B: Bouygues vs Dahl-Jenson

B is for Bouygues vs Dahl-Jensen. The decision in the first case on adjudication to reach the Court of Appeal provides a clear and enduring statement of how the courts will uphold an adjudicator’s decision if the adjudicator answers the right question, even it if is answered in the wrong way.

Bouygues was appointed as the main contractor for the building works related to a PFI contract for Cornwall House, part of King’s College, London. In turn, Bouygues appointed Dahl-Jensen as its mechanical subcontractor for the works.

The subcontract contained both an arbitration clause and an adjudication clause and provided for 5% of the contract price to be retained until the first half of the retention was released on completion of the works under the building contract and the second half of the retention was released on the certification of completion of making good defects under the PFI contract.

While the decision may seem a bit harsh, it reinforces the point that adjudication is intended to give the parties a quick and interim decision

After Dahl-Jensen had been working for 15 months, Bouygues purported to determine Dahl-Jensen’s employment under the subcontract for poor performance and Dahl-Jensen left the site and did not return. Bouygues arranged for the subcontract work to be completed by others, taking a further five months or so.

Shortly after leaving site, Dahl-Jensen issued a notice to adjudicate for payment for its work that it claimed had not been properly valued by Bouygues under the subcontract, damages for breaches of the subcontract by Bouygues and what Dahl-Jensen considered to be Bouygues’ repudiation of the subcontract.
Soon after Dahl-Jensen, Bouygues issued its own notice to adjudicate in which it claimed the refund of payments made for overvalued works under the subcontract, liquidated damages for delayed completion and damages for costs incurred in terminating Dahl-Jensen’s employment.

Both notices to adjudicate were referred to the same adjudicator and it was agreed that Bouygues’ claim should be treated as a counterclaim to that of Dahl-Jensen.

The adjudicator’s award would have resulted in a payment being made to Bouygues if the adjudicator’s award had correctly accounted for retention (i.e. had allowed Bouygues to continue to withhold the retention as it was not then due). The adjudicator however awarded a payment to be made to Dahl-Jensen due to an incorrect reckoning in relation to the retention money. When Bouygues’ solicitors pointed out this error and invited the adjudicator to correct it, the adjudicator declined to accept that a slip had been made.

The adjudication was conducted under the Construction Industry Council Model Adjudication Procedure, requiring that the parties “shall implement the adjudicator’s decision without delay whether or not the dispute is to be referred to legal proceedings or arbitration”, which reflected section 108(3) of the Construction Act. Despite this seemingly clear language, Bouygues contended that upholding the adjudicator’s award was unjust, particularly as Dahl-Jensen was in liquidation, which effectively meant that any payments to it would be irrecoverable.

The trial judge held that the adjudicator had the jurisdiction to answer the question put forward and the decision made was, therefore, binding on the parties and subject to summary judgment (that is, could be enforced by a court order without any further trial of the issues). Bouygues launched an appeal against the judgment but the Court of Appeal upheld that the trial judge had correctly stated the law and rightly applied it to the facts of the case.

While the decision may seem a bit harsh, it reinforces the point that the adjudication procedure under the Construction Act is intended to give the parties a quick and interim decision (or, as it was later put in Carillion vs Devonport Royal Dockyard, “The need to have the ‘right’ answer has been subordinated to the need to have an answer quickly.”). This Court of Appeal noted that “…unfairness in a specific case cannot be determinative of the true construction or effect of [adjudication] in general”.

The Court of Appeal judgment may have been given in 2000 when adjudication was still a relatively new process but the “doctrine of unreviewable error of an adjudicator within jurisdiction” is now known in the Technology and Construction Court for statutory adjudication (see Steve Domsalla (trading as Domsalla Building Services) vs Kenneth Dyason (2007)). In the recent case of Urang Commercial Ltd vs Century Investments Ltd (2011), the trial judge referred to Bouygues vs Dahl-Jensen when stating that “it is now firmly established that an error of law or fact made by an adjudicator when deciding an issue referred to him is no defence to an application to enforce the award”.

Michael Conroy Harris is a construction specialist at Eversheds