Introduction

The case of Van Oord UK Limited (the Pursuer) against Dragados UK Limited (the Defender) adjudicated by the Scottish Court of Session on April 7, 2022, centers on the adherence to the principles of natural justice within construction adjudication processes. This dispute arose from a sub-contract agreement related to the Aberdeen Harbour Expansion Project, where disagreements over delays and compensations led to multiple adjudications. The pivotal issue examined whether the adjudicator acted fairly by making decisions on matters not previously discussed with the involved parties, thereby possibly breaching natural justice.

Summary of the Judgment

The court examined whether the adjudicator in the construction dispute had made decisions based on facts and dates not presented to both parties, specifically concerning the critical date related to compensation events CEN 048 and CEN 055. The adjudicator had selected a baseline program and a critical date that neither party had contended, leading the Defender to argue a breach of natural justice. The court found in favor of the Defender, determining that the adjudicator had indeed breached natural justice by adopting a critical date and baseline program not agreed upon or discussed with the parties, rendering the decision unenforceable.

Analysis

Precedents Cited

The judgment extensively referenced several key cases to delineate the boundaries of natural justice within adjudication:

• Carrillion Construction Ltd v Devonport Royal Dockyard Ltd [2005] - Emphasized the courts' general stance on summarily enforcing adjudicator decisions unless there's a clear breach of natural justice.
• Costain Limited v Strathclyde Builders Limited [2004] - Highlighted that parties must be given a fair opportunity to present their cases.
• Roe Brickwork Ltd v Wates Construction Ltd [2013] - Stressed that adjudicators should not decide on matters not argued by either party.
• Balfour Beatty Engineering Services (HY) Ltd v Shepherd Construction Ltd [2009] - Defined when a breach of natural justice is material.
• Miller Construction (UK) Ltd v Building Design Partnership Ltd [2014] - Affirmed that adjudicators can take intermediate positions without prior notification.

These precedents collectively shaped the court's approach, establishing that while adjudicators have leeway in decision-making, they must adhere to fairness and provide opportunities for parties to respond to significant or novel decisions.

Legal Reasoning

The court's legal reasoning was anchored in the principles of natural justice, particularly the right to a fair hearing. It scrutinized whether the adjudicator had deviated from the submissions made by the parties without offering an opportunity to address such deviations. The crux was whether the selection of the March 2019 program and the establishment of a critical date earlier than proposed by the Pursuer constituted a material breach of natural justice.

The court concluded that by adopting a baseline program and critical date not advocated by either party, the adjudicator introduced novel elements without affording the parties a chance to contest or discuss these changes. This deviation was deemed material because it potentially altered the dispute's resolution without proper procedural fairness.

Impact

This judgment reinforces the necessity for adjudicators to maintain procedural fairness, especially when making decisions on matters not directly presented by the parties. It underscores that even within the flexible framework of adjudication, the principles of natural justice cannot be sidelined. Future adjudications will likely see heightened vigilance to ensure that all significant decisions are either supported by party submissions or followed by opportunities for parties to respond.

Complex Concepts Simplified

Conclusion

The Van Oord UK Ltd v Dragados UK Ltd case serves as a pivotal reminder of the paramount importance of natural justice within adjudication processes. By ruling that the adjudicator breached natural justice principles through unilateral decision-making on undisputed matters, the court has set a clear precedent. Adjudicators must ensure that all significant decisions, especially those altering the dispute’s core aspects like baseline programs and critical dates, are either rooted in party submissions or accompanied by opportunities for parties to respond. This judgment not only reinforces procedural fairness but also promotes transparency and accountability in construction adjudications.