Pick your adjudicator carefully

Adjudicators must be selected with care, especially on second adjudications when the same issues need to be looked at again. Otherwise a court may consider the adjudicator to be biased and choose not enforce the decision, warns Daniel Atkinson.

ADJUDICATORS are not judges; they are often not even lawyers. They are construction professionals who, by virtue of their knowledge and expertise, are deemed competent to obtain a quick and fair resolution to a dispute between parties to a construction contract.

But, as Guy Cottam observed on these pages last week, adjudicators now decide very complex disputes - often years after the relevant events.

Because of this, the courts, while acknowledging that adjudicators are not part of the judiciary, have insisted that they do act quasi-judicially. And, as such, the courts require that an adjudicator's conduct does not fall below the standards that would be expected of a judge.

A court will therefore not enforce an adjudicator's decision if it considers that, at the time of the adjudicator's appointment, there was a real possibility of bias. Clearly, the two disputing parties must select the adjudicator carefully, since the adjudication will have been a waste of money if the court does not enforce the decision.

Even in the tight time frame of adjudication, the parties may spend considerable sums. A wrong selection, possibly to obtain a tactical advantage, may prove costly in the end.

By the same token, an adjudicator must think carefully before deciding whether to accept an appointment. At present, as far as I am aware, only the Institution of Civil Engineers requires its adjudicators to comply with a code of conduct that addresses such matters.

The recent case of Amec Capital Projects v Whitefriars City Estates, heard by Judge Toulmin in February, raises all these points and offers a salutary lesson for all those embarking on or involved in adjudication.

By the time this dispute reached Judge Toulmin there had already been two adjudications and one court hearing on the same issues, with the same parties and the same adjudicator. The first adjudication commenced in May 2003, but nine months later the dispute was still unresolved and the two parties were back in court for a second time.

The cost of the two adjudications and the hearing on the first decision was some £277,000. If the parties had begun arbitration or litigation in May 2003, they probably would have had a hearing and even a final decision much sooner.

The adjudicator made his decision in the first adjudication in favour of Amec and ordered Whitefriars to pay it the sum of almost £600,000.The court (under Judge Humphrey Lloyd) declined to enforce the first decision on the basis that the adjudicator was not the designated adjudicator under the contract and so he did not have jurisdiction. Amec started the second adjudication and requested the appointing body to appoint the same adjudicator, which it did.

The adjudicator again found in favour of Amec and again the decision was referred to the courts. This time Judge Toulmin, like Judge Lloyd before him, also refused to enforce the adjudicator's decision; this time on the grounds that there was a real possibility of bias on the part of the adjudicator.

There were three crucial factors which led Judge Toulmin to this conclusion. The first factor was that in the first adjudication the adjudicator had obtained legal advice that he did not disclose to the parties. He did not obtain legal advice on this point in the second adjudication. Judge Toulmin held that there was a risk the adjudicator carried forward the legal advice he had obtained in the first adjudication to the second, and that it influenced the judgements he formed. He should have sought new legal advice on this issue from a different source. This was not only a breach of natural justice but also one of the factors that supported a finding of overall bias.

The second crucial factor was a telephone conversation between the adjudicator and Amec leading to his appointment in the second adjudication. The conversation went beyond the original enquiry as to where to send the papers; Amec discussed the judgement in relation to enforcement of the first decision, telling the adjudicator that, since the matter was now open again, it was referring the matter back to him. Judge Toulmin said that, while on its own this conversation might not have led to any bias, in the circumstances it might have led the adjudicator to the biased conclusion that he could simply reach the same conclusion as in the first adjudication.

The third factor was the advice obtained by the adjudicator in deciding whether he had jurisdiction in the second adjudication. He disclosed that advice to the parties but only after he had decided the matter. Whitefriars therefore had no opportunity to comment on the advice before the adjudicator decided he did have jurisdiction. Judge Toulmin was not prepared to enforce a decision reached in this way.

This issue of bias could have been avoided by appointing a different adjudicator. Judge Toulmin observed that an adjudicator may have significant difficulties in attempting to consider afresh matters he has already decided. It is often not possible at the outset to foresee problems and difficulties might only become apparent in the course of the second adjudication. Accordingly, it is very often better, when the same or similar issues need to be considered, to appoint a different adjudicator.

This case emphasises how important it is that adjudicators act quasi-judicially on all matters related to the adjudication. If the adjudication process is not to be a waste of money, the parties, appointing bodies and adjudicators must consider carefully whether the circumstances of appointment properly reflect the quasi-judicial nature of the appointment.

The ultimate safeguard is the adjudicators themselves and their readiness to refuse appointments. Cases like this one suggest that the appointing bodies should look closely at the training requirements for their adjudicators, as well as the requirements for adjudicators to adhere to a code of conduct.