approach of quoting at great length from various documents on which are relied by Affinity Sutton which, generally speaking, one is encouraged not to do as part of modern litigation. For my purposes, I have gone to the original documents and will refer to those as opposed to the quotations but in the context of this witness statement.
9. The document itself indicates that there are jurisdiction submissions, and those are set out. It refers to the availability of experts and sets out by long quotation some of those documents. It then refers to a meeting on Wednesday, which was a meeting in August 2014, which is set out by extensive quotations again. It then indicates details of the questions to the experts and the adjudicator's questions to those experts, again by largely long quotations and then makes reference to the closing submissions and the closing hearing, again by long quotations from the transcript. The document then refers to the final account, again by long quotation, and the decision set out in paragraph 116 is:
"It is clear from the decision that the adjudicator had not changed position from his original observations and had not in any meaningful way taken into account Affinity Sutton's Response or evidence.
117. This is demonstrated by the fact that the Adjudicator accepted Rydon's evidence in its Referral that the cause of the under invoicing was as a result of haphazard adjustments to the invoices by an employee who in fact did not work at Rydon for over half of the period when the alleged under invoicing took place. This issue was never addressed by Rydon and the adjudicator accepted that Kevan Burns was the cause of the problem despite the fact he was not employed by Rydon until 2007."
10. On that basis, she indicates in paragraph 118 for those reasons to which I have referred by summary only, it is her position that this Decision should not be enforced.
11. The skeleton arguments ordered by this court were provided by three counsel instructed by the defendants and I summarise the case they put. In doing so I read from pages 2 and 3 of their 22 page skeleton argument:
"There are three basic grounds they are as follows:
(a) The Adjudicator failed to follow the adjudication procedure agreed by the parties, in particular the parties' express written agreement that there be a written Reply followed by a meeting with the parties' legal teams and experts in attendance. Instead the Adjudicator adopted his own different procedure so as to determine the dispute. Whilst the Adjudication rules give the Adjudicator considerable flexibility in setting his own rules and procedure, his fundamental jurisdiction flows from the agreement of the parties and the rules do not permit departure from the parties' agreement. By acting as he did, the Adjudicator either: (i) acted outside the scope of his jurisdiction; or (ii) breached the rules of natural justice.
The Adjudicator acted in breach of the rules of natural justice by failing to conduct the adjudication in a fair and impartial manner and by giving the impression of apparent bias. In particular, the Adjudicator: (i) failed to give each party an equal and reasonable opportunity to present its case and to deal with its opponent's case; (ii) failed to ensure that each party was fully appraised of any arguments against it, and was given a reasonable opportunity to comment; and (iii) failed to adopt procedures appropriate to the case.
The Adjudicator had clearly reached a final conclusion as to the outcome of the adjudication prior to being in possession of all the relevant evidence and arguments. In doing so, the Adjudicator failed to make an objective determination of the issues that he was required to resolve, alternatively, he was guilty of apparent pre-determination."
12. The skeleton argument provided by the claimants based itself on a letter received on 24 October 2014 in which there were four particular matters which it was apparent from that letter that Affinity Sutton wishes to raise at this enforcement hearing. As it turned out, there are in fact three matters essentially in dispute which we have just set out and therefore much of the evidence provided in the skeleton argument was in fact not necessary. I make no complaint about this, but that was the best evidence that Miss Stephens had to which to respond to these disputes.
4. The Contract
13. This is a well-known JCT standard form measured term contract incorporating amendments 1/1999 and 2/2000, being the 1998 addition. It is clear from the Articles of Agreement that the employer is Bromley Housing Association Limited and the contractor is Rydon Property Maintenance Limited. The works, or recitals for those works, refer to maintenance and minor repair to be carried out in Biggin Hill, Chislehurst, Orpington, St Mary's Cray and St Paul's Cray. The agreement indicates in article 4 that there will be a planning supervisor involved. It also makes provision for resolution of disputes in the other articles. That is signed by those parties. There is no dispute in this case that the correct defendant is Affinity Sutton.
14. As I have indicated in the introduction, that then became subject to a separate ACA standard form contract, TPC 2000 amended in 2008, which contained express provisions. The provision for adjudication is contained in clause 14.4. It provides as follows:
"The procedures under clause 14.1, 14.2 and 14.3 are without prejudice to the rights of any Partnering Team member involved in a difference or dispute to refer it to adjudication, and any such reference shall be in accordance with the procedure referred to in Appendix 7 - Part 2."
15. Appendix 7, Part 2 is headed "Adjudication" and refers back to clause 14.4 of the partnering terms. Paragraph 1 reads as follows:
"The term the ‘Adjudicator' shall mean the individual named in or pursuant to the Term Partnering Agreement or (if no individual is so named) such individual as shall be appointed from time to time in accordance with the edition of the Model Adjudication Procedure published by the Construction Industry Council current at the date of the relevant notice of adjudication (the 'Model Adjudication Procedure')."
16. In this particular case, there was no named adjudicator and therefore the matter went in the usual way to the RICS who appointed an adjudicator in terms with matters I will deal with in due course.
17. I now come to the well-known model adjudication procedure, known as CIC/MAP 5 th Edition which, as a matter of fact, was the latest edition in existence. That 5 th Edition was published in 2011, which is the relevant date to when this dispute arose. I read from some of the well-known clauses which are express terms which bind both Rydon and Affinity Sutton.
18. Under the heading "General Principles", clause 1 provides:
"The object of an adjudication is to reach a fair, rapid, inexpensive decision upon a dispute arising under the Contract and this procedure shall be interpreted accordingly.
3. The Adjudicator may take the initiative in ascertaining the facts and the law. He may use his own knowledge and experience ..."
19. Under the heading "Application" paragraph 6 provides:
"If this procedure is incorporated into the contract by reference, the reference shall be deemed to be the edition current at the date of the Notice, unless expressly stated otherwise in the Contract."
20. Under the heading "Conduct of the Adjudication", I read from paragraphs 14 to paragraph 18 which are the key paragraphs relevant to this disputes between these two parties:
"14. The referring Party shall send to the Adjudicator within 7 days of the giving of the Notice (or as soon thereafter as the Adjudicator is appointed), and at the same time copy to the other Party, a statement of its case including a copy of the Notice, the Contract, details of the circumstances giving rise to the dispute, the reasons why it is entitled to the redress sought, and the evidence upon which it relies.
15. The date of referral shall be the date on which the Adjudicator receives the statement of case and he shall, as soon as practicable, notify the date to the Parties in writing.
16. The Adjudicator shall reach a decision within 28 days of the date of referral, or such longer period as is agreed between the Parties after the dispute has been referred. The Adjudicator may extend the period of 28 days by up to 14 days with the consent of the referring Party.
17. The Adjudicator shall have complete discretion as to how to conduct the adjudication, and shall establish the procedure and timetable, subject to any limitation there may be in the Contract or the Act. He shall not be required to observe any rule of evidence, procedure or otherwise, of any court or tribunal. Without prejudice to the generality of these powers he may:-
(1) request a written response, further argument or counter-argument;
(2) request the production of documents or the attendance of people whom he considers could assist;
(3) visit the site;
(4) meet and question the Parties and their representatives;
(5) meet the Parties separately;
(6) limit the length of time for submission of any statement, response or argument;
(7) proceed with the adjudication and reach a decision even if a Party fails to comply with the request or direction of the Adjudicator;
(8) issue such further directions as he considers appropriate.
18. The Parties shall comply with any request or direction of the Adjudicator in relation to the Adjudication."
21. Under the heading "Decision", paragraph 24 provides:
"The Adjudicator shall reach his decision within the time limits in paragraph 16 and issue the decision as soon as possible after that. He shall be required to give reasons unless both Parties agree at any time that she shall not be required to give reasons.
30. The Parties shall be jointly and severally liable for the Adjudicator's fees and expenses, including those of any legal technical adviser appointed under paragraph 19, but the Adjudicator may direct a Party to pay all or part of the fees and expenses. If he makes no such direction, the Parties shall pay them in equal shares. The Party requesting the adjudication shall be liable for the Adjudicator's fees and expenses if the adjudication does not proceed."
22. Under the heading "Definitions":
"'Act' means the Housing Grants Construction and Regeneration Act 1996, as amended by the Local Democracy, Economic Development and Construction Act 2009;
'Adjudicator' means the person named as such in the Contract or appointed in accordance with this procedure;
'Contract' means the contract between the Parties which contains the provision for adjudication.
'Party' means a party to the Contract, and any additional parties joined under paragraph 22 and 'referring Party' means the Party who gives notice under paragraph 8."
23. For the purposes of this ex tempore oral judgment, I will briefly expand slightly on how these sorts of rules may or may not apply to the dispute in hand. [Should a transcript be sought by the parties, I reserve in particular the right to amend this section –Perhaps delete this sentence following final consideration by the Judge? ].
24. In broad terms, it is clear from these well-known standard terms that, whilst the adjudicator must provide a fair decision (and that of course is important, that is the first word in the class of words which is the object of this exercise), it must also be a rapid and an inexpensive decision. Equally, it is obvious from these terms that there is a period of time set by clause 16 which is 28 days for which an adjudicator has to give his decision or as soon thereafter as he can. There is provision for the referring party to extend this time by 14 days, but that is all that is referred to in terms of the timing in this adjudication.
25. It is equally apparent from this particular set of rules that they are not a bifurcated system as one has in some other roles, namely a fast-track procedure and a long procedure for smaller or larger cases. This is a set of rules in which one case fits all. The parties therefore must have been taken to know that, whatever their dispute was, these rules would apply.
26. Equally, it is important to appreciate that the process by which the adjudicator exercises his express rights, and indeed obligations, includes the fact that he can take the initiative. Adjudications can and very often are, more of an interrogatory nature rather than the more standard procedure that we know well from the courts or some arbitrations. It is quite clear from the express provisions in clause 17, that these provisions do not provide for the usual court rules to apply as one knows them. When one compares and contrasts those two set of rules, it is apparent that this set of rules requires the provision of one set of pleadings from the referring party which have strict express conditions. Thereafter, what happens is largely a matter for the adjudicator to decide. This is not a set of rules which, like the High Court, has a set of pleadings, say a particulars of claim, a defence and reply; it is a set of rules which can be, and by experience if the adjudicator so considers very often are, proceeded in a very different way, provided, of course, they are fair.
27. Moreover, it is quite apparent from this set of agreements that this adjudicator specifically is allowed to meet one party separately. That cannot as such be a breach of natural justice. He can also give directions as he considers appropriate and the parties shall comply. It therefore follows that as this is a fast procedure, it can be (and very often is) entirely proper for an adjudicator to give certain directions and then, if necessary, change his/her mind to achieve the object. Again that object must be rapid, inexpensive but also, of course, fair.
28. That said, there are maybe two bases on which such a set of rules could be changed during the course of the reference. I do not limit the class in this way but two appear to be obvious. Firstly, one could, under the general rules of all contracts, including dispute resolution procedures, apply the well-known dicta or seminal dicta of Lord Hoffmann in Investors Compensation Scheme Ltd v West Bromwich Building Society (No. 1) [1998] 1 WLR 896 and, as expanded in Attorney General of Belize v Belize Telecom Ltd [2009] 1 WLR 1988 also from the same judge. If one were to do that, one would look at the express terms and ask oneself the question whether there could be some implication of a term beyond those express terms and, if one came to that view, one would add those to the set of rules.
29. Conversely, implied terms cannot of course go behind or re-write the rules and that is apparent from the decision in Belize, which now generally is accepted as the appropriate way to look at implied terms. Secondly, it is possible as part of an implied term that a rule of law, in other words, there was a case that binds this court relevant to these set of rules. None has been cited to me and I am not aware of any and therefore, for present purposes, one can put that to one side.
30. The second way by which these rules could be changed is if the parties wished to vary, during the course of the reference, the rules they had agreed in their contract. It seems to me that that is a very different set of affairs and, if one in fact found evidence of a variation, one would expect something which is clear enough, in other words, a contract between the two parties (as defined with a capital “P”) which was notified to the adjudicator in such a way that he could and should objectively speaking appreciate that these rules had been varied. If that were the case, that would give him the opportunity to either accept the variation or reject it. By way of example, if the parties wish to vary the rules to say that the 28 day period should now be three or four months, the adjudicator may say, “I fixed the period of time in my diary to discharge my duties. I do not have that time. I am a busy man (or woman)”, and so on. That sort of variation strikes me as very different from what would be implied into the contract at the date of this contract in 2000.
31. In looking at what happened during this adjudication, I am going, in broad terms, to apply those approaches.
5. Procedural Facts
32. On 28 July 2014 notice of intention to refer an adjudication was issued by Rydon to Affinity Sutton in respect of a final account. It refers to clause 14.4 in appendix 7 to which I have just referred in those rules. The relief sought was (1) a decision that the value of the final account is £1,857,006.29 or such other sum as the adjudicator finds; (2) VAT; (3) £71,401.26, a decision that Rydon is entitled to interest, £71,247.99, directions as to payment of those sums and (4) a decision as to fees and expenses of the adjudicator. As such, in my judgment, that is a perfectly proper notice. It complies entirely with the rules to which I have just referred.
33. Equally, in accordance with those rules, this adjudicator who was appointed, Mr Anthony Bingham of 3 Paper Buildings, Temple, a barrister and arbitrator, was notified to the parties of the result of his appointment by the RICS. In accordance with the rules that bound those parties, Rydon provided a referral notice which was the usual length and had quite extensive attachments. The referral notice refers to the introduction and the context of referral. As far as that is concerned, it is quite apparent from the face of those documents that on 24 January 2013 there was a report from Stone Turn (expert forensic accountants), and it further indicates that on 20 June 2014, which is close to when this document was served, there was a further Stone Turn summary in a Stone Turn report. Details of the attachments go from page 1 to 1,133. In the usual way the document sets out the contract provisions. It sets out the dispute, the JCT terms, what it called the TPC terms, the factual background, the monthly and annual invoicing procedure, the under-invoicing discrepancy, the various calendar months from 2004 to 2011 and then the final account breakdown, and final account reference to claims made and then reference to VAT and the relief, which is exactly the same as sought in the previous Notice to which I have referred.
34. On 1 August 2014, the adjudicator issued his Adjudicator’s Notice No. 1. That first expressed the fact that he had been appointed as an adjudicator by the Royal Institute of Chartered Surveyors on Friday, 1 October 2014. Paragraph 3 confirmed that the adjudication rules were the CIC October 2011 edition. Those, of course, are the rules to which I have just referred in some detail. 4, it ordered that the referring party, who is Rydon in this case, was requested to serve the Referral on the adjudicator and the respondent, and that the date of receipt would begin the 28 day process. 5. The respondent was requested to serve its Response seven days after the Referral. 6. Without more, the remaining period for the adjudication would be 21 days thereafter, taking the decision to day 28. 7. If the parties were required to serve further replies (beyond a Referral and Response) and/or there was thought to be a need for a meeting with the adjudicator, the parties were to seek leave. If leave is given it would be on the basis that the adjudicator would still require his 21 days from the final reply or any meeting, whichever was the latter, for his award. He then enclosed his terms.
35. Looking briefly at the set of orders, it is perfectly clear to me that that is made entirely in accordance with the CIC October 2011 terms to which I have referred. The period is made clear. On this particular occasion he has required a Response in seven days and there was no provision, so far as this order is concerned, for a Reply or any further document, though such other documents are indicated as possibilities, as indeed was a meeting.
36. Correspondence passed from Affinity Sutton to the adjudicator on 1 October 2014 in which they indicated the timetable was tight in the light of (1) the jurisdiction submissions and (2) the nature of the dispute which was complex and involved lengthy forensic accounting reports and therefore they invited that, first of all, Rydon agree from the outset to extend the time to reach a decision by 14 days, that Affinity Sutton’s Response would be served 4pm 14 days after the referral. That was responded to on the same day by the adjudicator in which he indicated that the referral had been served at 5pm in his chambers, as it was suggested in the timetable above, given, “that the clock was ticking from today, and rather than Monday please keep the directions to serve the response by the close of business next Friday, 8 th .” That was responded to on 2 August in which a one day extension was sought by Affinity Sutton. The view of the adjudicator on 2 October was that he wanted to keep to the directions and that the seven days’ period for a Response is a standard marker. He said “no relief for weekends in adjudication”. The basis on which that one day was sought was indicated in the letter of 2 August by Affinity Sutton in which they said:
“Furthermore, and without prejudice to our general reservations, as our legal team will not have seen the Referral until Monday, whilst we acknowledge your direction for the Response to be filed within 7 days, we would request a very short extension permitting us to Respond by 4pm on Monday 11 August (an extension of 1 weekend or 1 working day).”
37. I have referred to the rules and the powers given to this adjudicator. So far as I am concerned, his response to that is entirely in accordance with the rules and I find no basis whatsoever for complaint at that stage.
38. On 4 August 2014, there were submissions made by Affinity Sutton as to the jurisdiction and the appointment of this adjudicator as requested. The result of that on 4 August later on that day, the adjudicator sent an email to the parties saying this:
“The adjudicator is now reading-in the two submissions. Meanwhile Affinity is pressing for revised Directions. Moreover, it appears that Rydon will be willing to accommodate this to some extent.
The adjudicator proposes Directions by Consent:
(1) The Reply to the Referral is to be served 15th August
(2) That date is the deemed day 7.
(3) The unilateral right to extend the 28 day timetable remains in the authority of Rydon
(4) A Reply to Response is open to Rydon and if elected for is to be served on 29th August
(5) That the Date for Decision (without more) becomes 29th August + 21 days = 19th September. If leave is given by the adjudicator for further rounds (rejoinder/surrejoinder) or meeting, the date for Decision becomes + 21 days thereafter.”
39. Pausing there and looking at what took place there, it seems to me the adjudicator has again acted entirely in accordance with the rules that bind him. He has invited the parties by consent to extend time. If they do so then he will accept that, but he is not, so far as I can see, doing anything other than suggesting that response is a possibility, and he is leaving it to the parties, with the result that the parties came to agreement and that gave rise to Adjudicator’s Notice No. 2. That order is as follows:
“Dialogue with the Adjudicator (via emails) has provided for a timetable by consent notwithstanding which rules apply and overtake the Adjudicator’s previous Directions:
(1) The Reply to Referral is to be served 15th August 2014
(2) That date is the deemed day 7
(3) The unilateral right to extend the 28 day timetable remains in the authority of Rydon
(4) A Reply to Response is open to Rydon and if elected for is to be served on 29th August 2014;
(5) That the date for Decision (without more) becomes 29th August 2014 + 21 days = 19th September 2014
(6) If leave is given by the adjudicator for further rounds (rejoinder or surrejoinder) or meeting, the date for Decision becomes + 21 days thereafter.”
40. Pausing there again, looking at that set of directions, in my judgment, that is entirely in accordance with the powers given to the adjudicator. He is therefore recording the parties’ agreement for a relatively short extension given to and for the benefit of Affinity Sutton, twice that what he originally indicated. He has indicated that a Reply is open to Rydon. There is no order for a Reply; it is a matter for them. On the face of this document at this moment in time, it looks as if there is a view for service of that document by 29 August 2014 and that will be the end of the process, that is to say at this stage it does not look as if the adjudicator had indicated a meeting with the parties, submissions from counsel or indeed anything more than two rounds of submissions with a possibility or open to be by way of election on the part of Rydon, a further round of pleadings. In other words, a document type dispute without a hearing. That again is entirely in accordance with the powers given to the adjudicator and is, in my judgment, an entirely proper thing to do.
41. There followed a document on 6 August from the adjudicator to the parties in which he indicated the jurisdictional challenges by lists. Various paragraphs are set out. I look in particular at paragraph 2(4) in which he indicated it would appear, he says nothing more than that, adjudicator to be (4) “whether the works are within one construction contract.” That was one of the jurisdiction matters that was raised by Affinity Sutton which, although referred to in the letter before this matter came before this court, in due course has not been followed. It is indicated in the response on 7 August that Affinity Sutton agreed with the list, save for that one matter to which I have just referred, i.e., what is called the jurisdiction dispute.
42. In this matter before me there is, in that sense, no jurisdictional dispute whatsoever and therefore I do not need to consider it. I do, however, look into the case, as I have to generally, how the adjudicator conducted himself as this case is put, very understandably, in the round.
43. On 7 August 2014, having reviewed those matters the adjudicator set out his what he called “preliminary indications” on those issues and he indicated answers (1) to (8). He also indicated that the notion that the works were an ‘ad hoc’ or an excluded category of works under the contract would be canvassed. There was no real possibility that the works would to that extent be treated as the same bargain and Affinity Sutton were to identify which works were in or out. He indicated that on a preliminary basis there were not two contracts. This was one contract and that is as far as that indication goes.
44. On 7 August, it is apparent that this adjudicator wished to continue the process and take a certain approach which, having referred to the rules, he is entirely entitled to do. He writes to the parties in this way:
“Please ask Mr Stern to reserve 20th & and 21th August. For my purposes I will ask Mr Stern to take me through his reports; show me by sample how he tackled the task. Does Mr Stern have documentation to hand at his London office or do we meet at Rydon’s premises? How are these arrangements for Affinity?”
45. Again looking at that, Mr Stern had filed, of course, what was now two reports, one report of which Affinity Sutton had had for some time, which they had to consider and by the date fixed, 17 August, and to respond to in the way they thought fit.
46. There followed further emails between the parties, also on 7 August in which the adjudicator said this:
“Would you please inquire with David Stern his availability over the coming weeks. It may well be that a meeting is appropriate for questions to be put by the adjudicator and Affinity.”
47. Certain dates were provided on another email of 7 August, as to Mr. Stern’s unavailability and the basis of that. On that same day, 7 August, the adjudicator writes:
“Please ask Mr Stern to reserve 20th & 21st August [or alternative dates]. For my purposes I will ask Mr Stern to take me through his reports; show me by sample how he tackled the task.”
48. Then he refers to that same matter to which I have just referred. So at this moment in time it strikes me this is again well within the rules to which I have quoted. He is deciding that it may assist if an expert, who is the expert who puts the case for Rydon, could meet him and show him certain documents and help him through that material. An absolutely standard procedure well within the express terms of these rules. Moreover, he also indicated that there may be matters on which Affinity Sutton would also wish to ask questions. Again, an entirely sensible thing to do at that moment in time.
49. I can detect at that moment in the procedure no direction, no order, just a proposal of how he could then proceed with this adjudication, having regard to the time limits under which he is bound.
50. Further correspondence passed on 12 August 2014 which is particularly relied upon by Affinity Sutton. First of all, on 12 August Affinity Sutton wrote to the adjudicator in this way:
“Thank you for your email this morning. We have considered your comments and maintain that the approach you have suggested will be unfairly and unnecessarily prejudicial to Affinity’s position and there is an alternative way forward...”
51. One of the bullet points, the second last says this:
“At present, you have directed that Rydon provides its Reply (presumably including any comments from Mr Stern) by 29 August 2014. Affinity has provided dates from w/c 15 September when both Mr Stern and Mr Kyte will be available. Holding a meeting in that period will permit (i) both parties to understand each other’s case (ii) Rydon to serve a reply and any further comments of Mr Stern, (iii) both experts and legal teams to attend and (iv) the parties to walk you through the expert issues together. This is plainly a more appropriate way of dealing with the expert issues.”
52. Pausing there for a moment, Mr Kyte is or became or no doubt was (from the evidence I have seen) the expert instructed by Affinity Sutton and, in due course, when I come to the pleadings served by Affinity Sutton, his report is apparent.
53. It therefore seems, having read that, they are the proposals made by Affinity Sutton, which do not accord and do not correctly actually set out what in fact Adjudicator’s Notice No. 2 provided, and the way they proposed the adjudication should go forward. It is therefore a suggestion. That is responded to by Rydon in this way:
“I refer to the exchange of emails earlier today concerning the experts meeting. To assist your consideration of this matter, I would confirm that Rydon would consent to the following:
1.That ASHL be permitted to provide an expert report by Mr Kyte with its Response;
2.That Rydon will respond to the same by way of Reply, including, if necessary, a response from Rydon’s expert;
3.That the meeting between yourself and the experts shall take place after service of the Reply on 29 August (or any further submissions that you direct be served by either party). Both parties’ experts and appropriate representatives should be present at such a meeting;
4.In the event that the timing of such a meeting necessitates an extension of time for you to reach your decision, Rydon will consent to such extension.”
54. I pause there, looking at those two documents, I am unable to find a binding contract made by the parties which is said to vary the terms expressly incorporated into a contract between these parties. At best, in my judgment, this is simply a consideration which Rydon say they would consent to. They are therefore asking the adjudicator, not accepting an offer and not varying the contract in the ways I have described, but they are simply inviting the adjudicator to agree a certain course. He can say yes or no. There are a set of rules the parties have agreed that do bind them. I have explained what they mean and therefore it is a matter for him to decide.
55. The view he took in due course is apparent from the following emails. He writes later on 12 August:
“Meeting to hear Mr Stern: the adjudicator notes the comments yesterday by both parties and availability. The date is now Directed for 20 August”
And gives the address in Fleet Street where that will take place and he asks the parties to reserve 21 August. Then he sets out certain other matters in that e-mail.
56. In my judgment, having read the parties’ views, it is well within the powers of this adjudicator to make that decision. It cannot be said to be unfair, in my judgment. It is a matter that he can form views about. He has powers to do that and that is the decision he makes. I therefore find no binding agreement as a matter of fact by the parties. I certainly find no variation of the terms of the express agreement they made and I find nothing at that stage which can be complained about as to how the adjudicator decided to go about what he has clear and broad powers to do, which is act fairly and within the time limits given.
57. As required, Affinity Sutton duly provided their response which is an extensive document of some 112 pages settled by Nigel Jones QC, Michael Wheater and Brenna Conroy. That is, of course, dated 15 August 2014. It indicates the key questions, administrative matters, background, the JCT and TPC terms, is Rydon entitled to claim for additional sums at all? To what works should the additional sums relate and do they arise out of the JCT/TPC contracts? If Rydon is entitled to claim additional sums, what does it have to prove in order to justify that claim? If Rydon is entitled to claim additional sums and able to prove the same, how much is due and owing, VAT, interest, adjudicator’s fees and expenses and further directions and reasons. It is quite apparent from that document that appendix E is a report from Kyte Associates which is the expert engaged by this party.
58. Looking at some examples without detailed analysis which is not required for these purposes, it is apparent that, as part of their case, and I now look at paragraph 237.4 by way of example, which indicates Kytes’ calculations that, if the job codes alone should not be claimed from Affinity Sutton, this would reduce Rydon’s claim by £543,899. It refers to Rydon’s historic over-charging. The conclusions drawn at paragraph 250 by example is:
“In any event, Affinity invites you to conclude that Rydon should not be entitled to recover (at the very least) for (i) those transactions that do not have a corresponding UID and which cannot therefore be verified as having been incurred at all, (ii) the inexplicable re-coded items and (iii) the sums relating to irrelevant job codes. If those two items alone are removed from Rydon’s claim, the alleged under-invoicing is extinguished and, as set out in section G above, results in a net sum due to Affinity of between £348,321 (net) or £563,151.44 (net).”
59. The conclusions are in paragraph 257 and 258 these:
“257. For the reasons set out above, Affinity invites you to conclude that it has overpaid for the Partnering Works and is entitled to be reimbursed either:
257.1 £1,502,376 plus VAT and interest; or
257.2 £563,151.44 plus VAT and interest.
258. Accordingly, Affinity is entitled to a decision that it be repaid by Rydon one whichever of the bases set out above, or in such other sum, as you find due.”
60. On the next day, 18 August 2014, the adjudicator wrote again to the parties in this way:
“Of the direction for a meeting on Wednesday 20th, the adjudicator acknowledged that Affinity’s email earlier today.
1.The Direction stands.
2. Affinity characterises the Direction as a ‘unilateral meeting’. It is not. Having Directed the meeting on 7th August for the 20 th , Rydon agrees. Affinity says it cannot attend because “our legal team is not available”. It objects to the meeting. It proposes a date 5 weeks hence. Rydon is welcome to attend.
3. The application of Affinity to Direct Mr Stern to ‘produce screenshots of each and every screen and every step of every demonstration shown to (the adjudicator) and should produce the same to Affinity within 24 hours of the meeting, together with the text accompanying and explaining each demonstration’ is refused.”
61. Pausing there, it seems to me that, as a result of these express terms, which specifically have a right to this adjudicator to meet the parties on their own, this adjudicator is entitled to do that. The basis on which he did that is apparent from the surrounding correspondence, which was that the matter would be recorded for the purposes of consideration by Affinity Sutton, but in terms of the process which the parties expressly agreed to as a way of dispute resolution under this contract, this is a matter which is well within the power and expressly given to this adjudicator and at this stage I can see no basis on which it could be complained as to the order he has made.
62. On 18 August, having now had the submissions from Affinity Sutton, the adjudicator wrote again to the parties in which he indicated some “observations”. He made quite clear these are not decisions. He said:
“1. The parties may well have proceeded on the basis of a partnership.
2. Affinity’s policy and focus is on annual costs, annual budgets. Rydon’s focus is on monthly invoices. Affinity seems to have been content not to interrogate the monthly invoices. If there is a mistake therein (up or down) or the policy is a mistake, the partners repair the error.
3. The budget/bonus machinery does not trump the sums properly payable (up or down) in the monthly invoices.
4. The likely correct focus in the adjudication is on the forensic inquiry of the invoices. It is for that reason that the adjudicator sees the value in taking the initiative. Hence the plea for the cooperation of the parties ...and the meeting on Wednesday. Affinity really ought to attend.”
63. Again, looking at that letter at that moment in time, he is inviting attendance by Affinity Sutton. He is not requiring it. He is quite entitled to have a meeting. He is making now observations no doubt having seen and read to some extent certainly the submissions made by Affinity Sutton and he is forming prima facie views as to how he looks at the matter. These are not final views. They are what adjudicators regularly do to assist the parties in the forward progress of this dispute. At that stage I find nothing the adjudicator is doing that is outside his powers or in breach of any rules of natural justice, such as there may be. Everything I have seen so far entirely accords with those matters.
64. On 18 August the adjudicator sent a memo in which he sends some detailed matters as to various procedural budget payments. It is quite obvious from that that he is now considering in some detail, the material he has been given and therefore is in a position to move this matter forward as he has a right to do. I also note from the previous letter I have referred to that he referred to the process which he has entirely a power to make as to how he is going to set about his business in terms of an interrogation of the monthly invoices. These set of rules very often do require and entirely allow for interrogation of matters in that way and this adjudicator can therefore take that route. As far as I am concerned, that is entirely within his grasp.
65. So far as the present document which I am reviewing, the focus of the parties’ attention he says is this:
“Whether Mr Stern’s forensic enquiry can be relied upon.”
66. It seems to me that could be a very proper focus and, if that is the focus on which he wishes to consider, no doubt he will allow the parties to consider other matters. I cannot see any reason why he would not do so. Having, therefore, as it is quite apparent to me by this stage, looked at the parties’ cases with some more detail and provided them with a memo to assist them with the way forward, he then comes to this view on 19 August 2014. He says:
“Instead of a Reply to Response I Direct a meeting to hear the final commentary on Friday 29th August. Venue 3 Paper Buildings time: 11.30.”
That, of course, is a reference to the address at which this adjudicator practises as a barrister and adjudicator and is the third direction he has made. It is true it is in the form of an email, not a formal document as direction one and two were made. Nothing turns on that whatsoever, in my judgment, and it is equally clear that he has now decided that the option, it was no order, but an option for reply, given not to Affinity Sutton but to Rydon, is something he considers is not necessary and therefore he wished to proceed in a different way. Again, going back to the rules to which I have referred, he has power to do that and, in my judgment, it cannot be said that he is acting either outside the rules or in breach of any rule of natural justice as applies to this process. If that is the way he wished to proceed with the matter, in my judgment, he is entirely entitled to do that.
67. Accordingly, the parties therefore knew from that moment on that is how he was going to conduct his business. They are required under these rules to comply with his directions and, therefore, Affinity Sutton knew very well what they had to do.
68. Equally, on 19 August 2014 he sent out this further email, the directions stand in paragraph 1. In paragraph 2, he refers to 8 August and 20 August and the legal team being unavailable. Number 3, “Having read the response, this matter is capable of determination by documents only, together with further questions from the adjudicator and the meeting tomorrow for clarification. The final commentary is an opportunity for counsel to close. No alternative date is proposed by Affinity. It is invited. Affinity and their legal team is again invited to attend tomorrow.”
69. Pausing there for a moment, this is a matter in which he has formed the view, as he is entirely entitled to on the set of rules that bind him, and indeed the parties have signed up to, that he wishes that this matter will be a determination on the documents. He wishes to go ahead to clarify matters through his questioning of this expert, which he is quite entitled to do, and he also makes clear that there will be a final opportunity for counsel to close. He does not, as I read this document, indicate that counsel for either party will entertain a cross-examination of experts. He is under no obligation to order that; if he decides he can proceed with this matter in this way, that is entirely within his right to do so and I find no breach of the rules that govern the parties, or any aspect of natural justice.
70. He then writes further on 19 August in this way. He indicates there will be a final commentary by counsel. It remains directed for 29 August and he does so in response to quite a long email provided to him debating these matters. He has therefore again made quite clear how he wishes to proceed with this process.
71. His review of the several emails to which I have not quoted in some detail but if needs be I can to make this judgment even longer, it is apparent by 21 August that this adjudicator considers that there have been allegations of him acting unfairly and/or being biased. He writes to Rydon to ask their views, as it will be apparent from some of the orders to which I have referred affected not just Affinity Sutton by also Rydon, for instance, the Reply which initially they had a right to and then he decided that that would not happen. He said this. He referred to a clip of letters both to which I have referred to and, if need be I refer to the rest, indicating whether Affinity, who indicated there would be unfairness and bias on their part, and asked whether the application was made out according to Rydon. They replied on 21 August 2014 that they did not consider that the application made out, in particular in paragraph 1 they said:
“ASHL has suffered no prejudice. It was invited to attend the meeting between yourself and Mr Stern, it has the benefit of both the written transcript and a video recording of the meeting, the meeting was a discussion of Mr Stern’s report and ASHL has the opportunity to ask further questions of Mr Stern that arise out of those recordings.”
72. As I have indicated, I am quite satisfied that this adjudicator can have that meeting. He can interrogate, he can ask questions of an expert to understand the case if he thinks that is a central issue. All of these matters are entirely within a standard procedure within an adjudication process under these particular rules, and indeed the appropriate rules of natural justice that apply.
73. Further correspondence then passed on 22 August after that meeting on 20 August and only by the adjudicator, Mr Stern and those for Rydon, indicating that he was making availability of dates for a final hearing. That is set out in two emails of 22 August. Then, as indicated, on 26 August, in accordance with what took place at that meeting, a list of questions is prepared by Affinity Sutton in which they seek answer to those questions from Mr Stern. They are served on the adjudicator and indeed Mr Stern.
74. As a result of that, a review is made as to whether that is what was expected. The response from Rydon is on 26 August in which they write to the adjudicator indicating:
“It is clear from reading this document that it goes beyond questions which they would reasonably have put to Mr Stern had they attended the meeting in person, specifically addressing questions to Rydon and also making general observations.”
75. In due course I shall look at that document but fore present purposes, had Affinity Sutton attended that meeting, in the way in which it was originally described by the adjudicator and which they were encouraged to attend, there would have been a process that the adjudicator, having undertaken what he understood was required for his purposes, could, as he indicated in his letter of May, have allowed Affinity Sutton respond as they thought appropriate. That would, of course, no doubt have been controlled by the adjudicator, in terms of what the process was. I have not so far read that as being a basis on which there would be detailed cross-examination of an expert. That is not how I have understood his proposal to proceed. It was an appreciation of the report, so it was more by way of an interrogatory rather than a full cross-examination. Had he sought that approach, which he could no doubt have done, no doubt he would have required, as was suggested, both experts would attend and be cross-examined in the normal way. This therefore would not or should not necessarily be a one-way process. For his purposes he thought that correct and, in my judgment, that is well within his powers. I see no breach of any natural justice at that stage.
76. On 27 August 2014, a further email was sent by the adjudicator to the parties to which the questions put yesterday by Affinity Sutton to Mr Stern and Rydon, upwards of 90 will be enough and these matters will be addressed by counsel at the closing submission on 4 September. Looking at the way he therefore indicated the party is able to prepare for that meeting, which has now gone back from 29 August to 4 September, the result of availability or otherwise of counsel for Rydon, to which there are two or three more emails to which I can refer, it is clear to me as to what the parties could reasonably expect the process to be. I will come to further emails in a moment to indicate what the parties could have envisaged from that process.
77. The particular emails as to convenience of counsel are on 21 and 22 August and which initially she was engaged on other matters and therefore could not attend. I have asked her questions about that. She makes clear that had she not attended somebody else would have attended and that was not a reason to change the date so far as she was concerned. So far as the approach of the adjudicator, the events turned out that in fact she did become available and therefore there was no need for what could have been a change of those dates. The meeting itself did take place on 4 September and I have been supplied with a transcript which I have now read through which amounts to 146 pages from which it is apparent that Mr Jones QC, counsel for Affinity Sutton, started his submissions on page 22 and went to page 118, and Miss Stephens went from 119 to 146. One gets an indication of the amount of time given to the parties, and it is quite clear to me that the lion’s share of the time was given to Mr Jones QC. Part of that, and before page 22, there was an exchange between the adjudicator and Mr Jones QC in which those several letters to which I have referred for which Rydon was asked whether there had been some unfairness, were discussed and one gets a certain sense of the tension that may have existed in the room at that start. These matters of course are unfortunate and in many respects it is better that they are blown up and one gets on with the hearing.
78. It appears to me that at the end of that exchange which counsel, Mr Jones QC for Affinity tells me is one of the more notable matters in his professional life of 40 years, no doubt the adjudicator did not find it either a very pleasant occasion, but that does not take away from what, as far as I read, when one reads it generally took place which is, as far as I can see, this adjudicator allowed the process he had explained to the parties to take place. He did at the end of that exchange, or during the course of that exchange, make it clear that whilst he thought there could be some bullying taking place, it was his view that he would not let a representative who may have been silly, take away from what he would do for the client. What I read from that is he has made it quite clear to the parties, and as far as I can see this is what he in fact did, to allow them to fairly put their case and to comply with the rules that bind him and the rules of natural justice and he will not be side-tracked by any apparent altercation between counsel and a tribunal.
79. As part of those submissions, which start in fact on page 18 (though the transcriber says page 19) from Mr Jones QC, he then starts to put his submissions. The adjudicator makes plain quite shortly thereafter that he will not get answers to Mr Stern. It is a matter for him. He must now address me on the points where he had concern and the 90 questions and asked him to make his submissions in the way that I have understood he had invited at the outset. The detail of how that was put is apparent from pages 19 to 21 which I could quote fully, but I am not going to for brevity, and therefore that matter was discussed in that way.
80. The matter came to lunchtime, in which case there was a short adjournment and Mr Jones QC returned after lunch to make certain submissions at 151. It was about 2.15 when submissions were made by Miss Stephens, counsel for Rydon. It is at that stage, as is apparent from the transcript, that she in fact handed over to the adjudicator answers to those 90 questions which she had in her possession. It is apparent to me from the notes of this meeting the adjudicator controlled the meeting in the way he thought fit, which was entirely within his powers as provided by these rules, and therefore the first opportunity she got to provide this document was when he asked her to make her submissions. I will look at that document in a moment. He then indicated how he proposed to set about that matter. I will not quote fully, but as needs be I can set out fully the interchange at page 119 to 121, in which the adjudicator’s approach to that was made clear. Further on, very shortly thereafter the adjudicator indicated that what he would wish to do in view of the process was to make that available to Affinity Sutton and give them a chance to respond. That is at page 123, where he says this:
“Okay, all right. I am going to let all this in and I am then going to invite Mr Jones to reply or Affinity rather, and I am going to suggest that perhaps he replies in … when did you get your questions? I’ve got the date here. My word, the 26 th . ‘Please find attached, questions for Rydon and Mr Stern.’ 26 th . Seven days. Good for you, well done. Seven days reply. Now, it may well be that when you reply, you will have the last word. And I will then also, I think, give you something in order of seven days ,maximum, to reply and close that out. All right. Content?
Mr Jones: Yes.”
81. So rather than deal with it in that way, what the adjudicator did and, in my judgment, he is quite entitled to do without any breach of the rules, or indeed in accordance with these rules, any breach of natural justice is permit responses from Affinity Sutton to that document which they had been provided during the course of the hearing so they could achieve that. Complaint is made, as I shall come to in due course, from Affinity Sutton that they should have had it beforehand and could therefore have dealt with it. But as far as I read the order and the way this process was to take place, it was a process in which counsel would make submissions and therefore where they made submissions during the course of the hearing or later as they found by means of a response to that document, they at least made the submissions and, as I shall come to in due course, so far as I can see, this adjudicator took that all into account. For fullness in due course should I need to do so, I will also quote from the material at page 138 of this notes.
82. I promised to and I will come briefly to the document handover at about 2.15 by counsel for Rydon, Miss Stephens in which, having looked through many of these questions, the view, without forming any final views but prima facie alone, it does look as if the 90-odd questions that were raised were not obviously on their face questions that would have been within the process had Affinity Sutton attended that meeting on 20 August 2014. It looks to me that this is quite a detailed examination of an expert as if this adjudicator had ordered cross-examination of experts through documents. It is a matter he could have ordered and normally when one orders that, one would have cross-examined both experts not one, but that was not the process as far as I appreciate that this adjudicator decided to go through; he is quite entitled to take that view, in my judgment. One or two of these questions do look as if they could have arisen at the meeting on 20 August, had Affinity Sutton attended, but by and large the document is read, to my eye, in a different way.
83. The response that was given and therefore took place after the meeting on 4 September 2014, was provided on 11 September 2014 in accordance with the direction made orally at that meeting. I do not have that recorded in writing, but of course the adjudicator is quite entitled to make directions in this form and did so. Therefore, one sees and can therefore review the response that Affinity Sutton had to each of those questions.
84. I take some examples. Take, for example, the question at 2.5, looking at the three responses, first the question of Affinity Sutton, then the response from Rydon and then the response from Affinity Sutton:
“2.5. What was the process (software and procedural) used for extracting the Mentor data?
The Mentor data was extracted by Anne Hall.
Affinity: it is clear from this response that Stone Turn has not investigated or indeed asked how the Mentor data was extracted by Rydon. As above, it is clear that there is no analysis of whether the Mentor data is accurate and Rydon has provided no evidence or proof that the data is accurate.”
85. I could read further from 2.7, 2.8 and 2.9 as maybe can do, but I now read from 2.10, the question:
“Does Mr Stern accept his analysis in his 2014 report was based primarily (for the period 2006 onwards) on a comparison of spreadsheets generated by Rydon’s Financial Controller with spreadsheets accompanied the original invoices?
No, comparison of ‘Financial Controller Spreadsheets’ with ‘Rydon Monthly Spreadsheets’ [and he gives a reference to a report and a table] Stone Turn’s work undertaken is set out in section 4 and appendices 4.1 to 4.5 [of his report].
Affinity: This is crucial. Stone Turn has not performed an audit of Rydon’s claim nor has it provided an independent assessment of Rydon’s claim. Stone Turn has merely revised the calculations prepared by Rydon.”
86. It therefore made clear, as at 11 September to this adjudicator what approach in that crucial question Stone Turn decided that they wished to make and therefore in due course these were matters when it came to an award that had to be considered. As far as I can see, having looked to some extent through these two documents, there is nothing in them I can see which indicates the process was procedurally unfair or indeed not in accordance with the rules or indeed the rules of natural justice as far as I can see. A perfectly adequate opportunity was given to Affinity Sutton to put their case, maybe not at the meeting but thereafter, and therefore in no way were they debarred from fairly allowing this adjudicator to come to a decision on those matters.
6. Adjudication Decision
87. This decision was published on 17 October 2014 in accordance with the timetable set. It is a document which comprises 62 pages and, to some extent, is quite analytical. I shall not refer to the analysis, although again I can, if necessary, because I have read it quite carefully. What is apparent though is that so far as the evidence of Mr Kyle, which is obvious from the award as I shall come to, this adjudicator did not find his approach acceptable. Briefly I read from page 37 to 39 of the decision in which he deals with Mr David Kyte:
“ASHL appointed Mr David Kyte as a quantity surveyor 18 months ago, but would not instruct him to do the same (or any) exercise in depth as Mr David Stern, nor even meet with Mr Stern. He did a preliminary view and in 2013 that’s all. No report was produced. It was only in the adjudication of 15 August 2014 that Mr David Kyte published a report. It runs to 100 pages. He still has not done the same exercise. Nevertheless he says (Report [paragraph 11]):
‘On the basis of the information submitted by Rydon to date, it is my opinion that no reasonably competent quantity surveyor or auditor could assess that any sums have in fact been undercharged by Rydon.’
He then lists the reasons:
A key reason appears to be: there is no explanation by Rydon (or Mr David Stern) of how the alleged errors arose.
No evidence of failure of key control procedures by Rydon: he says: ‘Put simply, if the key control procedures were correct, how could there be errors in the invoicing of the magnitude alleged in the claim?’
Mr Kyte also says: ‘In any event, if the lack of explanation was the only problem, it would still be extremely difficult to verify the accuracy of the accounting data and to justify that any additional sums are due.’
When reviewing Rydon data: ‘I have noticed significant and concerning inconsistencies in the data.’ (and lists 5 points) and says also that the cost allocation was not appropriate because of ‘filtering out’. And there is an anomaly in respect of a large number of subcontractor ‘invoices’, which are subcontractor statements of account.
Mr Kyte’s report develops these reasons. None of it helps to defeat the work of Mr David Stern. He goes on to recognise Mr Stern’s work as ‘nothing more than a review of calculations and data provided by Rydon’ (Page 29 [paragraph 57]). He is critical because there is an audit of the information in the Mentor records. Mr Kyte is missing the point. Rydon’s case is that they embarrassingly failed to raise invoices to match the Mentor records. Mr Kyte is very seriously handicapped by not travelling the same road or even talking, or meeting with Mr Stern.
The Adjudicator is plain, nothing that Mr Kyte says about the work done by Mr Stern defeats that forensic inquiry. And Mr Kyte has the good grace to meet the adjudicator’s question with complete frankness.
Adjudicator to Mr Kyte: ‘Are you saying you have been deprived of access to the basic forensic information and deprived of full access to base mentor data?
Mr David Kyte’s reply:’ Yes.’
ASHL was pressed time and time again by Rydon to carry out an inquiry. It is ASHL that has deprived Mr David Kyte of access to the data. Moreover, this is open-book contract. Nothing stood in the way of ASHL examining every part of the records.”
88. He then comes to the 90 questions which is a second part:
“On 26 August 2014, ASHL (via Counsel) served upwards of ‘90’ questions headed:
‘These questions and issues arise out of the meeting that took place on 20 August 2014.’ The questions are principally aimed at StoneTurn; however, some of the questions include issues that may properly/better be addressed by Mr Rydon.
On 04 September 2014, an in-depth reply was served by Rydon and Mr Stern.
On 11 September 2014, a Response (again in depth) was served by Rydon.
On 16 September 2014, a final comment by Rydon was made.”
89. He then indicates his observations, under the heading “Adjudicator’s observation”:
“ASHL has had every opportunity in more than 18 months to carry out an inquiry. It is an open-book system. There is nothing in these ‘90’ questions and answers and comments that avoid the soundness of Rydon’s position.”
90. It might be said that is somewhat superficial and short. It might be said that is not sufficient reasons, but I do not read in that anything as such to indicate that he has not considered or has not given fair consideration to the matters raised fairly in a perfectly proper procedure in my judgment by Affinity Sutton and come to a view.
7. Legal Approach
91. That starting case that one very often cites in these matters is the decision of Jackson LJ in Lanes Group Plc v Galliford Try Infrastructure Limited [2011] EWCA Civ 1617. Under section 6 of which there is a seven part judgment, the second issue is: Is the adjudication decision tainted by apparent bias? He sets out from paragraphs 44 through to 62 his response to that:
44. “In relation to this issue, it is helpful to begin by setting out the relevant legal principles. Bias has been succinctly defined as "an attitude of mind which prevents the judge from making an objective determination of the issues that he has to resolve". See In re Medicaments and Related Classes of Goods (No. 2) [2001] 1 WLR 700 at paragraph 37. Actual bias may arise from a variety of causes, such as a desire to decide a case one way or the other regardless of the legal merits.
45. Pre-determination is sometimes treated as a species of bias, though it is conceptually somewhat different. Pre-determination arises when a judge or other decision maker reaches a final conclusion before he or she is in possession of all the relevant evidence and arguments.
46. In practice findings of actual bias or actual pre-determination are rare, because of the difficulties of proof. Apparent bias or apparent pre-determination is a more common basis for attacking judicial or quasi-judicial decisions.
47. The leading authority in this area is Porter v McGill [2001] UKHL 67, [2002] 2 AC 357. This is the House of Lords' decision arising out of the well-known "Homes for Votes" saga in Westminster. Westminster City Council's Auditor certified that certain councillors had caused approximately 31 million pounds loss to the council by their wilful misconduct. The House of Lords held that the Auditor's decision was valid. Despite the fact that the Auditor had issued a press statement announcing his provisional findings in the course of his investigations, the House of Lords dismissed allegations of bias or apparent bias against the Auditor. In reaching this conclusion, the House of Lords modified the common law test for bias in the light of the Strasbourg jurisprudence on ECHR Article 6. At paragraph 88, Lord Hope noted that there was a close relationship between the concepts of independence and impartiality. He continued:
"In both cases the concept requires not only that the tribunal must be truly independent and free from actual bias, proof of which is likely to be very difficult, but also that it must not appear in the objective sense to lack these essential qualities."
48. Lord Hope formulated the test for apparent bias in these terms at paragraph 103:
"The question is whether the fair minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased."
49. In Gillies v Secretary of State for Work and Pensions [2006] UKHL [2006] 1 All ER 731, the House of Lords was considering an allegation of apparent bias in respect of a tribunal member. At paragraph 17 of his judgment Lord Hope provided the following elaboration of the "fair minded and informed observer" test. He said:
"The fair-minded and informed observer can be assumed to have access to all the facts that are capable of being known by members of the public generally, bearing in mind that it is the appearance that these facts give rise to that matters, not what is in the mind of the particular judge or tribunal member who is under scrutiny. It is to be assumed … that the observer is neither complacent nor unduly sensitive or suspicious when he examines the facts that he can look at. It is to be assumed too that he is able to distinguish between what is relevant and what is irrelevant, and that he is able when exercising his judgment to decide what weight should be given to the facts that are relevant."
50. The test of the fair minded observer is applied both in cases of apparent bias and in cases of apparent pre-determination. In the context of adjudication the "fair minded observer" test is applied where apparent bias or apparent pre-determination is alleged against an adjudicator: see Amec Capital Projects Ltd v White Friars City Estates Ltd [2004] EWCA Civ 1418, [2005] 1 All ER 723.
51. One complication in recent years is the elaboration of the "fair minded observer" test. In view of the authorities mentioned above, the fair minded observer must be assumed to know all relevant publicly available facts. He or she must be assumed to be neither complacent nor unduly sensitive or suspicious. He or she must be assumed to be fairly perspicacious, because he or she is able "to distinguish between what is relevant and what is irrelevant, and when exercising his judgment to decide what weight should be given to the facts that are relevant": see Gillies at paragraph 17.
52. There are conceptual difficulties in creating a fictional character, investing that character with an ever growing list of qualities and then speculating about how such a person would answer the question before the court. The obvious danger is that the judge will simply project onto that fictional character his or her personal opinions. Nevertheless, this approach is established by high authority. I must follow it and do my best to avoid the pitfall just mentioned.
53. Let me now turn to the facts of the present case. As Judge Waksman rightly observed, Mr Atkinson expressed his Preliminary View in the language of a concluded decision. He used phrases such as "I find" and "I hold".
54. On the other hand, the Preliminary View began with the following passage:
"NOTICE
The statement "I find", "I find and hold" and "Decision" and other similar statements are not and not intended to be decisions of the adjudicator but preliminary views and findings of fact preparatory to the decision.
The preliminary views and findings are a step in making the decision and I am not bound by them.
I do not commit myself to communicate nor issue amendments or further Preliminary Views and Findings of Fact."
55. Furthermore the e-mail under cover of which the Preliminary View was sent to the parties (the text of which is set out in Part 2 above) made it plain that the conclusions set out in the Preliminary View were provisional only.
56. There is nothing objectionable in a judge setting out his or her provisional view at an early stage of proceedings, so that the parties have an opportunity to correct any errors in the judge's thinking or to concentrate on matters which appear to be influencing the judge. Of course, it is unacceptable if the judge reaches a final decision before he is in possession of all relevant evidence and arguments which the parties wish to put before him. There is, however, a clear distinction between (a) reaching a final decision prematurely and (b) reaching a provisional view which is disclosed for the assistance of the parties.
57. In my view the fair minded observer, with all the admirable qualities identified above, would have no difficulty in deciding this case. He would characterise the Preliminary View as a provisional view, disclosed for the assistance of the parties, not as a final determination reached before Mr Atkinson had considered Lanes' submissions and evidence.
58. There was some debate as to the principles upon which this court should act in the present appeal. I accept that under Civil Procedure Rules, rule 52.11 this court is carrying out a review, rather than a re-hearing. But such a review comes quite close to a re-hearing for the reasons set out by May LJ in E I Dupont de Nemours & Co v S T Dupont [2003] EWCA Civ 1368, [2006] 1 WLR 2793 at paragraphs 94-96.
59. On the apparent bias issue I come to a different conclusion from the judge. In my view the adjudicator's decision was not tainted by apparent bias or apparent pre-determination. Therefore Mr Atkinson's award was and is enforceable.
60. I am re-inforced in this conclusion by the fact that we are dealing with an adjudication decision, not an arbitration award or a judicial decision. Adjudication is a rough and ready process carried out at great speed. Vast masses of submissions and evidence have to be assimilated by the adjudicator in a short space of time. The adjudicator will fashion his procedure in whatever way enables him to discharge his onerous duties most swiftly, effectively and fairly. See clause 5.5 of the ICE Adjudication Procedure and paragraph 13 of the Scheme. An adjudication decision is not final. It is only binding until such time as the parties have concluded their litigation or their arbitration or their settlement negotiations or some other form of ADR.
61. Because adjudication has all these features, courts are reluctant to strike down adjudication decisions for breach of natural justice or on similar grounds, unless the complainant's case is clearly made out: see the judgment of the Court of Appeal in Carillion Construction Ltd v Devonport Royal Dockyard Ltd [2005] EWCA Civ 1358, [2006] BLR 15 at paragraphs 52-53 and 84-87.
62. Let me now draw the threads together. For the reasons set out above, my answer to the question addressed in this part of the judgment is no.”
92. Of note, he cites a decision of Porter v McGill [2001] 2 AC 357 the well-known decision of Lord Hope, and also Gillies v Secretary of State for Work and Pensions [2006] 1 All ER 731, a further decision of Lord Hope. He also then refers to the decision of Amec Capital Project v White Friars City Estates [2005] 1 All ER 723 and he indicates the concept of the fictional character, which of course Lord Hope is famous for, not just in those judgments, but also his views in a slightly different area of law, that of the man on the Clapham Omnibus.
93. In paragraph 56 he indicates this:
“There is nothing objectionable in a judge setting out his or her provisional view at an early stage of proceedings, so that the parties have an opportunity to correct any errors in the judge's thinking or to concentrate on matters which appear to be influencing the judge. Of course, it is unacceptable if the judge reaches a final decision before he is in possession of all relevant evidence and arguments which the parties wish to put before him. There is, however, a clear distinction between (a) reaching a final decision prematurely and (b) reaching a provisional view which is disclosed for the assistance of the parties.”
94. He then at paragraph 61 cites from the Court of Appeal in Carillion Construction v Devonport Royal Dockyard [2005] EWCA Civ 1358, which of course is an appeal from him, unsuccessful, and paragraphs 52 to 53, 84 to 87. For the purpose of the time and this decision, the decision of Amec Capital Projects v White Friars to which he refers is of course a decision of Dyson LJ, who has himself very considerable experience in these matters, as does Jackson LJ. He cites in that decision again the Porter v McGill case in paragraph 11, and further comes to views as to how the parties deal with this. Again for the purpose of time, I shall not quote it all, but that is a decision referred to by Jackson LJ in the usual sections that one sees in that, many of which referred to the footnotes and skeleton argument from Affinity Sutton, quite rightly.
84. Then a further case he refers, Carillion Construction v Devonport Royal Dockyard, a decision of Chadwick LJ, which was a decision of the Master of the Rolls and Moore-Bick LJ, a single decision in a court of all matters, the usual paragraphs one quotes from are paragraphs 52 and 53, which I shall assume is written into this decision. Then paragraph 84, 85, 86 and 87:
“84. It will be apparent, from what we have said in giving our reasons for refusing permission to appeal, that we are in broad agreement with the propositions which the judge set out at paragraph 81 of his judgment and which we have ourselves set out at paragraph 53 in this judgment. Those propositions are indicative of the approach which courts should adopt when required to address a challenge to the decision of an adjudicator appointed under the 1996 Act. We are, perhaps, less confident than the judge that the decision in Buxton Building Contractors Limited v Governors of Durand Primary School [2004] 1 BLR 474 can be reconciled with the first of those propositions. We endorse that first proposition and, to the extent that Buxton is inconsistent with that proposition, the judge was right not to follow that decision.
85. The objective which underlies the Act and the statutory scheme requires the courts to respect and enforce the adjudicator's decision unless it is plain that the question which he has decided was not the question referred to him or the manner in which he has gone about his task is obviously unfair. It should be only in rare circumstances that the courts will interfere with the decision of an adjudicator. The courts should give no encouragement to the approach adopted by DML in the present case; which (contrary to DML's outline submissions, to which we have referred in paragraph 66 of this judgment) may, indeed, aptly be described as "simply scrabbling around to find some argument, however tenuous, to resist payment".
86. It is only too easy in a complex case for a party who is dissatisfied with the decision of an adjudicator to comb through the adjudicator's reasons and identify points upon which to present a challenge under the labels "excess of jurisdiction" or "breach of natural justice". It must be kept in mind that the majority of adjudicators are not chosen for their expertise as lawyers. Their skills are as likely (if not more likely) to lie in other disciplines. The task of the adjudicator is not to act as arbitrator or judge. The time constraints within which he is expected to operate are proof of that. The task of the adjudicator is to find an interim solution which meets the needs of the case. Parliament may be taken to have recognised that, in the absence of an interim solution, the contractor (or sub-contractor) or his sub-contractors will be driven into insolvency through a wrongful withholding of payments properly due. The statutory scheme provides a means of meeting the legitimate cash-flow requirements of contractors and their subcontractors. The need to have the "right" answer has been subordinated to the need to have an answer quickly. The scheme was not enacted in order to provide definitive answers to complex questions. Indeed, it may be open to doubt whether Parliament contemplated that disputes involving difficult questions of law would be referred to adjudication under the statutory scheme; or whether such disputes are suitable for adjudication under the scheme. We have every sympathy for an adjudicator faced with the need to reach a decision in a case like the present.
87. In short, in the overwhelming majority of cases, the proper course for the party who is unsuccessful in an adjudication under the scheme must be to pay the amount that he has been ordered to pay by the adjudicator. If he does not accept the adjudicator's decision as correct (whether on the facts or in law), he can take legal or arbitration proceedings in order to establish the true position. To seek to challenge the adjudicator's decision on the ground that he has exceeded his jurisdiction or breached the rules of natural justice (save in the plainest cases) is likely to lead to a substantial waste of time and expense – as, we suspect, the costs incurred in the present case will demonstrate only too clearly.”
95. Lastly, reference can of course be made to an example of which there are not that many, in which the Outer House of Court of Sessions, indeed Lord Clarke was the opinion in Ardmore Construction v Taylor Woodrow Construction [2006] CSOH 3, that there had been a breach of the rules of natural justice in that particular case. The key paragraph in the facts of that case are, in my judgment, very substantially different from those in this case, is paragraph 48:
“I would like to stress in conclusion that I very much hope this is a rare case peculiar to its facts. I need no persuasion that on the whole the court should be generally restrained to invitation to pick over in an adjudication decision and to analyse over-closely and critically their procedures.”
96. And he cites Carillion. Then he goes on:
“Nevertheless, elementary basis principles of natural justice had to be observed by adjudicators for reasons I have alluded to above. If they behave in reaching a decision in a manner which an objective basis involves the disregard for fair play, the consequences of which appear to have been substantial materially effect on the adjudicator’s decision, then the court should be prepared to intervene. The present case is, in my judgment, on the facts one such situation involves a clear and substantial breach of natural justice in relation to the matters which are termed the adjudicator’s decision.” (Emphasis added)
97. As a matter of record, having looked at both parties’ skeleton arguments, it is clear to me that as a matter of law the parties are not apart and indeed, when one reviews the very helpful skeleton argument of Mr Jones QC and his junior counsel, Michael Wheater and Brenna Conroy of 14 January 2015, one sees a perfectly proper review of the law and therefore those matters are such not in dispute, but I would have to apply them and I do.
9. Grounds 1 to 3
98. In the skeleton argument, there are extensions of those three grounds which I summarised at the start of this somewhat long judgment. Ground one is failing to follow the parties’ agreed procedure, at which reference is made to comparisons said to be made between the adjudications and arbitrations. How arbitrators have to meet the parties’ agreements. I made it perfectly clear so far as I am concerned as a matter of fact, I do not see any agreement made between the parties. There was a suggestion made which both parties were comfortable with. It is a matter for the adjudicator whether he wishes to follow them or not. He was not bound by them. I am quite satisfied there was no variation of the terms bound by these parties as suggested by counsel for Affinity Sutton. I am equally satisfied there would be no implied term to allow this sort of argument to get off the ground. I therefore reject it completely.
99. The second matter is the application of natural justice in which, having set out the principles of law which I have really briefly cited and could expand on considerably but do need to in view of the fact that counsel were common on the law, there are three separate headings: first, procedural irregularity; second, apparent predetermination; and thirdly, apparent bias for lack of impartiality.
100. Dealing again with those, it is said that the adjudicator’s disregard for the parties’ agreement as to the appropriate procedure to be adopted, I have dealt with that already. I do not consider that to be the case at all. He indicates that the speed of the adjudication is a necessary factor in order to achieve the policy objectives, he makes that concession. He is quite right to note that. The rules which bind them to which I have referred in some detail make that perfectly clear, but of course it must be fair.
101. Paragraph 53, he refers to the approach of the expert evidence as irregular and unnecessary to a situation where he held a unilateral discussion with Rydon’s experts, thereafter disentitled Affinity Sutton to any meaningful ability to respond. In my judgment, you may even refer to it as a unilateral meeting. I made it perfectly clear that in my view he has power to hold that meeting. By express terms of the agreement he did that. It was recorded and he gave the proper, in my judgment, fair opportunity to Affinity Sutton to respond in the way I have set out in my detailed analysis of the relevant facts.
102. It is then said in paragraph 55 that Affinity Sutton was plainly prejudiced in dealing with Rydon’s expert evidence at the final hearing because the adjudicator directed that Affinity Sutton should present its closing submissions without having received the answers to the questions. I do not accept that to be the case. I have gone through the detail of what in fact took place. In my judgment, this adjudicator is entitled to and did in fact allow Affinity Sutton to make responses thereafter. It is clear to me he took those into account in his decision and came to a view as he is entitled to do. I therefore do not find anything either in terms of the rules of natural justice to be a breach of the applicable rules which were agreed between the parties. In my judgment, what took place in this hearing did give Affinity Sutton a proper and fair chance to put their case and it was considered by this adjudicator.
103. Lastly, so far as (b) is concerned, the apparent predetermination of the matter, I have referred to most of those documents and could, if needs be, refer to one or two more in which those suggestions were made and I have reviewed those documents carefully, as carefully set out individually by, in particular, junior counsel for Affinity Sutton. Having reviewed those letters, I have not formed the view that this adjudicator has formed a predetermined judgment. What he has done is made at various stages to which I have referred to most of the material, comments on his provisional views to assist the parties in the process.
104. I do not find, despite the submissions made by counsel for Affinity Sutton, that this adjudicator came to a view before it was necessary to do so. I am quite satisfied that the submissions he decided to accept from counsel he did take into account. I am quite satisfied that the questions he received he considered. I am quite satisfied that he therefore gave procedurally the proper, and indeed entirely in accordance with these rules, opportunity to Affinity Sutton to put their case.
105. Lastly, so far as apparent bias or lack of impartiality is concerned, I have reviewed that, as one does, as a fair-minded observer, as Lord Hope so carefully sets it out and so accurately. I have reviewed the submissions made by counsel for Affinity Sutton as to the answer to the questions and how that process took place. I am satisfied that the process was entirely in accordance with the rules. It in no way breached any rules of natural justice as I have set them out on the legal authority and therefore I do not accept that ground either.
10. Conclusions
106. I can therefore deal with these conclusions relatively shortly and I therefore do so. As I may need to, I can expand on grounds one to three and the reasons I reject them by further reasons if required. My conclusions however are these:
(1) I am satisfied that all the material directions given by the adjudicator in this reference were within the express powers given by the CIC rules, by the express terms of those rules. There was no variation by the parties to those terms and there is no basis for implying a term into those express powers by which can be said the adjudicator failed to comply with either one, which would either (i) exclude his jurisdiction or (ii) show he acted in breach of the rules of natural justice. So far as this court is concerned, the argument on jurisdiction is misconceived. So far as the question of compliance with the rule of natural justice, I am quite satisfied that they were complied with so far as that first submission is concerned.
(2) In my judgment, there is no basis for assertion that the adjudicator has given the impression of apparent bias under the rules that bind him in this adjudication and/or the more general rules applicable to case law of apparent bias in either (i) giving both parties an equal and reasonable opportunity to present their case and deal with each other’s cases; (ii) that each party was fully appraised of the arguments against it and a reasonable opportunity to comment on the procedures to be adopted in this dispute.
(3) I am satisfied on the facts set out above, that the adjudicator did no more than comment on the dispute as the procedure progressed and he did not reach any final conclusions as to the outcome prior to the close of all material put before him in the details which I have set out above and I am satisfied, in my judgment, there was no apparent pre-determination on his part as to the decision that he had to make. I am satisfied that the award he made was made in the usual way and he simply did not accept the case for Affinity Sutton for the reasons he somewhat briefly set out in his award, though satisfactory, in my judgment.
(4) I place these particular conclusions in the context of both (a) the binding authority on me as to how courts of first instance go about when there is a challenge to or alleged challenge to the breach of natural justice; and (b) I also stepped back and looked at all three of these grounds in the round and together formed a view that I am quite satisfied overall that the general principles of natural justice have been complied with and therefore I grant the applications and reject the submissions made by counsel for Affinity Sutton.
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