Essential Living (Greenwich) Limited v Conneely Facades Limited

Adjudicator "not guilty" of pre-determination and apparent bias.

Arguments to resist adjudication enforcement should be carefully considered, as a failure to persuade the court of their merits may result in a costs penalty.

In the recent case of Essential Living (Greenwich) Limited v Conneely Facades Limited [2024] EWHC 2629 (TCC) the Technology and Construction Court (TCC) upheld the enforcement of an adjudicator’s decision and dismissed the defendant’s claims that the adjudicator had breached the rules of natural justice by pre-determining the case and hence that he was biased. The judge further considered that the points raised were "unmeritorious" and "inappropriate" and awarded costs on an indemnity basis.

Background

• In 2017 Essential engaged Conneely to carry out design and construction works in connection with the cladding of a development at Greenwich Creekside.
• In February 2024 Essential commenced an adjudication against Conneely alleging that a brick slip cladding system designed and installed by Conneely was defective.
• During the adjudication Conneely requested disclosure of an earlier adjudication decision between Essential and another trade contractor. Conneely argued that the alleged defects were occasioned by breaches of contract by other parties and Essential was seeking double recovery of costs.
• The adjudicator rejected the disclosure application. Reasons for his rejection included that the earlier adjudication occurred prior to the first appearance of the defects which formed the subject of this adjudication and the request to disclose the decision, expert report and all other submissions "including, but not limited to the Referral, Response and Reply" were too vague to be justified and suggested that in the circumstances "the suggestion of double recovery is fanciful".
• The adjudicator further directed that these were "matters for Conneely’s experts to address by Response to the Referral in this Adjudication" and in response to criticism from Conneely confirmed that he was "willing to reconsider it in the light of evidence adduced by Conneely".
• In April 2024, Conneely produced a document confirming that following its own review, it did not consider that Essential Living had double counted the claim.
• The adjudicator issued his decision on 19 April 2024.
• On 15 May 2024, Conneely paid the adjudicator’s fees without reservation.

Allegations of pre-determination and bias – a breach of the rules of natural justice?

Essential applied for summary judgment. Conneely resisted enforcement on the basis that the adjudicator had breached the rules of natural justice by his ruling on the application for disclosure, which made a determination about the strength of Conneely’s case and there was "a real possibility that he had pre-determined the case, and hence that he was biased".

The court considered these allegations in the context of "the rough and temporary justice which characterises adjudication" and in particular considered that "adjudication decision should be enforced summarily unless there is a serious breach of the rules of natural justice" and "such breach must make 'a material difference to the outcome'".

The judge firmly rejected the natural justice challenge raised by Conneely for the following reasons:

1. The adjudicator’s ruling in relation to the application for disclosure was not a breach of the rules of natural justice, "let alone a serious breach", and the adjudicator was quite entitled to describe Conneely’s position in this regard as "fanciful".

2. At every stage the adjudicator left it open to Conneely to pursue both the disclosure materials and the causation and double recovery points.

3. Even if there were a breach, it did not make a "material difference" to the outcome. The judge noted that Conneely had abandoned the double recovery point in any event.

4. There was no predetermination. Conneely were unable to point to any issue decided against them where the adjudicator had expressed a prior concluded or even firm view.

5. In any event, Conneely’s payment of the adjudicator’s fees without reservation amounted to a wavier of the natural justice objection they had previously made and sought to pursue in this challenge.

In relation to point 5 above, the judge considered that Conneely could have paid the adjudicator’s fees while explicitly maintaining their natural justice objection. That would have kept the natural justice objection alive, while alleviating any concerns about paying the adjudicator’s fees (in circumstances where the adjudicator was threatening to issue a statutory demand in support of his fees claim).

This failed challenged proved to be a costly one for Conneely. The judge considered that the points raised by Conneely were "unmeritorious" and that they had "chosen to make an attack upon the way in which this very experienced adjudicator went about his duties, which seems to me have been wholly inappropriate". For these reasons, costs were awarded on an indemnity basis.

Key takeaways

• Adjudications will continue to be summarily enforced by the courts, pending a serious breach of the rules of natural justice.
• Further, any such breach must make a material difference to the decision, in order to be a realistic challenge to enforcement.
• Running "unmeritorious" arguments in response to an application for enforcement could result in a penalty to the offending party by way of an award for indemnity costs.
• Payment of the adjudicator’s fees, without explicitly referring to any ongoing natural justice objection, may constitute a deemed waiver of such an objection during future enforcement proceedings.

Absent a serious breach of the rules of natural justice which make a material difference to the decision, it is unlikely that a challenge to enforcement of an adjudication award will be successful. Further, parties need to ensure that they do not accidentally waive their right to raise a challenge at enforcement, by making payment of adjudicator’s fees without appropriate reservation. And finally, parties should carefully consider whether their proposed challenges are appropriate, as a failure to persuade the courts of the merits of the issues could be costly.