London & Amsterdam Properties Ltd v Waterman [2003] EWHC 3059

This summary was provided by CMS Cameron McKenna LLP.

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

An hourly rate is a sensible and reasonable yardstick for determining an adjudicator's fees.  If a dispute has crystallised on liability but details of quantum have not been provided then it can still be said that a dispute embracing both quantum and liability has arisen.  "Ambush" by way of the submission of late evidence may result in a breach of natural justice if the other party is not given an opportunity to comment on it.  An adjudicator should not proceed with a referral at all costs - if natural justice cannot be achieved then the adjudicator should abandon the referral. 

Waterman was engaged by LAP under a Deed of Appointment (the "Contract") as the structural and civil engineering consultants for the construction of a shopping centre in Milton Keynes.  A dispute arose between the parties and was referred to adjudication in accordance with the Scheme (as provided in the Contract).  The Referral Notice of 17 pages was served with over 1000 pages of supporting documents and an Adjudicator was appointed.  The Adjudicator provided that his fees would be calculated at an hourly rate and, as the Contract amended Part 7 of the Scheme to limit the Referral Notice and accompanying documents to 20 pages, the Adjudicator decided to receive only the first 20 pages of the Referral.  After Waterman issued a Response, LAP served a Reply containing late evidence and refused the Adjudicator's request for additional time within which to issue his decision.  The Adjudicator found in LAP's favour.

Waterman disputed LAP's application to enforce the award on a number of grounds, and in particular:

  • that the Referral was not in compliance with the Contract;
  • that no dispute had crystallised as at the time of the Referral; and
  • a breach of natural justice in that Waterman had been ambushed by LAP's late evidence. 

Waterman's first ground for challenging enforcement was on the grounds that the Adjudicator was appointed under different terms than provided in the Contract and therefore the Referral was invalid and the Adjudicator had no jurisdiction to determine the dispute.  However, the Court held that the Adjudicator's fee proposal was not at variance with paragraph 25 of the Scheme which provides that an adjudicator would be "entitled to the payment of such reasonable amount as he may determine by way of fees".  An hourly rate was, as a yardstick to ascertain final entitlement to the Adjudicator, both sensible and reasonable.  There was no suggestion that the rate or hours were unreasonable. 

With regard to the length of the Referral Notice, the Court held that the Adjudicator was right to find that the Referral Notice was excessive and did not comply with the contractual requirement of 20 pages.  The Judge found that the 17 page Referral Notice was a "synoptic summary" of the dispute and, as it sufficiently identified the disputes that existed, the Adjudicator was entitled to treat it as a compliant referral.

With regard to the "no dispute" issue: prior to the referral, LAP wrote to Waterman advising of its claim in somewhat broad terms, on liability and quantum, and invited Waterman to respond and/or request further particulars of the claim.  Waterman did just that and wrote a 44 page letter denying liability and requesting further documentation from LAP, largely in relation to quantum.  Waterman stated that they could not comment on the quantum of the claim until they received the information requested.  LAP provided some, but not all, of the information requested and, after further denial and a repeat request for outstanding documents by Waterman, referred the dispute to Adjudication.

The Court held that the definition of a "dispute" in Halki Shipping Corp v Sopex Oils Ltd [1998] i.e. which included any claim which the other party refused to admit or did not pay, applied with equal effect to adjudication and arbitration.  Further, Judge Wilcox found that, although the wider definition of "dispute" was not met on the quantum element of the claim, it had been met on the liability element and, as such, there was a dispute embracing both quantum and liability aspects and that the dispute was contained in the Referral. 

Waterman's claim of a breach of a natural justice did, however succeed: in its Reply, LAP submitted new evidence and documents which was available to them at the time of the Referral but chose not to rely on it.  Judge Wilcox found that the handling of the new evidence by the Adjudicator was "lame": instead of saying that he would keep Waterman's complaint in mind when considering the evidence, he should have considered whether there were in fact any grounds on which LAP should have been allowed to submit the late information. The Adjudicator made no consideration of whether Waterman had sufficient time to answer the late evidence.  The Judge acknowledged that mere ambush does not necessarily amount to procedural unfairness, however, here the submission of the late information meant that the Adjudicator made a decision on the basis of the evidence complained of and in the absence of expert evidence which Waterman did not have a fair opportunity to adduce.  As a result, there was a substantial and relevant breach of natural justice.  The Scheme did not require an adjudicator to deal with an adjudication at all costs - there will be instances that the referral cannot be dealt with fairly and impartially. 

Summary: An hourly rate is a sensible and reasonable yardstick for determining an adjudicator's fees.  If a dispute has crystallised on liability but details of quantum have not been provided then it can still be said that a dispute embracing both quantum and liability has arisen.  "Ambush" by way of the submission of late evidence may result in a breach of natural justice if the other party is not given an opportunity to comment on it.  An adjudicator should not proceed with a referral at all costs - if natural justice cannot be achieved then the adjudicator should abandon the referral. 

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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