Construction

Dealing with fraud in the adjudication

BM Services Inc Limited v Greyline Builders Limited [2018] EWHC 3884 (TCC)

This first instance decision of Mr Alexander Nissen QC (sitting as a Deputy Judge of the High Court) on an application for summary judgment to enforce an adjudicator’s award is the latest case to consider the circumstances and the relevant legal tests when fraud is raised as a defence. It further considers allegations that the adjudicator failed to consider a defence and failed to give reasons for his decision, breaching the rules of natural justice.

The facts

The claimant was employed as a labour-only subcontractor by the defendant which was employed as a sub-contractor to fit out kitchens on a redevelopment for a local authority. The claimant had a single director who was also a shareholder. This Mr Chirica was also employed by the main contractor. The claimant commenced proceedings in respect of the unpaid final balance. The defendant alleged the claimant’s director had colluded with the clerk of the work to artificially inflate sums due to the claimant.

The defendant had raised the alleged frauds in its rejoinder in the adjudication. Firstly, it relied on the alleged fraud to challenge the adjudicator’s jurisdiction. Secondly, it argued that the dishonest behaviour had overvalued the claimant’s work. The adjudicator decided that the alleged fraud did not deprive him of jurisdiction and went on to decide the matter in favour of the claimant in the sum of £138,275.65 plus interest.

The court’s decision

The defendant raised two challenges to the adjudicator’s decision which the court was required to resolve: 1) had the adjudicator considered the defence of fraud, and 2) had the adjudicator given sufficient reasons for any decision against the defendant’s allegations of fraud.

1) The judge set out the matters the adjudicator had considered and held that the issue of fraud was raised simply as an evidential defence and not as a stand alone defence in its own right. In essence, it was to say that certain documents had been tainted by fraud and so could not be relied upon to value the claimant’s work. All of the relevant evidence was available to the adjudicator but he did not find any fraud had been proved. The concluded that by considering the evidence to which the fraud allegations related, and finding there to be no evidence of any collusion, the adjudicator had considered the allegation of fraud and had found against the defendant.

2) Given the adjudicator decided that there was no collusion and that the dual-employment of the claimant’s director was known to all parties, the court held he had given reasons for his decisions. Where discrepancies in value were found to exist, the adjudicator dealt with them expressly. Accordingly, there was no breach of the rules of natural justice. The judge also considered that the defendant’s position was flawed by its failure to demonstrate what consequence the alleged fraud had. There was no evidence either before the adjudicator or the court to demonstrate the value of the claimant’s case had it not been tainted by fraud.

Summary

This case highlights the importance for parties to adjudication proceedings to ensure their evidence proves the point they are making. The defendant had produced such little evidence of the alleged fraud that the claimant did not even provide a detailed response to the allegations during the adjudication. The judge was demonstrably not impressed by the defendant’s bland assertion that further evidence of fraud had come to light between the adjudication and the court hearing without actually setting it out in addition to noting that it was not apparent that even if the allegations had been proved the award would have been reduced.

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BM Services Inc Limited v Greyline Builders Limited [2018] EWHC 3884 (TCC)

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