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Stuck in the middle with you: Lessons for adjudicators and contractors

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Often, a party in the middle of a contractual chain can find itself tempted to argue one thing up the chain to its employer, and the exact opposite down the chain to its subcontractor.  In Beumer v Vinci, the court had words of warning for contractors in this position, and refused to enforce an adjudicator’s decision where the adjudicator had failed to disclose his involvement in a related adjudication with another party in the chain.

Judge Peter Fraser QC took “a very dim view” of Beumer’s conduct, although it was doing what any number of contractors before it have done, namely arguing as against its sub-subcontractor, Logan, that contractual completion (Airport Operational Readiness or AOR) had not been achieved by a particular date, and the exact opposite, that it had been achieved, against Vinci, the main contractor up the line.

The contract (which was on the NEC3 standard form Option A, with dispute resolution clause W2) was for the baggage handling system at the South Terminal of Gatwick Airport. Vinci was the main contractor, and its subcontractor was Beumer. The subcontract was on the NEC3 standard form of Subcontract. Beumer engaged a sub-subcontractor, Logan, to install the till tray sorter. Disputes arose on both the subcontract and the sub-subcontract, and these were referred to adjudication.

Dr Cyrill Chern was one of three named parties for resolving disputes both in the main contract and the subcontract, and therefore seemed like the perfect candidate to adjudicate both disputes. Dr Chern was appointed in an adjudication between Beumer and Logan, and one between Beumer and Vinci. 

Subsequently Beumer entered into another dispute with Logan in which Beumer argued that Logan was late completing the subsubcontract works, and that second Beumer/Logan dispute was referred to Dr Chern for adjudication.  Beumer also entered into a dispute with Vinci in which it argued that the works were complete in time as it was entitled to an extension of time as a result of Vinci instructions which it argued were compensation events.  When Dr Chern came to be appointed in the Beumer/Vinci dispute, he did not inform Vinci of his involvement in the second Beumer/Logan adjudication.

Dr Chern found in favour of Beumer, that certain Vinci instructions were compensation events, and made certain declarations. Vinci refused to honour these declarations, and when Beumer applied for summary judgment to enforce the decision, Vinci objected on the grounds that there had been a breach of natural justice.

Noting that for a breach of natural justice to be sufficient to prevent enforcement of an adjudicator’s decision, the proceedings must have been obviously unfair, the judge considered that this was such a case.  Had Dr Chern disclosed his involvement in the second Beumer/Logan adjudication, most of the problems that arose subsequently could have been avoided. Vinci could have sought disclosure of the submissions that Beumer had made in that related adjudication, and Dr Chern could and probably would have ordered disclosure of those submissions. The case offers some clear advice to adjudicators who are appointed to adjudicate related disputes, which is that disclosure is key. 

The judge had some critical words for parties engaged in related adjudications in which they argued inconsistent sets of facts, stating that a director of a company could not have signed statements of truth in two sets of proceedings. He stated that “adjudication is not the wild west of dispute resolution.”

In our view, adjudication should not be the Wild West, but on occasion it can still be.  There is a problem of parties advancing inconsistent cases in different adjudications.  Lawyers involved in cases will consider their own ethical requirements in this regard, but what steps could be taken more generally to reduce the incidence of this tactic?  One idea (which worked in this case, eventually) is to have a named dispute resolver for disputes at various levels in the chain.  It is only because Dr Chern was adjudicator in both disputes that the issue arose and Vinci could find out what Beumer was doing.  Another idea is to require (or request) that submissions and witness statements be verified by a statement of truth.  That is not formally required in adjudication, and it is difficult to see how one would enforce a breach of a statement of truth.  Nonetheless, if individual adjudicators were to ask for statements of truth, it could have a salutary impact on parties to adjudications. 

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