Adjudication: The corrections

When the Adjudicator gets it Horribly Wrong was the title of a paper written some years ago for the Society of Construction Law by Mr Justice Edwards-Stuart, who is now the judge in charge of the Technology and Construction Court (TCC). He explained how it had been possible, in a case in which he had given the judgment, for a losing party in an adjudication to go to court to avoid the effect of an unfortunate error by an adjudicator. Five years later, the paper, and the case that was its main focus, are as relevant as ever.

The case was Geoffrey Osborne Ltd vs Atkins Rail Ltd. The parties were disputing the valuation of an interim certificate. The adjudicator had awarded Osborne, a subcontractor to Atkins Rail, a sum of around £500,000. The judge described the adjudicator’s decision – apart from one point – as appearing to be “a model of its kind”. Unfortunately, that one point was highly significant. Possibly because of a misunderstanding, the adjudicator had not appreciated that certain items had already been included in the interim certificate. So he did not deduct those items when he came to calculate the sums due. The result was that, whereas on his findings as to valuation, Osborne should have been ordered to pay about £400,000, his actual decision required a payment of £500,000 the other way.

The judge described the adjudicator’s decision – apart from one point – as appearing to be ‘a model of its kind’. Unfortunately, that one point was highly significant

In a much earlier case, Bouygues (UK) Ltd vs Dahl-Jensen (UK) Ltd, the Court of Appeal had refused to interfere with an adjudicator’s decision, even where it was accepted by the parties that the adjudicator had mistakenly  ordered the release of retention that was not then due. So what was the difference between this and the Osborne case? The answer lies in the type of application that was being made to the court.

In the Bouygues case, the main contractor had tried to argue that the adjudicator had exceeded his jurisdiction. This argument failed. As the court said, he had plainly answered the question he had been asked, albeit incorrectly.

But in Osborne, the losing party (Atkins) did not argue about jurisdiction. It simply asked the court for a final declaration on the point of law on which the adjudicator had made his decision containing the error. The court agreed to do so (the error was clear). After that, it followed that the decision could not be enforced.

Why had Bouygues not tried the same idea? Because, it seems, their subcontract contained an arbitration clause. That meant that only an arbitrator, not the court, could determine legal issues. Nor could the decision be corrected under the “slip rule” (now enshrined in statute) because the adjudicator had declined to do so.

The losing party did not argue about jurisdiction. It simply asked the court for a final declaration on the point of law on which the adjudicator had made his decision

So does all this mean that losing parties can now easily go to court to correct adjudicators’ decisions on matters of law? Not quite. This sort of application must be made under Part 8 of the court rules. Part 8 is allowed only where the question “is unlikely to involve a substantial dispute of fact”. Also, if the contract contains an arbitration clause, the procedure is not available (it might be possible in theory to obtain some sort of speedy award from an arbitrator, and then go to court, but that would not be easy).

However, the Part 8 procedure is now being used by parties who can identify a clear legal point for final determination by the court. In Caledonian Modular Ltd vs Mar City Developments Ltd  (2015), the question was whether a contractor’s application qualified as a payee’s payment notice. This was a short, self-contained point requiring no oral evidence. The court held that the document was not a payment notice. The “winning” party could not enforce the decision. Similarly in Bouygues (UK) Ltd vs Febrey Structures Ltd  (2016) the court felt able to finally determine a dispute about the interpretation of a contract. No factual evidence was needed. The court then went on to clarify the correct dates for the service of payment and pay less notices, which had been key issues in the adjudication.

The TCC judges have repeatedly said that adjudicators’ decisions are there to be enforced. However, they are clearly willing, in special cases, to make final decisions on legal points, so as to avoid having to enforce a decision unjustly. Provided that these cases are indeed limited to self-contained points of law, this approach is to be welcomed.

Ian Yule is a construction partner at Weightmans