Disclosing Without Prejudice Communications in Adjudication

In the case of Ellis Building Contractors Ltd v Vincent Goldstein, [2011] EWHC 269 (TCC) Mr Justice Akenhead had to look at whether an adjudicator's decision should be enforced given the disclosure of without prejudice material to the adjudicator during the course of the adjudication which, the employer alleged, gave rise to apparent bias against him.

The Facts

Ellis Building Contractors Limited (the "Contractor") were employed by Mr Goldstein (the "Employer") to carry out a part demolition, rebuild, refurbishment and fit out of 12 commercial units in Brighton.

The Contractor originally tendered for a total of £429,270.28 in respect of the works in early 2009. A first letter of intent was then issued on 18 June 2009 for works up to the value of the amount tendered for plus a contingency sum of 10% giving a value of £472,197.31 plus VAT. The letter of intent stated that the parties agreed that the works would be carried out under the terms of the JCT 2005 Intermediate Building Contract. The letter was signed by both parties.

Works started by mid September 2009 and, by April 2010, it was apparent there would be a significant overspend of some £110,000. A second letter of intent was issued on 4 May 2010 and was signed by the Contractor. This was for a maximum amount of £580,000.

On 3 June 2010, the Contractor notified the Employer that further amounts were due and that the limit in the second letter of intent would be exceeded shortly. They asked for a further letter of intent but the Employer refused to increase the financial limit. Following a meeting with the architect for the project on 1 July 2010, the Contractor sent the Employer the signed contract documents and asked him to sign them. He did not do so. The letter which enclosed the signed contract made it clear that the letters of intent were not incorporated into the document. Following practical completion on 23 July 2010, a dispute arose between the parties. The total gross sum said to be due by the Contractor was £650,224.46.

The dispute was referred to an adjudicator and, shortly after the issue of the notice of adjudication by the Contractor, a without prejudice letter was written to the Contractor's solicitors. This letter set out what was essentially the Employer's position at that stage, namely that the sum of £429,270.28 mentioned in the first letter of intent was the agreed cap. There was no mention of the applicability of the second letter of intent or the cap referred to...