Van Oord v Dragados: To frolic is to fail … if you’re an adjudicator. Adjudicator’s decision not enforced due to a breach of natural justice
The Collins English Dictionary defines frolic as:
“1. a light-hearted entertainment or occasion
2. a light-hearted activity; gaiety; merriment”
While that definition seems pretty apt given the Queen’s recent Platinum Jubilee, I would be happy to bet that neither of the parties in the Scottish case of Van Oord UK Ltd v Dragados UK Ltd  CSOH 30 felt very light-hearted or merry following the adjudicator’s decision in the sixth adjudication between the parties, which arose from Van Oord’s subcontract to dredge silts, sands, gravel and glacial till as part of the Aberdeen harbour expansion project.
In fact, perplexed would probably be a more appropriate response given that the adjudicator determined Van Oord’s entitlement to extension of time and prolongation costs arising from one of four compensation events, using a baseline programme which had been expressly rejected by both parties and their experts.
Whereas Van Oord’s expert sought to rely on a programme from October 2018, and Dragados’ expert relied on a programme from April 2019, the adjudicator based his decision on a rejected programme prepared in March 2019. As a result, the adjudicator determined a critical date which was two days earlier than Van Oord had proposed.
As Dragados pointed out, the issue here was that the adjudicator made his decision without canvassing either the critical date or its consequences with the parties, meaning that neither party was given the opportunity to comment or make submissions on these points, which Dragados argued was a breach of natural justice.
In summary, the court agreed that the adjudicator had gone off on a “frolic of his own” and that fairness demanded that the adjudicator should have given the parties an opportunity to address him on those issues, particularly so that the parties could have dealt with the consequences of the determined critical date.
When does a decision become a frolic?
While no doubt frustrating for Dragados, the adjudicator’s decision does allow us to frolic ourselves (or dwell for you more sensible types) in the rare circumstances where the courts reject adjudication enforcement due to there being a breach of natural justice.
Let’s not forget, we are constantly reminded how the court’s approach to adjudication enforcement is a “robust” one, and that decisions will be enforced whether wrong on the facts or the law.
Enforcement is typically only refused where it can be shown that the adjudicator did not have jurisdiction or that there was a breach of natural justice; and, on this, the courts are clear that it should not take an overanalytical approach to questions of jurisdiction and natural justice arising in adjudications under the Construction Act 1996.
" Where an adjudicator seeks to step beyond the four corners of the parties’ submissions, they must assess their own findings and be able to confidently draw a line between findings which are potentially decisive or of considerable importance to the outcome adjudication, and those which are peripheral or of less importance to the outcome of the decision. It is those decisive findings on which the parties should be invited to comment. "
So, when these judgments do arise, it seems wise for adjudicators and legal practitioners alike to pay close attention to the court’s reasoning, as it is a not always easy to determine when an adjudicator has taken themself off on a frolic.
Ultimately, in Van Oord, Lord Braid agreed with Dragados’ submission that: “it was not for Dragados to show that their argument would have necessarily succeeded, simply that Dragados was deprived of the opportunity of making it”.
The court reminded the parties of the threshold test set down in Barrs v British Wool Marketing Board  S.C 72: the question of whether natural justice has been breached was not “has an unjust result been reached?” As most of us know, adjudication is not called “rough justice” for nothing. It is well accepted that the need to have a right answer sometimes gets trumped by the need for a speedy resolution of the dispute. Instead, the key question is “was there an opportunity afforded for injustice to be done?”
Unfortunately, there is no straightforward answer to this. If anything, it is one of those questions which generates even more questions, such as: what opportunity should adjudicators look out for, and how many times must the parties be approached for comment or submissions before an adjudicator can be confident that an opportunity for injustice has been avoided?
In the case of Van Oord, it seems clear that the adjudicator created an opportunity for injustice by not giving the parties a fair opportunity to present their submissions on his critical date findings, particularly when they were based on a factual point that was not argued or put before him by the parties; in fact, it was expressly rejected not only by both parties, but also by their independent experts.
Dragados argued that, had it been aware the adjudicator was considering an alternative critical date, it would have argued that Van Oord’s entire claim was time barred under the subcontract. This was a material issue between the parties and one which required the parties’ submissions.
In other cases, the circumstances are not as clear cut, which is hardly surprising given the discretion given to adjudicators. For example, the Scheme for Construction Contracts (England & Wales) Regulations 1998 provides that the adjudicator may take the initiative in ascertaining the facts and the law necessary to determine the dispute, and the courts have previously been clear that an adjudicator may adopt an intermediate position not argued for by either party without giving notice of their intention to do so.
In practice, it is not unusual for an adjudicator to come to a decision that is not wholly based on the parties’ submissions, but which derives from the adjudicator’s own knowledge or previous experience. Such an approach may even be welcomed by the parties who are both keen to settle the dispute.
However, practically, the difficulty for adjudicators comes from striking a balance between the fairness demanded by natural justice and ensuring the adjudication process remains a speedy and cost-effective means of settling disputes provisionally. For example, how many times can an adjudicator ask the parties for submissions before undermining one of the main purposes of adjudication, namely a speedy decision?
Arguably, it is unrealistic and counterintuitive to the underlying purposes of adjudication to expect an adjudicator to request submissions from the parties on all of the adjudicator’s observations or initial views up to the point of issuing their decision.
It seems that, where an adjudicator seeks to step beyond the four corners of the parties’ submissions, they must assess their own findings and be able to confidently draw a line between findings which are potentially decisive or of considerable importance to the outcome adjudication, and those which are peripheral or of less importance to the outcome of the decision. It is those decisive findings on which the parties should be invited to comment.