Breach of Natural Justice in Adjudication: Van Oord UK Ltd v Dragados UK Ltd [2022] CSOH 30

Whether you have been successful or unsuccessful at adjudication, the next step is to pursue or defend proceedings at court to enforce the adjudication decision. A key defence to any enforcement is to argue that there is a breach of natural justice in the adjudication decision.

This article will explore the case of Van Oord UK Ltd v Dragados UK Ltd where this argument was successfully used to avoid enforcement.

Background 

The parties entered into a sub-contract (“Contract”) whereby Dragados were to dredge silt, sand, gravel and glacial till for the Aberdeen Harbour Expansion Project, for which Van Oord was the main contractor. Disputes resulted in several adjudications between the parties. 

In the sixth adjudication, Van Oord claimed an extension of time and prolongation costs in respect of four compensation events. The difficulty was that there was no agreed programme but numerous programmes had been prepared throughout the Contract. Both parties claimed the other was responsible for the delay and this was supported by expert evidence. Van Oord’s expert favoured a programme from October 2018 whereas Dragados’ expert favoured a programme from 15 April 2019. Critically, both experts rejected a programme prepared on 15 March 2019. 

The adjudicator awarded Van Oord an extension of time and prolongation costs for one of the compensation events. The adjudicator based this on the March 2019 programme based upon a critical date within it of 31 July 2019. Significantly, neither the date nor the consequences of it was part of the dispute until the decision was issued and neither party was given the opportunity to comment or make submissions on these points. 

Van Oord issued proceedings at court to enforce the adjudicator’s decision. Dragados defended on the basis that there had been a breach of natural justice as the decision had been reached on a basis not tested with the parties and they had not been given the opportunity to address the March 2019 programme. This was important as it is arguable that the claim would have been time-barred due to the claim being issued late by Van Oord.

The Law

The courts will in general enforce decisions of adjudicators[1]. The exception to this is where an adjudicator is found to have acted contrary to the interests of natural justice[2]. Some examples relevant to the present dispute include the following:

• Each party must be given a fair opportunity to present its case[3].
• If the adjudicator makes investigations and inquiries of his own, or proposes to use his own knowledge and experience, it will normally be appropriate to discuss those propositions with the parties before a decision is made[4].
• The adjudicator should not decide a point on a factual or legal basis that has not been argued or put forward before him[5].
• For a breach of natural justice to nullify a decision, it must be a material breach[6].
• An adjudicator may adopt an intermediate position not argued for by either party without giving notice of his intention to do so[7].

"The test is not 'Has an unjust result been reached? but 'Was there an opportunity afforded for injustice to be done?' If there was such an opportunity, the decision cannot stand[8]."

Van Oord’s Argument 

Van Oord argued that it had been open to the adjudicator to adopt the March 2019 programme as the adjudicator had given the experts the opportunity to comment on it at an adjudication meeting held on 6 September 2021.

Dragados’ Argument

Dragados argued;

1. That the adjudicator had gone off on a “frolic of his own” and it was not open to him to adopt the March 2019 programme which had been rejected by both experts, without putting that to parties and asking what the consequences might be. 
2. That it was also not open to the adjudicator to take the critical date as 31 July 2019, when that had not been argued for by Van Oord. Had Dragados been aware that the adjudicator was considering adopting 31 July 2019 as the critical date, it could and would have argued that the entire claim was time barred pursuant to a clause in the Contract. Dragados was not required to demonstrate that its time bar argument would have succeeded, simply that it was tenable. As such, the breach of natural justice was material.
3. That the adjudicator could not be said to have adopted an intermediate course where, he had gone beyond the position argued for by Van Oord.

Held by the Court…

It could not be argued that the adjudicator had adopted an intermediate course. The critical date selected by the adjudicator was earlier than the date argued by Van Oord.

The adjudicator should have allowed the parties a further opportunity to address him on those issues. The adjudicator had not given the parties a fair opportunity to comment on his proposed adoption of the March 2019 programme as the baseline and the consequences for the critical date. There had therefore been an injustice and the Court declined to enforce the adjudicator’s award.

Commentary 

This case highlights the importance of the adjudicator to consider and allow the parties to comment and test the thoughts of the adjudicator before a decision is issued where reasoning had been put forward by the adjudicator and information was presented which had not been argued by the parties. If there has been an opportunity for injustice, there is a risk that the decision will not be enforceable at court. It is also important for parties who have possibly suffered a breach of natural justice to be alive to arguments to resist the enforcement of an adjudication decision.

[1]               Carrillion Construction Ltd v Devonport Royal Dockyard Ltd [2005] EWCA Civ 1358 at 84-87

[2]               Gillies Ramsay Diamond v PJW Enterprises Limited 2004 SC 430 

[3]               Costain Limited v Strathclyde Builders Limited 2004 SLT 102

[4]               ibid

[5]               Roe Brickwork Ltd v Wates Construction Ltd [2013] EWHC 3417, per Edwards-Stuart J at paragraph 22.

[6]               Cantillon Ltd v Urvasco Ltd [2008] BLR 250

[7]               Miller Construction (UK) Ltd v Building Design Partnership Ltd [2014] CSOH 80 , Lord Malcolm at paragraph 17

[8]               Lord President Clyde in Barrs v British Wool Marketing Board 1957 SC 72 at 8