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Scope of Duty

Published 17 December 2018

Breach of natural justice – a tool to resist enforcement?

The recent decision in Synergy Gas Services Limited V Northern Gas Heating Limited [2018] EWHC 3060 (TCC) is the latest example of the losing party to an adjudication decision attempting to resist enforcement on the basis that the adjudicator breached the rules of natural justice when reaching his decision.

Facts of the Case

Synergy Gas Services Limited (“Synergy”) issued a claim for summary judgment in the TCC following the failure of Northern Gas Heating Limited (“Northern Gas”) to pay the sum of c. £75,000 to Synergy following an adjudicator’s decision in their favour.

The sums claimed by Synergy in the adjudication related to unpaid invoices for services rendered to Northern Gas.  Northern Gas sought to set off or deduct from the sums owed the costs of various alleged remedial works.  The adjudicator found in favour of Synergy because clause 14.4 of the contract required Northern Gas to notify Synergy of any defective work and offer them the opportunity of remedying such work as pre-condition to deduction or set-off of any sum.  No such notice was provided by Northern Gas and therefore it was not entitled to deduct or set off sums against Synergy’s outstanding invoices.

Resisting enforcement

In response to Synergy’s application for summary judgment, Northern Gas sought to argue that the adjudicator’s decision should not be enforced on the basis that the decision breached the rules of natural justice because:

The adjudicator reached his decision on the basis of matters not raised by the parties; and the adjudicator reached his decision without taking into account matters raised by Northern Gas.

The Court’s decision

The crux of Northern Gas’s argument for breach of natural justice was that the adjudicator decided the requirement to give notice under clause 14.4 was a condition precedent to deduction or set off by Northern Gas, and this was not argued for or put to him by Synergy.  As a result, the adjudicator reached his decision on a matter not raised by the parties and/ or without taking into account matters raised by Northern Gas.

The Court did not agree and found for Synergy.  In the whole, Synergy’s case centred around whether Northern Gas was entitled to deduct or set off any sum.  There were plenty of references to clause 14.4 in the Referral and the Reply, in particular, in a detailed Scott Schedule which referred to clause 14.4 and set out why Northern Gas was not entitled to deduct or set off sums from Synergy.  The principal reason was that Synergy was never provided with an opportunity to inspect or remedy the purported defects.

The Court held the in deciding whether Synergy was afforded this opportunity the adjudicator necessarily had to consider the whole of clause 14.4 and the requirement for Northern Gas to give notice.  The Court found that the "…allegation of a non-opportunity to repair sweeps up the allegations of no notice because without notice any need to repair is unknown…".

The Court also took the opportunity to re-state the leading case law in this area and made clear the approach that will be taken by the Court when considering arguments for breach of natural justice:

Carillion Construction v. Devonport Royal Dockyard [2006] BLR 15 is the starting point; the courts will respect and enforce an adjudicator’s decision unless it is plain that (i) the question which he has decided was not the question referred to him or (ii) the manner in which he has gone about his task is obviously unfair.

This point was confirmed in Beumer Group UK Limited v. Vinci Construction UK Limited [2016] EWHC 2283 where the Court held that for breaches of natural justice to be sufficient to justify the Court declining to enforce an adjudicator's decision, they must be the plainest of cases – the adjudication proceedings must have been obviously unfair.  The court also gave the following warning in that case which is particularly pertinent in light of Northern Gas’s position:

“…Combing through what has occurred, or concentrating on the fine detail of the material before the Adjudicator, to allege a breach of natural justice, will neither be encouraged nor permitted by the Court…”

Commentary

This case serves as a useful reminder of the Court’s attitude towards parties who attempt to resist enforcement of an adjudicator’s decision on the basis of a breach of natural justice.  It will only be possible to establish such a breach in the plainest of cases and where the adjudication has been obviously unfair.  This ground is difficult to establish and should be approached with extreme caution.

Authors

Mark Roach

Mark Roach

London - Walbrook

+44 (0)20 7894 6314