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“Adjudicators are not expected to be perfect”

My last post considered a Fraser J judgment (Beumer Group v Vinci Construction) and used a line from the judgment as the title. This post does the same, only this time the judgment is Amey Wye Valley Ltd v Hereford DC. No Will Smith reference on this occasion though, just a case about roads and highway maintenance.

Michael Curtis QC and Charles Pimlott (who acted for the council) discussed the case at the time and addressed some of the key issues. It’s arguable that they highlighted why it is sometimes sensible for the same adjudicator to be appointed in serial adjudications (but that’s another story). I want to look at two aspects of the judgment, which I think are the most interesting, mistake and severance.

Amey Wye Valley Ltd v Herefordshire DC

The parties’ dispute was all about the pricing mechanism to deal with inflation under a 10-year contract for the repair and maintenance of highways and roads in Herefordshire (the service delivery agreement (SDA)). The SDA included rates for certain types of work and referred to a number of indices known as the Baxter indices.

When the parties couldn’t agree about the inflation price adjustments under the SDA, they entered into a joint statement. Part of that agreement related to how prices would increase over the contract’s life. This was known as the VOP3. Essentially, VOP3 set out how the Baxter index would be applied. However, even then the parties could not agree on what the words in VOP3 actually meant.

Cue adjudication one, which was referred to Mr Entwistle in early 2013.

Mr Entwistle was essentially asked to decide what VOP3 meant, which he did. He wasn’t asked to put money to those findings, so he didn’t do so. That was left for adjudication two, which was referred to Mr Molloy (yes, Matt), in January 2015. Matt decided that the council had overpaid Amey by some £9.5 million. Unsurprisingly, the money was not repaid and, ultimately, the parties ended up before Fraser J in the TCC. The council sought to enforce Matt’s decision and Amey sought a number of declarations.

Adjudicators can make mistakes

Amey argued that Matt did not follow or apply what Mr Entwistle had decided, which was a mistake of fact that meant he acted without jurisdiction, and his decision should not be enforced.

Fraser J rejected this challenge. He started by reminding us that adjudicators’ decisions will be enforced, regardless of errors of fact or law (Bouygues v Dahl-Jensen). He then went on to look at three Court of Appeal decisions that focused on the extent to which a second (or third) adjudicator was deciding an issue that had already been decided (Quietfield v Vascroft, Harding v Paice and Brown v Complete Building Solutions Ltd). He noted something Jackson LJ said in Harding v Paice:

“It is quite clear from the authorities that one does not look at the dispute or disputes referred to the first adjudicator in isolation. One must also look at what the first adjudicator actually decided. Ultimately it is what the first adjudicator decided, which determines how much or how little remains available for consideration by the second adjudicator.”

Fraser J said that if an adjudicator’s mistake (any mistake) meant that the adjudicator was acting without jurisdiction, in this instance, that would mean Matt “occupied an entirely unique position amongst adjudicators” because he would not be allowed to make any errors or fact or law. If he did, his decision would be unenforceable. Fraser J described this argument as misconceived.

Fraser J reinforced the message that the issue for adjudicators is whether they are resolving the dispute referred to them, not re-deciding something that is not before them. Here, Matt was looking at the financial consequences of Mr Entwistle’s findings. It was necessary to consider the:

“… terms, scope and extent of the dispute previously referred, and the terms, scope and extent of the earlier decision.”

If that was applied to what Matt did here, it was clear that he:

“… not only knew, but applied, that Mr Entwistle had considered and decided… Mr Molloy did not purport or attempt to decide those again.”

Fraser J went on:

“Mr Entwistle had not decided the financial consequences of his findings on VOP3, and expressly had not done so. The parties had not asked him to do so. That was the task that Mr Molloy was asked to perform, and it was the task that he did perform.”

That’s that sorted then!

As an aside, Matt did make a mistake when he adjusted a spreadsheet, but it was an arithmetical one. It led to Amey alleging the financial consequences to it were £2.5 million (the council said it was £1.9 million). Either way, it was far less than the “staggering figure” of £35 million that was the error in Amey’s calculations and, in the context of a contract worth more than £204 million, was only a “small element” of the sums paid to Amey. (This “mistake” is relevant to the severance point I discuss below.)

Fraser J said that “absolutely no criticism” could be levelled at Matt for this error because:

  • Adjudicators work under very considerable time pressure.
  • Matt was asked to deal with very complicated calculations. Compounding was involved:

    “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.”

  • Both parties made errors themselves in the material and calculations they submitted (including Amey’s £35 million one).
  • The parties had had 20 months to analyse the calculations and discover the spreadsheet adjustment “was not entirely perfect”.

Court severing an adjudicator’s decision

Amey’s severance point was argued in the alternative and revolved around the £2.5/£1.9 million mistake in the spreadsheet. As enforcement proceedings are dealt with as summary judgment, Amey sought leave to defend that part of Matt’s decision “up to the amount of the error”.

Fraser J accepted that it was possible for the court to sever an adjudicator’s decision, but a decision dealing with a single dispute was “either valid and enforceable, or invalid and unenforceable” (Akenhead J in Cantillon v Urvasco). Here the single dispute was the financial effect of the inflation adjustment.

Thankfully (in my view), Fraser J gave this argument short shrift. He acknowledged that such an approach was contrary to the law on enforcing adjudicators’ decisions. It would amount to the court “correcting” an adjudicator’s decision (here a “single mistake of fact”). That would be contrary to the principle that adjudicators’ decisions are enforceable, regardless of mistakes of law or fact.

Finally, Fraser J rejected any suggestion that the adjudicator’s intention when he made the mistake was relevant. The test is whether the adjudicator decided something he had jurisdiction to decide, not what the adjudicator’s intention was at the time. To decide otherwise would lead to “an enormous amount of wasteful satellite litigation”.

What do I take from this judgment?

I think there are three key messages here:

  • Parties and representatives must appreciate that, while adjudicators make every effort to avoid mistakes, as Fraser J acknowledged, they will on occasion occur due to the speed of the process.
  • It is important for parties and representatives to check decisions as soon as they have been received in order to try and identify any mistakes that can be corrected under the slip rule. Although, on the facts of this case, it may have been difficult for the parties to have identified the mistake immediately after Matt’s decision was published (it appears to have taken them 20 months, and even then they couldn’t agree the quantum), if it is a genuine mistake that does not reflect the adjudicator’s intentions, the adjudicator will normally correct that mistake.
  • In terms of severance, this case highlights the limitations of what can be severed. It is only those parts of decisions made without jurisdiction, and not parts of a decision that are wrong on the facts or law. Fraser J would have opened a can of severance worms if he had decided that errors of fact and law could also be severed.
MCMS Ltd Jonathan Cope

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