Serving legal documents to the other party in an adjudication is normally rather straightforward. Under section 115 of the 1996 Act, the parties can agree on the manner of service of any notice or other document; if there is no such agreement, a notice or other document may be served on a person by any effective means. If a notice or other document is sent by post, it shall be delivered to the addressee’s last known principal residence or last known principal business address.

One may think that as long as you have complied with the above requirements, the service of the documents would be valid and if for some reason, the documents were in fact not received by the other party, a decision made by the adjudicator would be binding and enforceable.

This is what the contractor had done in M Rohde Construction v Nicholas Markham, but the court set aside the default judgement enforcing the adjudicator’s decision made in the contractor’s favour. Why? Because Mr Justice Jackson found that the other party did not actually receive the documents and was ignorant of the adjudication proceedings. The judge said there was a breach of natural justice.

The Facts

The client, Markham-David engaged a contractor to carry out renovation work on his second house. A dispute arose and the contractor referred the dispute to adjudication. An adjudicator was duly appointed and made a decision in the contractor’s favour. All seemed to be straightforward. What is unusual, however, are the circumstances which were rather irrelevant to the dispute itself: While the contracted works were in progress, Markham-David’s marriage broke down and the couple moved out of their matrimonial home and into separate houses. All the adjudication documents were sent to the matrimonial home and the communications were returned as undelivered.

The contractor sought to enforce the adjudicator’s award, and obtained an order for service of the documents to both the client’s exmatrimonial home and his ex-wife’s home. Again, no response or acknowledgement of service was received and the court gave judgement in default.

The matters then rested for a good three years until in 2005, the client applied to set aside the default judgement.

The Law

In deciding whether to set aside the default judgement, Mr Justice Jackson considered: “Does the defendant have a real prospect of successfully defending the claim?” In other words, should the adjudicator’s award be enforced by the court? If the answer to the above issue is yes, then in the exercise of its discretion, whether the court should set aside the default judgement?

In relation to the first issue, Jackson rejected a number of arguments put forward by the defendant, such as there was no contract in writing, the adjudicator’s decision was delivered out of time. The judge then considered the argument that the defendant was ignorant or probably ignorant of the adjudication proceedings.

The contractor argued that all the documents were sent to the claimant’s last known principal residence which constituted effective service under section 115(4) of the 1996 Act. The judge did not seem to dispute this argument. However, he looked at what he called “an important feature”, which was that the client could easily have been contacted at his business premises and the contractor knew about this address as it previously carried out work there on behalf of the client.

He asked the question: “Did the claimant have available during the adjudication a ready means of contacting the defendant, which the claimant chose neither to use nor to communicate to the adjudicator?” The judge found affirmative to this question. He then considered whether in these circumstances, the adjudicator’s award was enforceable.

Having found little help from the existing authorities, the judge turned to the principle of natural justice. Referring to Carillion Construction Limited v Devonport Royal Dockyard, he expressed his view that: “If, after hearing evidence in the present case, it turns out that the claimant took a deliberate decision, which deprived the defendant the opportunity to make representation in the adjudication, then I consider this may be one of those rare and exceptional cases in which the court will decline to enforce an adjudicator’s decision by reason of breach of natural justice.”

Basing his finding on the fact that the claimant failed to utilise a ready means of contacting the other party, the judge concluded that the defendant had a defence available with real prospect of success. With regard to the issue of exercising discretion to set aside the default judgement, the judge weighed up the following competing facts: The prejudice which the claimant would suffer if judgement was set aside; the prejudice which the defendant would suffer if judgement was not set aside; the interests of justice; all the circumstances of this case.

Having regard to all these elements, he concluded that if the default judgement stood there would be a real risk that the defendant would suffer injustice. The prejudice caused to the defendant by dismissing his application outweighed the prejudice caused to the claimant by setting the judgement aside. The defendant moved with reasonable promptness to make his application. The judge decided to set aside the default judgement and let the action proceed to trial.

A lesson for the parties

This decision must be correct as a party cannot be held to the outcome of legal proceedings of which he was ignorant and in which he could not participate. Parties involved in an adjudication must be warned that mere compliance with section 115 may not be enough. This case seems to impose a common law burden upon the parties on the grounds of natural justice although in the author’s view, this decision should only apply where there is a ready means of contacting the other party.

As such, a party should be alert in adjudication proceedings when a notice or the documentation is returned and/or undelivered. If in doubt as to whether the other party has been contacted or has received a notice or documents, make use of any other available means to contact the other party.