When I read Lord Malcolm’s judgment in Bouygues E&S Contracting UK Ltd v Vital Energi Utilities Ltd, I was reminded of the TV game show, Supermarket Sweep. For those unfamiliar with Supermarket Sweep, as far as I can remember (with a little help from Wikipedia) the premise was that contestants played games to accumulate time, which they then used to fill their shopping trolley with goods by running around a supermarket. The one with the most valuable trolley at the end won the prize.
When you read Lord Malcolm’s judgment in Bouygues v Vital, you will see why I drew the supermarket trolley analogy.
Bouygues v Vital
This case concerned a mechanical and electrical sub-contract, entered into by Bouygues and Vital. Vital was the main contractor to Fife Council who, in 2006, had commissioned a power plant.
The judgment doesn’t go into the detail of what went wrong, but it does explain that the first adjudicator decided that Vital’s termination of the sub-contract was justified. That was in May 2013 and, in January 2014, a second adjudicator was asked to award Vital £4.482 million for the costs of completing the sub-contract works (under condition 57 of the sub-contract) and damages for delay.
The second adjudicator rejected the delay claim, but ordered Bouygues to pay to Vital just over £1.6 million under condition 57. That money was not paid and, inevitably, enforcement proceedings followed.
- The adjudicator had failed to “exhaust the jurisdiction conferred upon him”, which was contrary to the rules of natural justice.
- The adjudicator accepted advice that he received from an assessor (a consulting engineer) regarding the invoices for completion and rectification of the sub-contract works, but did not give Bouygues an opportunity to respond to the assessor’s view.
- The adjudicator had relied on his own experience of similar court disputes and how a court may approach the sampling of invoices, and had not given the parties an opportunity to respond.
Lord Malcolm rejected all of Bouygues’ challenges, as you will see below. He also reiterated the courts’ support for the adjudication process and that it will not review the merits of an adjudicator’s decision, as was explained in Diamond and others v PJW Enterprises Ltd.
Failed to exhaust his jurisdiction
The problem with the first challenge is apparent from the first sentence of paragraph six of the judgment, that is, Bouygues was asking the court to decide that the adjudicator had reached the wrong decision on a line of defence. The adjudicator had not decided what sub-contract works were defective, he had simply calculated the cost to Vital of completing those works (whether because they were defective or incomplete). As the adjudicator wrote in his decision:
“On a proper construction of condition 57 there is no requirement to determine a breach and no issue of causation. What is required in relation to this element of the dispute between the parties is a determination of the cost to the employer for completion of the works. I do not need to find that any expenditure was ‘caused’ by conduct on the part of the responding party. I need only be satisfied that it was incurred in carrying out the subcontract works.”
Asking the court to review the merits of the adjudicator’s decision was never likely to succeed. Nevertheless I can understand Bouygues’ frustration – while condition 57 isn’t quoted, it does appear somewhat odd that the adjudicator was not required to determine whether any alleged defects actually constituted defects.
The second ground of challenge is interesting. In my experience assessors seem to be used a lot more by lawyers than other professions, but that is an aside. I think it is the exercise that the assessor undertook which makes this interesting. Namely he assessed 10% of the invoices and, on the basis that they related to completion or rectification of the sub-contract works, the adjudicator awarded payment of over £1.6 million.
Was a 10% sample really adequate? I’m not sure that there is enough information in the judgment to say either way, but I’m not sure that I’d feel entirely comfortable with such a small sample. It reminds me of HS Works Ltd v Enterprise Managed Services Ltd where the adjudicator also undertook a sampling exercise. In that case Akenhead J said that the adjudicator had jurisdiction to spot-check and it was not a breach of natural justice. He made the point about adjudication being “rough and ready”. However, he also made the following distinction in paragraph 55(e):
“There may arguably be a distinction to be drawn between using spot checks to verify the overall credibility of some evidence and using spot checks to prove or disprove a claim in full. The former approach is commonly used by auditing accountants and quantity surveyors and is even deployed by judges; it is an acceptable approach to check credibility. If spot checks reveal that one side’s quantum on a specific head of claim is unjustified, that undermines the credibility of that side’s position on that particular claim. That can lead legitimately to the conclusion that one side’s evidence on that head of claim is to be preferred. It was this approach which the adjudicator deployed at places in the decision. It cannot be said to have been unfair or to have amounted to his failing to address the dispute referred to him.”
In Bouygues v Vital, which approach did the adjudicator take?
While the adjudicator had already determined that he didn’t need to decide the issue of liability (see the first challenge, Failed to exhaust his jurisdiction) so the sampling arguably didn’t necessarily “prove or disprove a claim in full”, the assessor’s advice on the sampling appears to have been applied to the full extent of the quantum claimed.
Relying on own experience
There’s not a great deal to be said about the third challenge. The chances of it succeeding were clearly remote, but it is possibly a lesson for adjudicators to limit use of phrases such as “In my experience of similar disputes in court…” and the like.
So, the value of Bouygues’ trolley turned out to be nil. I’m not sure what Dale Winton would have made of that?!?