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Failure to make reservations dooms challenge to adjudicator’s decision

August 2017 - Issue 96

In Dawnus Construction Holdings Ltd v Marsh Life Ltd (2017 EWHC 1066) a hotel developer resisted enforcement of an adjudicator’s decision, claiming that there had been a breach of the rules of natural justice.

Facts of the case

Marsh engaged Dawnus to design and build a hotel and retail/restaurant unit in Poole. The project fell into delay and the contract was terminated. Various disputes arose between the parties, leading to a total of four adjudications. The Court was concerned with the decision of the fourth adjudication, which was referred by Marsh Life seeking a valuation of the account upon termination. Although it was Marsh that had made the referral, the Adjudicator found in favour of Dawnus. The total amount said by the Adjudicator to be due to Dawnus came to just under £1.5 million.

Marsh Life sought to resist enforcement on the basis that the adjudicator had allegedly committed serious breaches of the rules of natural justice in failing to consider the defences Marsh Life had advanced in relation to Dawnus’ claim for loss and expense.

Marsh Life argued that there had been a breach of natural justice in that the Adjudicator had failed to consider and deal with various defences that they had put forward. However, the Judge first had to consider whether Marsh, by inviting the Adjudicator to correct the errors in the decision under the slip rule, was accepting the validity of the decision. By doing this without a general reservation of rights, Dawnus said that Marsh was electing to forgo any opportunity it might otherwise have had to challenge the decision.

Decision

Following the issue of the decision, both parties had written to the Adjudicator raising a number of slips. Dawnus raised mathematical errors but Marsh raised more substantive issues, namely alleged breach of natural justice going to whether or not the Adjudicator had considered the arguments raised by Marsh during the adjudication. Marsh said that the failure by the Adjudicator to have considered the arguments must have been a slip. The Adjudicator revised the quantum of his decision but rejected the more substantial points that were raised.

The Judge explained that the doctrine of election prevents a party from “approbating and reprobating” or “blowing hot and cold” in relation to an adjudicator’s award. Here Marsh could have, but did not, expressly reserve its right to challenge enforcement of the award on the basis of a breach of the rules of natural justice when inviting the Adjudicator to make corrections under the slip rule. By not doing this, when inviting the Adjudicator to exercise his powers under the slip rule, Marsh had waived or elected to abandon its right to challenge enforcement of the Decision since it had thereby elected to treat the Decision as valid – “assuming that good grounds exist on which a decision may be subject to objection, in the absence of an express reservation of rights, either the whole of the relevant decision must be accepted or the whole of it must be contested.”

The Judge went on to conclude that there had been no breach of the rules of natural justice because, on a proper analysis of the adjudicator’s decision, he had accepted Dawnus’ argument that there was a contractual entitlement to loss and expense and had thereby rejected Marsh Life’s argument that there was not.

Comment

This decision is an important reminder that if a party wishes to challenge the validity of an adjudicator’s decision they must be astute to reserve their position otherwise they are at risk of losing any rights they may have to do so. It is also a reminder that the Technology and Construction Court will not be sympathetic to a close textual analysis of the pleadings exchanged in an adjudication, or to the decision itself, in considering natural justice challenges, but will instead look at matters on a wider level to identify in broad terms what claims were made, what defences were raised, and what decision was reached. 

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