Keeping things simple: complexity and time pressures in adjudication

The TCC yesterday handed down judgment in Home Group Limited v MPS Housing Limited [2023] EWHC 1926 (KB), enforcing an adjudication for over £6.5 million. Matthew Thorne (instructed by Devonshires Solicitors LLP) acted for the successful claimant.

Background

The claimant (Home Group) is a social housing provider and owns thousands of properties in England and Scotland. The underlying contract, on a JCT Measured Term 2011 form, required the defendant (MPS) to carry out planned and reactive maintenance, minor and emergency works to Home Group’s properties in the south-east of England. The Orders carried out under the contract were generally low value, high volume.

It was decided in an earlier adjudication that MPS had committed a repudiatory breach of the contract in May 2022, bringing the contract to an end. Home Group then commenced a further adjudication for quantification of its losses. The Referral contained a substantial expert report, witness evidence and large quantities of documents and data, covering many thousands of small value work orders, to which MPS was required to respond.  In April 2023, the Adjudicator decided that MPS was liable to Home Group for sums in excess of £6.5 million.

MPS refused to pay and sought to resist enforcement. It contended that it had been unable properly to digest and respond to the material served with the Referral in the time available, and that this was a breach of natural justice, such that the Decision was unenforceable.

The Decision

The Court disagreed. Mr Justice Constable reviewed the authorities on complexity and time-pressure, and distilled the legal position in paragraph 50 as follows:

1. Adjudication decisions must be enforced even if they contain errors of procedure, fact or law.
2. An adjudication decision will not be enforced if it is reached in breach of natural justice and the breach is material, in that it has led to a material difference in the outcome. However, the Court should examine such defences with a degree of scepticism;
3. Both complexity and constraint of time to respond are inherent in the process of adjudication, and are no bar in themselves to adjudication enforcement. Whilst it is conceivable that a combination of the two might give rise to a valid challenge, in circumstances where the Adjudicator has given proper consideration at each stage to these issues and concluded that he or she can render a decision which delivers broad justice between the parties, the Court will be extremely reticent to conclude otherwise;
4. In cases involving significant amounts of data, an adjudicator is entitled to proceed by way of spot checks and/or sampling. The assessment of how this should be carried out is a matter of substantive determination by the adjudicator and an argument that the adjudicator has erred in his or her approach, absent some particular and material related transgression of natural justice, will not give rise to a valid basis to challenge enforcement.  It would, even if correct, merely be an error like any other error which will not ordinarily affect enforcement.

The Judge went on to conclude that, on the facts, MPS’s position was “without merit”. It ought to have taken up an offer to inspect the underlying data on the basis of sampling when that proposal was made some months earlier; and it had received a draft copy of Home Group’s expert report a number of weeks before the Adjudication commenced. Spot checks and sampling are a permissible procedure for an adjudicator to adopt. In the time available, MPS had ultimately been able to identify significant areas of dispute and advance arguments based on sampling. Whilst MPS’s adjudication response “was less comprehensive than would be expected in litigation or arbitration… that is plainly not the test”.

The Judge also gave welcome clarity on the test of materiality, confirming that a party challenging enforcement must show that the alleged breach of natural justice must have led to a material difference in the outcome. The Judge noted at [59] that, despite the time which had passed since the adjudication, MPS had not presented “evidence which they say they would have been able to produce given more time,” and failed to acknowledge the scrutiny given by the Adjudicator to the competing factual evidence.

To take away…

This decision is an important reminder to paying parties that, when faced with claims, they will be expected to engage proactively. Where an adjudicator has decided that he or she is able to do “broad justice between the parties,” arguments of insufficient information, complexity or a lack of time are unlikely to be met with sympathy from the TCC upon enforcement. Where evidence is voluminous, an adjudicator can permissibly proceed by sampling or spot checks.

A strong case will be required if such a challenge is to succeed, and a responding party will need to show that any breach actually affected the outcome.

The full judgment can be found here

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Matthew Thorne FCIArb

Call 2011

Related practice areas

Construction & Engineering