Adjudicators – free to frolic?
Springtime brings with it the joyful sight of lambs frolicking about in the fields. This springtime also gave us an important judgment concerning the ability of adjudicators to come to decisions on a basis not put to them by the parties, often referred to as the adjudicator going on a “frolic of their own”.
In AECOM Design Build Limited v. Staptina Engineering Services Limited Mr Justice Fraser decided that an adjudicator was entitled to come to a decision on a basis that was different from that put to her by either party, without further reference to them, and that in doing so she did not breach the rules of natural justice or go off on a “frolic of her own”.
Staptina was engaged by AECOM under an NEC 3 short subcontract to carry out mechanical installation works. AECOM terminated Staptina’s employment and sought to deduct from the sum due to Staptina an amount for alleged defective work. Staptina maintained that AECOM was not entitled to make such deductions, which gave rise to a dispute and the third adjudication between the parties.
In her decision, the adjudicator said that AECOM was entitled to deduct the costs of defects from Staptina following termination. The adjudicator also found that AECOM’s right to deduct costs from Staptina was confined to a deduction of the amount it would have cost Staptina to rectify the defects.
AECOM asked the court, by way of Part 8 proceedings for a declaration, to decide that the adjudicator did not have jurisdiction to make the second part of her decision concerning the amount AECOM was entitled to deduct, alternatively that this part of her decision was made in breach of the rules of natural justice as AECOM said it was not given the opportunity to make submissions on this point.
" When I act for referring parties in adjudication I usually try to agree the identity of the adjudicator with the responding party by sending a short list of adjudicators with experience in the particular area of the dispute."
On jurisdiction, Mr Justice Fraser found that Staptina’s notice of adjudication was drafted sufficiently widely to give the adjudicator jurisdiction to decide how the deductions were to be assessed and that, even if that was not the case, AECOM had made submissions in its response about how deductions were to be made which gave the adjudicator jurisdiction to consider the wider issue.
In respect of natural justice, Mr Justice Fraser found that there had been no breach as the adjudicator was entitled to come to an answer on a point before her that was different from the arguments put by the parties. Mr Justice Fraser said that as questions of contractual interpretation often have more than two possible answers, in choosing a third answer not raised by either party the adjudicator did not breach natural justice by finding this third answer. Mr Justice Fraser also found, importantly, that the adjudicator did not have to consult the parties on her draft findings in advance due to the tight timescales of adjudication. The adjudicator did not therefore go off on a frolic of her own.
When I act for referring parties in adjudication I usually try to agree the identity of the adjudicator with the responding party by sending a short list of adjudicators with experience in the particular area of the dispute. I want the adjudicator to be able to use that experience in preparing their decision. If the adjudicator was not able to use that experience to come to the right answer because the parties had adopted overly narrow positions, it would be a waste of that valuable experience. I welcome Mr Justice Fraser’s decision that adjudicators are not to be penned in by the parties’ submissions, and that they may use their experience to come to the right answer, provided of course that they answer the question that has been asked.
If you have any experience of adjudicators going off on “frolics of their own”, please let us know by leaving a comment.