Rankilor & Perco Engineering Service Ltd v Igoe (M) Ltd [2006] Adj.L.R. 01/27

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An adjudicator’s decision will only be unenforceable for a serious breach of the rules of natural justice in very exceptional cases.  An adjudicator who made a finding of fact on an issue raised by the parties, but which was a finding that neither party had contended for, was held not to have committed a serious breach of the rules of natural justice.

His Honour Judge Gilliland QC – Queen’s Bench Division, Salford District Registry, Technology and Construction Court

Background

Igoe appointed Perco as a sub-contractor to carry out some auger boring work.  The sub-contract was a fixed price contract and the agreed term, according to Igoe, for completing the work was 10 days.  Perco encountered difficulties carrying out the work.  Perco argued that this was as a result of unforeseen ground conditions, therefore it was not in breach of contract for taking longer than the 10 days envisaged and indeed, it was entitled to extra payment for dealing with those conditions.  For its part, Igoe considered that the difficulties encountered were matters that should have been taken into account when quoting for the work.

The dispute that arose over how much Perco was entitled to be paid for this work was referred by Igoe to adjudication.  Dr Rankilor, the adjudicator, essentially found in favour of Perco.  He held that the delays were the result of unforeseen ground conditions, therefore Perco was entitled to the extra payment claimed under the contract.

Igoe refused to comply with Dr Rankilor’s decision on the ground that Dr. Rankilor had reached his decision in breach of the rules of natural justice and therefore the decision was not binding.  In particular, Igoe argued that Dr Rankilor had made findings of fact and/or reached conclusions based upon his own expert assessment of a laboratory analysis which had been produced by Igoe when such findings and/or conclusions had not been contended for by either Igoe or Perco and when Igoe had had no opportunity to comment upon those findings or conclusions.

Two actions were before the court: the first was brought by the adjudicator, to recover one half of his referring fee from Igoe, and the other by Perco, to enforce Dr Rankilor’s decision against Igoe.

Decision

HHJ Gilliland QC noted that if Dr Rankilor’s decision were to be challenged then it would have to be shown by Igoe that: (i) a breach of the rules of natural justice had occurred; and (ii) that the breach was a serious breach or, to put it another way, that the adjudicator had gone about his task in a way that was obviously unfair.  In his view, it would only be in rare and exceptional circumstances that this test would be found to have been satisfied.

On the facts, the judge reached the conclusion that there had not been a serious breach of the rules of natural justice.  Although Dr Rankilor had made a finding of fact that the clay soil was exceptionally highly compact and dense, a finding for which neither Perco nor Igoe had contended, nevertheless the nature of the soil was a matter that had been raised.

HHJ Gilliland QC did not have to decide Dr Rankilor’s alternative submission, namely that, regardless of whether his decision was declared to be vitiated by a serious breach of the rules of natural justice, Dr Rankilor would still be entitled to payment of his fees pursuant to the terms of the adjudication contract that had been entered into.  Nevertheless, the judge commented that it would be “surprising” if an adjudicator were entitled to claim payment for producing what was in fact a worthless decision without even any temporary binding legal effect. 

Perco was entitled to summary enforcement of the adjudicator’s decision and Dr Rankilor was entitled to recover the half share of his fee from Igoe.

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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