An adjudicator’s decision may be invalidated if a false statement was made during the appointment process

When a dispute goes to adjudication, it is common for both sides to agree on who the adjudicator should be. If they cannot, either side can ask a nominating body to appoint one. In 2014, the decision in Eurocom Ltd v Siemens Plc established the principle that any misrepresentation during this application process can render the adjudicator’s decision unenforceable. That principle has now been clarified by the Technology and Construction Court in RNJM Limited v Purpose Social Homes Limited.

Although this is an English decision, it is likely to be influential in Scotland as well.

Background

RNJM Limited (RNJM) and Purpose Social Homes Limited (PSHL) were parties to a contract for the construction of an apartment block in Harrogate. Several disputes arose, which resulted in five separate adjudications.

The second, third and fourth adjudications were dealt with by the same adjudicator, Mr Bunker. In each of those, Mr Bunker decided in favour of PHSL. He also directed RNJM to pay his fees, which RNJM did not do.

Before the fifth adjudication, RNJM applied to the nominating body, RICS, and asked for a different adjudicator to be appointed. On the application form, RNJM stated that Mr Bunker had a conflict of interest as there was an outstanding “dispute over payment”. On this basis, RICS did indeed appoint a different adjudicator: Mr Wood.

In the fifth adjudication, Mr Wood decided in favour of RNJM, and awarded it a payment from PHSL of approximately £130,000. RNJM then applied for summary judgment to enforce the decision and recover the award from PHSL.

In its defence, PSHL disputed the representation in the RICS application form that there had been a dispute over payment with Mr Bunker. It claimed that, because RNJM had not explained any basis to dispute the fees to PSHL or to Mr Bunker, there was no dispute: RNJM had simply chosen not to pay.

On that basis, PSHL argued that the statement from RNJM was a false representation which unfairly prejudiced PSHL in the fifth adjudication, and that therefore Mr Wood’s appointment and his decision were both void.

Decision

The Technology and Construction Court agreed with PSHL, and dismissed RNJM’s application for summary judgment.

It did so on the basis that PHSL had a realistic prospect of establishing that RNJM had deliberately or recklessly made a false statement in the RICS application form, which would invalidate the appointment of Mr Wood and therefore his decision.

In reaching its judgment, the court had to consider three things.

The information provided by RNJM to RICS asserting that there was a dispute between it and Mr Bunker
Whether the statement made by RNJM was false
If the statement was false, whether it was made deliberately or recklessly

The court decided that RNJM’s evidence in relation to the existence of a payment dispute with the adjudicator was insufficient for the statement to be considered truthful. It said that it was “telling” that RNJM had not provided further evidence about the alleged payment dispute. It noted also that RNJM had not fully answered the question on the RICS application form, and had only given minimal details of the nature of the alleged dispute.

Key takeaway

It is unusual for courts to refuse the enforcement of an adjudicator’s decision, but they may intervene when one party has been unfairly prejudiced at any point. The process to commence adjudication and appoint an adjudicator must therefore be conducted in a robust and honest manner. If it is not, any subsequent decision may be subject to challenge.

If you have any questions or would like to discuss how our specialist team can help you, please get in touch with our Construction, Engineering and Infrastructure Disputes team, or your usual Shepherd and Wedderburn contact.

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