Charles Edwin Edwards MSt(Cantab) MSc(Lond) FCInstCES Barrister
Charles Edwards, Construction Barrister and Head of Chambers at Gray’s Inn Construction Chambers, reviews the recent case of Home Group Limited v MPS Housing Limited [2023] EWHC 1946 (TCC) where enforcement of the adjudicator’s decision (which ran to 74 pages) was challenged on the basis of a breach of natural justice due to the sheer volume of the Defendant’s Referral which included a quantum expert report of 155 pages, with 76 appendices, which consisted of 202 files in 11 sub-folders, amounting to 338 megabytes of data and an additional 2,325 files in 327 sub-folders and five factual witness statements (which amounted to 88 pages, with hundreds of exhibited pages).
The Claimant (“Home Group”) sought summary judgment of an adjudicator’s decision dated 28 April 2023. The Adjudicator in his Decision ordered payment by the Defendant (“MPS”) to the Claimant Home Group of £6,565,831.94 plus interest and 85% of his fee.
Pursuant to a JCT Measured Term Contract (the “Contract”), the Claimant engaged the Defendant to carry out maintenance and repair works to some of its properties. The Claimant claimed termination losses caused by the Defendant’s repudiatory breach of a JCT Measured Term Contract. On 11 May 2022, the Defendant, pursuant to Clause 8.7.2 of the Contract, purported to terminate the Contract. The Claimant did not agree that Defendant were entitled to terminate the Contract and claimed that the Defendant’s termination was a repudiation of the Contract. The validity of the termination was addressed in the first adjudication. On 25 November 2022, it was decided that the Defendant had repudiated the Contract, hence its attempted termination was invalid. The second adjudication proceeded with regards to recuperating the Claimant’s losses.
On 17 March 2023, the Claimant served a Referral which included: a quantum expert report of 155 pages, with 76 appendices, which consisted of 202 files in 11 sub-folders, amounting to 338 megabytes of data and an additional 2,325 files in 327 sub-folders and five factual witness statements (which amounted to 88 pages, with hundreds of exhibited pages).
In the adjudication, the Defendant were given a timeframe of 19 days (or 13 working days) to provide its response to the Referral. Due to the sheer quantity of material, the Defendant claimed that this was an insufficient timeframe for it to respond. The Defendant argued that it was not feasible to adequately consume and respond to the quantity of material served and that this was a breach of natural justice which has led to a material difference in the result, and that as such the adjudicator’s decision was not enforceable. The Defendant did not argue that the dispute was incapable of adjudication; but rather, it asserted that the Claimant should have provided a more reasonable timeframe to understand the claim, whether in advance of the Notice of Adjudication or by agreeing to an extended timetable.
After the termination of the Contract by the Defendant, but preceding the outcome of the first adjudication, on 5 October 2022, the Contract Administrator provided the parties with the Final Account issued pursuant to clause 4.6.3 of the Contract. This outlined that a total of £7,813,201.89 was due from the Defendant to the Claimant. The calculation included a sum of £7,532,049.48 as the sum the Claimant was entitled to recover from the Defendant as a result of the Defendant’s breaches of contract.
Following the termination decision, on 23 December 2022, the Claimant requested payment in the sum of £8,297,521.01 plus VAT as applicable, from the Defendant, stating that if they did not make payment by 6 January 2023, a dispute would have crystallised, and it would have no option but to recover its losses by way of a third-party tribunal. The letter did not give more than a high-level breakdown of how the sum of £8,297,521.01 had been calculated and there was no supporting analysis. The sums claimed by Claimant essentially comprised sums said to have been paid out to third parties to complete works that the Defendant ought to have completed, and the sums it would have had to pay the Defendant (plus several other heads of claim).
On 4 January the Defendant observed that despite claiming more than £8m, the Claimant had not provided either the information or level of detailed required to assess and respond to the claim, nor any supporting documents and, as a result, any reference to adjudication would be premature. The Defendant proposed a method for resolution of the claim and requested that particular documents (listed in a schedule to the letter) were issued by Claimant. It was suggested that following the receipt of the requested information, the Defendant would require 8 weeks to respond. The Claimant rejected the timetable and proposed the agreement of a random 5% sample of Orders which had been placed by Claimant with third parties for work which was required under the Contract as a representative sample. They proposed that the Defendant would attend the Claimant’s office to review the information and evidence in relation to the sample. The Claimant asserted that within 7 days of Defendant’s review of the information, it would require the Defendant to issue an offer of payment of the Claimant’s losses. It gave a short timetable for the agreement of a sample and attendance at its office.
On 10 January 2023, the Defendant did not accept the sampling proposal, and requested a spreadsheet which showed for each work order, with eight categories of information as a minimum. On 12 January 2023, the Defendant commenced its assessment of the claim, considering the data on a spreadsheet appended in due course to its Response. The Claimant responded to the Defendant on 10 January 2023 by letter revising its claim upwards by £478,087.812 and providing eleven spreadsheets to support its claim. The Claimant asserted that the Defendant had all details for the pre-termination losses and a considerable amount of information regarding the post-termination losses. The Defendant’s position was that the Claimant had still failed to provide the bare minimum of information required, arguing that the spreadsheets were insufficient.
The Claimant on 10 February 2023, issued a draft of the expert report on a “without prejudice save as to costs basis”. This was the same expert report on which it would rely in the adjudication in and was provided almost two months before the Defendant would be required to serve its responsive evidence. Following this, the Claimant provided, on a without prejudice basis, revised appendices to the draft expert report; which were the same appendices served with the Referral.
On 16 February 2023, the Defendant stated that it would need until 19 May 2023 to provide a response. On 24 February 2023, after the Claimant had refused to allow an extended timeframe, the Defendant contended that, “it was impossible for us to commence any meaningful review (or ultimately for an adjudicator to properly consider the position) in the absence of a full and detailed description of the work that was undertaken against each and every work order”.
The Claimant’s subsequent response to this, was a reinforcement of its offer for the Defendant to attend the Claimant’s office to access the systems. This offer was not accepted by the Defendant at any point before the procedure the adjudication.
The Technology and Construction Court (TCC) reviewed the law on the matter and stated amongst other things, the following:
At paragraph 36, the TCC stated:
“Notwithstanding the way in which some of the submissions before the Adjudicator seemed to focus on the complexity of the dispute per se ,…rightly does not press a submission before me that the dispute was intrinsically so complicated or heavy that in no circumstances could it have been subjected to adjudication. Such a contention would, in any event, have failed. As pointed out by Akenhead J in HS Works Limited v Enterprise Managed Services Limited [2009] EWHC 729 (TCC), at [56] that, ” Parliament provided for ‘any’ relevant dispute to be referable to adjudication and must have envisaged that there would be simple as well as the immensely detailed and complex disputes which can arise on a construction contract.”
At paragraph 37 to 39 of the judgment, the TCC stated:
37. Similarly, in Amec Group Limited v Thames Water Utilities Limited [2010] EWHC 419 (TCC), Coulson J (as he then was) held:
’60. In my judgment, therefore, the law on this subject can be summarised as follows:
- The mere fact that an adjudication is concerned with a large or complex dispute does not of itself make it unsuitable for adjudication: see CIB v. Birse .
(b) What matters is whether, notwithstanding the size or complexity of the dispute, the adjudicator had: (i) sufficiently appreciated the nature of any issue referred to him before giving a decision on that issue, including the submissions of each party; and (ii) was satisfied that he could do broad justice between the parties (see CIB v. Birse ).
(c) If the adjudicator felt able to reach a decision within the time limit then a court, when considering whether or not that conclusion was outside the rules of natural justice, would consider the basis on which the adjudicator reached that conclusion ( HS Properties ). In practical terms, that consideration is likely to amount to no more than a scrutiny of the particular allegations as to why the defendant claims that the adjudicator acted in breach of natural justice.”
(d) If the allegation is, as here, that the adjudicator failed to have sufficient regard to the material provided by one party, the court will consider that by reference to the nature of the material; the timing of the provision of that material; and the opportunities available to the parties, both before and during the adjudication, to address the subject matter of that material.”
38. At [61], the Judge stated in terms that, ” size/complexity will not of itself be sufficient to found a complaint based on a breach of natural justice “. In the present case, the Adjudicator correctly kept under review the question of his ability to do broad justice between the parties, notwithstanding the substantial quantity of material he had been presented with. Having determined that he could, this Court will be extremely slow to interfere with that conclusion.”
39. Instead, the question in almost all cases where the Adjudicator has considered the position but expressed the clear ability to render a fair decision, will inevitably centre upon the timing of the provision of the material to the responding party, and its ability to fairly put its case, rather than the complexity of the material per se.
The TCC considered the presumed intention of Parliament, discussed by Chadwick LJ in Carillion v Devonport Royal Dockyard [2005] EWCA 1358:
“85. The objective which underlies the Act and the statutory scheme requires the courts to respect and enforce the adjudicator’s decision unless it is plain that the question which he has decided was not the question referred to him or the manner in which he has gone about his task is obviously unfair. It should be only in rare circumstances that the courts will interfere with the decision of an adjudicator. The courts should give no encouragement to the approach adopted by DML in the present case; which … may, indeed, aptly be described as “simply scrabbling around to find some argument, however tenuous, to resist payment”.
86. … The task of the adjudicator is not to act as arbitrator or judge. The time constraints within which he is expected to operate are proof of that. The task of the adjudicator is to find an interim solution which meets the needs of the case. … The need to have the “right” answer has been subordinated to the need to have an answer quickly. The scheme was not enacted in order to provide definitive answers to complex questions…
87. In short, in the overwhelming majority of cases, the proper course for the party who is unsuccessful in an adjudication under the scheme must be to pay the amount that he has been ordered to pay by the adjudicator. If he does not accept the adjudicator’s decision as correct (whether on the facts or in law), he can take legal or arbitration proceedings in order to establish the true position. To seek to challenge the adjudicator’s decision on the ground that he has exceeded his jurisdiction or breached the rules of natural justice (save in the plainest cases) is likely to lead to a substantial waste of time and expense — as, we suspect, the costs incurred in the present case will demonstrate only too clearly.”
Further the TCC stated that the legal authorities demonstrate that arguments based upon time constraints impacting the ability to respond fairly have enjoyed little success. For example, in chronological order the TCC stated [emphasis added]:
(1) Edenbooth Limited v Cre8 Developments Limited [2008] EWHC 570 (TCC), in which Coulson J (as he then was) held:
“17. The other point taken by Mr. Mencer, that is to say the question of the speed with which he was obliged to produce information, is, I am afraid, a complaint often heard on adjudication enforcement applications. It is an inherent feature of adjudication that the Adjudicator is obliged to produce his decision quickly. That means he has to put pressure on the parties to ensure that they provide the necessary information to him just as promptly. Adjudication does not work if the parties take too long to provide information to the Adjudicator. The corollary of that is that parties often feel under pressure to do things more quickly than they would like. However, as I have said, that is simply an inevitable consequence of the adjudication process.”
(2) The Dorchester Hotel Limited v Vivid Interiors Limited [2009] EWHC 70, in which the Referral Notice included 37 lever arch files, two expert reports (one of 20 and another of 30 pages) and six witness statements. An extension of the 28-day period was agreed, but the responding party argued that the time available was inadequate and there was a very real risk of a breach of natural justice. Coulson J refused to grant the injunctions sought during an ongoing adjudication. He stated:
“18. … I take it to be settled law that the rules of natural justice do generally apply to the adjudication process…
19. But these and other authorities have stressed that there are obvious limits on the application of these rules to the adjudication process. As HHJ Bowsher QC pointed out in Discain , “The adjudicator is working under pressure of time and circumstance which make it extremely difficult to comply with the rules of natural justice in the manner of a court or arbitrator.” Or, as HHJ Lloyd QC put it in Balfour Beatty Construction Ltd v London Borough of Lambeth [2002] EWHC 597 (TCC), the purpose of adjudication is not to be thwarted “by an overly sensitive concern for procedural niceties”.
20. Accordingly, a Court has to approach an alleged breach of the rules of natural justice in an adjudication with a certain amount of scepticism. The concepts of natural justice which are so familiar to lawyers are not always easy to reconcile with the swift and summary nature of the adjudication process; and in the event of a clash between the two, the starting point must be to give priority to the rough and ready adjudication process. …
23. …the Courts have long accepted that the 1996 Housing Grants (Construction and Regeneration) Act, and the standard forms of building and engineering contracts amended in its wake, permit such claims to be made, and what is more those claims can be made “at any time”.‘
(3) Bovis Lend Lease Ltd v The Trustees of the London Clinic [2009] EWHC 64, in which one of the arguments raised by the responding party on enforcement was that the nature and volume of new evidence served, and the timetable imposed, did not give it a fair or effective opportunity to respond to the case (which was new), and accordingly the decision was in breach of the rules of natural justice. Akenhead J rejected the argument. It is undoubtedly right, as Mr Neuberger contends, that Akenhead J considered the argument lacked credibility principally because the responding party had failed to raise the point during the adjudication. However, this makes the case at best neutral. The judge certainly does not express the view that, but for the failure to have raised the point, it would have given rise to a successful challenge;
(4) CSK Electrical Contractors Limited v Kingwood Electrical Services Limited [2015] EWHC 667 (TCC), in which Coulson J (as he then was) held that:
“14. The defendant’s third challenge is the suggestion that the adjudicator’s timetable was too quick and put too great a strain on their resources.
15. Again, this point has been taken in a number of the authorities. It has never to my knowledge been upheld. Cases in which the point has been rejected include Bovis Lend Lease Ltd v Trustees of the London Clinic Ltd [2009] EWHC 64 TCC) and Dorchester Hotel Ltd v Vivid Interiors Ltd [2009] EWHC 70 (TCC). The plain fact is that adjudication is a rough and ready process because it has to be carried out within a very strict timetable. That often causes particular pressure for the responding party. That is, I am afraid, a fact of adjudication life; it is inherent in the whole process.”…”
At paragraph 50 of the judgment, the TCC summarised the legal position from the authorities regarding the claim of a breach of natural justice in relation to an adjudicator’s decision as follows:
- Adjudication decisions must be enforced even if they contain errors of procedure, fact or law.
(2) An adjudication decision will not be enforced if it is reached in breach of natural justice and the breach is material, in that it has led to a material difference in the outcome. However, the Court should examine such defences with a degree of scepticism;
(3) Both complexity and constraint of time to respond are inherent in the process of adjudication, and are no bar in themselves to adjudication enforcement. Whilst it is conceivable that a combination of the two might give rise to a valid challenge, in circumstances where the Adjudicator has given proper consideration at each stage to these issues and concluded that he or she can render a decision which delivers broad justice between the parties, the Court will be extremely reticent to conclude otherwise;
(4) In cases involving significant amounts of data, an adjudicator is entitled to proceed by way of spot checks and/or sampling. The assessment of how this should be carried out is a matter of substantive determination by the adjudicator and an argument that the adjudicator has erred in his or her approach, absent some particular and material related transgression of natural justice, will not give rise to a valid basis to challenge enforcement. It would, even if correct, merely be an error like any other error which will not ordinarily affect enforcement.”
Conclusion
The TCC rejected the Defendant’s submission that “whether by reason of the volume of material, constraints of time, and access to material, and whether taken separately or in aggregate, there has been any, or any material, breach of natural justice” to render the adjudicator’s decision unenforceable.
The adjudicator’s decision was enforced by way of summary judgment in favour of the Claimant in the sums of:
(1) £6,565,931.94
(2) Interest thereon in the sum of £197,676.51, plus £593.62 daily from the date of the Decision;
(3) £41,259.66 in respect of the Adjudicator’s fees, plus interest to be calculated by the parties.
For those involved in adjudication proceedings, please note that this case demonstrates that merely pointing to a large quantity of material, some of which is seen for the first time in an adjudication itself is not of itself sufficient to succeed with a claim for a breach of natural justice. An adjudicator’s decision would not be enforceable if it was in breach of natural justice, if the breach was material, causing a material difference in the outcome. However, where adjudication cases involve large amounts of data, an adjudicator was entitled to proceed by way of spot checks and/or sampling. It was not realistic for the Defendant to require the Claimant to provide detailed information on each and every line item, and to use that as a justification to disengage in analysis of the material provided through sampling.
For further information with regard to the resolution of payment related issues as set out above, please do not hesitate to contact Charles Edwards Construction Barrister at Gray’s Inn Construction Chambers on: cedwards@graysinnconstructionchambers.co.uk to see how chambers can assist you or your organisation. The above is for general information only and to encourage discussion and does not constitute legal advice. The author does not assume any responsibility for the accuracy of any statements made and appropriate legal advice should be taken in each instance and relied upon before taking or omitting to take any action in respect of any specific matter.
Charles Edwin Edwards MSt(Cantab) MSc(Lond) FCInstCES Barrister
Gray’s Inn Construction Chambers
60 Gray’s Inn Road
London WC1X 8AQ
Tel: +44(0)203 286 0008
