Danger – slippery law

Recently in these columns, with Nick Raynsford’s second-anniversary review of the Construction Act in mind, I made some suggestions about how that legislation could be improved. One of those suggestions was the introduction of a “slip” rule, similar to that which operates in litigation and arbitration. Put simply, such a rule would permit an adjudicator to correct a clerical error or mistake, or to clarify or remove an ambiguity in a decision after that decision has been announced.

What lay behind that suggestion was the apparent injustice involved in two recent decisions on the enforcement of adjudication awards. In Bouygues vs Dahl-Jensen, Mr Justice Dyson enforced an adjudicator’s decision, despite the fact that it contained an obvious and substantial arithmetical error. Mr Justice Dyson acknowledged the apparent injustice of this, but considered that it was the inevitable price to be paid for a rough-and-ready and immediately enforceable remedy such as adjudication.

The second case was the decision in FW Cook vs Shimizu, in which His Honour Judge Lloyd decided that, in interpreting an adjudicator’s decision, it was appropriate to go behind it and consider the contents of the original notice of adjudication (3 March). Whether or not one agrees with the judge’s interpretation of the adjudicator’s decision in that case, or his logic in reaching it, justice would surely have been done more accurately, more quickly and more cheaply had it been possible to seek clarification from the adjudicator. However, the conventional wisdom has been that once an adjudicator has issued a decision, he or she becomes “functus officio” and therefore has no power to take further action.

  It appears that conventional wisdom may have been mistaken and, if so, the implications are likely to be profound. This is the result of a decision that His Honour Judge Toulmin has just handed down in Bloor Construction vs Bowmer & Kirkland. The case involved a groundworks subcontract and a claim by the subcontractor for moneys allegedly owing from the main contractor. An adjudicator was appointed to deal with the dispute and ultimately he directed the main contractor to pay the subcontractor about £122 000.

So far so good. But now it’s time to reach for the stopwatch! At 3.22pm on 11 February, the adjudicator faxed a copy of the decision to both parties. On receipt of the fax, the main contractor’s managing surveyor realised that the adjudicator had failed to take note of a number of on-account payments that had been made to the subcontractor. He contacted the adjudicator immediately and at 5.53pm the adjudicator sent a further fax to the parties correcting what he described as “an obvious slip” in his prior communication. The effect of doing that was to wipe out the payment due to the subcontractor under the original decision.

The subcontractor sought to enforce the original decision notwithstanding the adjudicator’s attempt to correct it. In doing so, the subcontractor accepted that if the original decision were enforced, it would be unfair to the main contractor. However, despite that, the subcontractor also argued that once the original decision had been issued, the adjudicator had no power to take any further action.

Judge Toulmin decided that adjudication should have an implied “slip” rule, so that an obvious mistake can be corrected, as long as it is done quickly and without prejudice

The main contractor, in seeking to uphold what the adjudicator had done, argued that a term should be implied into the adjudicator’s appointment whereby the parties give the adjudicator the power to correct manifest errors in his or her decision.

In accepting this contention, the judge was greatly influenced by the fact that the Arbitration Act 1996 contains an express slip rule and that the Civil Procedure Rules also contain an equivalent provision for litigation. The logic of his approach seems to be that, because a slip rule is expressly conferred in arbitration and litigation, it follows that it should be implied in adjudication.

It is worth bearing in mind in this context that the proper test for implying a term into an agreement is not whether it is merely reasonable to do so, but whether it is essential. Having decided to go down the route of implying such a term into the contract between the adjudicator and the parties, the judge appreciated that there had to be a clear definition of what that term should be. He defined the term as being that an adjudicator can, on his own initiative or on the application of one of the parties, either correct an accidental error or omission, or clarify or remove an ambiguity in his or her decision. That latter wording would, on the face of it, have been sufficient to enable the adjudicator in Cook to remove what appeared to be a clear ambiguity in his decision.

The judge also recognised that there would have to be practical limitations on the exercise of the implied slip rule power. He therefore made the implied term subject to two provisos. First, any corrections would have to be made reasonably quickly. Second, a correction that caused prejudice to the other party would not be permitted.

It remains to be seen whether the judge’s approach will in practice be restricted to extreme situations such as applied in the Bloor case, where the correction was communicated to the parties within two hours of publication of the decision. The judge was not prepared to follow the example of the Arbitration Act 1996, which provides that corrections to an arbitrator’s award can be made at any time within a period of 28 days. Where will the courts draw the line?