This article summarises the High Court judgment in Balfour Beatty Construction Ltd v The Mayor and Burgesses of the London Borough of Lambeth [2002] EWHC 597 (TCC). The case concerned an application by BB to enforce the decision of an adjudicator in a dispute relating to delay damages withheld by Lambeth. Lambeth successfully challenged the adjudicator’s decision on grounds of impartiality, breach of natural justice, and excess jurisdiction.

Background to Dispute

BB and Lambeth entered into a contract in March 2000 for the refurbishment and remodelling of Falmouth House, incorporating the JCT Standard Form of Building Contract 1998 Edition, Local Authorities with Quantities. The architect granted some extensions of time, fixing a new completion date of 23 October 2000. However, certificates of non-completion were also issued, leading to the deduction of delay damages. Practical completion occurred on 24 May 2001.

The dispute referred to adjudication in December 2001 concerned the amount of damages for delay (£355,831.71) withheld by Lambeth. BB argued it was entitled to extensions of time due to numerous Relevant Events under clause 25 of the JCT conditions and therefore the damages with incorrectly deducted. BB relied on an ‘Overall Review Analysis’ of its As-Built programme, accepting that the critical path fluctuated due to changes. Lambeth criticised BB’s failure to record progress properly and the inadequacy of its programmes, arguing they did not conform to recognised delay analysis methods. Lambeth contended BB’s analysis was a “claim in the most global of natures.”

The adjudicator requested further information from BB, including a schedule of Relevant Events and supporting documentation. He held a meeting with the parties’ claims consultants. He later indicated the need for assistance to check BB’s as-built programme. The adjudicator found in favour of BB, granting an extension of time of thirty-five weeks and one day and ordering Lambeth to repay £283,997.14 in incorrectly deducted damages, plus interest and the adjudicator’s fees.

Impartiality, Natural Justice and Jurisdiction

Lambeth challenged the adjudicator’s decision on three counts. It alleged the adjudicator did not act impartially and failed to give Lambeth an opportunity to comment on arguments he relied upon, including his method of delay analysis. Lambeth also alleged that the adjudicator improperly employed assistants for work beyond the agreed scope and thus acted in excess of his jurisdiction. The third limb of Lambeth’s challenge alleged that the adjudicator failed to properly consider the final submission.

The court reiterated the adjudicator’s obligations under section 108 of the Housing Grants, Construction and Regeneration Act 1996 and clause 41A.5.5 of the JCT conditions to act impartially and fairly. Judge Lloyd QC drew analogies with arbitration principles, stating: “A tribunal does not act fairly and impartially if it does not give a party an opportunity of dealing with arguments which have not been advanced by either party.” He emphasised that this principle extends to a methodology of analysis adopted by the adjudicator but not agreed or proposed by the parties.

The adjudicator effectively adopted a collapsed as-built analysis to determine the criticality of the Relevant Events. The court found that the adjudicator failed to inform the parties of his intention to use this specific methodology and did not seek their comments on its suitability. The judge stated “In my judgment Mr Richards exceeded his jurisdiction by himself making good fundamental deficiencies in BB’s material, namely the lack of a critical path and the method of analysis adopted for demonstrating the criticality or otherwise of the Relevant Events” [34]. The Court considered this a significant breach of natural justice.

The court found that the adjudicator’s use of technical assistants for tasks such as converting BB’s programme formats went beyond the agreed terms, which limited assistance to the “determination of fact” and required prior notice. While acknowledging this as a breach of contract, the court did not find it had material consequences on the decision or caused substantial injustice to Lambeth in itself.

Lambeth also argued that the adjudicator made his decision with undue haste, not properly considering their final submissions. While acknowledging Lambeth’s late submissions, the court found that even if the adjudicator had taken more time, the content of the final submissions was unlikely to have significantly altered the outcome.

Conclusion

Judge Lloyd QC dismissed BB’s application for summary judgment to enforce the adjudicator’s decision. He concluded that Lambeth had established a “realistic prospect of success” in arguing that the adjudicator did not act impartially and failed to comply with the rules of natural justice by effectively constructing BB’s case and furthermore not giving Lambeth a proper opportunity to respond to the methodology and conclusions. At [39] he stated:

 “In my judgment an observer would conclude that by making good the deficiencies in BB’s case and by overcoming the absence of a sustainable as-built programme with a critical path and the complete lack of any analysis as to which of the relevant events were critical and non-critical, the adjudicator moved into the danger zone of being impartial or liable to ‘apparent bias’, as it is now recognised.”

The judgment also highlights the crucial role of critical path analysis in delay claims, particularly in complex projects. The judge provided some opinion on what can be expected from a party proving a delay claim: “Despite the fact that the dispute concerned a multi-million pound refurbishment contract no attempt was made to provide any critical path.” He went on: “A valid critical path (or paths) has to be established both initially and at every later material point since it (or they) will almost certainly change.” [30]