Adjudication Matters – April 2019

5th April 2019

Adjudication enforcement– ‘fraud’ might fail

Introduction

In BM Services Inc Ltd v Greyline Builders Ltd [2018] EWHC 3884 (TCC), the Technology and Construction Court (TCC) held that an adjudicator had adequately dealt with the defendant’s allegations of fraud in his decision and so did not breach the principles of natural justice.

Key Legal Principles

Duty of natural justice: The rules of natural justice provide that every party has the right to a fair hearing and the right to be heard by an impartial tribunal. Adjudicators must comply with the duty of natural justice.  A breach of this duty could include bias or apparent bias, failing to act impartially or some other form of procedural irregularity.

Duty to provide reasons for adjudicator’s decision: An adjudicator’s decision may not be enforceable if the parties have requested that the adjudicator provide reasons for his decision and the adjudicator fails to do so.

Background

In a decision dated 26 January 2018 in respect of an adjudication relating to a final account, an adjudicator found in favour of BM Services Inc Ltd (BM Services). Walker Morris LLP was instructed by BM Services in this case. Greyline Builders Ltd (Greyline) did not pay the required sum and BM Services brought a summary judgment application in the TCC to enforce the adjudicator’s decision in the sum of £138,275.65 (together with interest, VAT and legal fees).

Greyline attempted to resist enforcement of the adjudicator’s decision on the following grounds:

• The principles of natural justice had been breached. Greyline alleged the adjudicator had not considered the fraud defence which Greyline had raised in the adjudication in its rejoinder. The alleged fraud was that BM Services’ director was concurrently employed by a third party, Mears, and this had led to a conflict of interest and an overvaluation of the relevant works; or
• In the alternative, if the adjudicator had considered and dismissed the fraud allegations, he had not provided sufficient reasons for such dismissal.

In general, the Court has shown a robust approach to enforcement of adjudicators’ decisions and challenges to adjudicators’ decisions are rarely successful.

Previous case law has established the distinction between raising allegations of fraud during an adjudication and raising those allegations afterwards, during the enforcement process (see SG South v King’s Head Cirencester [2009] EWHC and Coulson LJ’s judgment in Gosvenor London Ltd v Aygun Aluminium Ltd [2018] EWCA Civ 2695 (which was covered in our January 2019 edition of Adjudication Matters)). Where the allegation is (or could have been) raised during the adjudication, it will not usually succeed as a defence during the enforcement process. In such cases the alleged fraud has (or should have) already been adjudicated upon.  Further, where fraud is found to be an independent cause of action or an independent defence (i.e. separate from the subject matter of the original adjudication decision), it should not be used as a defence to prevent enforcement.

A separate point was raised in this case regarding fees. As part of the adjudicator’s original decision, the defendant was liable for the adjudicator’s fees, however the parties remained jointly and severally liable for the same. When Greyline did not make the relevant payment, the adjudicator sued both parties for his fees.  BM Services paid these fees and then sought to claim from Greyline the monies it had paid in this regard.

Decision

Alexander Nissan QC, sitting as a deputy High Court judge in the TCC, held that the adjudicator in this case had been aware of the fraud allegation and had considered it as part of his decision. He had provided reasons for his decision and had concluded that there was not sufficient evidence of collusion and that all parties were aware of the dual-employment situation with Mears.

The TCC noted that the real issue in this application was valuation of the relevant works. The fraud element was not an independent cause of action, and involved assessing whether the documents prepared as part of the valuation process were prepared genuinely and honestly. The TCC held that the adjudicator was entitled to treat the documents as having been genuinely and honestly prepared, as Greyline did not adduce sufficient evidence to illustrate the occurrence of fraud in this regard.

The TCC concluded that the adjudicator did not breach the principles of natural justice and his original decision was enforced. Further, although the adjudicator was required to consider Greyline’s substantive defence, as noted in previous case law (see Pilon Limited v Breyer Group Plc [2010] EWHC 837 (TCC) and Jacques (t/a C&E Jacques Partnership) v Ensign Contractors Ltd [2009] EWHC 3383 (TCC)), he was not required to specifically address in his decision all aspects of the evidence put forward and his reasons were adequate here.

In relation to the adjudicator’s fee, the TCC directed that Greyline reimburse to BM Services the sum it had paid to the adjudicator. BM Services was also able to recover its legal costs in defending and settling the proceedings brought by the adjudicator regarding his fee.

Practical Implications

This case serves as a reminder that where a party seeks to resist enforcement of an adjudicator’s decision:

• allegations of fraud raised during the adjudication procedure (or which could have been raised at that time) will not usually succeed;
• an adjudicator is only required to address the main aspects of the particular matter in his decision, and is not required to specifically refer to all aspects of the evidence put forward in support of a party’s defence;
• an adjudicator will not be judged as strictly as judges or arbitrators in relation to the giving of reasons in a decision.

This case also highlights the TCC’s continued support for adjudication and confirms a party can recover legal costs incurred in settling a dispute with the adjudicator regarding his fees.