22 November 2023
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Adjudication enforcement; breach of natural justice and bias for deploying without prejudice correspondence.

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Clarification of when an adjudicator's decision will be unenforceable for a breach of natural justice by reason of apparent bias and how deploying without prejudice material in an adjudication may render a decision unenforceable. The risk of bias is greater where the without prejudice material is either central to the issues being determined or is put front and central in a parties' submissions.

What was the dispute about? 

The subject matter of the underlying dispute arises out of works to replace the stair core pressurisation systems to a building. In an adjudication, the dispute included the question of whether a contract was finalised between the parties. During the adjudication AZ deployed material relating to that question, which BY argued was subject to without prejudice privilege. This material was also at odds with the contractual position the BY advanced during the adjudication. 

The adjudicator decided that a key meeting between the parties was not held on a without prejudice basis but was 'open'. He concluded his decision on that basis, ultimately finding in AZ's favour.

AZ subsequently brought a Part 7 Claim in the TCC to enforce the adjudicator's decision. By Part 8 proceedings, brought by BY, it sought declarations relating to the status of the without prejudice material, its admissibility and a declaration that the adjudicator's decision was unenforceable. The two claims were heard together. 

The Court judgment is anonymised and heavily redacted to maintain without prejudice privilege. The full judgment will not be available until such time that the privilege is no longer relevant. 

In his judgment, Justice Constable first had to determine if the in question material was without prejudice, and then, if so, to address the consequences of that, namely were the documents inadmissible and, if so, was the adjudicator's decision unenforceable. 

The law on without prejudice material and enforceability

The judgment sets out a useful summary of the law regarding without prejudice privilege and exceptions to that rule; including whether without prejudice correspondence results in and agreed settlement. It was held on applying the law and on its facts that the communications in question were subject to without prejudice privilege. The detailed basis of this finding is redacted.

On the question of admissibility, it was found that the without prejudice material relied upon did not result in a binding agreement so it had been wrongly decided as admissible in the adjudication.

Usefully the judgment considers earlier authorities addressing the deployment of without prejudice material within adjudications. In particular, Justice Constable referred to the case of Ellis Building Contractors Limited v Vincent Goldstein [2011] EWHC 269 (TCC) where Justice Akenhead summarised his conclusions on the interplay between without prejudice material and apparent bias as follows:

  1. Obviously, such material should not be put before an adjudicator. Lawyers who do so may face professional disciplinary action.
  2. Where an adjudicator decides a case primarily upon the basis of wrongly received "without prejudice" material, his/her decision may well not be enforced.
  3. The test as to whether there is apparent bias present is whether, on an objective appraisal, the material facts give rise to a legitimate fear that the adjudicator might not have been impartial. The Court on any enforcement proceedings should look at all the facts which may support or undermine a charge of bias, whether such facts were known to the adjudicator or not."

At paragraph 20 Justice Constable approved the test for apparent bias articulated at (c) above and noted that apparent bias did not depend upon actual influence. It was held that the reference to a case being decided "primarily upon" without prejudice material, at paragraph (b), was not to be read as being a threshold test (as argued by AZ).  

The judgment also restates the accepted position that adjudicator's decisions will be enforced notwithstanding the fact that they contain an error of law. However, an error as to the admissibility of without prejudice material is an error of law, but an error that could potentially impact the fairness of the decision-making process in accordance with the rules of natural justice. Therefore, it is an error which can affect the enforceability of the decision if the test for apparent bias is also met. 

What was the result?
What are the key lessons?

Our Construction & Engineering team deal with adjudications on a daily basis and would be delighted to discuss any of the issues raised in this article with you. 

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