Neutral Citation Number: [2011] EWHC 269 (TCC)
Case No: HT-11-22
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 18th February 2011 

Before :

MR JUSTICE AKENHEAD
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Between :

	ELLIS BUILDING CONTRACTORS LIMITED	Claimant	
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	VINCENT GOLDSTEIN	Defendant	

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Crispin Winser (instructed by Stephen Rimmer LLP) for the Claimant
Marion Smith (instructed by Philip Ross) for the Defendant

Hearing dates: 11 February 2011
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JUDGMENT

Mr Justice Akenhead: 

1.	The Claimant, Ellis Building Contractors Limited ("Ellis"), seeks summary judgement in these proceedings to enforce the decision of an adjudicator issued on 12 January 2011 by which he ordered the Defendant, Mr Goldstein, to pay to Ellis £121,566.86 plus VAT on part as well as requiring Mr Goldstein to pay his fee. Issues are raised in relation to possible bias and breaches of natural justice. One aspect of this is a complaint based on without prejudice material being put before the adjudicator. This is not wholly uncommon unfortunately and it is a practice that should be discouraged.
The Background
2.	The facts and history as I set them out in this judgement only relate to this judgement and are not intended to bind the judge who tries any issues as to what in fact any contract between the parties comprised.
3.	Mr Goldstein wished to carry out a part demolition, rebuild, refurbishment and fit out of 12 commercial units at Bush Mews, 5 Arundel Road, Brighton. Architects, Farmiloe Architects ("FA"), were employed to design and administer the project. Negotiations appear to have continued between about April 2008 through to June 2009 between Mr Goldstein and his associate a Mr Conway and, although it is clear that tenders were sought from at least two other tenderers, Ellis tendered on 17 March 2009 in the total sum of £429,270.28. On 18 June 2009, Mr Goldstein sent a Letter of Intent (the "First Letter of Intent") to Ellis. The following was stated:
“Please accept this as our Letter of Intent to enter into a Contract with Ellis… to carry out and complete the repair & refurbishment works to Bush Mews…
At this point in time, certain elements of the design are required to be finalised by our directly employed Design Team and in the interim, to establish a Contract Sum we will base this Letter of Intent on Ellis…letter dated 9 February 2009 and letter…dated 17 March 2009 identifying a contract sum of £429,270.28 plus VAT. To this will be added a contingency sum of 10% which gives a Contract sum of £472,197.31 plus VAT…
This letter provides you with the authority to commence all necessary preconstruction works to facilitate the earliest possible commencement date from the date of this letter. These works will be carried out under the specific terms of JCT 2005 Intermediate Building Works Contract, Clause 2.23 Liquidated Damages at the rate of £Nil per week…Date of issue of Interim Certificates as per Contact Particulars 4.6.1 shall state 14 days from date of possession.
In the event of failure to conclude the Contract	or either party deciding that the provision of the work should cease for whatever reason, the Employer’s total liability will be Ellis… pre-construction costs together with any costs and expenses reasonably and properly incurred together with associated overheads and profit.
In the event that the formal Contract is not prepared prior to commencement, following commencement the parties agree that the works will be carried out under the specific terms of the JCT 2005 Intermediate Building Contract.”
This was signed by the parties. 
4.	Another Letter of Intent appears to have been drafted on 4 August 2009 but  does not appear to have been sent or actioned. By mid-September 2009, work had been started by Ellis and their report No 1 at that time suggests that four weeks worth of work had been done and a further 21 weeks remained for completion. FA sent to Mr Goldstein a draft Intermediate Building Contract which appears to have assumed a contract price of £472,197.31 which was Ellis’s latest price plus a 10% contingency. Project meetings were held regularly and frequently, attended by Ellis, Mr Goldstein and FA. Substantial payments appear to have been made to Ellis. By April 2010 consultants were telling Mr Conway that there was an overspend which would produce a final completion value estimated at £583,099.55 which would involve a total overspend of some £110,000 over the earlier assumed contract price. On 15 April 2010 Ellis wrote to Mr Goldstein:
“…we have conducted a periodic review…and are aware that the value of the works is fast approaching the value of that stated in your letter of intent dated 18 June 2009 for a Contact sum of £472,197.31 plus VAT.
Normally this would not be an issue as the letter of intent would have been superseded by the Contact Documents which had the necessary mechanism within them to cater for an increasing contract value. However, for reasons which are unclear to us, these documents are yet to be formally issued and therefore need to bring this matter to your urgent attention.
As we see it there are two options for dealing with this situation:-
1. Issue a further letter of intent to cater for the increase in value of the works.
2. Formally issue the Contract Documents.
We would anticipate that we are currently very close to the contract sum for the works actually carried out on site and have committed orders to various sub-contractors and suppliers that will exceed the value of the letter of intent. We would therefore very much appreciate if you could see your way clear to organising a prompt response to these matters…”
5.	Following some further discussions, this resulted in the second Letter of Intent dated 4 May 2010 being issued by Mr Goldstein and signed by Ellis:
“Further to your letter of intent dated 18 June 2009, we now write to you to extend the authority of the aforementioned letter to expire on the execution of the Contract unless extended again in writing by us.
These works will be carried out under the terms of JCT 2005 Intermediate Building Works Contract, Clause 2.23 Liquidated Damages at a rate of £Nil per week and Clause 6.7 Option C shall apply in respect of insurance. Dates of Interim Certificates as per Contract Particulars 4.6.1 shall state 14 days from date of possession.
In the event of failure to conclude the Contract or either party deciding that the provisions of the work should cease for whatever reason, the Employer’s total liability will be Ellis… pre-construction costs together with any costs and expenses reasonably and properly incurred together with associated overheads and profit.
We undertake to pay you the proper and reasonable costs incurred by you in working in accordance with the Drawings, Specification and Instructions issued by [FA] (acting as our Agents) for properly providing services, works, goods and materials for the Authorised Works, in accordance with this letter, providing that our liability to you will be extended by £107,802.69…and will not exceed £580,000…(the "Maximum Amount").
Both parties agree that the works will be carried out under the specific terms of the JCT 2005 Intermediate Building Contract.
Please acknowledge receipt of this letter and confirm the acceptance of its contents by signing the duplicate copy and returning it to us.”
6.	Following receipt of a cheque for £100,000 from Mr Goldstein’s solicitor, Philip Ross, Ellis responded on 3 June 2010 acknowledging receipt and asserting that the sum due to date was £568,841.42 and that the Second Letter of Intent limit would be exceeded shortly. Ellis asked for a further letter of intent. The solicitor replied on 22 June 2010 sending a further payment of £44,769.92 and indicating that Mr Goldstein would not agree to increase the financial limit. On 23 June 2010, Ellis wrote back hinting that there might have to be a cessation of work if the financial limit in the Second Letter of Intent was to be exceeded.
7.	A meeting was held on 30 June 2010 attended by Mr Conway, three representatives of Ellis and two from FA. Minutes, which may ultimately be disputed, produced by FA on or shortly after 7 July 2010 stated at Minute 2.20:
“FA issued two copies of the contract documents to [Ellis] for signature prior to being forward to [Mr Conway] for signing. [Mr Conway] is to then return a single signed copy of the contract to [Ellis]. FA requested [Ellis] include the second Letter of Intent prepared within the Contract Documents and forward a copy of this to FA for their records.”
8.	Apparently, before those minutes were received by Ellis, on 1 July 2010, Ellis sent to Mr Goldstein the signed contract documents asking him to sign. Ellis wrote that it had incorporated the additional documentation requested and as detailed in its letter to FA dated 1 July 2010. The letter to FA of 1 July 2010 makes it clear that the Letters of Intent were not incorporated into the documents. This obviously raises an issue as to what was said or  agreed at the meeting of 30 June 2010, namely as to whether the Second Letter of Intent was in some way incorporated into the contract which was to be signed.
9.	The documentation and evidence does not reveal precisely what happened in relation to the contract documents or how the works progressed thereafter. It is said that the Certificate of Practical Completion was issued on 23 July 2010. So far as I can ascertain, £83,759.82 plus VAT was the outstanding unpaid sum certified for payment by FA whilst Ellis claimed an additional £35,000-£40,000 plus VAT for variations and prolongation which had not been certified. A total gross sum said to be due of £650,224.46 was claimed by Ellis. £98,417.78 inclusive of VAT was claimed for certified sums and £47,030.39 was claimed in respect of uncertified sums.
10.	Perhaps unfortunately, Ellis decided to serve a statutory demand on Mr Goldstein in respect of his alleged liability to Ellis in respect of the works. In his formal application dated 29 October 2010 to the Bankruptcy Court to set aside the statutory demand, Mr Goldstein’s solicitor, presumably upon instructions, in effect said that there was a dispute about the alleged sum claimed but only argued that, although there was "an unsigned building contract" subsisting between the parties, that the contract was subject to an "express fixed sum provision" which was that effectively arising out of the first Letter of Intent dated 18 June 2009 in the sum of £429,270.28 with a 10% contingency giving a Contract Sum of £472,197.31. He does not mention the Second Letter of Intent or the financial limit identified therein at all.
11.	Following the issue by Ellis of a Notice of Adjudication, Mr Goldstein’s solicitor wrote a without prejudice letter to Ellis’ solicitor on 21 December 2010. This letter set out over 1½ pages essentially what Mr Goldstein’s position was 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 in it. Although it was certainly his view that no further sum was payable, his "commercial view of the matter" was such that he was prepared to offer a sum which in the version before the Court and the Adjudicator was redacted.
The Adjudication
12.	The Notice of Adjudication identified the contract as "the JCT 2005 Intermediate Building Contract, Revision 1 2007 with Attestation Update as identified in two letters of Intent issued by Mr Goldstein on 18 June 2009 and 4 May 2010 and as detailed on the contract documents prepared by the Architect…”. Mr Mark Pontin FRICS FCIArb was appointed the adjudicator. The Referral Notice prepared by a claims consultant was served before Christmas 2010. The Referral attached a number of letters and other documents and in particular those relating to the application to set aside the statutory demand (referred to above). Paragraph 3 stated that the contract:
“was concluded through direct negotiations between the parties. These negotiations culminated in a Letter of Intent dated 18 June 2009 in the total sum of £429,270.28, to which was added a 10% contingency making the total value of the Letter of Intent £472,197.31…”
13.	It is clear from the Referral that essentially Ellis was asserting that the Intermediate Building Contract (“IBC”) was part of the contract. At Paragraph 12 for instance, Ellis asserts:
“The version of the IBC in force at that time [18 June 2009] was the version containing Revision 1 2007 with Attestation Update. This version of the IBC came into effect on 1 April 2007. This can be verified from the inside cover of the contract prepared by the Architect and handed to Ellis at the site meeting on 30 June 2010. However, should Mr Goldstein seek to challenge this and rely on the earlier and original version of this Contract, which is accepted by the Adjudicator, it matters not because all the relevant clauses and provisions relied upon by Ellis in this adjudication are common to both forms."
Ellis go on to seek to undermine the argument that the cap in the First Letter of Intent applied by expressly referring in Paragraph 16 to the Second Letter of Intent which extended the original figure up to £580,000. Paragraph 20 states this:
"The position regarding the contract documents developed on 30 June 2010, when at a site meeting held on site on that date, the Architect issued two copies of the contract documents to Ellis for signature. These documents, one signed by Ellis were to be sent to Mr Andrew Conway who was representing Mr Goldstein. Mr Goldstein would then sign them and forward one copy of the executed contract documents to Ellis. The minutes of this meeting are attached and item 2.20 refers.”
Paragraph 21 goes on to invite attention to the attached copy of the contract which apparently identified the original sum of £472,197.31, albeit that this was not subject to any cap but was subject to the normal type of adjustments, for instance in for variations and prolongation allowed by the standard IBC contract. The Referral goes on in detail to explain the quantum claimed and what were said to be the outstanding sums.
14.	Mr Goldstein served his Response dated 4 January 2011 which was drafted by his solicitors who had been engaged in relation to the adjudication. He highlighted at Paragraph 4 that he accepted Paragraph 3 of the Referral (set out above) subject to some immaterial qualifications. At Paragraph 3 he stated:
“The core of Mr Goldstein’s Response is that by a further Letter of Intent signed by both parties and dated 4 May 2010, as the contractual works were reaching an end, the parties agreed that Mr Goldstein’s maximum liability to Ellis would not exceed £580,000 (excl VAT); accordingly, Ellis’s claims for payment are not to be allowed save to the extent that they do not in aggregate (excluding VAT, and any interest) exceed £580,000.”
He accepted at Paragraph 7 that the parties agreed to the incorporation of the IBC, albeit subject to what had been agreed in the Letters of Intent. He argued that, however, the parties never reached or signed agreement to the Contract Particulars in the IBC form.
15.	At Paragraph 12 of the Response, he addressed in some detail the meeting of 30 June 2010 and in particular Minute 2.20 (set out above):
“(b) the note at paragraph 2.20 of the 30 June 2010 Project Meeting… may record the architects as having issued contracts for execution, and as having asked Mr Conway to return a single signed copy; but there is nothing which records Mr Conway as having formally agreed [so] to do, or to be bound by its terms. In the event, he and Mr Goldstein did not choose to sign a copy of the IBC so as to be bound fully, not only by its standard terms, but also by the parts which had been inserted by Ellis. In any event, there is no doubt that any such signature would have been accompanied by a formal record and insertion of the Maximum Amount which had been agreed in writing between the parties; and
(c) it is not accepted that the parties have conducted themselves as though the contract document produced by Ellis…is in full effect; the parties have conducted their affairs in accordance with the terms of the two Letters of Intent and (in general terms, and save as otherwise amended) the general standard terms of the IBC, but subject (as from 4 May 2010) to the Maximum Amount…”
16.	Mr Goldstein admitted in Paragraph 21 that Ellis was entitled to the unpaid certified sums subject to the cap of £580,000. He did not address the valuation put forward by Ellis on its merits preferring to rely upon the cap contained in the Second Letter of Intent. The Response was accompanied by witness statements from him and Mr Conway which addressed the history of the project and provided support for the proposition that the Second Letter of Intent was agreed and remained binding. 
17.	On 7 January 2011, Ellis served on the adjudicator and Mr Goldstein’s solicitor a Reply which mainly considered the Second Letter of Intent and the cap of £580,000. In Paragraph 10, it raised the difficulties created by Mr Goldstein’s argument in that the cap would enable him to have ordered any variations of any size with impunity. Ellis refers to the without prejudice letter of 21 December 2010 referred to above in the context that even in that letter Mr Goldstein did not rely upon or raise the Second Letter of Intent as a defence or at all. It did say that the redacted figure was for a sum “very substantially below the now admitted liability”. Ellis considered whether as a matter of construction the Second Letter of Intent was in effect a cap. Paragraph 20 states:
“The sequence of events was that following the first Letter of Intent dated 18 June 2009, a second Letter of Intent was issued on 4 May 2010…Following this [FA] issued the contract documents at a site meeting on 30 June 2010. Item 2.20 refers as does paragraph 20 of the Referral. Nowhere in these contract documents is there reference to an agreed financial limit of £580,000, despite the fact that the IBC documentation was issued after the Second Letter of Intent. Had there been the type of agreement contended for by Mr Goldstein then it is expected that [FA] would have recorded it in the contract documents, or in writing. They did not.”
18.	At Paragraph 23, Ellis said that the binding and limiting nature of the Second Letter of Intent had been raised for the first time by Mr Goldstein in the Response. Paragraph 30 goes on to say:
“What is clear is that a cap was not incorporated into the contract documents issued after the second Letter of Intent…”
Between the service of the Reply and the decision of the adjudicator, no objection was made by Mr Goldstein or his solicitors as to the reference to the “without prejudice” letter or any request made to rebut any part of the Reply.
19.	It had been agreed that the adjudicator could have until 20 January 2011 to issue his decision. However, he did produce on Wednesday 12 January 2011 his decision within 5 days after the service of the Reply. It summarises the parties’ submissions unexceptionably. He summarised Ellis’s contentions “that the second Letter of Intent was in turn superseded by the issue of the Contract Documents…by Mr Goldstein’s Architect, [FA] at the project meeting of 30 June 2010” and that “Ellis conclude that the Contract governing its works is the [IBC] as prepared by Mr Goldstein’s Architects and as returned signed to him on 1 July 2010”. At Paragraph 22 he decided that the “Contract was as set out in the [IBC]” and gave Reasons at Paragraphs 23 to 26:
“23. The parties are agreed as to the issue of two Letters of Intent one on 18 June 2009 and the other on 4 May 2010. The parties are also agreed that on 30 June 2010 Mr Goldstein’s Architect issued a set of Contract Documents for Ellis to complete.
24. It is not disputed that Article 2 of those Contract Documents refers to a Contract Sum of £472,197.31 or such other sum as shall become payable under the Contract.
25. The disagreement arises because Mr Goldstein contends that the IBC incorporates the maximum financial cap as set out in his 4 May 2010 Letter of Intent.
26. However, the copy of the Contract provided at Referral Appendix 8 does not incorporate any such term or cross reference to the letter itself, and in response Mr Goldstein does not direct me to any alternative set of documents in which such a term or cross reference is set out.
27. It is thus clear to me that the Parties contracted firstly on the Letter of Intent dated 18 June 2009 second on the Letter of Intent dated 4 May 2010 and finally on the Contract Documents prepared by Mr Goldstein’s Architect and handed to Ellis on 30 June 2010 for completion. These documents were completed by Ellis and returned to Mr Goldstein and they do not include any term or cross reference to a maximum financial value in the manner set out in the 4 May 2010 Letter of Intent and as contended by Mr Goldstein in this Adjudication.”
20.	The adjudicator then went on, perhaps unsurprisingly in the absence of evidence as to the valuation of the work save from Ellis, to find that Ellis was entitled to the sum claimed, broken down as to £83,759.82 being the outstanding unpaid certified sum and £35,057.70 being uncertified. These sums were ordered to be paid plus any applicable VAT, plus interest of £2,749.34 up to 9 December 2010 and daily interest thereafter. As to his fees, he ordered Mr Goldstein to bear his fee of £2,736 but in the interim Ellis was to pay it and be reimbursed by Mr Goldstein. At Paragraph 44 he said:
“In making this Decision I have taken into account all submissions made whether or not specifically mentioned herein.”
21.	Following some correspondence, it was not until 28 January 2011 that Mr Goldstein’s solicitors raised an issue relating to the deployment of the “without prejudice” letter as a ground for opposing any summary judgement application. 
These Proceedings
22.	On 21 January 2011, Ellis issued proceedings and a summary judgement application to enforce the adjudicator’s decision. Witness statements were exchanged from which I have extracted the material history as at out above.
23.	There are two issues raised by Mr Goldstein. The first is that the adjudicator decided the case on a basis which had never been argued by either side, namely that the contract between the parties was in the IBC form as issued by Mr Goldstein’s Architect and signed and returned by Ellis; this is put on the basis of a breach of the rules of natural justice. The second is that there is apparent as opposed to deliberate bias on the part of the adjudicator in allowing in and not raising with the parties the “without prejudice” letter.
The Law
24.	It is properly accepted that adjudicators are under a duty to apply the rules of natural justice, albeit that this is to be looked at in the context that adjudication is intended to be a process to be undertaken within a short timescale, usually 28 days albeit sometimes extended. It is part of the application of these rules that a tribunal must not decide a case on the basis of an argument or case which has not been argued before him or her, at the very least without giving each party the opportunity of being heard on the point in question. The position was summarised in Cantillon Ltd v Urvasco Ltd [2008] EWHC 282 (TCC):
“From this and other cases, I conclude as follows in relation to breaches of natural justice in adjudication cases: 
“(a) It must first be established that the Adjudicator failed to apply the rules of natural justice;
(b) Any breach of the rules must be more than peripheral; they must be material breaches;
(c) Breaches of the rules will be material in cases where the adjudicator has failed to bring to the attention of the parties a point or issue which they ought to be given the opportunity to comment upon if it is one which is either decisive or of considerable potential importance to the outcome of the resolution of the dispute and is not peripheral or irrelevant.
(d) Whether the issue is decisive or of considerable potential importance or is peripheral or irrelevant obviously involves a question of degree which must be assessed by any judge in a case such as this.
(e) It is only if the adjudicator goes off on a frolic of his own, that is wishing to decide a case upon a factual or legal basis which has not been argued or put forward by either side, without giving the parties an opportunity to comment or, where relevant put in further evidence, that the type of breach of the rules of natural justice with which the case of Balfour Beatty Construction Company Ltd -v- The Camden Borough of Lambeth was concerned comes into play. It follows that, if either party has argued a particular point and the other party does not come back on the point, there is no breach of the rules of natural justice in relation thereto.”
25.	The improper deployment of “without prejudice” material in adjudication is something which happens in adjudication as in court although this Court has at least anecdotally seen an increase in this behaviour in adjudication. This often arises because parties represent themselves or are represented by consultants who are not legally qualified and, perhaps, they do not fully understand that truly “without prejudice” communications are privileged and should not be referred to in any legal or quasi-legal proceedings, including adjudication. Whilst if “without prejudice” communications surface in a court, the judge being legally qualified and experienced can usually put it out of his or her mind, it is a more pernicious practice in adjudication because most adjudicators are not legally qualified and there will often be a greater feeling of unease that the “without prejudice” material may have really influenced the adjudicator. This Court can only strongly discourage parties from deploying “without prejudice” communications in adjudication.
26.	In Rush & Tompkins Ltd v Greater London Council [1989] AC 1280 at 1299 to 1230, Lord Griffiths, with whom the other members of the House agreed, explained the "without prejudice" rule in these terms: 
"The "without prejudice" rule is a rule governing the admissibility of evidence and is founded upon the public policy of encouraging litigants to settle their differences rather than litigate them to a finish. It is nowhere more clearly expressed than in the judgment of Oliver L.J. in Cutts v. Head [1984] Ch.290, 306:
"That the rule rests, at least in part, upon public policy is clear from many authorities, and the convenient starting point of the inquiry is the nature of the underlying policy. It is that parties should be encouraged so far as possible to settle their disputes without resort to litigation and should not be discouraged by the knowledge that anything that is said in the course of such negotiations (and that includes, of course, as much the failure to reply to an offer as an actual reply) may be used to their prejudice in the course of the proceedings. They should, as it was expressed by Clauson J. In Scott Paper Co v. Drayton Paper Works Ltd. (1927) 44 R.P.C. 151, 156, be encouraged full and frankly to put their cards on the table….The public policy justification, in truth, essentially rests on the desirability of preventing statements or offers made in the course of negotiations for settlement being brought before the court of trial as admissions on the question of liability".
27.	Mr Justice Coulson addressed the problems associated with the introduction of “without prejudice” material in adjudication in Volker Stevin Ltd v Holystone Contracts Ltd [2010] EWHC 2344 (TCC):
20.	“The issue is whether the adjudicator's knowledge of the fact that a 'without prejudice' offer had been made by Holystone to Volker meant that, however unconsciously, he was biased towards them. The relevant test is set out by the Court of Appeal in In Re Medicaments and Related Classes of Goods (No. 2) [2001] 1 WLR 700. Lord Phillips put it in this way: 
"The Court must first ascertain all the circumstances which have a bearing on the suggestion that the Judge was biased. It must then ask whether those circumstances would lead a fair-minded and informed observer to conclude that there was a real possibility, or a real danger, the two being the same, that the tribunal was biased.
21.	I am in no doubt that a fair-minded and informed observer would not reach any such conclusion here, and any suggestion to the contrary is entirely unrealistic. The adjudicator's letter of 19th July 2010, and his written decision, made clear that he was wholly unconcerned with the fact that an offer had been made. On the face of both documents, the adjudicator treated his knowledge of the fact of the offer as irrelevant. There is other evidence that supports that conclusion. On 14th July, that is to say at a time before the adjudicator was aware that an offer had been made, he noted that "many elements of the decision have been decided". That suggests, therefore, that the bulk of the decision had indeed been produced before he was aware of the fact of the offer. Moreover, the nature of the decision itself also leads to the conclusion that his knowledge had no effect: as Ms Parkin correctly points out, in his decision the adjudicator went through each item of claim, and each defence to that item of claim, in painstaking detail, explaining how and why he had reached the view he had done. 
22.	Looking at the position rather more widely, I simply cannot see how the adjudicator's knowledge could suggest even unconscious bias. In any construction dispute, the adjudicator, just like a TCC judge, would tend to expect that negotiations had taken place between the parties, and that offers had been made. It is a very rare case in which negotiations or offers do not occur. Accordingly, so it seems to me, the adjudicator would have been unsurprised by the fact that an offer had been made by the responding party. Indeed, in this case, I would go one stage further and observe that, since liability had already been decided by the first adjudicator, and since Mr Holloway was dealing solely with what, if anything, was due to Volker as a result of their valid termination, he would probably have been amazed if he had been told that no offer of any kind had been made by Holystone. In a dispute where the only issue was the quantification of the consequences of termination, the party who has unsuccessfully contested the validity of the termination must almost always expect to pay something, and will therefore make an offer to protect its position on costs sooner rather than later. 
23.	More generally, I also ought to note this. It is not so long ago that, in arbitration, a white envelope containing the without prejudice offer would be formally presented to the tribunal and reside on the arbitrator's desk for the duration of the hearing. The arbitrator never knew if the without prejudice offer was for £1 million or a penny, but it was never suggested in those circumstances that in some way the arbitrator was unconsciously biased as a result of his knowledge of the fact of an offer. On the contrary, doubtless to convey the impression of reasonableness on their part, it was often the respondent who insisted on the public presentation of the envelope. 
28.	Earlier in Specialist Ceiling Services Northern Ltd v ZVI Construction (UK) Ltd [2004] BLR 403,  HHJ Grenfell had to deal with a similar problem and quoted with approval and applied the Court of Appeal case of Re Medicaments and Related Classes of Goods (No 2) [2001] 1 WLR 700 in which Lord Phillips MR said that in cases of apparent (as opposed to actual) bias: 
“The Court has then to decide whether, on an objective appraisal, the material facts give rise to a legitimate fear that the judge might not have been impartial…The material facts are not limited to those which were apparent to the applicant. They are those which are ascertained by the court.”
It should be appointed out that in both the Volker Stevin and Specialist Ceiling cases representations were made to the adjudicator about the submission of without prejudice material to him.
29.	One can draw the following conclusions about the consequences and ramifications of the improper submission of “without prejudice” material before an adjudicator:
(a) Obviously, such material should not be put before an adjudicator. Lawyers who do so may face professional disciplinary action.
(b) Where an adjudicator decides a case primarily upon the basis of wrongly received “without prejudice” material, his or her decision may well not be enforced.
(c) The test as to whether there is apparent bias present is whether, on an objective appraisal, the material facts give rise to a legitimate fear that the adjudicator might not have been impartial. The Court on any enforcement proceedings should look at all the facts which may support or undermine a charge of bias, whether such facts were known to the adjudicator or not.
Discussion
30.	So far as the first challenge is concerned, namely whether the adjudicator decided the case on a basis which was not argued by either party let alone gave the parties an opportunity to address the issue, it is necessary to remind oneself that there is no jurisdictional challenge in this case, to the effect that the adjudicator had no jurisdiction to decide the case on the basis of a contract reflected in the contract documents given to Ellis by Mr Goldstein’s Architect, FA, and signed by Ellis at their direction. This is an important observation because it then becomes an exercise simply in ascertaining what was put before the adjudicator on the issue.  Another factor to take into account is that in jurisdictional terms, whilst it is only crystallised disputes which are referable to adjudication, it is open to a defending party to raise any defence to the disputed claim even if it has not been raised before. It must be open in those circumstances to the claiming party to address any defence advanced, possibly by way of reply to any response submitted in the adjudication.
31.	In my judgment, Ellis did raise the issue about the signed contract documents in its Notice of Adjudication and actually expressly referred to this in describing the contract as being: the IBC “as identified in two letters of Intent issued by Mr Goldstein on 18 June 2009 and 4 May 2010 and as detailed on the contract documents prepared by the Architect…”. That could not be clearer. The Referral taken overall shows that importance was attached by Ellis to the submission by FA to it of contract documents drawn up by them for signature and actually signed by them. There is and was no issue that these contract documents did not contain any reference to the 4 May 2010 letter or cap. Ms Smith argued that the Referral in effect pinned its colours to the mast of arguing only that the contract was contained in the First Letter of Intent (see Paragraph 3 of the Referral set out above). However, that is untenable in the light of the rest of the Referral (see Paragraphs 12 and 20, particularly, set out above).
32.	Mr Goldstein chose not to address head-on the question of the impact of his Architects’ drawing up of contract documents which did not refer to the 4 May 2010 letter or cap, their asking Ellis to sign the contract and Ellis’ return of the signed contract without any reference to that letter or cap. Although he did address the meeting and made some relatively "thin" points about whether Mr Conway had formally agreed to return a signed copy or to be bound by the terms, there is no suggestion that FA had no authority to produce the contract in the terms in which it was produced. What is surprising is that he did not refer to that part of the minute of the 30 June 2010 meeting which rightly or wrongly stated that “FA requested [Ellis] include the second Letter of Intent prepared within the Contract Documents”. These minutes were attached to Ellis’ Referral and would have supported a case that the status quo, as far as he was concerned, was being maintained. He clearly had the opportunity to comment but for reasons best known to him and his legal team he did not.
33.	The Reply addressed in some detail why the second Letter of Intent was not binding or effective and reiterated “that a cap was not incorporated into the contract documents issued after the second Letter of Intent…”. 
34.	I must conclude from all this that the issue of the impact of the submission and signing of contract documents after the second Letter of Intent which did not expressly or even by necessary implication refer to that letter was clearly and properly before the adjudicator and to the extent that Mr Goldstein chose not to address the point, that was his right but this does not now allow him to seek to impugn the enforceability of the decision. Whilst it might be argued that the Referral and the Reply could have been even more specific than it was in relation to the assertion that the signed contract formed the basis of the contract between the parties, it was jurisdictionally in front of the adjudicator and it was open to him to find what he did. Whether he was wrong in fact or in law to do so is in itself immaterial to the enforceability of the decision. It follows from this that Mr Goldstein’s argument that there was unfairness on the part of the adjudicator in this respect fails.
35.	In relation to the second point, the deployment of the "without prejudice" letter, I have no doubt that it was improper and that the material was in strict legal terms not admissible. It is no valid excuse or explanation that Ellis’ consultant is not legally qualified. The primary issue therefore is whether or not its deployment gives rise to a legitimate fear that the adjudicator might not have been impartial. There are three material considerations:
(a) No objection was made by Mr Goldstein or his solicitors in the five days between the service of the Reply and the issue of the decision. Three of those days were working days. There is no evidence that suggests that they could not have challenged the introduction of the "without prejudice" letter within that time scale.
(b) The adjudicator did expressly say at the end of his decision that he had "taken account of all submissions made whether or not specifically mentioned" in the decision. This type of statement is not uncommon in adjudication decisions and may well reflect a desire to demonstrate that the adjudicator has considered everything which has been put before him or her.
(c) It is equally clear however that the adjudicator did not base his decision at least openly on the contents of, the fact of or inferences drawn from what was or was not in the "without prejudice" letter.
36.	Ms Smith for Mr Goldstein argued forcefully that the apparent bias arose primarily from the absence in the “without prejudice” letter of any reliance by Mr Goldstein and his advisers on the Second Letter of Intent or the cap mentioned in that letter. The vice and prejudice arises, she argues, because it remains unclear what if any weight was given by the adjudicator to the arguments in relation to the Second Letter of Intent being raised apparently only for the first time in the Response in the adjudication. However, on analysis this is not a strong point because, as a matter of apparently undisputed fact, it was only during the adjudication that this defence was actually raised for the first time. It had not been mentioned by him or his advisers in seeking to have the statutory demand set aside. The “without prejudice” letter was simply another occasion on which the defence could have been mentioned but was not. Ms Smith also peripherally relied upon the very fact that a "without prejudice" communication had been put before the adjudicator, albeit the adjudicator was told that the redacted offer was "very substantially below" the now admitted liability. However, the fact of the without prejudice offer having been made could not readily have prejudiced the adjudicator in favour of Ellis; that offers are made is well known in construction-type disputes and the fact that the offer was nowhere near what is now said to have been admitted cannot give rise to any obvious prejudice.
37.	On the face of the decision, it is clear that the adjudicator analysed this case, as it was presented to him, in a simple way. There were two successive Letters of Intent which did have caps on expenditure but they were both in effect subject to the IBC form of contract. One then has Mr Goldstein’s own Architects, not said to be acting outside their authority, producing a form of contract for signature which contained no reference to any caps let alone to the Second Letter of Intent. No detailed point is taken by Mr Goldstein in the adjudication about this. He then decides that the contract between the parties was in exactly the form produced by his Architects for signature. The adjudicator did not expressly rely upon or need to rely upon the (at best) "jury" point made by Ellis that Mr Goldstein had not raised the Second Letter of Intent point before the adjudication.
38.	There is then the fact that Mr Goldstein and his solicitors did not react in any way between the service of the Reply and the issue of the decision to the lodging of "without prejudice" material. What is clear is that they had the opportunity to raise it with the adjudicator and, for whatever reasons, chose not to do so. Whilst it is of course theoretically possible that none of them actually looked at the Reply or the attachments, that is unlikely. A reasonable inference to draw is that they thought between them that it was unlikely materially to influence the adjudicator.
39.	I have formed the view here taking into account the above that the material facts do not give rise to a legitimate fear that the adjudicator might not have been impartial. Although I do assume that the adjudicator did see and read the Reply and the attachments, the "without prejudice" communication did not raise anything other than a tangential point which was in any event supported by "open" evidence such as that generated by the statutory demand. The very fact that the adjudicator did not mention the "without prejudice" communication suggests very strongly that it was not part of and clearly did not and did not need to influence his reasoning.
Decision
40.	 The Claimant is entitled to summary judgement for the sums claimed. As Mr Goldstein has made it clear that he wishes to pursue his Counterclaim in these proceedings in effect for a declaration that the Second Letter of Intent had contractual force, I gave directions for the trial of this matter in June 2010. I was persuaded from an abundance of caution also to order that the hearing and this judgement should remain confidential to the parties and should not be shown to the judge trying the case very much on the basis that the “without prejudice” communication is privileged and should not be relied upon in the Court proceedings. If the trial judge saw this judgement, he would necessarily be aware of the “without prejudice” communication, albeit that I suspect that like me he would consider it irrelevant in determining what the true nature of the contract between the parties was.
41.	So far as costs are concerned, the Claimant, having succeeded, is obviously entitled to its costs. It argues that it should have costs on an indemnity basis. However, I consider that the "without prejudice" point was a point which it was reasonable and proper for the Defendant to raise and that therefore this is not a case for indemnity costs. The Claimant claims some £13,163 by way of costs. This is opposed as being unreasonably high and arguments are pressed as to hours and rates claimed as being excessive. There is a general point made that the bill is disproportionately high. I have formed the view that a fair reasonable and proportionate allowance by way of summary assessment is £10,000. There was a substantial amount of documentation to consider but the total number of some 45 hours is too high for the Defendant to have to pay in full for; the rates claim for solicitors are somewhat high for Eastbourne solicitors. All in all, £10,000 is fair.
42.	There is an argument about the form of the order. The whole judgement sum should be payable by 28 February 2010. There is no justification for any part of the judgement sum not be paid as has been argued by the Defendant; any deferment of payment would defeat the whole contractual and statutory purpose of adjudication. The order to be drawn up should reflect this.