Power abuse invalidates adjudication

An adjudicator should liaise with both parties if he finds he has insufficient evidence, otherwise his decision will be invalid, writes Daniel Atkinson.

ESTABLISHING the causes of delay to the completion of a construction project usually requires careful analysis of the method of construction. The entitlement to an extension of time will depend on the proper interpretation of the contract and this will dictate the method of analysis to be adopted. Disagreements about the method of analysis and the method of construction can make extension of time disputes complicated and difficult to resolve.

An adjudicator faced with such a dispute will have a hard task, not least because the analysis submitted to him is often insufficiently detailed. In that case, how far should the adjudicator go to establish the facts? Should he determine the critical path to completion himself? If so, how much involvement should the parties have in deciding the appropriate method of analysis?

Or should he accept that adjudication was not intended for such complicated disputes and simply decide on the information presented to him?

Judge Humphrey Lloyd QC addressed these difficult questions in a recent application by Balfour Beatty Construction to enforce an adjudicator's decision against its client, the London Borough of Lambeth.

The contract between Balfour Beatty and Lambeth was for the refurbishment and remodelling of Falmouth House in London under the JCT standard form of building contract 1998 edition with contractor's designed portion supplement.

Although extensions of time had been granted, this did not account for all the delay. Lambeth was entitled to deducted damages for delay totalling some £350,000 and this it duly did.

Balfour Beatty gave notice of adjudication on the issue of entitlement to extension of time. The company submitted its referral notice but the adjudicator was unable to make use of submitted 'as-built' programme and analysis. He asked Balfour Beatty to produce a schedule of relevant facts.

In a subsequent meeting Balfour Beatty was unable to identify the critical path on its programmes as they were only simple bar charts.

Judge Lloyd observed that if adjudication was to be used effectively it was essential that the referring party gave the adjudicator all that was needed in a highly manageable form. In this case it was clear that Balfour Beatty did little or nothing to present its case in a logical or methodical way. There was no attempt to provide a critical path analysis.

Judge Lloyd appears to have accepted that it was reasonable for the adjudicator to verify Balfour Beatty's as-built programmes and to try to perceive a critical path. He accepted the adjudicator could take the initiative in ascertaining the facts, to apply his own knowledge and experience and, in effect, do Balfour Beatty's work for it. The issue was how far the adjudicator should use his own judgement without the involvement of the parties. In this case the adjudicator adopted a 'collapsed as-built' method of analysis but did not present his conclusion to the parties for their comment.

Judge Lloyd held that the adjudicator should have invited comments on whether the as-built program he had drawn was a suitable basis from which to derive a retrospective critical path. He should have informed the parties of the methodology that he intended to adopt, or seek observations from them as to the manner in which it or any other methodology might reasonably and properly be used in the circumstances to establish or to test Balfour Beatty's case.

The adjudicator should not of his own volition have used his powers to make good fundamental deficiencies in the material presented by one party without first giving the other party a proper opportunity of dealing both with that intention and with the results.

Lambeth was entitled to have the dispute decided on the material provided by Balfour Beatty either originally or in answer to the adjudicator's requests - not on a basis devised by the adjudicator.

Judge Lloyd said if an adjudicator uses his powers to find out more about the facts or to form the opinion that a different principle should be applied for their evaluation, he would have to tell both parties what he had found, and, if necessary, the potential implications of those findings. Judge Lloyd held that the adjudicator exceeded his jurisdiction by making good fundamental deficiencies in Balfour Beatty's material, namely the lack of a critical path and the method of analysis adopted for demonstrating the criticality of events.

Constructing, or reconstructing, a party's case for it without confronting the other party is such a potentially serious breach of the requirements of both impartiality and fairness that the decision was invalid, said the judge. Accordingly, he dismissed Balfour Beatty's application.

This decision indicates that while an adjudicator can take can take an inquisitorial approach to ascertaining the facts, including preparation of an analysis, the process of adjudication is ultimately adversarial. The parties must be given the opportunity to make submissions on developments that could affect the final decision of the case.

The adjudicator must make his decision based on the parties' submissions and not on evidence that he gives only to himself. These developments in adjudication reinforce the view held by many that the training of adjudicators needs to be more exacting than it has been up to now.

Key points

If adjudication is to be used effectively it is essential that the referring party gives the adjudicator everything required in a highly manageable form.

An adjudicator should not attempt to reverse fundamental deficiencies in the material presented by one party without first giving the other party a proper opportunity to deal with the intention and the results.

If an adjudicator uses his powers to find out more about the facts or to form the opinion that a different principle should be applied for their evaluation, he should tell both parties what he had found, and the potential implications.

While an adjudicator can take an inquisitorial approach to ascertaining the facts, including preparation of an analysis, adjudication is ultimately adversarial.