In Primus Build Ltd v Pompey Centre Ltd & Anor [2009] EWHC 1487 (TCC) Mr Justice Coulson considered a claim for enforcement of an adjudicator's decision which raised two points of principle.
- The proper service of a Notice of Adjudication and the possible consequences of invalid service.
- The validity of an adjudicator's decision which is based upon a critical finding and calculation that neither side relied on in their submissions and did not have an opportunity to address.
Coulson J observed that generally there were only two ways for a paying party to avoid payment: either by demonstrating a lack of jurisdiction on the part of the adjudicator, or a material breach of the rules of natural justice. He observed that even then, the Courts have made it clear that such arguments face something of an uphill task.
Service of Notice of Adjudication
At some point during 6th March, the Adjudication Notice was seen by Pompey's solicitor, who had been involved in some of the previous dealings between the parties on the loss of profit issue. Notwithstanding that receipt,Pompey argued that pursuant to clause 26 of the contract, the notice should have been provided either by way of personal delivery (which they equate with personal service) or by fax and, because it was not served in either way, it was invalid and that, consequently, the adjudicator did not have the necessary jurisdiction.
Coulson held that because an adjudicator derives his jurisdiction from the Notice of Adjudication, if it is proved that the Notice has not been validly served, it will generally operate to deprive the adjudicator of any jurisdiction.
In the instant case clause 26.1 used the unusual expression "personal delivery" (or, more accurately, "shall be delivered personally"). Coulson J held , the parties must be taken to have meant something different from "personal service", which was a well known concept requiring the handing over of the document in question in a personal exchange between two individuals. He held that "Delivery" meant actual delivery, whether by post or by some other mechanism. "Personal", as defined in the Oxford English Dictionary, meant "of, affecting or belonging to a particular person rather than anyone else, done or made by a particular person; involving the actual presence or action of a particular individual." He held that "delivered personally" meant the actual delivery by an appropriate individual within Primus to a similarly appropriate individual within Pompey. The document in question must actually be delivered. The method of delivery did not matter, provided that the document is actually delivered to the named address in Schedule 1. Because clause 26.1 referred expressly to 'the address for service', that was another reason to distinguish this procedure from personal service, which can happen anywhere.
He held that since there was actual delivery to the named address and to an appropriate person at that address namely Pompey's solicitor (arguably the most appropriate person to receive it) there was actual personal delivery and there was no breach of clause 26. Coulson J stated that iIf the contract had required, say, personal service, or the documents had sat on a reception desk for a week or been lost or even delayed in the post, then he would have decided that the Notice had not been properly served in accordance with the contract.
Breach Of Natural Justice
Coulson J summarised the law on the matter of natural justice by reference to decided cases. The rules of natural justice apply to adjudication, but they cannot always be fully applied, given the short timetable and 'the crude methodology' sometimes involved. Any alleged breach must be examined critically and must be material or of significance to the decision actually made by the adjudicator.
Coulson J observed that there were a number of reported cases in which an adjudicator's decision has not been enforced, because it relied heavily on something which had not come from either of the parties but from the adjudicator himself, in circumstances where the parties had not even had the opportunity to comment on this new approach. The issue was always a matter of fact and degree.
In the instant case Coulson J found that the profit figures in Primus's accounts ultimately formed the basis of the adjudicator's decision. He also found that both parties agreed that the accounts should be "ignored". Coulson J held that the adjudicator did not have the jurisdiction to consider those accounts or make any findings based upon them. The adjudicator ought not to have gone beyond that agreement.
Although not necessary to do so, Coulson J then considered the position if the Adjudicator was entitled to look at the accounts. The adjudicator had accepted Pompey's principal case, that proof of actual loss of profit was what mattered. The difficulty for the adjudicator was that, because of the way in which Primus had put their case, he had not been persuaded that there was any evidence of actual loss of profit. Hence, he was driven to calculate his own figures from a set of documents that both sides had told him to ignore. Coulson J considered that an adjudicator could not, and was not required to consult the parties on every element of his thinking leading up to a decision, even if some elements of his reasoning may be derived from, rather than expressly set out in, the parties' submissions. But where an adjudicator considered that the referring party's claims as made could not be sustained, and he identified a possible alternative way in which a claim of some sort could be advanced, he would normally be obliged to raise that point with the parties in advance of his decision. That principle applied a fortiori in circumstances where the document from which the alternative approach was to be derived, was a document which the adjudicator was told by the parties to ignore. In the instant case the adjudicator's entire decision was founded on his calculation and subsequent use of the 1.3%. Without it, Primus would have recovered nothing. Coulson J considered that the adjudicator was obliged to go back to the parties with his new calculation.
Coulson J held that the jurisdiction/natural justice issue arising out of the adjudicator's unheralded use of Primus's accounts and his calculation of the 1.3% has been made out and he was unable to enforce the adjudicator's decision. | 