Without prejudice documents and the rules of natural justice in adjudication

It is well-known that adjudicator's decisions are generally enforced by the courts unless the adjudicator lacks jurisdiction or breaches the rules of natural justice. Following on from that, if an adjudicator wrongly receives without prejudice material could an adjudicator's decision be challenged on the basis that an adjudicator in reaching his decision is influenced by that material which could lead to a suggestion of apparent bias?

What is the position if "without prejudice" correspondence is inadvertently submitted during an adjudication?

By way of recap, in Ellis Building Contractors v Goldstein [2011] EWHC 269, Akenhead J warned that an adjudicator's knowledge of a without prejudice letter or communication might give rise to apparent bias resulting in a decision being challenged on the grounds of a breach of natural justice. This was likely to be the case where the decision was primarily based on that wrongly received without prejudice material.  However, there is no hard and fast rule that an adjudicator would be influenced by receipt of without prejudice material and in Ellis Building the receipt of such material did not prevent the adjudicator's decision being enforced. The adjudicator had not based his decision on the contents of the without prejudice letter and there was no legitimate fear that the adjudicator might not have been impartial. 

Akenhead J commented that the practice of putting without prejudice material before an adjudicator was not "wholly uncommon unfortunately" and should be discouraged before concluding that:

 "The test as to whether there is apparent bias present is whether, on an objective appraisal, the material facts give rise to a legitimate fear that the adjudicator might not have been impartial. The Court on any enforcement proceedings should look at all the facts which may support or undermine a charge of bias, whether such facts were known to the adjudicator or not."

What is the latest position?

In a recent Scottish case of Transform Schools (North Lanarkshire) Limited v Balfour Beatty Construction [2020] CSOJ 19, the court enforced an adjudicator's award of just over £4 million in a latent defects dispute arising from the construction of a school in North Lanarkshire.  

Balfour Beatty challenged the enforcement on the basis that the adjudicator had used certain "without prejudice" documents in reaching his decision and in doing so had breached the rule of natural justice.

It was significant in this case that the adjudicator was legally qualified and had himself identified the issue of the without prejudice material. The adjudicator had given both parties the opportunity to make submissions on the question of the admissibility of the without prejudice material before coming to a reasoned decision.

The court was of the view that just as a court would be entitled to consider whether without prejudice documents were admissible and make a decision as to their admissibility so could an adjudicator. If the adjudicator was wrong to decide that those documents were admissible, then that would be an error of law. However, it would not justify the court in refusing to enforce the adjudicator's decision.

The court concluded having reviewed that decision in Ellis Building that the adjudicator's behaviour did not involve any breach of natural justice or apparent bias. The admissibility question was a central issue in the case and was "far removed" from the position in Ellis Building.  

What does this mean?

Parties should take care not to inadvertently disclose without prejudice material to an adjudicator. However, parties should not assume that doing so will result in the adjudication becoming undermined by adjudicator bias. It may be possible to resolve the issue without an adjudicator having looked at the document if the parties raise the issue of an inadvertent submission of a without prejudice document sufficiently quickly.

But if not, the test remains as set out in Ellis Building that there may be circumstances where an adjudicator's decision will not be enforced where the adjudicator has wrongly received without prejudice material but this depends on an objective appraisal of the material facts to assess whether there is a legitimate fear of bias on the part of the adjudicator.