Material breach of natural justice by adjudicator

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ABB v BAM Nuttall [2013] CILL. TCC, Akenhead J

ABB was the main contractor on power upgrade works on the London Underground.  BAM Nuttall was its sub-contractor to design and install new cabling on the NEC3 form of sub-contract.  There was a clause (11.1A) which provided that the sub-contract could not be altered or amended except expressly in writing and signed by the parties.  BAM submitted a claim for additional works.  It maintained that it had submitted quotations which the contract deemed to be accepted if ABB did not respond in time.  ABB’s defence was that there was an unwritten agreement between the parties entitling ABB to respond to quotations outside the contractual time limit so that it was not bound by such quotations simply because of the passage of time.

The adjudicator did not consult either party upon the meaning and effect of clause 11.1A but adopted this clause in his Decision as grounds for rejecting ABB’s argument and awarding £973,000 to BAM.  BAM refused to pay.

High Court Held

  1. Neither of the parties had relied upon or referred to clause 11.1A in the adjudication.  The adjudicator made no mention of it before publishing his Decision.  He therefore clearly failed to comply with the rules of natural justice.
  2. This breach was material because if he had given the parties opportunity to make submissions then he might have received submissions of fact or law which would have caused him to form a different view.

Comment

  1. This was an easy mistake for an adjudicator to make.  The time pressure is intense, the arguments are often extremely complex and the papers voluminous.  A point which may be very obvious to an adjudicator when reading the papers may in fact not have actually been mentioned to him by either party.  Sometimes the mistake is not “material” in that the adjudicator may have based his finding on several alternative grounds and the courts are clear that not every mistake in procedural fairness will invalidate a Decision.
  2. Clause 11.1A was an amendment to the standard NEC sub-contract but it is quite a common arrangement.  The Judge remarked in passing that an agreement about a price for a compensation event does not amount to a variation or amendment of the sub-contract itself.  Also such a provision can be dispensed with by the agreement of the parties whatever it may say.

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