Meeting claims of human rights and natural justice

HAVING established adjudication under the Construction Act as an important process, the courts are now examining the type of process involved. Two recent decisions give useful guidance to the industry.

In the first case, Elanay Contracts v The Vestry (2000), Elanay sought to enforce the decision of an adjudicator who had ordered The Vestry to pay Elanay £64,000. The Vestry resisted the application by arguing that adjudication under the Construction Act did not comply with Article 6 of the European Convention on Human Rights.

Article 6 requires each party to be given a reasonable opportunity to present its case, including evidence, under conditions that did not place it at a substantial disadvantage.

The court in the Elanay case recognised that the process of adjudication is very rough and ready, but held that this could not itself be regarded as a reason for refusing summary judgment.

It held that Article 6 does not apply to an adjudicator's decision or to the proceedings before an adjudicator. While adjudication clearly decides a question of civil rights, the decision is not in any sense a final determination but only provisional, pending final determination in arbitration or litigation. On this basis the court gave summary judgment for Elanay.

This is an important decision. The adjudicator in many cases simply decides which party is to hold a sum of money until the dispute is finally resolved. It is no different in that regard to an engineer's or architect's decision under the terms of standard construction contracts.

Both proceedings are simply part of the contractual machinery, albeit that the process of adjudication can be implied by statute.

We must wait until early next year to see whether the Court of Appeal agrees with the decision.

We must also wait to see whether a similar line will be taken by the courts in relation to the Human Rights Act, which gives statutory effect to the rights and freedoms under the Convention. There is no reason why the courts should not do so.

My second case concerns fairness. Adjudication might not need to comply with the Convention, but this does not mean that the process should not be fair. There is no reason why adjudicators should not adopt procedures which allow each side to assist fully in that process. Indeed, in my experience it is essential to do so, since the parties are usually best placed to provide facts and analysis. This is a matter of flexibility, a relaxed approach to working hours and good, robust case management.

The decision in Discain Project Services v Opecprime Development shows the courts' approach.

In that case one of the issues being decided was the jurisdiction of the adjudicator. Submissions were made by one party via fax, but the adjudicator did not consult the other party on the submissions due to the speed of the process. The court held that the adjudicator should have made sure that the other party was involved in the discussions regarding his jurisdiction. Accordingly the court would not enforce his decision.

The court emphasised that this does not mean that parties in adjudication should search around for breaches of procedure; it is a question of fact and degree in each case. In this case it was questioned whether the adjudicator had stretched the rules of natural justice. The rules of natural justice require that each party should have an opportunity to present its case and to know the other side's case and that the adjudicator must be seen to be unbiased.

The court considered that, because an adjudicator works under pressures of time and circumstance it is extremely difficult to comply with the rules of natural justice in the manner of a court or arbitrator. Some breaches of the rules of natural justice which have no demonstrable consequence can be disregarded.

But in this case the court held that, if the rules of natural justice had been complied with, the adjudicator might have reached a different decision. But if he had reached his decision, different or not, after complying with the rules of natural justice, his decision would have been enforced.

So there it is. No doubt there will be a flood of cases in which lawyers will try to test the boundaries of natural justice in adjudication. In practice all the court held was that adjudicators have to involve the parties in the process, and be seen to be doing so.

They need to consult with the parties before making a decision and allow each side a chance to make its point without being disadvantaged. This is no more than common sense, but parties need to realise this may mean weekend working to meet the deadlines.

Key points

While adjudication clearly decides a question of civil rights, the decision is not a final determination but only provisional, pending final determination in arbitration or litigation.

Article 6 of the European Convention on Human Rights does not apply to adjudicators' decisions.

Because an adjudicator works under pressures of time and circumstance, breaches of the rules of natural justice which have no demonstrable consequence can be disregarded.

Even so, adjudicators have to consult both parties before making a decision and allow each side a chance to make its point without being disadvantaged.