| Date | 2 May 2001 |
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| Judgment | Discain Project Services Limited -v- Opecprime Development Limited TCC 11 April 2001 |
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| The Issue | Use of telephone communications in adjudication. |
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| Implication |
Telephone communications in adjudication should be limited to matters of administration only. |
printIn October of last year, I reported in Contract Journal the case of Discain Project Services -v- Opecprime Development Limited. The matters which were heard in that judgment have been brought back to the court for a full trial, resulting in a further judgment dated 11 April 2001. Opecprime was a developer who had entered into a contract with Discain for the design, manufacture and erection of steelwork balconies at a property in Harrow. Disputes arose concerning payment and Discain, the contractor, commenced adjudication proceedings. It argued that it was entitled to be paid in respect of applications for payment and that the adjudicator should not look behind the amount shown in these applications, since Opecprime had failed to give payment or withholding notices under Sections 110 and 111 of the Construction Act. Opecprime argued that it had given relevant notices, including notices for withholding, but an issue arose as to the validity of those notices. They had not been written on the letter headed notepaper of Opecprime itself, but instead had been communicated using headed paper from a sister company. Indeed, it appears that many communications between the parties had been conducted in this way, and it had become normal for correspondence to be written by associated companies of Opecprime, yet everyone apparently understood which company was involved. Whether such notices would be treated as valid would be crucial to the outcome of the adjudication, and accordingly Discain wished to make appropriate representation on this point. Its representative telephoned the adjudicator on three occasions to discuss the manner in which the adjudicator would deal with this point. Whilst attempts were made to confirm the contents of these telephone discussions by subsequent fax, it seems that the faxes were less than complete recollections of the conversations. However, on the critical point of whether the adjudicator would take into account notices written on the letterhead of companies other than Opecprime, the adjudicator confirmed his discussion with Discain's representative to the effect that this was not a fundamental issue, as the other companies seemed to be acting for and on behalf of Opecprime. This sent a strong message to the parties. Discain were concerned that the adjudicator would now find against them on the validity of the withholding notices and asked for time to make further legal representations. Opecprime, on the other hand, were content to understand that the adjudicator would take into account its notices for payment and withholding. Comforted by this communication, Opecprime did not think it necessary to make further representations to the adjudicator on the matter of notices. The adjudicator's decision, when it eventually arrived, was however a bombshell. Quite contrary to his earlier indication, the adjudicator had taken a strict view of Section 111 in that he felt that the notice requirements could only be satisfied by the paying party personally, and not by a sister company. Believing that they had been misled, Opecprime refused to pay, arguing that the adjudicator had failed to observe the rules of natural justice in conducting the adjudication. His Honour Judge Bowsher QC recognised that there is no reason in law why an adjudicator should not have telephone conversations with individual parties to the adjudication. In the very tight timescale allowed for adjudication, telephone calls may be required to get the work done. Judge Bowsher noted however that acting inquisitorially does not mean acting unfairly. Moreover, he considered that there is a difference between telephone calls of a purely administrative nature, such as a call asking for a legible copy of a document, and calls that convey or elicit relevant information. The adjudicator is required by the adjudication process to convey all such relevant information to the other party. Communicating by telephone may be much more time consuming and more dangerous than communicating by fax. It requires taking a careful note of the telephone conversation and then sending a letter or fax to both parties summarising the conversation. There will, of course, always be the risk that the party to the telephone conversation will dispute the summary or that the party who did not take part in the conversation may be suspicious of what has been said. In any event, the parties' representatives and the adjudicator must clearly act with caution when dealing with telephone conversations. Reviewing the evidence, Judge Bowsher was willing to accept that despite these difficulties, the adjudicator had acted impartially. However, the adjudicator had heard submissions from Discain's representative on an important matter that he had not reported to Opecprime. Moreover, he had misled Opecprime into taking the view that there was no need for it to make further submissions on the question of the validity of its notices. Opecprime was justified in forming the opinion that what had been happening was unfair. Although the adjudicator was not biased, the facts found by Judge Bowsher were sufficient to lead a fair minded and informed observer to conclude that there was a real possibility or a real danger that he was biased. The adjudicator's decision would therefore not be enforced.
CJ-0117
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