Adjudication: Transparency and the 2 dispute rule

Beumer Group v Vinci Construction [2016] Building Law Reports, page 44 TCC, Fraser J

Facts

Vinci was the main contractor at Gatwick Airport for the South Terminal Baggage Works and engaged Beumer as sub-contractor for the baggage handling system.  Beumer in turn engaged Logan as its sub-sub-contractor for the “tilt tray sorter” which was to form part of the baggage handling system.  Disputes arose both between Beumer and Vinci, and between Beumer and Logan.

On the same day, Beumer started an adjudication against Logan saying that it had delayed Beumer and claiming delay damages; and also an adjudication against the main contractor, Vinci, claiming that Vinci had (also!) delayed Beumer and seeking an extension of time!

Beumer also got the same adjudicator, Dr Chern, appointed in both adjudications.  Neither Dr Chern nor Beumer told either Vinci or Logan that there were 2 adjudications going on.  Neither Logan nor Vinci knew the contradictory case has been made in the 2 separate adjudications by Beumer.

Eventually Dr Chern found in favour of Beumer in the Vinci adjudication.  Vinci refused to pay and discovered that Dr Chern had been involved “secretly” in adjudicating down the sub-contract chain against Logan at the same time.

TCC Held:

1. The Adjudicator had a duty to tell the parties of his involvement in 2 different adjudications at the same time on the same subject. His failure to do so created a clear impression of bias. The failures by both Beumer and the adjudicator to disclose what was going on further created a material breach of natural justice sufficient to invalidate the Adjudication Decision.
2. Beumer had acted improperly in pleading in one direction that the sub-sub-contractor had delayed it, and in the other direction that it had no responsibility for delay which is all down to the main contractor. This not only discredited Beumer but also was a material fact which Logan and Vinci should have been made aware of to enable them to use in their respective adjudications.

Comment

1. The Judge remarked that “adjudication is not the “Wild West”. In other words although adjudication is accepted as rough and ready, it should still be subject to basic rules of professional conduct and commercial honesty.  The Judge said he “took a very dim view of the proprietary of behaviour” where Party A says on one set of proceedings with Party B that the works were completed at a given date and then says in a different set of proceedings with Party C that the works were not yet complete, claiming liquidated damages.  The Judge specifically said “I seriously doubt that a director of a company could sign the statement of truth in two sets of legal proceedings in such circumstances saying such quite different things on the same point.”  The Judge gave a very broad hint that the same issues of commercial fraud which came up in Eurocom v Siemens applied here.
2. In addition to the spotlight shone on Beumer’s behaviour, the Judge had severe words for the Adjudicator. There was not just the unfairness of keeping the other parties in ignorance of what was going on, but also the real risk that in Adjudication 2, representations could be made which the other party to Adjudication 1 would not know of and vice versa.  It is critically important for natural justice that the parties have equality of information, and the opportunity each to make its own case fairly and fully.  Unfortunately the Adjudicator had given a clear appearance of bias which seriously endangered the validity of the Decision.

At the recent TeCSA Annual Conference Mr Justice Coulson referred to this case and commented “Transparency is common sense”.

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