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In a recent case*, the Court had to consider whether an adjudicator’s appointment was invalid because of information provided by the referring party to the RICS in making the application for the appointment of said adjudicator.

Eurocom (the sub-contractor) commenced an adjudication against Siemens (the contractor). Matthew Molloy was appointed as the adjudicator. He decided that Eurocom should pay £35,283 to Siemens.

Just over a year later, Eurocom put forward a further adjudication against Siemens.

Eurocom, represented by Knowles, served a Notice of Adjudication on Siemens.  Knowles then applied to the RICS who was the nominating body for the appointment of an adjudicator. One of the questions on the RICS’ appointment form is “Are there any Adjudicators who would have a conflict of interest in this case?”. Knowles listed 13 individuals who should not be appointed. One of the adjudicators listed was Matthew Molloy, who Knowles stated had “acted previously”.

The RICS appointed Anthony Bingham as the adjudicator. Mr Bingham awarded Eurocom £1.6 million.

When Siemens did not pay the awarded sum, Eurocom commenced enforcement proceedings.

Siemens sought to resist enforcement proceedings on the basis that the nomination process was invalid because of the information Knowles had provided to the RICS in making the application.

The Judge decided that in completing the RICS form it was only appropriate to include the name of individuals who actually had a conflict of interest. By listing the names of 13 individuals, including Matthew Molloy, as having conflicts of interest Knowles had made a false statement. In fact, the Judge went further and concluded that this was a fraudulent representation to the RICS.

The effect of the fraudulent misrepresentation was to invalidate the second adjudicator’s appointment. In turn, this meant that the second adjudicator lacked jurisdiction.

The Judge noted that the RICS would normally appoint an adjudicator who had been appointed previously. Since Matthew Molloy was not appointed in the second adjudication, the RICS had been deceived. He and others had been wrongly eliminated from the pool of potential adjudicators, which resulted in that pool being improperly limited.

The Court accepted the general principal that parties entering into contracts do so on the basis that the other party will act honestly. In other words, there is an implied term that a party would act honestly when it applied to the adjudicator nominating body. A party should not undermine the system of adjudicator nomination by making a fraudulent misrepresentation. That was an example of the implied term that a party should not act dishonestly.

In this case, there had been a breach of the implied term and, therefore, there were sufficient grounds to conclude that the adjudicator’s appointment was invalid. The consequence of this was that the adjudicator lacked jurisdiction.

As far as we are aware, this is the first time a responding party has successfully argued that, when completing the RICS’ adjudicator application form (or for that matter any other adjudicator nominating application form), the referring party has to act honestly when it completes the section of the form regarding individuals who may have a conflict of interest.

The decision in this case may surprise those who have always used the form to include a list of those adjudicators to whom a referral document would not be sent, thereby saving the referring party time and money in having to apply for alternate adjudicators. However, using the form as a pre-emptive rejection list is, in light of this judgment, a risky strategy. Going forward, if the name of an individual is included on the appointment form, that individual will actually need to have a genuine conflict of interest. If they don’t, this will form the basis of a potential jurisdictional challenge by the responding party on enforcement.

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*Eurocom Limited v Siemens Plc [2014] EWHC 3710 (TCC)

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This blog is intended only as a synopsis of certain recent developments. If any matter referred to in this blog is sought to be relied upon, further advice should be obtained.