Adjudication: an iterative process?

On 11 August 2023, the Irish High Court delivered judgment enforcing two adjudicator’s decisions in DNCF Ltd. v Genus Homes Ltd. [2023] IEHC 490. Central to the judgment is a consideration of whether an adjudicator is under a positive obligation to request further and better particulars in relation to the positions advanced by the parties. The court confirmed that adjudication is not an iterative process, and that an adjudicator is not under a positive obligation to invite the parties to elaborate upon their submissions to shore up their positions.

Background

The works, the subject matter of the adjudications, reached substantial completion in December 2022. The applicant contractor did not immediately submit its final account and the respondent employer carried out a final account assessment in February 2023. The assessment produced a figure in favour of the respondent (i.e. an overpayment by the employer) of €1.6m.  This assessment appears to have precipitated the adjudications commenced by the contractor.

The respondent’s architect had issued a February 2023 payment certificate, which indicated that the applicant had been overpaid. The respondent contended that the overpayment shown on the certificate could be set off against the amounts claimed by the contractor in the adjudications.

The payment certificate had not been included in the documentation that the respondent submitted to the adjudicator. The adjudicator queried its absence, and the certificate was then provided by the respondent, but without any detailed breakdown of the sums stated in it. The adjudicator concluded that the payment certificate could not give rise to a set off because no explanation for the negative figure had been provided.

The respondent resisted enforcement of the adjudicator’s decisions on several grounds. Including that the adjudicator had failed to indicate to the respondent that he was going to refuse to set off the amount stated in the February certificate because a breakdown of the payment certificate had not been provided. The respondent contended that the adjudicator was obliged to alert the respondent to this and to give the respondent an opportunity to provide the breakdown.

Decision

When considering a breach of fair procedures. the court said that it must be wary not to be drawn into a detailed examination of the underlying merits of the adjudicator’s decision, under the guise of being asked to identify a breach of fair procedures.

This was not a case where the adjudicator had embarked ‘on a frolic of their own.’ The respondent had raised the issue of overpayment by reference to the February payment certificate but had not provided the certificate to the adjudicator until requested to do so. A detailed breakdown of the figures contained therein was not provided. The court considered that the respondent’s approach naturally carried with it the risk that the adjudicator would find that the relevant line of defence had not been substantiated.

Simons J concluded that the adjudicator had not breached fair procedures stating (in paragraph 33) that:

‘The fundamental flaw with the employer’s argument is that it necessitates regarding adjudication as an iterative process, whereby the adjudicator is under a positive duty to invite the parties to elaborate upon their submissions. This is not what the law requires.’

And (in paragraph 34) that:

‘It is not a matter for an adjudicator to “advice proofs” for any party. On the facts of the present case, the onus lay with the employer to put forward such evidence as it thought fit to substantiate its defence. There was no obligation upon the adjudicator to assist the employer to make its case.’

Simons J noted that the adjudication process is, primarily, adversarial in nature. Whereas an adjudicator has discretion to adopt an inquisitorial role, the adjudicator is not obliged to do so. In Ireland, the default position is that leave to enforce will generally be allowed once the formal proofs as prescribed under the Act and Order 56B of the Rules of the Superior Courts have been established.  The High Court will only refuse leave to enforce an adjudicator’s decision on the grounds of procedural unfairness where there has been a blatant or obvious breach of fair procedures, which has had a potentially significant effect on the overall outcome of the adjudication, such that it would be unjust to enforce the immediate payment obligation. However, Simons J cautioned that:

‘11 … if an adjudicator has genuinely gone off on a frolic of his own and has reached a decision by reference to a legal or factual point which had not been advanced by either side, and which the parties could not reasonably have anticipated might be considered relevant, then this would reach the threshold of a blatant or obvious breach of fair procedures.’

Simons J discussed, in the same paragraph, conduct by adjudicators that would not amount to a breach of fair procedures:

‘The adjudication process is intended to be expeditious, and the adjudicator is entitled to make use of his specialist knowledge where appropriate.  Moreover, an adjudicator is not necessarily restricted to reaching a conclusion which coincides precisely with the position advocated for by one or other of the parties.  Rather, the adjudicator can reach his own conclusions on the basis of the materials before him in respect of which the parties have had an opportunity to make submissions. Thus, for example, if the dispute in an adjudication centres on the correct interpretation of a contractual clause, the adjudicator is not necessarily bound to plump for the interpretation favoured by one or other of the parties.’

The court is not under an obligation to help a party with its defence and advise that further evidence is required. This applies equally to adjudication. Simons J stated that:

‘36 … An adjudicator does not have a role in cajoling the parties to elaborate or improve upon their cases.  The adjudicator was entitled, consistent with fair procedures, to reach a decision on the basis of the materials put before him by the parties.  The adjudicator was not obliged to enter into a dialogue with the employer nor to invite the employer to shore up its defence by adducing further evidence.  Indeed, there would be no such obligation on a court of law to do so in similar circumstances.’

Conclusions

The judgment provides another example of the Irish Courts’ continued support for adjudication and gives useful guidance in relation to an adjudicator’s obligations under the Construction Contracts Act 2013. An adjudicator is not under a positive obligation to invite the parties to elaborate on their positions, or to provide the parties with an indication of his or her proposed findings. An adjudicator may conduct the process on an inquisitorial basis but is not obliged to do so. An adjudicator can reach their own conclusions based on the material put forward by the parties and upon which the parties had an opportunity to comment. The conclusions reached need not coincide precisely with the position advocated by one or other of the parties.

For further information in relation to this topic, please contact Conor Owens, partner, Enda O'Keeffe, partner, Paul Hughes, senior associate, or any member of ALG's Construction & Engineering team.

Date published: 16 August 2023