Practical Law

It has been a few years since I wrote about an adjudicator failing to “exhaust his jurisdiction“, but it cropped up recently in NKT Cables A/S v SP Power Systems Ltd, where Lady Wolff held that the adjudicator had failed to “exhaust his jurisdiction”. She also found that a slip rule could be implied (for the first time in Scotland), but that the adjudicator exceeded the scope of that implied term when he amended his decision.

Failing to “exhaust his jurisdiction”

This is fundamentally a Scottish concept. I understand the phrase to mean that in failing to consider all the evidence, the adjudicator restricted his own jurisdiction too much. Although the Scottish courts may consider that it is a breach of the rules of natural justice, they describe it as the adjudicator failing to “exhaust his jurisdiction”. It can be traced back to cases like CSC Braehead Leisure v Laing O’Rourke and RBG Ltd v SGL Carbon.

In England, if the adjudicator has not considered part of a defence, we would simply talk about the adjudicator breaching the rules of natural justice or tripping-up in the exercise of their jurisdiction. It goes back to cases like Quartzelec Ltd v Honeywell Control Systems, Thermal Energy v Lentjes and Pilon v Breyer.

Now we have another case to add to the list.

NKT Cables A/S v SP Power Systems Ltd

NKT Cables was employed by SP Power to carry out significant electrical cabling works at the athletes’ village, built for the 2014 Commonwealth Games in Glasgow. The contract was dated November 2010, which was before the amendments to the Construction Act 1996 came into force. The works were substantially completed by the time the contract was terminated. Thereafter, NKT referred a dispute to adjudication, claiming the balance of the sum it said was due to it. The agreement the parties and the adjudicator entered into expressly referred to the Scheme for Construction Contracts (Scotland) 1998 (SI 1998/687).

The adjudicator issued his original decision on 1 July 2016 and then, after a query from NKT, issued an amended decision on 4 July 2016. The original decision awarded NKT some £1.85 million and the revised decision awarded it £2.1 million.

In NKT’s enforcement proceedings, SP Power raised the issue of whether the adjudicator had the power to correct his decision under the slip rule and also argued that the adjudicator had failed to exhaust his jurisdiction, because he failed to have regard to a number of its defences. This meant he had failed to give reasons.

Adjudicator failed to exhaust his jurisdiction

Lady Wolff carried out a fairly detailed review of the adjudicator’s decision and the parties’ submissions on it, and it makes the judgment somewhat detailed, trying to sort the VO claims from the AP claims. In reaching the conclusion that the adjudicator failed to exhaust his jurisdiction, she made a number of telling findings, such as:

“This is the only substantive ground of defence, of seven substantive defences, addressed by the Adjudicator in his Decision… There is, however, no reference whatsoever to any of the six other substantive defences advanced by the defender…

…However, there is again no mention of any of the substantive defences. And, while he considered the alternative valuations, albeit apparently those of IEC rather than those of the defender, he nowhere considered these other substantive defences in their application to the VO claims…

Apart from this, there is simply no mention of or, more fundamentally, any engagement with the other substantive defences. Of the nine claims set out in table 5, only 4 of these engaged the cable defence. Substantive defences are asserted for the remaining 5 claims.”

It meant the adjudicator’s original decision was not enforced. Tellingly, she held that it was insufficient for the adjudicator to simply state that “time precludes a ‘detailed consideration’ of each VO”. Rather,

“It was incumbent upon the Adjudicator to address the other substantive defences, however briefly. Apart from this generic sentence, there is simply no indication that the Adjudicator addressed his mind to these defences, much less the basis for rejecting all of these out of hand… the Adjudicator had failed to exhaust his jurisdiction in respect of all but one of the substantive defences advanced by the defenders to the clause 34 claims.”

Lady Wolff also found that this meant the adjudicator had failed to give adequate reasons in respect of SP Power’s substantive defences.

I thought it was interesting that Lady Wolff invited the parties to consider whether the adjudicator’s original decision should be severed, so the unaffected parts could still be enforced. I wonder what they said about that and how likely it was that they’d reach any kind of consensus on the point?

Slip rule implied but scope exceeded

In light of the express reference to the Scheme for Construction Contracts (Scotland) 1998 in the adjudicator’s agreement, I think the adjudicator was perhaps fortunate that Lady Wolff implied a slip rule into that agreement, which meant he could issue his amended decision on 4 July. He was, perhaps, less fortunate in that she decided he exceeded the power she had just given him by:

“… seeking to correct an error which was a true omission, in the sense that on the face of his Decision he had given no thought to these two matters at the time of undertaking his calculation or promulgating his Decision, and, therefore, treatment of these figures did not form part of his first intention when making the Original Decision.”

This was because Lady Wolff had decided that the implied term was limited to:

“… correcting a typographical or clerical error of something expressed within the four corners of the decision and which is apparent on the face of the decision. It is not warrant to correct what are more substantive errors, in the sense of a mistake of fact or law. Nor, in my view, is it warrant to correct a pure omission, being something that the adjudicator intended to include or take account of but which he has wholly omitted to in reaching his decision.”

She arrived at this conclusion by looking at the language of paragraph 22 A of the Scheme for Construction Contracts (Scotland) Regulations 2011, which she considered provides adjudicators with a “narrow” slip rule. That rule does not apply to “pure omissions”, but simply to correcting a clerical or typographical error (like mathematical errors in adding or subtracting, and so on). This error must be a “mistake in expression”, rather than a change in the “reasoned or intended basis of the decision”.

The result was the amended decision was made without jurisdiction, so it fell away, leaving the parties with the adjudicator’s original decision.

What should an adjudicator do?

As an adjudicator, it is important to ensure that your decision covers all the issues that have been referred to you, and all of the responding party’s defences too. You need to bear in mind that this is not only in the interests of natural justice, but if part of a submission or the evidence has been overlooked (intentionally or inadvertently), that will always provide fertile ground for the losing party to challenge the enforcement of that decision.

It is also worth remembering that if you do make a mistake, you always have the option of relying on the slip rule to correct it. While I think that Lady Wolff’s interpretation of the slip rule could be helpful as an aid to other courts (north or south of the border) when looking at the meaning of the statutory slip rule, I do wonder whether her interpretation is narrower than was otherwise thought.

As an example, I wonder whether, on the facts of Amey Wye Valley Ltd v The County of Herefordshire District Council, had the parties identified my “small” mathematical error within five days (and not 20 months), whether it would have been something that I would have had power to correct. If it constituted (to use Lady Wolff’s words), “an arithmetical error… a slip in carrying over a calculation from one part of the decision to another”, then I perceive that there would have been no difficulty. However, if the error was truly “an omission” to do something, then this may not have been the case.

It may well be that the question of whether something constitutes an omission turns on whether the fact that it is contrary to the adjudicator’s intentions can be ascertained from the face of the decision itself. As with many things, I am sure that much will turn on the prevailing facts and circumstances.