Babcock Marine (Clyde) Ltd v HS Barrier Coatings Ltd

[2019] ScotCS CSOH 110 

In Issue 232, we discussed the case of Dickie & Moore Ltd v McLeish & Others where an adjudicator had been assisted by a quantity surveyor, described as a pupil. On the facts, the courts did not consider that there had been a breach of natural justice. Here the parties had entered into a contract for the re-preservation of shiplift docking cradles at HM Naval Base Clyde. The contract incorporated the NEC3 Engineering and Construction Short Contract (June 2005) with bespoke Z clause amendments. Disputes had arisen and on being appointed, the adjudicator wrote to the parties confirming acceptance of the appointment.  Paragraph 14 of the “Terms and Conditions of Appointment” stated: “If I require quantity surveying input during the Adjudication I will utilise the resources of [...]. This matter is at my absolute discretion and I will not require the consent of the parties.” The decision was issued on 22 March 2019. The accompanying fee note said: “QS assistance – 28 hours @ £95 £2,660.”

HS brought proceedings in Scotland in July and at the end of September referred to the QS assistance saying that: “To the extent that the defender was not advised of the appointment of the QS and the nature of the assistance provided by him, an opportunity has been afforded for injustice to be done.” This was a breach of natural justice. Further, it would be necessary to inquire into the precise nature of the services provided by the QS to determine whether the breach of natural justice had in fact been material.

Babcock contacted the adjudicator who referred to paragraph 14 of his terms saying that the use of QS assistance had been entirely at his discretion and he did not need to advise the parties of it. The parties had known about this since March 2019 but no issue had been taken with it. He further noted that he thought that the assistance provided could have been of a clerical and administrative nature. 

When it came to the QS assistance, it was agreed that the relevant test was not “Has an unjust result been reached?” but “Was there an opportunity afforded for injustice to be done?” However, immaterial breaches of natural justice would not render a decision unenforceable: the provisional nature of an adjudicator’s decision justified ignoring non-material breaches.

The question for Lord Doherty was whether it could be said at this stage, without inquiry, that this defence was bound to fail; in the usual way this was an application for summary judgment not a full trial. The Judge did not think that paragraph 14 communicated an intention to employ QS assistance. It made provision for what would happen if it subsequently transpired that the adjudicator considered that he was going to need QS surveying input. It was also going “too far too fast” to infer at this stage that the assistance provided by the QS was of a type which did not require to be disclosed. It was arguable that clause 2.3 concerned matters which were likely to be material to the decision-making process (“help that he considers necessary in reaching his decision”), such as QS opinion or advice upon which an adjudicator proposes to rely. With material of that sort, fairness required that it be disclosed to enable the parties to comment on it. 

The Judge “inclined” to the view that even if the assistance provided by the surveyor was merely clerical and administrative, natural justice required (i) that the adjudicator ought to have told the parties that the surveyor had been engaged; and (ii) that while detailed disclosure for comment would not have been necessary, the adjudicator ought to have indicated (in brief, broad terms) just what it was that the surveyor was doing. Here, the Judge could not, without inquiry, conclude that there had not been a material breach of natural justice. Therefore whilst the Judge observed that it was “highly regrettable” that HS took six months to raise the complaint, he concluded that it was in the interests of justice that there should be an inquiry or full hearing. 

Back to the previous page

Click to download PDF