(1) G PAICE (2) KIM SPRINGHALL v M J HARDING (T/A M J HARDING CONTRACTORS) (2015)

QBD (TCC) ( Coulson J ) 10/03/2015

DISPUTE RESOLUTION - ADMINISTRATION OF JUSTICE - CONSTRUCTION LAW

ADJUDICATION : BIAS : CONSTRUCTION DISPUTES : JURISDICTION : WAIVER

A fair-minded observer would conclude that an adjudicator had been biased where he had failed to disclose that one of the parties had telephoned his office two months earlier and spoken to his office manager at length about the dispute. Although he had not been a party to the phone call, he had actual knowledge about the content of the conversation.

The claimant property developers applied for an order to enforce an adjudication award against the defendant building contractor.

The claimants had entered into a contract with the defendant for the construction of two houses. A dispute arose and the contract was terminated. Two adjudication awards were made against the claimants in respect of interim payments. In a third adjudication it was decided that the claimants had to pay the full amount of the defendant's final account because they had not served a pay less notice in time. The claimants telephoned the office of the adjudicator who had dealt with the first two adjudications. They spoke to his office manager for about an hour and explained how disappointed they were with their previous advisors and asked some questions about procedure. The office manager informed the adjudicator about the call. Two months later the claimants began a fourth adjudication and the adjudicator who had dealt with the first two adjudications was appointed. In response to a request from the defendants, the adjudicator confirmed that he had had no contact with the claimants save in respect of the first two adjudications. The defendant unsuccessfully applied for an injunction restraining the fourth adjudication, but had obtained permission to appeal and the hearing was pending. The adjudicator held that the pay less notice regime did not apply and made an award against the defendant. The claimants sought to enforce that award. The defendants produced telephone records showing the claimants' call to the adjudicator. The adjudicator made a witness statement saying that the phone call had only been about procedure, criticising the defendant's case and stating that the court should enforce the award in favour of the claimants. The issues were whether (i) the adjudicator's failure to disclose the phone call would cause a fair-minded observer to conclude that there had been apparent bias; (ii) the defendant had waived his right to argue apparent bias because he had known about the phone call at the start of the fourth adjudication and had said nothing; (iii) the adjudicator had lacked jurisdiction because he had purported to decide something that had been decided in the third adjudication.

HELD: (1) The phone call should not have been permitted to take place because the adjudicator had already acted in two previous disputes. In any event, once the phone call had been permitted to proceed a detailed file note should have been made immediately afterwards. While some of the conversation had been about procedure, the bulk of the conversation had been about the claimants' unhappiness about the first and second adjudications. Those matters had then been relayed to the adjudicator. Fairness required that the existence of the conversation should have been disclosed when the adjudicator had been informed about his appointment. Although he had not been a party to the phone call, he had actual knowledge about the content of the conversation. Guidance produced by the Royal Institute of Chartered Surveyors on conflicts of interest made it clear that such an approach was not justified. The fact that the phone call took place two months before the adjudication made no difference; what mattered was not the timing, but the content of the conversation. An adjudicator should not engage in a unilateral conversation, Glencot Development & Design Co Ltd v Ben Barrett & Son (Contractors) Ltd [2001] B.L.R. 207 and Woods Hardwick Ltd v Chiltern Air Conditioning Ltd [2001] B.L.R. 23 applied. It was not a case of inadvertence; the adjudicator had chosen not to disclose the conversation. A fair-minded observer would consider that the unequivocal denial of the conversation in the adjudicator's response was a further factor to be taken into account, Director General of Fair Trading v Proprietary Association of Great Britain [2001] 1 W.L.R. 700 applied. The adjudicator's explanation made the possibility of bias more likely. A fair-minded observer would think that the adjudicator had been so concerned to see one side win that he had been at risk of losing all objectivity, Woods Hardwick Ltd applied. A fair-minded observer would conclude that the adjudicator had been biased. (2) Even if the defendant had known about the phone call when the fourth adjudication had started, he had not known the content and so had not known that a ground for a natural justice challenge had arisen, Farrelly (M&E) Building Services Ltd v Byrne Brothers (Formwork) Ltd [2013] EWHC 1186 (TCC), [2013] Bus. L.R. 1413 applied. (3) As permission had been granted by the Court of Appeal, the instant court was obliged to conclude that the defendant had reasonable prospects of arguing that there was a reasonably substantial overlap between the third and fourth adjudications, and that the adjudicator had therefore lacked jurisdiction.



Application refused

Related Proceedings:   Harding (t/a MJ Harding Contractors) v Paice [2014] EWHC 3824 (TCC), 157 Con. L.R. 98