[2016] EWHC 2368 (TCC)

Amey entered into a contract, called a Service Delivery Agreement (“SDA”), for repair and maintenance works to the highways and roads in Herefordshire. Amey agreed to provide a range of services to Herefordshire District Council (“HDC”), broadly comprising highway maintenance and other construction and related works. The period for these services was to be ten years, ending on 31 August 2013. The SDA expressly incorporated Option A of the ECC (2nd edition 1995), together with Contract Data in Parts One and Two, as adjusted by the items listed in Schedule 5 (“the NEC Conditions”).

During 2005, the parties fell into a dispute concerning how to calculate the price adjustment for inflation under the SDA. That dispute was resolved in a letter dated 21 July 2005. Part of that agreement related to the way in which the price increase mechanism was to apply over the life of the contract. This became known as “VOP3”.

This case concerned two adjudications, and the relevant adjustment for inflation purposes of sums paid to one party by the other, for works to the highways and roads of Herefordshire over a ten-year period between 2003 and 2013. The first adjudication was conducted in 2013; the second in 2015.

Under the NEC form, if a party does not serve a notice of dissatisfaction within a set time period, the adjudication decision becomes final and binding. Neither Amey nor HDC challenged the first decision. The first adjudicator was asked to decide (amongst other things) what VOP3 actually meant; the second adjudication was concerned with putting money figures to the first decision.

The financial consequences of the second decision were that Amey was ordered to repay to HDC some £9.5 million, being the sum by which HDC were said to have overpaid Amey for works during the contract period.

It was accepted by the parties that the second adjudicator made an error in the spreadsheet he used to arrive at the final figure for repayment contained in his decision. However, there was no agreement about the effect of that error. Amey said it was £2.5 million, HDC £1.9 million. Mr Justice Fraser was clear that no criticism could be levelled at the second adjudicator. Adjudicators work under very considerable time pressure:

“Errors of fine detail are part of the process effectively accepted by Parliament as a consequence of the process of adjudication. The ‘right’ answer is secondary to the parties having a rapid answer.”

That was especially the case here, where both parties made admitted errors themselves in the material and calculations that they submitted. The Judge also noted that the second adjudicator correctly found that the findings in the first adjudication were binding on HDC and Amey and that he was required to consider the parties’ respective calculations and positions in relation to the issues between them in the context that those findings were binding.

Amey’s position was that the second adjudicator did not follow those findings and so acted without jurisdiction. In doing so, Amey to some degree raised the “same dispute” issue, namely the principle that an adjudicator’s decision will not be enforceable to the extent that they purport to decide again that which has already been decided. That was not what had happened here.

Further, the Judge made it clear that the court would not embark upon a detailed analysis of how any adjudicator has made detailed calculations or findings of fact leading to their ultimate decision. Such an exercise is not the function of the court on enforcement proceedings. Here, the way in which the adjudicator performed his calculations was not immediately determinative of whether he had jurisdiction to perform those calculations. Providing that the adjudicator was resolving the dispute referred to him, and not re-deciding something that was not before him, then he had jurisdiction to determine that dispute, whether he made mistakes in doing so or otherwise.

The first adjudicator decided to what extent, and how, VOP3 was to be considered (including whether it was to be binding); the second adjudicator decided the financial consequences of that. His decision was enforceable. In coming to a decision, it is necessary for the court to consider the terms, scope and extent of the dispute previously referred, and the terms, scope and extent of the earlier decision, not the accuracy of an adjudicator’s arithmetic.

As to severance, Amey said that the decision should not be enforced in the full amount because part of the amount of repayment calculated involved an error in one part of the spreadsheet. Mr Justice Fraser said that such an approach would be contrary to the law regarding enforcement of decisions by adjudicators. It would amount to a correction of an error of fact on the face of the decision to arrive at a different outcome. A decision on a single dispute is either valid and enforceable, or invalid and unenforceable. This was a single dispute, namely what was the financial effect of the inflation adjustment necessary as a result of VOP3. The error made in one part of the calculation of that total cannot be severed. This would, in the Judge’s view, amount to a correction of a single mistake of fact. The Judge concluded:

“An error in the arithmetic does not render the decision unenforceable.”