Another failed natural justice challenge: Home Group Limited v MPS Housing Limited [2023] EWHC 1946 (TCC)

The Judgment in Home Group Limited v MPS Housing Limited [2023] EWHC 1946 (TCC) is a reminder of the difficulty of succeeding in a natural justice challenge based on the complexity of the material and/or the time needed to respond.

The Facts

On 11 May 2022, MPS Housing Limited (“MPS”) purported to terminate its contract with Home Group Limited (“Home Group”). In a first adjudication, the adjudicator found that termination was invalid and MPS had repudiated the contract. The second adjudication was commenced in order to recover Home Group’s losses. The adjudicator ordered payment by MPS to Home Group of £6,565,831.94 plus interest and 85% of his fee (“the Decision”). Home Group sought enforcement of the Decision by summary judgment.

Home Group’s Referral in the second adjudication included: “…a quantum expert report of 155 pages, with 76 appendices, which comprised 202 files in 11 sub-folders, amounting to 338 megabytes of data and a further 2,325 files in 327 sub-folders and five factual witness statements (which amounted to 88 pages, with hundreds of exhibited pages sitting behind)” (Judgment, paragraph 3). 

MPS only had 19 calendar days (or 13 working days) to produce its response to the Referral.

MPS submitted that this was an inadequate period of time. It could not properly digest or respond to the material served with the Referral. That was a breach of natural justice, which had led to a material difference in the outcome, and accordingly the Decision was not enforceable. Home Group should have provided MPS with a greater opportunity to understand the claim, either in advance of the Notice of Adjudication or by agreeing to an extended timetable during the adjudication.

The Law 

The Judge noted that arguments based on time constraints impacting the ability to respond fairly have enjoyed little success (paragraph 41). At paragraph 50, he distilled four points from his review of the authorities:

“(1) Adjudication decisions must be enforced even if they contain errors of procedure, fact or law.

(2) An adjudication decision will not be enforced if it is reached in breach of natural justice and the breach is material, in that it has led to a material difference in the outcome. However, the Court should examine such defences with a degree of scepticism;

(3) Both complexity and constraint of time to respond are inherent in the process of adjudication, and are no bar in themselves to adjudication enforcement. Whilst it is conceivable that a combination of the two might give rise to a valid challenge, in circumstances where the Adjudicator has given proper consideration at each stage to these issues and concluded that he or she can render a decision which delivers broad justice between the parties, the Court will be extremely reticent to conclude otherwise;

(4) In cases involving significant amounts of data, an adjudicator is entitled to proceed by way of spot checks and/or sampling…”

Analysis 

The Judge rejected MPS’s defence to enforcement. He noted:

• The quantity of information itself is not a valid basis for challenging enforcement. As an aside, he noted that it was not particularly persuasive or helpful to conceptualise the extent of electronic data by what it will look like printed, particularly where there are a lot of spreadsheets that were not designed to be printed. 
• In reality, the case was a “vanilla ‘final account’”. The dispute revolved around a relatively small number of categories (21) of factual or expert dispute. In many ways, it was “…significantly more straightforward than many ‘kitchen sink’ final account adjudications…” (paragraph 46). 
• Before the adjudication, MPS had insisted on a full and detailed description of the work that was undertaken against each and every work order, and did not agree to a sampling proposal by Home Group. That was an unrealistic approach. Whilst there was the potential for a debate about the nature and extent of the sampling exercise, there was “little excuse” not to take up Home Group’s offer to access the underlying material based on an incremental approach to the sampling exercise (paragraph 55).
• At the date of the Referral, 5 weeks had passed since the provision of Home Group’s quantum expert report on a without prejudice basis, and 3 weeks had passed since the appendices had been provided. MPS could and should have been actively engaged in analysing it since it was received. 
• A review of MPS’s expert and factual evidence demonstrated that MPS was able to and did properly and thoroughly engage in the substance of the claim. It was able to undermine a number of the high-value aspects of the claim. Although the response was not as comprehensive as it would have been in litigation or arbitration, this was “plainly not the test” (paragraph 57).

Comment 

In my view, there are two points particularly to note from the Judgment:

• First, it provides a convenient summary of the law on natural justice challenges to enforcement of adjudicator’s decisions based on the complexity of the material and/or the time needed to respond. Any party seeking to mount such a challenge is going to face an uphill struggle.
• Secondly, the Judge was clearly unimpressed by the position taken by MPS in the correspondence leading up to the adjudication. Rather than engaging in any analysis of the material provided on a sampling basis, MPS’s responses “…were strategically driven in an attempt to create a jurisdictional challenge that no dispute had crystallised” (paragraph 55). Wherever possible, a responding party needs to try to engage with the material provided, and not have unrealistic expectations about how long it will be given to review and consider the material.