Many a Slip......

In the present application to enforce an adjudication award, Celtic argued that the adjudicator, Mr. Liam Holder, had acted unfairly and in breach of the rules of natural justice in his second decision of 1 December 2009. The case raised questions about to what extent unfairness can be inferred where an adjudicator has made a mistake and t is agreed that the slip rule may be used.

Celtic Composting Systems (Celtic) was the main contractor for civil engineering works in Devon. Celtic engaged Rok as subcontractor to provide an in-vessel composting facility. The subcontract incorporated the New Engineering Contract (NEC3) Option B dated June 2006, as amended by the parties.

The adjudication rules used in the contract were the Construction Industry Council’s Model Adjudication Rules, 4th edition. Clauses 26 and 28 of these provided that the adjudicator might open up, revise and review an certificate, decision etc. made in relation to the contract, and enabled him to correct his decision due to an accidental error or omission within 5 days of delivering it.

The parties disputed whether Rok had completed the subcontract works on 8 June 2009, and whether Celtic was required to release half the retention. This also had ramifications for whether or not Celtic was entitled to liquidated damages. In the first adjudication, Rok had been awarded an extension of time due to flooding until 6 March 2009, so that damages would only be levied from that date until 8 June or whatever date it was decided that completion had been achieved.

The second adjudication concerned whether completion had been achieved, whether the retention should be paid and whether Celtic was entitled to deduct liquidated damages from certificates 12 and 15 and subsequent certificates. Mr. Holder decided that the works had been completed on 8 June so that Celtic should pay Rok the first moiety of retention, plus interest for late payment, and that Celtic was entitled to deduct liquidated damages of £47,000.00. Celtic was ordered to pay Rok £32,500.00 as liquidated damages which had been wrongfully deducted from certificates 12 and 15, plus interest and the adjudicator’s fees and expenses.

On receiving his decision in December 2009, Celtic e-mailed Mr. Holder pointing out there had been an error in his calculations. Certificate no, 15 had had a negative balance which had never been paid by Rok. In addition, Celtic asked Mr. Holder to clarify why it should have to pay all his expenses when, as Celtic saw it, Rok had misled him about what it had actually paid. Celtic intimated that it would be sending over a final list of ambiguities in the decision by 4 December.

Mr. Holder acknowledged the clerical errors and pointed out that he could correct them within the five days from the delivery of the decision but that, thereafter, he would be functus officio. He considered that the remainder of the matters raised by Celtic were outside those which could be corrected under the slip rule and were outside the provisions of clauses 26 and 28 of the Mode Adjudication Rules. He then proceeded to issue the parties with his revised decision which amended the clerical errors. Celtic responded with a detailed e-mail calling for further clarification and adjustment to the decision. Mr. Holder responded that he was functus officio and unable to deal with the points Celtic had raised.

Rok commenced the present proceedings because Celtic failed to honour the award, seeking summary judgement for the various sums the adjudicator had awarded. Celtic resisted, arguing that Mr. Holder had breached the rules of natural justice. Rok submitted that the adjudicator had acted fairly and whether his decision had been right or wrong was immaterial.

The court observed that the information about payments and certificates which had been put before Mr. Holder had been complicated and unclear. Celtic had had the opportunity to present the payment position simply, but had not done so. Matters had been complicated further by the issue of certificate no.16 whilst the first adjudication had been ongoing.

All that aside, an error should not affect the enforceability of the decision. In the court’s view it was not seriously arguable that the adjudicator had been unfair or had acted contrary to the rules of natural justice. He had reviewed all the evidence and arguments carefully, taking particular account of the contemporanaeous documents. It was pointless for Celtic to argue that, based on the evidence, no reasonable adjudicator could have found that the works had been completed on 8 June. Nor could Celtic say that the adjudicator had breached the rules of natural justice because there had been no meeting with the parties. An adjudicator is not obliged to have a meeting. The court could not see how Rok had misled the adjudicator; certainly there had nothing which could not have been refuted by Celtic.

The judge also rejected the allegations that Mr. Holder had failed to apply the slip rule fairly. The parties had agreed that Mr. Holder might have a discretion to correct any ambiguities or errors from his decision, but this did not extend to correct or reconsider major parts of his decision. The adjudicator was the person best placed to decide what was an “error” or “omission”. In the court’s view, there had been no ambiguity in his decision, and there was nothing obviously “accidental” in the decision. The judge found that Mr. Holder had been right, or at least not arguably wrong, in deciding that he could not correct his decision to reflect the e-mails sent by Celtic, and it was not arguable that he had been unfair or had breached the rules of natural justice in so doing.

Celtic was not without a remedy even if the adjudicator had made an error such as it was alleging. It could commence arbitration proceedings so that the state of the parties’ final account could be determined.

Author: Ann Glacki

Date: January 2010

Commentary

The case dealt with issues that arise regularly in, and resulting from, Adjudication namely the difference between a ‘slip’ and an incorrect decision and the treatment of each and also the difference between making a decision (right or wrong) and the application of the rules of natural justice.

In this case the Court found that the Adjudicator had been correct in agreeing to amend mathematical errors as a slip but not the substantive issues dealt with in his decision even if his decision was wrong.

Further that the Adjudicator had not breached the rules of natural justice and had not given a decision ‘that no reasonable adjudicator could give’.

The judgement reinforces the message from the Courts that a Party will need to go a long way to establish a breach of natural justice, not least in circumstances where they could take the case on to further proceedings.

For more information please contact Lorne Alway by telephone 01295 275975 or by email on lorne.alway@alway-associates.co.uk

Author: Lorne Alway

Date: February 2010

Lorne Alway

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