Adjudicator’s frolics - Victory House General Partner Limited v RGB P&C Limited

The Technology and Construction Court handed down another decision on natural justice in adjudications in January that will come as some relief to adjudicators.

Basically, the original contract was to build a hotel, part of which required a transformer. After some delays, the parties entered into a Memorandum Of Understanding (MOU) such that the transformer could be installed and payments made.

RGB P&C Limited’s (RGB) main argument was that the contract was binding and Victory House General Partner Limited’s (VH) main argument was that the MOU was binding. So which was the adjudicator to choose?

The adjudicator instead decided that “the true effect of the MOU was to suspend the obligation on VH to make interim payments under the contract until such time as the transformer was installed and operational”. Of course, no-one had actually made that argument before the adjudicator. That was a new solution to the problem.

VH argued that this was a breach of natural justice. VH said that the adjudicator had gone off on a “frolic of his own”.

The judge disagreed, giving the following reasons (summarised):

• The parties were both aware that a central question was the interpretation of the MOU;
• The adjudicator had asked questions on the point during the adjudication;
• RGB clearly responded to the adjudicator’s questions;
• VH responded to the adjudicator’s questions indirectly;
• VH had the opportunity to respond to the adjudicator’s question directly;
• The rule in Cantillon v Urvasco [2008] is that if a party has argued a point and the other does not come back on that point, it does not cause a breach of natural justice. In this case, the adjudicator had asked questions about exactly this point.

The adjudicator’s decision was therefore upheld.This decision follows a relatively long line of cases from Balfour Beatty Construction v Lambeth [2002], where the court found that the adjudicator’s reliance on his own critical path analysis was in breach of natural justice, to AECOM Design Build v Staptina Engineering Services [2017], where the court has found that an adjudicator is entitled to make a finding that neither party submitted, so long as the parties were sufficiently able to canvass their views on the point.