When can an adjudication decision be set aside?
Section 15 Construction Industry Payment & Adjudication Act 2012 of Malaysia("CIPAA 2012") provides that:-"An aggrieved party may apply to the High Court to set aside an adjudication decision on one or more of the following grounds:
(a) The adjudication decision was improperly procured through fraud or bribery;
(b) there has been a denial of natural justice;
(c) the adjudicator has not acted independently or impartially; or
(d) the adjudicator has acted in excess of his jurisdiction."
This post seeks to explore the concept of natural justice.
What Is Natural Justice?
It is a term that denotes specific procedural rights in the English legal system. There are two rules that natural justice is concerned with - the rule against bias and the right to a fair hearing.
1. Rule Against Bias
This basic concept of impartiality where a person is barred from deciding any case in which he may be, or suspected to be biased, applies to courts of law, tribunals, arbitrators and all those having the duty to act judicially, including adjudicators.
Bias may be actual, imputed or apparent. Actual bias is established where it is actually established that a decision-maker was prejudiced in favour of or against a party, which is in practice, very hard to prove.
One form of imputed bias is biased on the decision-maker being a party to a suit, or having a pecuniary or proprietary interest in the outcome of the decision. Once this fact has been established, the bias is irrebuttable and disqualification is automatic - the decision-maker will be barred from adjudicating the matter without the need for any investigation into the likelihood or suspicion of bias.
In certain limited situations, bias can also be imputed when the decision-maker's interest in the decision is not pecuniary but personal.
Apparent bias is present where a judge or other decision-maker is not party to a matter and does not have an interest in its outcome, but through his conduct or behaviour gives rise to a suspicion that he is not impartial.
Exceptions to the rule against bias includes Necessity and Waiver.
Necessity is where a disqualified adjudicator cannot be replaced. as no one else is authorized to act. Waiver of the right to object, and proceedings are allowed to continue if no objection is raised as soon as the prejudiced party has knowledge of the bias.
The effect of a finding of bias - judgment not void but voidable. This advice is not wrong in the context of a judicial act under review, where the judgment will be held valid unless reversed on appeal.
2. Right To A Fair Hearing (Audi Alteram Partem)
The aspects of a fair hearing includes:
i. Prior notice of hearing - the right to adequate notification of the date, time, place of the hearing as well as detailed notification of the case to be met.
ii. Opportunity to be heard - the right to have a hearing and be allowed to present his own case. However, this requirement does not necessarily mean the decision-maker has to meet the complainant face to face.
iii. Conduct of the hearing - the adjudicator has to ask whether the person charged has a proper opportunity to consider, challenge or contradict any evidence, and whether the person is also fullly aware of the nature of the allegations against him.
iv. Right to legal representation
Summary of Cases
1. Costain Ltd v. Strathclyde Builders Ltd [2003]
The adjudicator issued a decision that the defender should repay the full amount withheld as liquidated and ascertained damages. The pursuer now raised proceedings to recover the sums found due by the adjudicator by means of court proceedings via a motion for summary decree. The only defence advanced was that the adjudicator's decision is vitiated by a breach of the principles of natural justice, due to the fact that the adjudicator had requested for to grant an extension of four days as he wished to "discuss one point in particular with [his] appointed legal adviser". The result of the discussions with the legal adviser was not made known to the parties, nor was either party told of the terms of the discussions that had taken place, or to see their result. Neither party was invited by the adjudicator to comment or make submissions upon the advice tendered, and neither party requested any opportunity to do so.
Held :
1. It is important that confidence in the adjudication process should be maintained. For such confidence to be maintained, it is important that adjudicators should be clearly seen to give parties a fair opportunity to present their arguments by fulfilling the principle of audi alteram partem.
2. The mere possibility of injustice is sufficient for a challenge to an adjudicator's decision for the reasons set out in para 1. above. The parties do not know the content of the legal advice obtained by the adjudicator. It could have been crucial. Indeed, because the adjudicator asked for advice on a particular matter, it is reasonable inference that he thought that it was important. I do not think that the possibility of injustice can be excluded.
3. I conclude that the defender has stated a relevant defence to the pursuer's claim to enforce the adjudicator's decision. It follows that the pursuer has not satisfied the test for summary decree, namely that the question of law that arises as to the relevancy of the defender's averments admits of a clear and obvious answer in the pursuer's favour. Pursuer's motion for summary decree is refused.
2. Discain Project Services Ltd v Opecprime Development Ltd [2001]
If an adjudicator's decision was to be challenged on account of a breach of the principles of natural justice, the breach must be substantial and relevant.
3. Inland Revenue v Barrs [1961]
Lord Reid - this is at least clear : no tribunal, however informal, can be entitled to reach a decision against any person without giving to him some proper opportunity to put forward his case.
4. Barrs v British Wool Marketing Board [1957]
This is a case involving a statutory tribunal that determined the valuation of wool.
Lord President Clyde - "Although quasi-judicial bodies such as this tribunal are not Courts of law in the full sense, it has been the law of Scotland that they must conform to certain standards of fair play, and their failure to do so entitles a Court of law to reduce their decisions. Were it not so, such tribunals would soon fall into public disrepute, and confidence in them would evaporate. Fair and equal opportunity afforded to all interests before the tribunal is the fundamental basis upon which the tribunal must operate, and, in the absence of such fair play to all, it is right and proper that a Court of law should reduce the tribunal's decision...
The test is not 'Has an unjust result been reached?' But 'Was there an opportunity afforded for injustice to be done?' If there was such an opportunity, the decision cannot stand".
5. Balfour Beatty Construction Ltd v London Borough of Lambeth [2002]
It was accepted that the principles of natural justice were applicable to adjudication proceedings. It was further accepted that if an adjudicator obtains material from sources other than the parties, including his own knowledge and experience, he must give the parties a reasonable opportunity to comment on that material.
6. RSL (South West) Ltd v Stansell Ltd [2003]
In this case, the adjudicator had indicated to the parties' representatives that he wanted to obtain assistance on programming issues from a specialist in that area. The plaintiff's representative agreed without qualification, but the defendant;s representative agreed subject to a request that he be allowed to see any report prepared by the specialist and that he be given reasonable time to comment upon any such report.
It was held that it is elementary that the rules of natural justice require that a party to a dispute resolution procedure should know what is the case against him and should have an opportunity to meet it... It is essential, in my judgment, for an adjudicator, if he is to observe the rules of natural justice, to give the parties to the adjudication the chance to comment upon any material, from whatever source, including the knowledge or experience of the adjudicator is minded to attribute significance in reaching his decision."
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