Adjudicator's decisions: can they be partially enforced?

Summing up

The case:

Cantillon Limited -v- Urvasco Limited, TCC, 27 February 2008.

The issue:

The extent to which an adjudicator's decision is severable, or may be partially enforced.

The implication:

Part of a decision may be set aside on the grounds of a breach of natural justice and/or for want of jurisdiction where in fact it relates to a separate and identifiable dispute that is distinct from other disputes that have been decided in the same adjudication. Otherwise the decision as a whole will be enforced or set side.

This article considers the basis on which it might be possible to enforce only part of an adjudicator's decision and not the remainder, or in other words the extent to which a decision may be severable. This is an aspect of the judgment in the recent case of Cantillon v Urvasco (2008) and, while Mr Justice Akenhead's observations on the question of severability were not relevant to the decision reached, they are nevertheless of interest since there have been few cases on the point.

When the parties to an adjudication receive the decision, they will inevitably turn to the last page to discover what their adjudicator has decided to award to whom, before turning to the reasons to establish why.

Limited grounds

No matter what a party might think about a decision or parts of a decision, the grounds on which enforcement of a decision might be resisted are now very limited. The courts have sought at every turn to give effect to adjudicators' decisions. It has long been established that a decision that is wrong on the facts will be enforced, provided the adjudicator had jurisdiction to decide the matter and he answered the question referred to him.

The two principal grounds for avoiding enforcement of an adjudicator's decision are: (a) that the adjudicator had no jurisdiction or exceeded his jurisdiction and/or (b) that in reaching his decision, the adjudicator failed to apply the rules of natural justice or was biased.

A point that was considered in Cantillon -v- Urvasco was whether a part of a decision could be set aside in the event that it could be shown that the adjudicator did not have jurisdiction or had failed to apply the rules of natural justice in respect of that part of the decision.

In essence, natural justice requires that the adjudication procedure is a fair one that allows each party a reasonable opportunity to make their case and to respond to that of the other party.

The judge found that a breach of natural justice must be a material breach, and that a material breach will arise if the adjudicator has failed to bring to the attention of the parties a point that they ought to have been given the opportunity to comment on and that is either decisive or of considerable importance to the outcome. There will be a breach if an adjudicator decides a case on a factual or legal basis that has not been argued or proposed by either side without giving the parties an opportunity to comment. It follows that if either party has argued a point and the other party does not come back on the point, then there will be no breach of the rules of natural justice.

Thus, in practice, it should be uncommon to find an obvious breach of the rules of natural justice.

The judge then considered the question of severability and reviewed a number of cases that have touched on this point. In Shimizu Europe -v- Automajor (2002), Automajor had paid Shimizu in respect of part of the adjudicator's decision, but resisted payment of the balance on the basis that part of the decision was made without jurisdiction.

His Honour Judge Seymour QC found that the jurisdiction issue was not made out and he said that if there were two unconnected disputes, one about extensions of time and one about money, then it would be open to a party to accept one question but challenge the other.

Extension of time

But he also said this was to be distinguished from the situation where it was necessary to decide what extension of time was due, in order then to decide what loss and expense flowed from it as part of a decision about a total sum of money due to a party. In such a case, the decision on the extension of time was a constituent part of the overall decision on the sum due. This, he said, was a different situation in which a party must either accept the sum awarded in its entirety or not at all. Similarly, in the case of a decision on an extension of time comprising a number of events, the decision on the entire extension of time must be accepted or not at all. It is not open to a party in these circumstances to accept part of the decision.

The judge in the Cantillon case concluded that:

a) The first step is to establish what dispute or disputes have been referred to adjudication, and whether in fact or in effect there is only one dispute or two, and what any dispute comprises.

b) A party may refer more than one dispute and if the responding party does not object, then the adjudicator must decide all disputes referred to him. If the responding party does object, then the adjudicator cannot decide more than one dispute unless the contract permits him to do so.

c) If a decision properly addresses more than one dispute, then a decision on one dispute can be challenged on the grounds of jurisdiction or breach of the rules of natural justice without the validity and enforceability of the others being affected.

d) If the decision is drafted such that on the wording it is not severable or the breach of the rules of natural justice is all pervading, then the decision as a whole will not be enforced.

Identifiable dispute

It follows from the above that it is the decision on any one identifiable dispute that is binding and enforceable unless successfully challenged. In circumstances where it is necessary to make findings on the way to determining the question referred to the adjudicator, such as for example the requirement to decide an extension of time in order to determine the sum that is due to the referring party, it has been previously suggested that such findings on the way have no status as it is only the decision that is ultimately enforceable. However, on the basis of the above analysis, it could equally be argued that they form an essential part of the decision that is accepted or rejected as a whole.