Specialist Ceiling Contractors v ZVI Construction [2004] 4T-0006 1 Leeds 00.03.2004

This summary was provided by CMS Cameron McKenna LLP.

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An adjudicator that receives "without prejudice" correspondence will still be able to proceed with the adjudication if it he acts in an objectively unbiased manner.

Judge S P Grenfell, Technology and Construction Court

27 February 2004

Specialist Ceiling Services Northern ("SCSN") were engaged by ZVI Construction (UK) Limited ("ZVI") under a DOM/2 subcontract to carry out works at the Holiday Inn in Bradford.  Disputes arose involving variations, extensions of time, delay, and loss and expense. 

During attempted negotiations to reach a resolution, ZVI made a without prejudice offer to settle the account.  SCSN rejected this offer and commenced adjudication, claiming £400,000 from ZVI.  In the referral notice SCSN referred to ZVI having made a without prejudice offer although did not include the offer itself. 

ZVI counterclaimed for £120,000.  ZVI also invited the adjudicator to withdraw, arguing that the adjudicator's knowledge of the without prejudice offer made it impossible for him to be seen to be impartial.  ZVI sought to rely on the case of Berg v IML London Limited [2002], where the court held that the proper test in this context is whether the information the adjudicator had seen would lead a fair minded and informed observer to conclude that there was a real danger that the adjudication would be unfair.  ZVI argued that viewed objectively such a danger did exist because ZVI's prior offer to settle could conflict in the adjudicator's mind with ZVI's position in the adjudication that it was owed money.

The adjudicator decided not to withdraw.  He explained it is well established that parties to a dispute often discuss matters on a without prejudice basis and that a party may agree to make a payment simply on commercial grounds so as to get rid of the dispute.  The adjudicator went on to find in favour of SCSN, awarding them £200,000.  ZVI refused to pay and SCSN applied for summary judgment in the Leeds District Registry of the TCC.

HHJ Grenfell found that there was positive objective evidence that the adjudicator had approached the adjudication in an even-handed manner.  He had applied the correct test to determine whether or not there was any risk of bias and had then gone on to reach a decision, uninfluenced by such "without prejudice" material as he had seen.  As a result there was no objective indication of bias or unfairness; the defence had no real prospect of success and summary judgment was granted.

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-cmck.com/Construction/Construction-Disputes

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