Delegation of Decision Making Function
By Victoria Russell, Fenwick Elliott
John Sisk & Son Ltd v Duro Felguera UK Ltd [2016] EWHC 81 (TCC) (25 January 2016)
Sisk applied to the court to enforce a decision of an adjudicator in which he had awarded them a sum in excess of £10M. The Defendant, Duro, resisted the application on the ground that there were breaches of natural justice and/or a wrongful delegation of the adjudicator’s decision making function.
Duro relied on three matters. First, they said that there was a real danger that the adjudicator had approached certain issues with a closed mind. Second, he had delegated, or at least he had appeared to have delegated, certain parts of his decision making role to a third party, without notifying the parties of this or seeking their consent. Third, he purported to rectify or to amend the contract in circumstances where neither party had submitted that it should be rectified and without giving the parties any notice of his intention to take that approach.
In his judgment, Mr Justice Edwards-Stuart dealt with many issues which commonly arise in adjudication enforcement proceedings, relating to a breach of the rules of natural justice, such as bias or pre-determination, the adjudicator not consulting the parties and going off on a “frolic of his own”. In this instance, he enforced the adjudicator’s decision, holding that the adjudicator did not breach the rules of natural justice and that he did not wrongfully delegate parts of his decision making role to a third party.
The third party concerned was a quantity surveyor and a qualified lawyer. He was not an adjudicator. He attended a meeting but no comment was raised by or on behalf of Duro about his involvement until over two weeks after the adjudicator had issued their decision and nearly two month after the meeting in question.
When queried as to the third party’s role, the adjudicator replied by saying that he had taken a note for him so the adjudicator, “could concentrate on the matter in issue. At other times he also did certain items of checking and research into matters that I directed he review on my behalf. I have made no charge for his involvement for the time he worked on this application”.
Further enquiries of the adjudicator then followed, with the adjudicator describing the inference that the third party was the author of integral parts of his decision as “plainly incorrect”.
The Judge said that he could see no basis for doubting the adjudicator’s statement that he had asked the third party to produce spreadsheets that assembled similar items of work from different areas of the project so that the adjudicator could deal with all similar items in a consistent manner. The Judge said that:
“In my judgment, that exercise is simply one of assembling information in a particular order; it does not involved any decision making (save the very mundane level of deciding which items should be grouped together)”.
The Judge could find “no evidence that any material decision or valuation” was taken by the third party, rather than by the adjudicator and, felt that, on the contrary, the documents were entirely consistent with the adjudicator’s explanation that the third party’s role “was that of a data handler and manipulator and a general administrative assistant”.
The Judge said:
“61. Stepping back for a moment and looking at the position overall, I have to say that the more that I have examined Duro’s submissions in relation to the role of Mr Hutchinson [the third party] the less compelling I have found them to be. The Adjudicator had to assimilate within the very short timescale allowed in an adjudication information that was in some 20 lever arch files. Without the assistance of someone who could assemble and manipulate the data in a manner that made the figures manageable, the Adjudicator’s task would have been almost insuperable. I find it surprising that the court has been given no explanation for the delay of almost two months that elapsed after the meeting of 3 September 2015 before [Duro’s solicitors] raised the question of Mr Hutchinson’s involvement in the adjudication. It seems extraordinary that no one in Duro’s camp asked about his role unless, of course, it had been explained at the outset of the meeting on 3 September 2015 as the Adjudicator has described. Adjudication is a private and confidential process and so, if there was an outsider at that meeting whose position and role was not explained, I find it hard to believe that Duro’s representatives… would not have asked what he was doing…
62. In these circumstances, Duro has come nowhere near persuading me that any relevant part of the decision making process was delegated to Mr Hutchinson. Regrettably, it appears that Duro is effectively challenging the honesty of the Adjudicator’s responses to the questions put to him without having any reasonable justification for doing so.”
Duro’s challenge to the adjudicator’s decision therefore failed on every ground, and Sisk was awarded summary judgment.
An adjudicator may be in breach of the rules of natural justice by failing to consult with both parties about taking advice from a third party. Although the challenge in this case failed, adjudicators should take note and make sure that they consult with the parties and clearly explain the role of any third party engaged to assist with the adjudication process.