Adjudication procured by fraud – how does the court deal with that?

A good chunk of the TCC’s business concerns the enforcement of arbitration awards.  It is well known that there are very limited circumstances in which it will refuse to do so.  One such ground is where the adjudication award was procured by fraud and we reported last year on the unsuccessful attempt in Gosvenor v Aygun.

The issue came before the court again in PBS Energo v Bester Generacion.  The case concerned a biomass energy generating plant in Wrexham and had already led to other disputes between the employer (Equitix), the main contractor (Bester) and its sub-contractor (PBS).

PBS brought court proceedings against Bester relating to the termination of the sub contract.  The claim is due to go to trial in July 2019.  In a separate adjudication it was decided that PBS had validly terminated the subcontract.  PBS then commenced a second adjudication to determine what payment it was entitled to as a result.  The adjudicator ordered that Bester pay PBS £1.7m, Bester didn’t do so and PBS issued enforcement proceedings.

Crucially, between the second adjudication and the enforcement hearing disclosure in the underlying court proceedings had taken place.  Bester’s lawyers waded through 57,000 documents (including 17,000 documents in Czech or Slovak with no English translation) to uncover what they said was evidence of fraud.  In a nutshell, the documents apparently disproved PBS’ claim that it was unable to sell elsewhere parts manufactured for the Bester contract, so didn’t need to give Bester any credit for them.

At the enforcement hearing the court found that (1) various representations had been made in the adjudication about whether equipment could be resold (2) the representations were arguably false (3) PBS arguably knew them to be false (4) the adjudicator relied on them in the adjudication and (5) the allegation of fraud couldn’t have been taken during the adjudication because the evidence didn’t come to light until disclosure in the underlying court proceedings.  On that basis the court dismissed PBS’ application for summary judgment in relation to the second adjudication.  Issue (5) allowed the court to take a different approach to the Gosvenor decision.

Whilst Bester successfully relied on the fraud allegation to resist enforcement in this case, the number of hoops through which it first needed to jump is reminder of the court’s general robust approach to adjudication enforcement.