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Natural justice and a cautionary tale on costs

In the case of Jacques & anor (t/a C&E Jacques Partnership) v Ensign Contractors Ltd [2009] the Technology and Construction Court (TCC) recently considered whether an adjudicator was in breach of the rules of natural justice for ruling that certain evidence was inadmissible. It also considered the costs implications for any party who does not accept a settlement offer which they fail to beat at Court. The TCC also granted a partial stay of execution of the Adjudicator’s Decision, as on the evidence, the Jacques Partnership (Jacques) would be unable to repay the judgement sum in full.

Dispute:

Ensign Contractors Ltd (Ensign) entered into a contract with two sisters, trading as C&E Jacques to renovate a number of flats. A number of disputes arose between the parties, which resulted in a series of adjudications.

As a result of numerous jurisdictional challenges the parties agreed, by written agreement, that the Fourth Adjudication that took place was “null and void”. In the Fifth Adjudication, Ensign sought to rely on the Fourth Adjudicator’s Decision, even though the parties had agreed it was “null and void”. Jacques invited the Adjudicator to ignore references made to the Fourth Adjudication Decision and the Adjudicator agreed.

Ensign failed to pay the sums awarded and Jacques initiated enforcement proceedings. Ensign alleged that the Adjudicator’s Decision to exclude references to the Fourth Adjudicator’s Decision was a breach of the rules of natural justice and that consequently he could not properly understand or consider Ensign’s defence.

Natural justice:

Akenhead J held that the Fifth Adjudicator’s Decision should be enforced and that the Adjudicator had not breached the rules of natural justice. The TCC reviewed the case law in this area and drew the following conclusions:

1 An adjudicator must consider defences properly put forward in adjudication.
2 It is within an adjudicator’s jurisdiction to decide what evidence is admissible, and what evidence is helpful and unhelpful in determination of the dispute. If, within jurisdiction, the Adjudicator decides that certain evidence is inadmissible, that will rarely (if ever) amount to a breach of the rules of natural justice.
3 Even if the Adjudicator’s Decision (within jurisdiction) to disregard evidence as inadmissible or of little or no weight was wrong in fact or in law, that decision is not open to challenge as a breach of natural justice.
4 The Court must distinguish between a failure, by an adjudicator, to consider and address a substantive defence and a failure to address all aspects of evidence which supports that defence. It is not practicable, usually, for every aspect of the evidence to be assiduously considered, weighed up and rejected or accepted in whole or in part. Primarily, an adjudicator needs to address substantive issues, but does not need to address each and every aspect of the evidence. An adjudicator should not be considered to be in breach of the rules of natural justice if the decision does not address each aspect of the evidence.

Costs liability:

In summary, the Court held that Jacques had been successful on enforcement. In the ordinary course of events Jacques would recover 80% of its costs up to the hearing (there was a 20% reduction as Ensign succeeded in its applications for a stay of execution). However:

1 since the hearing, each party had pursued applications that they had lost. As such, both parties would bear their own costs since the hearing date.
2 prior to the enforcement hearing, the parties had entered into settlement discussions and the Court could take these into account, even though the discussions were not on a “without prejudice save as to costs basis“. This included an offer from Ensign to pay the sum claimed in full, by way of instalments.

In view of these factors, the TCC held that Jacques should only be entitled to 50% of its costs. As the TCC had already reduced the recoverable amount to 80%, this meant only 40% of Jacques’ costs were recoverable.

Comment:

On the natural justice point, this case confirms that, while adjudicators must comply with the rules of natural justice, they also have a wide discretion as to the conduct of an adjudication. The TCC continued its strong trend of enforcing adjudicators’ decisions and clarified that an adjudicator should not be considered to be in breach of the rules of natural justice if the decision does not address each aspect of the evidence.

With regard to the matter of costs, this reminds parties to be mindful of the issue of costs as part of the “bigger picture” in enforcement, as well as recovery of the sum awarded in adjudication. Failure to make and / or accept appropriate offers may result in costs reductions/penalties.

Advice:

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Disclaimer: This article should not be relied upon or taken as factual statements of law. If necessary, professional legal advice should be taken.