Adjudication Matters – September 2019

9th September 2019

Right question, wrong answer: a breach of natural justice in Corebuild Ltd v Cleaver and another

In Corebuild Ltd v Cleaver and another [2019] EWHC 2170 (TCC), the Technology & Construction Court (TCC) declined to enforce an adjudicator’s decision due to the adjudicator deciding a dispute based upon a point which had not been argued in submissions by either party.

Background

Mr Cleaver and Ms Osmolaska (Cleaver) engaged Corebuild Limited (Corebuild) under a JCT Intermediate with Contractor’s Design 2016 contract to design and construct extension works to a residential property in London (the Contract).

During the course of the works, the contract administrator issued a letter to Corebuild advising that he considered Corebuild to be in contractual default for failing to proceed regularly and diligently with the works. Following a period of 14 days, the contract administrator advised Cleaver that the specified default had continued and Cleaver subsequently terminated Corebuild’s employment under the Contract.

Corebuild commenced adjudication proceedings seeking a decision that Cleaver’s termination of its employment under the Contract was not valid and was therefore a repudiatory breach.

During adjudication proceedings, Cleaver argued that even if it was decided that the termination had been invalid, it could not be repudiatory in nature on account of Cleaver’s reliance on the contract administrator’s advice that there had been a specified default (enabling termination). Corebuild argued that the reliance upon the contract administrator was immaterial for the purpose of the question to be decided by the adjudicator, i.e. was there wrongful termination by Cleaver?

In his decision, the adjudicator decided that Cleaver had not relied upon the contract administrator’s judgment when terminating Corebuild’s employment under the Contract and wrongful termination had occurred. This led to the award of £80,000 to Corebuild.

Corebuild brought enforcement proceedings. However, Cleaver resisted enforcement arguing that the decision was unenforceable on account of the adjudicator breaching the rules of natural justice.

Amongst other natural justice arguments, Cleaver argued that in consideration of the question of the validity of termination and repudiatory breach, the adjudicator had made his decision on a point which had not been argued by either party, and, importantly, one to which Cleaver had had no opportunity to address (given it had been formulated by the adjudicator in his decision without first consulting the parties).

Decision

In its judgment, the court decided that there had been a breach of natural justice and the adjudicator’s decision was not enforced.

In reaching its decision, the court agreed that the adjudicator had decided the question of wrongful termination and repudiatory breach on the basis of a factual finding which had not been canvassed by Corebuild or Cleaver in its submissions.

As such, there had been no opportunity for Cleaver to comment on the point and present submissions/evidence.

Through application of the principles set out in Cantillon Limited v Urvasco Limited [2008] EWHC 282, the court considered this was therefore a clear breach of natural justice.

Implications

This case serves as a useful reminder of the critical importance of correctly terminating a contractor’s employment in accordance with the provisions of the contract (failing which could give rise to a repudiatory breach). This case also serves to reinforce previous authority that an adjudicator must decide the dispute on the basis of the submissions put before him/her, and must not “go off on a frolic” of his/her own.

Whilst natural justice challenges rarely succeed, careful consideration should still be given to the adjudicator’s decision, in order to determine whether there are any natural justice arguments which may be raised as a consequence. On rare occasions such as in this case, a natural justice argument could enable a party to successfully resist enforcement of an adjudicator’s decision.