Lanes Group Plc v Galliford Try Infrastructure Ltd (t/a Galliford Try Rail)

This judgment is in seven parts namely,

These are conjoined appeals in three separate actions concerning an adjudication decision. The two essential questions are whether the adjudicator had jurisdiction to conduct the adjudication and whether his decision is a nullity by reason of apparent bias.

The claimant in the adjudication and appellant in two of the appeals is Lanes Group Plc, to which I shall refer as “Lanes”. The respondent in the adjudication and appellant in the third appeal is Galliford Try Infrastructure Limited trading as Galliford Try Rail, to which I shall refer as “Galliford”.

In this judgment I shall refer to the Institute of Civil Engineers as “ICE” I shall refer to the adjudication procedure published by the ICE in 1997 as “The ICE Adjudication Procedure”.

I shall refer to the Housing Grants, Construction and Regeneration Act 1996 as “the 1996 Act”. Section 108 of the 1996 Act provides:

“108 - (1) A party to a construction contract has the right to refer a dispute arising under the contract for adjudication under a procedure complying with this section.

For this purpose “dispute” includes any difference.

(2)

The contract shall –

(a)

enable a party to give notice at any time of his intention to refer a dispute to adjudication;

(b)

provide a timetable with the object of securing the appointment of the adjudicator and referral of the dispute to him within 7 days of such notice;

(c)

require the adjudicator to reach a decision within 28 days of referral or such longer period as is agreed by the parties after the dispute has been referred;

(d)

allow the adjudicator to extend the period of 28 days by up to 14 days, with the consent of the party by whom the dispute was referred;

(e)

impose a duty on the adjudicator to act impartially; and

(f)

enable the adjudicator to take the initiative in ascertaining the facts and the law.

(3)

The contract shall provide that the decision of the adjudicator is binding until the dispute is finally determined by legal proceedings, by arbitration (if the contract provides for arbitration or the parties otherwise agree to arbitration) or by agreement.

The parties may agree to accept the decision of the adjudicator as finally determining the dispute.

(4)

…

(5)

If the contract does not comply with the requirements of subsections (1) to (4), the adjudication provisions of the Scheme for Construction Contracts apply.”

The Scheme referred to in Section 108(5) of the 1996 Act is the Scheme which is contained in the schedule to the Scheme for Construction Contracts Regulations 1998. I shall refer to this as “the Scheme”.

Paragraph 1 of the Scheme provides:

“Notice of Intention to seek Adjudication

(1)

Any party to a construction contract (the “referring party”) may give written notice (the “notice of adjudication”) of his intention to refer any dispute arising under the contract to adjudication.

(2)

The notice of adjudication shall be given to every other party to the contract.

(3)

The notice of adjudication shall set out briefly –

(a)

the nature and a brief description of the dispute and of the parties involved,

(b)

details of where and when the dispute has arisen,

(c)

the nature of the redress which is sought, and

(d)

the names and addresses of the parties to the contract (including, where appropriate, the addresses which the parties have specified for the giving of notices).”

Paragraph 7 of the Scheme provides:

“7

(1)

Where an adjudicator has been selected in accordance with paragraphs 2, 5 or 6, the referring party shall not later than seven days from the date of the notice of adjudication, refer the dispute in writing (the “referral notice”) to the adjudicator.

(2)

A referral notice shall be accompanied by copies of, or relevant extracts from, the construction contract and such other documents as the referring party intends to rely upon.

(3)

The referring party shall, at the same time as he sends to the adjudicator the documents referred to in paragraphs (1) and (2), send copies of those documents to every other party to the dispute.”

Paragraph 19 of the Scheme provides:

“19

(1)

The adjudicator shall reach his decision not later than –

(a)

twenty eight days after the date of referral notice mentioned in paragraph 7(1), or

(b)

forty two days after the date of the referral notice if the referring party so consents, or

(c)

such period exceeding twenty eight days after the referral notice as the parties to the dispute may, after the giving of that notice, agree.

(2)

Where the adjudicator fails, for any reason, to reach his decision in accordance with paragraph (1)

(a)

any of the parties to the dispute may serve a fresh notice under paragraph 1 and shall request an adjudicator to act in accordance with paragraphs 2 to 7; and

(b)

if requested by the new adjudicator and insofar as it is reasonably practicable, the parties shall supply him with copies of all documents which they had made available to the previous adjudicator.

(3)

As soon as possible after he has reached a decision, the adjudicator shall deliver a copy of that decision to each of the parties to the contract.”

In this judgment I shall refer to the initial notice of intention to refer a dispute to adjudication as an “adjudication notice”.

After these introductory remarks I must now turn to the facts.

Lanes is a company which carries on business as a multi-disciplinary contractor in the railway industry. Galliford is a major contractor in the construction industry undertaking, inter alia, infrastructure projects in the public and related sectors. This dispute concerns works carried out under a sub-contract between Galliford and Lanes, whereby Lanes contracted to renew the roof at the traction maintenance depot (“TMD”) in Inverness, Scotland.

The TMD is owned and run by Network Rail Infrastructure (“NRI”). Galliford were the main contractors to NRI. Under the sub-contract Lanes agreed to remove the existing roof and to carry out the re-roofing and glazing at the TMD. The original sub-contract sum was £819,367.00 plus VAT.

The sub-contract was evidenced by Galliford’s sub-contract order dated 13^th May 2008 and it embodied the Civil Engineering Contractors Association’s “Blue Form” of sub-contract terms and conditions, together with associated drawings, specifications and other documents mentioned in Galliford’s sub-contract order of that date. There were subsequent variations to the sub-contract, but those are not material to the present proceedings.

The works were scheduled to commence on 3^rd June 2008, but in the event their commencement was put back by Galliford and as a result of further delays were not commenced until 13^th October 2008. On 28^th April 2009 Galliford determined Lanes’ employment under the sub-contract. At that time, the sub-contract works were substantially incomplete and the only extensions of time which had been granted by Galliford were from 25^th November 2008 until 9^th December 2008 owing to the delayed start on site. Lanes claimed that the works were substantially varied and amended by Galliford, in particular in early March 2009, that it was entitled to substantial extensions of time and that accordingly the sub-contract was wrongfully terminated. Galliford alleged that Lanes had failed to proceed with the works with due diligence.

In November 2010 Lanes commenced an action against Galliford for wrongful termination of the sub-contract and claimed approximately 2 million pounds in damages. In response Galliford issued an application to stay those proceedings for arbitration. Independently, on 23^rd December 2010, Galliford sent Lanes a substantial claim in relation to delay and termination of the sub-contract under which it claimed some 2.7 million pounds in damages from Lanes.

By agreement, the parties compromised Galliford’s application to stay the court proceedings for arbitration and agreed that the case should proceed in arbitration in the Technology and Construction Court before Mr Justice Ramsey sitting as arbitrator.

While the arbitration was proceeding, Galliford decided to seek the interim remedy of an adjudication award. Accordingly, Galliford duly served an adjudication notice on Lanes. On the 9^th March 2011 Galliford applied to the ICE to appoint an adjudicator.

On 10^th March 2010 the ICE appointed Mr Howard Klein as adjudicator. Mr Klein duly accepted the appointment. However, Galliford’s solicitors failed to take the next step, namely sending referral documents to the arbitrator in accordance with clause 4.1 of the ICE Adjudication Procedure. The reason which Galliford’s solicitors gave for this refusal was that Mr Klein was, or appeared to be, biased because of a robust clash which Galliford’s solicitors had had with Mr Klein in relation to an earlier case. I shall not go into the details of that particular matter, because no one now suggests that Mr Klein was disqualified because of actual or apparent bias. Clearly he was not.

Galliford’s solicitors, honestly but mistakenly believing that Mr Klein was disqualified on grounds of bias, served a fresh notice of adjudication. They then applied to the ICE to appoint a fresh adjudicator. The ICE responded by appointing Mr Daniel Atkinson. Mr Atkinson accepted the appointment.

Lanes’ solicitors protested that Mr Atkinson did not have jurisdiction, on the grounds that Mr Klein rather than Mr Atkinson was the only adjudicator appointed to resolve the present dispute. Lanes brought proceedings in the Technology and Construction Court to restrain Mr Atkinson from proceeding with the adjudication, but those proceedings (to which I shall refer in detail later) were unsuccessful.

Mr Atkinson’s adjudication duly proceeded. Galliford served its referral documents in accordance with Clause 4.1 of the ICE Adjudication Procedure. Lanes was due to serve its response by 10^th April, but it did not do so. On 14^th April Mr Atkinson sent to the parties a document entitled “Preliminary Views and Findings of Fact”. I shall refer to this document as the “Preliminary View”. The Preliminary View set out the provisional conclusions which Mr Atkinson had reached. In his covering letter to the parties, Mr Atkinson wrote as follows:

“Preliminary Views and Findings of Fact

The date for the Response specified in the ICE Adjudication Procedure has passed and Lanes has made no submissions at all on the substantive issues. There has been no agreement to a revised timetable and indeed no response at all to my suggested timetable yesterday.

Accordingly, in order to assist me in my examination of the issues referred to me, in my ascertainment of the facts and the law and in order to allow the Parties the opportunity to make further submissions on the issues I enclose Preliminary Views and Findings of Fact on some of the initial issues raised in the Referral.

The Preliminary Views and Findings of Fact are a step in making my Decision and I am not bound by them nor do I commit myself to communicate nor issue amendments or further Preliminary Views and Findings of Fact.

I direct the Parties to make any comments or submissions on the Preliminary Views and Findings of Fact by 17:00 hrs on Thursday 21^st April 2011. I direct the Parties to refer to or submit any evidence, arguments, authorities etc that they consider relevant.”

In due course both parties submitted their comments and submissions in relation to the Preliminary View. Mr Atkinson considered the material before him. On 17^th May 2011 he issued his final decision. The adjudicator awarded to Galliford £1,214,538.98 and ordered that Lanes should pay his fees and expenses at £87,908.25 plus VAT of £17,581.65. His decision was subsequently corrected and the ultimate award in favour of Galliford was increased to £1,360,145.28 plus the adjudicator’s fees.

Lanes was aggrieved by Mr Atkinson’s decision. Accordingly, Lanes commenced a second action in the Technology and Construction Court to challenge the validity of Mr Atkinson’s appointment and the validity of his decision.

Having set out the factual background, I must now summarise the proceedings in the Technology and Construction Court.

The first action in the Technology and Construction Court was Lanes’ claim for an injunction to restrain Mr Atkinson’s adjudication from proceeding. The basis of this claim was Lanes’ contention that Galliford’s failure to serve referral documents in the Klein adjudication was a repudiatory breach, which Lanes had accepted. Therefore Galliford had forfeited its entitlement to have the dispute identified in its initial adjudication notice adjudicated.

In his judgment dated 19^th April 2011 Mr Justice Akenhead noted that a statutory entitlement to adjudicate underlay the contractual provisions for adjudication. Accordingly he held that the concept of repudiation was inapplicable. In any event Galliford could not have forfeited its right to have other disputes adjudicated, so the contractual provisions for adjudication had to remain in force. It was not possible to say that there was a separable agreement to refer the specific issues identified in the notice of adjudication dated 8^th March 2011 to adjudication. Accordingly, while Mr Justice Akenhead accepted that Galliford’s failure to serve referral documentation in the Klein adjudication was a breach of contract, he rejected Lanes’ claim for an injunction.

The second action in the Technology and Construction Court was a claim by Lanes for declarations to the effect that Mr Atkinson’s appointment and his subsequent award were invalid. Lanes contended that Mr Klein was the only validly appointed adjudicator and therefore Mr Atkinson lacked jurisdiction. In the alternative, Lanes contended that Mr Atkinson was or appeared to be biased in that he reached firm conclusions in his Preliminary View before considering Lanes’ submissions.

The third action in the Technology and Construction Court was Galliford’s claim to enforce Mr Atkinson’s adjudication award. The second and third actions both came on for hearing before His Honour Judge Waksman QC on 21^st June 2011. The judge dismissed Lanes’ challenge to Mr Atkinson’s jurisdiction. He held that Galliford was entitled to start a second adjudication, despite allowing the first adjudication to lapse as a result of failing to serve referral documents. However, the judge went on to hold that the adjudicator appeared to have made up his mind by issuing the Preliminary View before he had received or considered Lanes’ submissions. Accordingly Mr Atkinson’s decision was a nullity on the grounds of apparent bias. In the circumstances the judge dismissed Galliford’s claim to enforce Mr Atkinson’s award.

Both parties were aggrieved by the decisions of the Technology and Construction Court, albeit for different reasons. Accordingly both parties appealed to the Court of Appeal.

Lanes appeals to the Court of Appeal against the decisions of Mr Justice Akenhead and Judge Waksman to the effect that Mr Atkinson had jurisdiction as adjudicator. Galliford appeals to the Court of Appeal against the finding of apparent bias on the part of Mr Atkinson.

Both parties obtained permission to appeal on paper. The appeals were heard together on 8^th December 2011. Mr Richard Wilmot-Smith QC appeared for Lanes, leading Ms Karen Gough and Miss Rachael O’Hagan. Mr John Marrin QC appeared for Galliford. I am grateful to counsel on both sides for the excellence and conciseness of their submissions.

There are two separate issues to consider in this appeal. The first issue is whether Mr Atkinson had jurisdiction as adjudicator. The second issue is whether Mr Atkinson’s decision was a nullity because of apparent bias.

I shall deal with matters in that order, starting with the adjudication issue.

Lanes’ first line of attack, based on the repudiation argument, was obviously unsound for the reasons stated by Mr Justice Akenhead in his judgment in the first action. Although on paper there is an appeal against Mr Justice Akenhead’s decision, in this court Mr Wilmot-Smith has not advanced any criticism of the reasoning of Mr Justice Akenhead. He was wise not to do so. Mr Justice Akenhead was clearly right to reject the repudiation argument which Lanes advanced in the first action.

Mr Wilmot-Smith focused his submissions on Lanes’ case as presented in the second action. The argument there is that section 108 of the 1996 Act and, in this case, clause 18B of the sub-contract conditions permit a party to refer a dispute to adjudication on one occasion only. If the party seeking adjudication (to whom I shall refer as “the claimant”) does not follow through the reference, that is the end of the matter. The right to adjudication of the dispute notified in the adjudication notice is lost forever. Therefore, argues Mr Wilmot-Smith, Galliford having allowed the adjudication before Mr Klein to lapse could not commence a fresh adjudication in respect of the same subject matter.

The court was initially attracted by Mr Wilmot-Smith’s submission. The proposition that a claimant can allow an adjudication to lapse because it disapproves of the appointed adjudicator and then start a fresh adjudication before a different adjudicator is not an appealing one. Mr Marrin may possibly have detected that the court was unsympathetic when he embarked upon his response to Mr Wilmot-Smith’s submissions. Mr Marrin has persuaded me, however, that there are formidable difficulties in the case which Lanes advances. First, it does sometimes happen that an adjudication is not pursued further after the preliminary steps have been taken. There is no authority to suggest that as a consequence the claimant loses its right to adjudicate that dispute for all time.

Secondly, both the Blue Form sub-contract, the ICE Adjudication Procedure and the Scheme recognise a right to restart an adjudication in a variety of circumstances. See the table which Mr Marrin has prepared and which I reproduce as an appendix to this judgment. It is possible to think of many situations, not all of which are provided for by express terms, in which the adjudication procedure would be thwarted if there were no right to re-start an abortive adjudication. For example, suppose there is a postal delay which prevents the referral documents being served within two days as required by paragraph 4.1 of the ICE Adjudication Procedure. It cannot be right that the claimant’s entitlement to adjudicate the dispute in question is irretrievably lost.

Mr Wilmot-Smith seeks to overcome these difficulties by arguing that the claimant only loses the right to adjudicate if he deliberately and without good reason fails to serve referral documents by the due date. In my view, however, it is quite impossible to imply a term of this nature either into the present contract or into the 1996 Act and the Scheme. Furthermore, if such an elaborate provision were to be implied, an expensive factual investigation would be required in some cases in order to determine whether the claimant had or had not lost the right to adjudicate.

Adjudication is an unusual procedure, distinct from arbitration and sui generis. The service of an adjudication notice and the subsequent appointment of an adjudicator do not start time running or clothe the adjudicator with jurisdiction. The adjudicator has no powers until there has been a subsequent referral: see Hart Investments Limited v Fidler [2007] BLR 30 at paragraph 52. Furthermore, even after there has been a referral, the right of a claimant to drop one head of claim and to reserve it for later adjudication was recognised in Midland Expressway Ltd v Carillion Construction Ltd (No. 3) [2006] BLR 325 at paragraphs 99-108.

During the course of argument the court raised the question whether Galliford’s conduct could be characterised as abuse of process. Mr. Marrin pointed out, however, that abuse of process has no place in adjudication: see the reasoning of Dyson LJ in Connex South Eastern Ltd v MJ Building Services Group plc [2005] EWCA Civ 193, [2005] 1 WLR 3323. I accept that submission.

Let me now draw the threads together. Forum shopping is never attractive. My first view of this case was that Galliford could not be permitted simply to drop the first adjudication and then adjudicate before a different adjudicator whom it preferred. Mr. Marrin’s submissions have persuaded me, however, that Galliford’s conduct was permissible under the contract and the second adjudicator did indeed have jurisdiction. In the result therefore I would uphold the decision of Judge Waksman on this issue. My answer to the question posed in this part of the judgment is yes.

I must now turn to the second issue in this appeal, namely apparent bias.

In relation to this issue, it is helpful to begin by setting out the relevant legal principles. Bias has been succinctly defined as “an attitude of mind which prevents the judge from making an objective determination of the issues that he has to resolve”. See In re Medicaments and Related Classes of Goods (No. 2) [2001] 1 WLR 700 at paragraph 37. Actual bias may arise from a variety of causes, such as a desire to decide a case one way or the other regardless of the legal merits.

Pre-determination is sometimes treated as a species of bias, though it is conceptually somewhat different. Pre-determination arises when a judge or other decision maker reaches a final conclusion before he or she is in possession of all the relevant evidence and arguments.

In practice findings of actual bias or actual pre-determination are rare, because of the difficulties of proof. Apparent bias or apparent pre-determination is a more common basis for attacking judicial or quasi-judicial decisions.

The leading authority in this area is Porter v McGill [2001] UKHL 67, [2002] 2 AC 357. This is the House of Lords’ decision arising out of the well known “Homes for Votes” saga in Westminster. Westminster City Council’s Auditor certified that certain councillors had caused approximately 31 million pounds loss to the council by their wilful misconduct. The House of Lords held that the Auditor’s decision was valid. Despite the fact that the Auditor had issued a press statement announcing his provisional findings in the course of his investigations, the House of Lords dismissed allegations of bias or apparent bias against the Auditor. In reaching this conclusion, the House of Lords modified the common law test for bias in the light of the Strasbourg jurisprudence on ECHR Article 6. At paragraph 88, Lord Hope noted that there was a close relationship between the concepts of independence and impartiality. He continued:

“In both cases the concept requires not only that the tribunal must be truly independent and free from actual bias, proof of which is likely to be very difficult, but also that it must not appear in the objective sense to lack these essential qualities.”

Lord Hope formulated the test for apparent bias in these terms at paragraph 103:

“The question is whether the fair minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased.”

In Gillies v Secretary of State for Work and Pensions [2006] UKHL [2006] 1 All ER 731, the House of Lords was considering an allegation of apparent bias in respect of a tribunal member. At paragraph 17 of his judgment Lord Hope provided the following elaboration of the “fair minded and informed observer” test. He said:

“The fair-minded and informed observer can be assumed to have access to all the facts that are capable of being known by members of the public generally, bearing in mind that it is the appearance that these facts give rise to that matters, not what is in the mind of the particular judge or tribunal member who is under scrutiny. It is to be assumed … that the observer is neither complacent nor unduly sensitive or suspicious when he examines the facts that he can look at. It is to be assumed too that he is able to distinguish between what is relevant and what is irrelevant, and that he is able when exercising his judgment to decide what weight should be given to the facts that are relevant.”

The test of the fair minded observer is applied both in cases of apparent bias and in cases of apparent pre-determination. In the context of adjudication the “fair minded observer” test is applied where apparent bias or apparent pre-determination is alleged against an adjudicator: see Amec Capital Projects Ltd v White Friars City Estates Ltd [2004] EWCA Civ 1418, [2005] 1 All ER 723.

One complication in recent years is the elaboration of the “fair minded observer” test. In view of the authorities mentioned above, the fair minded observer must be assumed to know all relevant publicly available facts. He or she must be assumed to be neither complacent nor unduly sensitive or suspicious. He or she must be assumed to be fairly perspicacious, because he or she is able “to distinguish between what is relevant and what is irrelevant, and when exercising his judgment to decide what weight should be given to the facts that are relevant”: see Gillies at paragraph 17.

There are conceptual difficulties in creating a fictional character, investing that character with an ever growing list of qualities and then speculating about how such a person would answer the question before the court. The obvious danger is that the judge will simply project onto that fictional character his or her personal opinions. Nevertheless, this approach is established by high authority. I must follow it and do my best to avoid the pitfall just mentioned.

Let me now turn to the facts of the present case. As Judge Waksman rightly observed, Mr. Atkinson expressed his Preliminary View in the language of a concluded decision. He used phrases such as “I find” and “I hold”.

On the other hand, the Preliminary View began with the following passage:

“NOTICE

The statement “I find”, “I find and hold” and “Decision” and other similar statements are not and not intended to be decisions of the adjudicator but preliminary views and findings of fact preparatory to the decision.

The preliminary views and findings are a step in making the decision and I am not bound by them.

I do not commit myself to communicate nor issue amendments or further Preliminary Views and Findings of Fact.”

Furthermore the e-mail under cover of which the Preliminary View was sent to the parties (the text of which is set out in Part 2 above) made it plain that the conclusions set out in the Preliminary View were provisional only.

There is nothing objectionable in a judge setting out his or her provisional view at an early stage of proceedings, so that the parties have an opportunity to correct any errors in the judge’s thinking or to concentrate on matters which appear to be influencing the judge. Of course, it is unacceptable if the judge reaches a final decision before he is in possession of all relevant evidence and arguments which the parties wish to put before him. There is, however, a clear distinction between (a) reaching a final decision prematurely and (b) reaching a provisional view which is disclosed for the assistance of the parties.

In my view the fair minded observer, with all the admirable qualities identified above, would have no difficulty in deciding this case. He would characterise the Preliminary View as a provisional view, disclosed for the assistance of the parties, not as a final determination reached before Mr Atkinson had considered Lanes’ submissions and evidence.

There was some debate as to the principles upon which this court should act in the present appeal. I accept that under Civil Procedure Rules, rule 52.11 this court is carrying out a review, rather than a re-hearing. But such a review comes quite close to a re-hearing for the reasons set out by May LJ in E I Dupont de Nemours & Co v S T Dupont [2003] EWCA Civ 1368, [2006] 1 WLR 2793 at paragraphs 94-96.

On the apparent bias issue I come to a different conclusion from the judge. In my view the adjudicator’s decision was not tainted by apparent bias or apparent pre-determination. Therefore Mr Atkinson’s award was and is enforceable.

I am re-inforced in this conclusion by the fact that we are dealing with an adjudication decision, not an arbitration award or a judicial decision. Adjudication is a rough and ready process carried out at great speed. Vast masses of submissions and evidence have to be assimilated by the adjudicator in a short space of time. The adjudicator will fashion his procedure in whatever way enables him to discharge his onerous duties most swiftly, effectively and fairly. See clause 5.5 of the ICE Adjudication Procedure and paragraph 13 of the Scheme. An adjudication decision is not final. It is only binding until such time as the parties have concluded their litigation or their arbitration or their settlement negotiations or some other form of ADR.

Because adjudication has all these features, courts are reluctant to strike down adjudication decisions for breach of natural justice or on similar grounds, unless the complainant’s case is clearly made out: see the judgment of the Court of Appeal in Carillion Construction Ltd v Devonport Royal Dockyard Ltd [2005] EWCA Civ 1358, [2006] BLR 15 at paragraphs 52-53 and 84-87.

Let me now draw the threads together. For the reasons set out above, my answer to the question addressed in this part of the judgment is no.

For the reasons set out in parts 5 and 6 above, in my view the judgment of Mr. Justice Akenhead should be upheld. The judgment of Judge Waksman should be upheld on the jurisdiction issue but reversed on the apparent bias issue.

If my Lords agree, the consequences are as follows. Galliford’s appeals will be allowed to the extent indicated. Lanes’ appeals will be dismissed. There will be summary judgment for Galliford for the sums due on Mr Atkinson’s adjudication decision together with appropriate interest.

Counsel are requested to agree the figures and to submit an agreed form of order giving effect to these decisions.