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Natural Justice in Adjudication – How is it determined?

31 May 2017

When involved with construction adjudication, you often hear and come across the use of the term ‘natural justice’, i.e. the adjudicator is obliged and should always ensure that natural justice prevail. But what exactly does this entail and when is natural justice breached?

A recent UK judgment “Dawnus Construction Holdings Limited v Marsh Life Limited [2017] EWHC 1066 (TCC) (11 May 2017)” (“Dawnus case”), dealt with an application brought by the claimant (Dawnus Construction Holdings Limited) for summary judgment for the enforcement of an adjudication decision and in defending the application, the defendant (Marsh Life Limited) argued that the adjudicator failed to apply the rules of natural justice by failing to consider and deal with certain of the defendant’s defences that was put forward. This article is not intended to deal with the facts of this particular case, but mainly to clarify principles of ‘natural justice’ as was determined by the courts (most of which are from the UK, but can be cited and referred to when dealing with similar issues and disputes in South Africa).

In the Dawnus case, dealing with natural justice, the court referred to a matter, “Hutton Construction v Wilson Properties [2017] EWHC 517 (TCC)” (“Hutton case”). In this case the judge inter alia stated that “the starting point… is that, if the adjudicator has decided the issue that was referred to him, and he has broadly acted in accordance with the rules of natural justice, his decision will be enforced” (Macob Civil Engineering Limited v Morrison Construction Limited [1999] BLR 93), and it was further said that “Adjudication decisions have been upheld on that basis, even where the adjudicator has been shown to have made an error” (Bouyques (UK) Limited v Dahl-Jensen (UK) Limited [2000] BLR 522.). In “Carillion Construction Limited v Devonport Royal Dockyard Limited [2006] BLR 15), the judge stated that “the need to have the ‘right’ answer has been subordinated to the need to have an answer quickly.”

As you note from the above, few matters have dealt with this issue regarding the principles of natural justice.

The Dawnus case further confirmed that the authorities have consistently emphasised that, for a breach of natural justice to be a bar to enforcement, the breach must be “plain“, “significant“, “causative of prejudice” or “material“.

In considering earlier authorities, in “Cantillon v Urvasco [2008] BLR 250” (“Cantillon case”), the applicable principles related to breaches of natural justice in adjudication were summarised to be the following:

a) It must first be established that the adjudicator failed to apply the rules of natural justice;

b) Any breach of the rules must be more than peripheral; they must be material breaches;

c) Breaches of the rules will be material in cases where the adjudicator has failed to bring to the attention of the parties a point or issue which they ought to have given the opportunity to comment upon which it is one which is either decisive or of considerable potential importance to the outcome of the resolution of the dispute and is not peripheral or irrelevant.

d) Whether the issue is decisive or of considerable potential importance or is peripheral or irrelevant obviously involves the question of degree which must be assessed by any judge in any case such as this.

e) It is only if the adjudicator goes off on a frolic of his own, that is wishing to decide a case upon a factual or legal basis which has not been argued or put forward by either side, without giving the parties an opportunity to comment on or, where relevant put in further evidence, that the type of breach of the rules of natural justice with which the case of Balfour Beatty Construction Company Ltd v The Camden Borough of Lambeth was concerned comes into play. It follows that, if neither party has argued a particular point and the other party does not come back on the point, there is no breach of the rules of natural justice in relation thereto.”

Based on the above, it does seem straight forward. If you are an adjudicator or looking to become one, stay updated with most recent cases on these type of topics, whether to be found under our own South African law, UK or otherwise. It is important to keep ahead with the game to prevent that you fall subject to a possible review of your adjudication decision/ruling.

Author: Barry Herholdt – Associate