A Frolic Too Far? The Balance between Adjudicator Discretion and Party Consultation in the Context of Natural Justice
As construction specialists drawn from diverse disciplines, adjudicators are well equipped to analyse party submissions and determine cases. Commonly labelled as “rough justice”, adjudication is a fast-paced process – typically less than 45 days from the notice of adjudication to decision – with limited time for parties to review and make submissions.
Nevertheless, the process is still subject to the principle of natural justice, so it is important to keep in mind that whilst decisions are to be made quickly, they must also be fair and carefully considered. Natural justice encompasses the fundamental rights of parties to be heard and to make submissions to support its own case or to meet the case of the other party. If the decision of an adjudicator is found to breach natural justice, and the breach is prejudicial, the courts will refuse to enforce the decision.
An adjudicator may also rely on their own experience and judgment and investigate the facts and the law. This may mean the adjudicator will consider that the correct answer is not what either of the parties have suggested in their submissions.
If an adjudicator is to make a decision based on their knowledge and experience, is there an obligation upon the adjudicator to set out their thought process in detail and allow the parties to respond (whilst reaching a decision within the constraints of the adjudication timetable)?
It can be difficult to reconcile these requirements, and this tension was recently explored in the case of Clegg Food Projects Ltd v Prestige Car Direct Properties Ltd [2025] EWHC 2173 (TCC).
Clegg Food Projects Ltd v Prestige Car Direct Properties Ltd [2025] EWHC 2173 (TCC)
In Clegg, the Court found that the enforcement of an adjudicator’s decision would only be denied where the failure to consult the parties had a material effect on the outcome, resulting in substantial prejudice.
The dispute arose between the Claimant (contractor) and Defendant (employer) under an amended JCT Design & Build contract, in respect of the valuation of a number of variations included within payment application 37 (“Application 37”).
After several rounds of submissions, both parties were permitted to make one final submission on one variation. The adjudicator issued an 88-page decision, finding in favour of the Claimant. The adjudicator found the Defendant’s payment notice had undervalued the eight variations and that the Claimant was entitled to an extension of time, reducing the Defendant’s entitlement to liquidated damages. In the decision, the adjudicator set out why he considered the calculations advanced by both parties were incorrect and applied his own “fair and reasonable” rate, based on “first principles” and his view of the work involved.
The Defendant asked the adjudicator to clarify why he had applied his own “fair and reasonable” rates, and how the underlying calculations were reached. In response, the adjudicator explained this was because the parties had invited him to determine the value of the items in dispute, using the information provided and his own experience. The Defendant alleged that this amounted to a breach of natural justice, claiming that the adjudicator had introduced new rates and measurements in order to reach some valuations, without consulting the parties. The Claimant applied to the Technology and Construction Court to enforce the decision, and Kelly J was tasked with deciding whether by failing to consult with the parties by way of additional submissions when departing from the rates advanced, the adjudicator had breached natural justice.
The Claimant submitted that “in order to vitiate a decision, any breach of natural justice must be serious or of considerable potential importance to the outcome”, arguing this was not the case in this instance, and that the use of the new rate must be material to the outcome and materially prejudice the Defendant. Notably, in all but two of the variations the new rates were more advantageous to the Defendant, leading to an increased valuation of less than 0.2% of the valuation of the variations.
The Court rejected the Defendant’s arguments, finding that whilst the adjudicator “could not go off on a frolic of his own”, he had been asked to determine the overall gross valuation of Application 37, using either those rates submitted by the parties or “such other sums as the adjudicator shall see fit.” Kelly J also cited Coulson J (as he was) in Primus Build Ltd v Pompey Centre Ltd [2009] EWHC 1478 (TCC) [40], “An adjudicator cannot, and is not required to, consult the parties on every element of his thinking leading up to a decision, even if some elements of his reasoning may be derived from, rather than expressly set out in, the parties' submissions.”
The Court further referred to prior authority which decided an adjudicator can decide to crudely split the difference without further consultation with the parties. In Arcadis UK Ltd v May and Baker Ltd (t/a Sanofi) [2013] EWHC 87 (TCC), Akenhead J held at paragraph 37: “The fact that he was persuaded that the proper answer lay between the two adjusted forecast figures and that he happened to split it down the middle can not be considered to be a breach of the rules of natural justice.
The Court considered that the adjudicator had stayed within the bounds of natural justice, Kelly J concluding, “In my judgment, it is relevant that the adjudicator was asked to provide an overall gross valuation of Application 37. Inevitably, an adjudicator given that task has to look at the individual items which make up the payment application as a whole. However, in my judgment, it is acceptable for an adjudicator to come to a different view from the parties in respect of the value of a particular item which he considers “fair and reasonable” using the documentation provided and submissions made by the parties.
The Court also found that the Defendant had been unable to demonstrate that it had suffered a “substantial injustice” as a result of not being consulted.
Van Oord UK Ltd v Dragados UK Ltd [2022] CSOH 30
In comparison, in the Scottish case of Van Oord the Court found that the failure to consult had led to a material effect on the outcome, being that the claim was time barred, and so the adjudicator’s decision was not enforced.
The Court commented that “the line between an adjudicator going off on a frolic of their own, and, on the other, making legitimate use of their experience to analyse material which has been lodged, and commented on by the parties, before reaching a decision not contended for by either party, is not always an easy one to draw”. The analytical process of the adjudicator must be fair to both parties; if the approach adopted in relation to a significant issue is not as proposed by either party and the parties have not been consulted, it is likely to be unfair. In Van Oord, depriving the defender of the opportunity to make submissions on the adjudicator’s methodology in arriving at a critical date which was both different from and earlier than that submitted by the pursuer, which led to a material effect, was an injustice.
Conclusion
The above cases are of course very much fact-specific, but the courts are astute to parties raising technical arguments about breach of natural justice, and such arguments are likely to succeed only where the lack of consultation results in real prejudice.
Whilst an adjudicator should always afford parties the opportunity to consider a departure from the case as presented, they still retain a wide discretion to assess the facts and the law based on their own knowledge and expertise.
