ICC Commission Report Construction Industry Arbitrations Part 2
Out-Law News | 30 Oct 2018 | 11:45 am | 4 min. read
Giving the judgment of the court (11-page / 143KB PDF), Justice of Appeal Stephen Chong said that it was unlikely that the adjudicator, who was not a legally-trained person, had used the term "beyond reasonable doubt" in his decision in the legal sense. However, even if he had done, it was still not a breach of natural justice, as the parties could have reasonably foreseen that the applicable standard of persuasion was "an issue so integral and crucial to the adjudicator's task" that they should have presented evidence accordingly.
The Court of Appeal also found that, had there been a breach of natural justice in this case, it was not one that caused prejudice to the losing party and therefore was not one in which a court was entitled to intervene. In the appeal court's view, the adjudicator would have come to the same conclusion regardless of the standard of proof applied.
Construction disputes expert Patricia Ho of Pinsent Masons MPillay, the Singapore joint law venture between MPillay and Pinsent Masons, the law firm behind Out-Law.com, said that the decision was "a welcome clarification on the limits of natural justice challenges in adjudication".
"The decision reinforces the point that the parties themselves ought to be alert to the relevant, live issues during the proceedings and cannot rely solely on the adjudicator to take the obvious step of inviting submissions from the parties on a given issue," she said.
The underlying dispute in this case arose over allegedly defective shower screens installed by Glaziers Engineering Pte (Glaziers) at The Hillford, a residential development for the elderly, on which WCS Engineering Construction Pte (WCS) was the main contractor. Glaziers pursued an adjudication when WCS did not pay it for the work on time. During the course of the adjudication, WCS sought to deduct losses from the amount claimed by Glaziers to reflect the defects.
The adjudicator made a determination in favour of Glaziers. He said that WCS had to be able to persuade him beyond reasonable doubt that Glaziers was liable for the defective work, and that it had not done so. He did not seek, and did not receive, any evidence from the parties about the standard of proof required. Both parties claimed that, had they done so, they would have told him that this was the wrong standard of proof, as it is not the role of an adjudicator to decide whether the parties have objectively 'proved' their cases.
In the High Court, Judge Coomaraswarmy found that the fact that the adjudicator had not sought representations from either party was "unusual" enough to amount to a breach of natural justice. He went on to find that the breach was 'causally connected to the outcome' of the case and had caused WCS 'actual prejudice', meaning that he was able to set aside the determination on breach of natural justice grounds.
However, the Court of Appeal disagreed. The circumstances of this case did not justify interference by the courts, particularly given the limitations of adjudication as a means of dispute resolution, Justice of Appeal Stephen Chong said.
"[I]t is precisely because adjudication determinations only enjoy temporary finality that the courts ought to read such determinations more generously, bearing in mind that the dispute between the parties may later be reopened and ventilated in another more thorough and deliberate forum," he said. "The courts should also read and interpret adjudication determinations more generously in light of the roughshod but quick species of justice provided for by the [2006 Building and Construction Industry Security of Payment] Act, bearing in mind that an adjudicator is required to render his decision within a fairly short timeframe."
"Here, the adjudicator was not a legally-trained person and the adjudication determination must be read in that light ... In our judgment, although the adjudicator used the term 'beyond reasonable doubt' on a few occasions, it was doubtful that he intended to use those words with all the import that they would carry if they were used by a lawyer or a judge. On balance, it was more likely that the adjudicator used the term 'beyond reasonable doubt' to mean that he needed to be satisfied that there was a basis for [WCS's] back charge, and that he would not be so satisfied if he entertained reasonable concerns or doubts," he said.
The appeal court then went on to consider the "two crucial points" on which Judge Coomaraswarmy ultimately arrived at his decision. Firstly, it found that it was incorrect to suggest that the parties had not had the opportunity to present evidence on the standard of persuasion required. Secondly, the "overall tenor" of the adjudicator's determination suggested that WCS's case would have been unsuccessful in any event, and so it did not suffer material prejudice.
"At the risk of stating the obvious, a fair and reasonable opportunity of being heard may or may not require a decision-maker to take the overt step of inviting submissions from the parties on a given issue," said Justice of Appeal Chong in his judgment.
"In our judgment, the present case comes within this category of cases where the parties are precluded from complaining of a breach of the fair hearing rule because they ought reasonably to have foreseen that the issue in question (here, the applicable standard of persuasion) would arise, but failed to make submissions on the point. Indeed, it is a gross understatement to say that the parties could 'reasonably foresee' that the issue of the standard of persuasion would arise, or that the issue was 'reasonably connected' to the arguments raised by the parties," he said.
"Seen in this light, it could not have been a breach for the adjudicator to have omitted to invite submissions from the parties as to the applicable standard of persuasion. The applicable standard was a question so obviously crucial to his determination that he was not obliged to highlight to the parties that it would be a live issue. If the parties decided not to address it, knowingly or otherwise, they cannot complain that they had no fair or reasonable opportunity to be heard," he said.
ICC Commission Report Construction Industry Arbitrations Part 2