[2009] EWHC 2425 TCC

GOL and ARL were the parties to two cross-applications before the TCC. One application was to enforce an adjudicator’s decision, the other was for a declaration that a significant element of the decision was wrong and was to be set aside.

GOL and ARL were parties to a subcontract for civil engineering works taking place on National Rail infrastructure near Basingstoke. A dispute arose between the parties in relation to sums owed to GOL in respect of two items: ground investigations carried out by GOL; and variations in connection with the construction of a signal control centre. Assessments for the items of work had been included in ARL’s Interim Certificate No 35 totalling £912,147, but overall the certificate had a negative value and £400,000.00 was deemed to be owed to ARL due to previous overpayments. GOL then issued Payment Application No 36 and ARL failed to issue a certificate for this application. GOL subsequently referred the two items of work to adjudication on 19 March 2009.

The adjudicator assessed the value, but in doing so neglected to deduct the £912,147 already certified in Interim Certificate No 35. On 15 July 2009 the adjudicator decided that ARL was to pay GOL £504,385 (rather than the £400,000 owed by GOL to ARL) and that ARL should pay his costs. As this was an obvious and significant error, ARL invited the adjudicator to correct his mistake under the slip rule which he declined to do by letter on 20 July 2009. Following this, GOL commenced enforcement proceedings on 6 August 2008 which were met by a cross-application from ARL on 11 August 2009. As it is well-established that adjudicators’ decisions are binding until they have been finally determined by court proceedings, ARL issued Part 8 proceedings as a pre-emptive strike to defeat GOL’s application to enforce the adjudicator’s decision. GOL submitted that Part 8 proceedings were inappropriate unless they were being used to determine the whole of a dispute, rather than part of one, as in this case.

However, the Judge stated that this was an entirely legitimate approach, provided that the Court was not being asked to decide on a substantial dispute of fact. As such, the court was able to sever part of an adjudicator’s decision by way of Part 8 proceedings and finally determine that issue:

“Whilst I agree that the court must be in a position to answer whatever question is under consideration, I can see no reason why the court has to adopt an all or nothing approach to the decision. 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 it just and expedient for the court to do so, such a course would give effect to the overriding objective of the CPR”

Turning to the application itself, the Judge considered that under its sub-contract GOL was only entitled to payment of an amount stated in a payment certificate. The applicable Adjudication Rules provided that the adjudicator is to reflect “the legal entitlement of the parties” and to decide that a party to the dispute is liable to make payment “under the contract”. Also, the Notice of Adjudication was written in such terms that GOL was not intending to ask the adjudicator to order ARL to pay the total value of the ground investigations and the variations for the signal control centre without deducting the amounts already included in Interim Certificate 35.

Therefore, in not taking into consideration the sums previously certified for these two items the adjudicator’s decision did not reflect the legal entitlement of the parties under the contract. The adjudicator was therefore wrong in law to order ARL to make a payment without taking account of sums already paid for these items. As ARL had pleaded that the adjudicator was wrong in law on this specific point, the Judge decided it was entitled to a declaration to that effect.

The Judge’s declaration in ARL’s favour, however, did not change the position on costs. The adjudicator had the jurisdiction to make a costs order. Even though it may have been the case that, had the adjudicator not concluded that such a large amount was owed to GOL, there may have been a different costs order, it was not obvious that he would have done so.