As noted in our report on Rok Building Limited v Celtic Composting Systems Limited (No 2) [2010] EWHC 66 (TCC), the general position is that the court will enforce adjudicator’s decisions even if the adjudicator has made an error, unless the adjudicator had no jurisdiction to decide the dispute or there has been a breach of natural justice.

There has been some debate as to whether the court can sever the good parts of an adjudicator’s decision from the bad parts of a decision so as to allow the good parts to be enforced - see Cantillon Ltd v Urvasco Ltd [2008] EWHC 282 (TCC) reported in our March 2008 Updater and Quartzelec Limited and Honeywell Control Systems Limited [2008] EWHC 3315 (TCC) reported in our February 2009 Updater. Severance would allow part of an adjudicator’s decision to be enforced where the lack of jurisdiction or breach of natural justice related only to one part of the decision.

In the following case, the court had to consider whether the adjudicator’s mistake in relation to part of the decision meant that that part of the decision was not enforceable. In so doing the court had to consider the use of Part 8 proceedings as a means of attempting to avoid enforcement and whether the court could make a final determination of part only of a dispute.

Geoffrey Osborne Ltd v Atkins Rail Ltd [2009] EWHC 2425 (TCC)

The contractor (Atkins Rail Ltd) was appointed under a main contract with Network Rail Infrastructure Limited to design and construct signalling and related civil engineering works as part of the Basingstoke Area Infrastructure Project. The contractor in turn engaged the sub-contractor (Geoffrey Osborne Ltd) to construct part of the civil works associated with the main contract.

A dispute arose between the parties on the valuation of the sub-contract works which resulted in an adjudication decision in favour of the sub-contractor. The difficulty was that the adjudicator made a significant error in his decision.

The adjudicator was asked to value two items of work relating to the sub-contract works. These items were the ground investigation carried out by the sub-contractor and variations in connection with the construction of the signal control centre.

Having carefully assessed the value of the two items, the adjudicator failed to deduct the amounts already included in respect of those items in interim certificate No 35 (the last certificate issued before the adjudication commenced). As a result the adjudicator concluded that the sub-contractor was owed some £500,000 by the contractor. However, the correct result on the adjudicator’s findings was in fact that the sub-contractor had been overpaid by over £400,000.

The contractor claimed that the adjudicator had made a mistake and invited the adjudicator to correct his decision. The adjudicator declined to do so.

As a result the contractor brought Part 8 proceedings seeking a final determination in the form of an appropriate declaration to the effect that the adjudicator’s decision (or at least that part of it relating to the order of payment of money to the sub-contractor) was plainly wrong and should be set aside. The sub-contractor sought to enforce the decision of the adjudicator by way of summary judgment under Part 24 on the basis that the error was within the adjudicator’s decision. The two applications were heard together.

By the time the case was heard, it was common ground between the parties that the adjudicator had made a mistake because he had not taken into account the sums certified in interim certificate No 35 in relation to the two items when he made his decision that the contractor should pay the sub-contractor the £500,000.

The court’s approach: Part 8 proceedings

The court acknowledged that Part 8 proceedings had been brought by the aggrieved party in Bouygues (UK) Ltd v Dahl-Jensen [2000] BLR 49. In that case, the Court of Appeal had enforced the adjudicator’s decision, notwithstanding a mistake by the adjudicator.

However, the court considered that the application under Part 8 in Bouygues was concerned with whether the enforcement of the adjudicator’s decision could be resisted on the grounds of lack of jurisdiction - the aggrieved party considered that the adjudicator had in effect exceeded his jurisdiction by deciding a question that was not referred to him. There was no suggestion in Bouygues that the aggrieved party was asking the court to make a final determination on a point of law or fact decided by the adjudicator.

In this case, however, the contractor disputed the adjudicator’s decision, claiming that it was wrong in law. The court considered that it was not prevented by Bouygues from making a final determination of the dispute, provided that it was a question that did not involve a substantial dispute of fact. The court was prepared to do this in respect of part only of the dispute:

“If there is part of an adjudicator’s decision that can be isolated and determined by the court, then it seems to me that, if the court considers that it would be just and expedient for the court to do so, such a course would give effect to the overriding objective of the CPR.”

The contractor’s argument

The contractor submitted that the adjudicator was wrong in law to order the payment to the sub-contractor because:

  • he had not taken into account the payment and certification process under the sub-contract; and
  • he had not taken into account the fact that the sub-contractor had been paid or allowed some of the sums the adjudicator awarded.

The court’s view

The court held that the notice of adjudication gave the adjudicator the jurisdiction to assess the true value of the two claims and to order the contractor to pay the difference between the amounts assessed by the adjudicator and the amounts already included within certificate No 35. The adjudicator was not being asked to order the contractor to pay the total value of the claims as assessed without deducting the amounts included in the last certificate.

As a result, the adjudicator was right to assess the value of the two claims but should have taken into account the sums already paid or allowed against those claims. This was because the sub-contractor’s entitlement to payment arose only under certificates and the sum payable under each certificate was the total of the amounts assessed in the certificate less the amounts already paid or allowed. The adjudicator was wrong in law to make an order directing that the contractor should pay a sum in respect of the two claims that made no allowance for amounts already paid or allowed against those two claims.

The contractor was therefore entitled to a declaration to the effect that the adjudicator was wrong to order payment of sums to the sub-contractor in respect of his assessment of the value of its two claims without taking into account, and if appropriate deducting from the amounts assessed, any sums that the contractor had paid or allowed to the sub-contractor at the time of the notice of adjudication.

Editors’ comments

This case is interesting because it confirms that in an adjudication context the court is prepared to make a final determination of a dispute (or part of a dispute) under Part 8 declaratory relief proceedings, provided that the question that the court had to deal with did not involve a substantial dispute of fact, and provided that the court had jurisdiction to make a final determination. This would not be the case if, for example, the relevant contract contained an arbitration clause since any final determination would have to be by way of arbitration and not litigation.

However, in our view the decision is likely to have a narrow application because any substantial factual enquiry will mean that final determination by way of Part 8 declaratory relief will not work. In any event, the decision does not affect the robust approach of the courts towards enforcement of adjudicators’ decisions, so in our view the courts will continue to enforce adjudicators’ decisions, unless it is plain according to the now well established rules that the adjudicator lacked jurisdiction or there has been a breach of natural justice.

In this case, Part 8 declaratory relief proceedings were brought after the adjudication. However, as well as being used at enforcement stage, it is worth remembering that Part 8 declaratory relief proceedings can also be used during an adjudication, for example, to determine whether an adjudicator has jurisdiction to hear the dispute.

View: Geoffrey Osborne Ltd v Atkins Rail Ltd [2009] EWHC 2425 (TCC)