Rsl (South West) Ltd. v Stansell Ltd.

An adjudicator must observe natural justice, even where the contractual procedure is designed to be swift. Each party must know the case against it and have an opportunity to comment on material which the adjudicator considers significant, including advice obtained from an expert. Where an adjudicator relies on an undisclosed final report which may have influenced the result, the decision is unenforceable. An adjudication decision is enforceable because of the parties’ contract. If the decision determining the overall dispute is successfully challenged, the court cannot ordinarily salvage constituent sums unless the contract makes them independently binding. A decision concerning separate disputes may, however, be separately enforceable.

RSL sought summary judgment enforcing an adjudicator’s decision requiring Stansell to pay £93,204.50 under a construction sub-contract. The adjudicator had obtained programming assistance from Mr Adie. Stansell consented on terms that it would receive reports and a reasonable opportunity to comment. It received an initial report but not the final report, which the adjudicator considered before deciding that RSL was entitled to an extension of time and associated loss and expense.

Stansell challenged enforcement on the grounds of breach of the agreed procedure, breach of natural justice and wrongful delegation. RSL alternatively sought an interim payment representing elements of the adjudicator’s decision unaffected by the challenge. The central issues were whether the adjudicator’s procedure invalidated the decision and whether any part of the sum could nevertheless be enforced.

1. Natural justice. The adjudication decision was not enforceable. The duty to act impartially includes the duty to observe natural justice and is more than a duty merely to avoid bias. A party must know the case against it and have an opportunity to meet it. That requirement applies to material obtained from any source, including technical advice and the adjudicator’s own knowledge or experience.
2. The adjudicator should not have relied on Mr Adie’s final report without giving both parties an opportunity to consider and comment on it. If an extension of the contractual time limit was needed for that purpose, the adjudicator should have explained the reason when seeking consent. A refusal given without knowing that purpose could not amount to waiver. The possibility that the report might have been important, and uncertainty as to its contents, were sufficient to establish the breach.
3. Agreed procedural terms. Stansell’s consent to Mr Adie’s involvement was conditional on receiving relevant reports and a reasonable opportunity to comment. The adjudicator’s subsequent communications reinforced that legitimate expectation. Failing to provide the final report breached both the agreed procedure and natural justice.
4. Delegation. The court did not need to decide the point. Had it mattered, the evidence did not establish wrongful delegation. The adjudicator treated Mr Adie’s conclusions as significant but retained responsibility for the decision.
5. Contractual enforceability and severability. An adjudicator’s decision is enforceable because the parties have contractually agreed to comply with it. It is not directly enforceable as an arbitration award or court judgment. The contract made the adjudicator’s decision on the referred Final Account dispute binding as a whole. Once that decision was successfully challenged, no constituent sum was independently binding, so neither summary judgment nor an interim payment could be ordered.
6. Where several separate disputes are referred and decided together, invalidity affecting one dispute may not affect another. That was not the present case. The application and the action were dismissed.