Speymill Contracts v Eric Baskind [2010] EWCA Civ 120

This summary was provided by CMS Cameron McKenna LLP.

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

Summary

Where there is an arguable case that an adjudicator’s decision was procured through fraud, and that the fraud either was not or could not have been referred to during the adjudication, then the decision will not be enforceable.  However, there is a distinction between an adjudication taking place in which an allegation of fraud is made (and can be made), and where a fraud only comes to light after an adjudication has taken place.  In the latter case, fraud (or a strong allegation of fraud) could provide a basis for refusing to enforce an adjudicator’s decision.  In the former, it will not.

Court of Appeal

Facts

The respondent in the Court of Appeal (“Mr Baskind”) engaged the claimant (“Speymill”) to convert a country house hotel into Mr Baskind’s home.  Speymill was engaged on JCT 98 terms (Private With Quantities) that incorporated the JCT adjudication procedure (which is not used in the 2005 suite).  As the contract was for the construction or alteration of a dwelling, the Construction Act did not apply, but the parties “opted in” by using the JCT 98 form.  The architect issued fifteen payment certificates under the contract.  Mr Baskind paid the first eleven of these, part-paid the twelfth, and refused to make payment in respect of the remaining three certificates.  Speymill brought an adjudication in respect of (among other matters) these outstanding payments.  One of the issues in the adjudication was whether Mr Baskind had issued valid withholding notices against the payment certificates.  Mr Baskind said that he had, but was unable to produce those withholding notices.  This was because (Mr Baskind said) Speymill’s workers had stolen files from Mr Baskind’s office which included the withholding notices, and furthermore the Mr Baskind did not have electronic versions of the notices because a lightning strike and power surge had damaged his computer.  Speymill, for its part, denied ever having received any withholding notices.  The respective evidence and arguments as to the alleged theft and on whether withholding notices had been served were put to the adjudicator.  The adjudicator decided that he no power to deal with allegations which were of a criminal nature and restricted his deliberations to considering whether or not valid and effective withholding notices were issued by Mr Baskind.  He weighed up what evidence there was and decided there was insufficient evidence to show that any withholding notices had been issued.  Accordingly, he allowed Speymill’s claim and ordered Mr Baskind to pay the outstanding certificates in full  Speymill sought to enforce the adjudicator’s decision in court by seeking summary judgment.  However, Mr Baskind successfully resisted summary judgment by arguing that Speymill had obtained the adjudicator’s decision as a consequence of its fraud, namely the supposed theft of the withholding notices.  Speymill appealed.

Issues

The Court of Appeal addressed the issue of whether or not an adjudicator’s decision is unenforceable when the losing party had made an allegation of fraud against the referring party during the adjudication proceedings.

Decision

The Court of Appeal held:

  • The judge in the lower court had been wrong to find that the adjudicator’s decision was unenforceable.  The fraud point - which turned on whether Mr Baskind’s files had been stolen by Speymill - was argued before the adjudicator, and he had decided the matter, on the evidence before him, by reference to whether the withholding notices had (or had not) been served.  His decision was therefore binding, even if it turned out that the contractor had stolen the files containing any withholding notices.
  • There is a distinction between an adjudication taking place in which an allegation of fraud is made  (and can be made), and where a fraud only comes to light after an adjudication has taken place.  In the latter case, fraud (or a strong allegation of fraud) could provide a basis for refusing to enforce an adjudicator’s decision.  In the former case it will not.  The decision in SG South Ltd v Kings Head Cirencester LLP [2009] EWHC 2645 was approved in this regard.

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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