REUTERS | Wolfgang Rattay

Consequential corrections are covered by adjudicator’s slip rule

The slip rule is an essential part of the adjudicator’s toolbox, for situations when a mistake has crept into our decision or, as I put it back in 2011:

“It is a handy implied term for those occasions when adjudicators make a mistake.”

It took on statutory form in 2011 with section 108(3A) of the Construction Act 1996 and paragraph 22A of the Scheme for Construction Contracts 1998. Prior to this, we relied on a number of cases, including Bloor v Bowmer & KirklandO’Donnell Developments Ltd v Build Ability Ltd (where Ramsey J said the adjudicator must not be “giving effect to second thoughts or intentions but of giving proper effect to his first thoughts”), Redwing Construction Ltd v Wishart and YCMS Ltd v Grabiner (where Akenhead J said that the adjudicator’s mistake must be a “genuine slip which failed to give effect to his first thoughts”).

Over the years, I have looked at the slip rule a few times, most recently to consider Lady Wolff’s judgment in NKT Cables A/S v SP Power Systems Ltd, where she confirmed that it is there to enable an adjudicator to correct clerical or typographical errors, not to allow “changes to the reasoned or intended basis of the decision”.

I’m looking at it again today because, in Axis v Multiplex, Roger ter Haar QC held that, when used properly, the slip rule extends to consequential corrections. 

Axis v Multiplex

This was a dispute over the value of Axis’ interim application for payment 23 (IA 23), which involved a number of variations and Multiplex’s entitlement to deduct contra charges. The parties were some way apart, with Axis valuing the variations at £7.3 million and Multiplex at £2.6 million. The contra charges were valued at £784,000.

In the adjudicator’s original decision, he concluded that Axis’ claim failed, as he found there was a negative balance due to it. As the claim failed, there was no entitlement to interest and the adjudicator’s fees and expenses were Axis’ responsibility.

Four days later, the adjudicator issued a corrected decision. This time, he found that Axis was entitled to £654,000 plus interest. He also decided that Multiplex was liable for his fees and expenses. He reached this conclusion after being told of an error with the contra charges, which he’d effectively taken into account twice.

When it came to the enforcement proceedings that followed the corrected decision, Multiplex argued the adjudicator did not have jurisdiction to make the changes he had included in his corrected decision because they went beyond those permitted by paragraph 22A of the Scheme for Construction Contracts 1998.

Scope of paragraph 22A

In order to determine whether what the adjudicator had done was OK or not, Roger ter Haar QC first looked at paragraph 22A of the Scheme and then carried out a detailed review of the authorities, most of which pre-dated paragraph 22A.

Paragraph 22A(1) provides that:

“The adjudicator may on his own initiative or on the application of a party correct his decision so as to remove a clerical or typographical error arising by accident or omission.”

When looking at the case law, the judge didn’t pull all the principles together in a nifty list, so beloved of certain other judges. However, I think you can do that and can say that when correcting a mistake (or “genuine slip”), the adjudicator must be giving effect to his first thoughts and intentions, rather than changing something because he is having second thoughts.

Interestingly, in NKT, Lady Wolff looked in detail at paragraph 22A the Scheme. On the “accident or omission” wording, she didn’t think “omission” meant something the adjudicator meant to do, but forgot to do. She thought it was an error in expression or calculation, not an error going to the reason or intention forming the basis of the decision. This meant the scope of the slip rule was:

“…confined 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.”

Whether a mistake falls within the scope of these principles will be a question of fact and, on the facts before the judge in Axis, he felt the double counting of the contra charges fell within the statutory slip rule.

He explained that he reached this conclusion by looking at the dispute that had been referred to adjudication – the dispute the adjudicator had to decide. Here it was all about the appropriate value of the variations and what, if any, contra charges should be deducted. Thus, the adjudicator was clear in his task and just made a mistake in his arithmetic.

Consequential corrections from gateway errors

Possibly the most interesting aspect of this case was the judge’s conclusion that the adjudicator had jurisdiction to correct his decision on interest and liability for fees and expenses. These were consequential corrections caused by changing the amount of contra charges, which had the effect of changing the “winning” party from Multiplex to Axis.

In deciding whether the scope of the slip rule extended this far, the judge considered section 57 of the Arbitration Act 1996, which is a similar statutory provision and allows arbitrators to correct their awards to remove a “clerical mistake or error arising from an accidental slip or omission”. He also referred to the judgment in Gannet Shipping v Eastrade Commodities Ltd, where the arbitrator had been faced with a similar situation. In that case, the arbitrator had decided he had jurisdiction to review the costs position as well as correcting the arithmetical error:

“… when the arbitrator’s decision on a particular point, in this case liability for costs, is based on an admitted mistake, then surely as a matter of common sense the arbitrator must have power to review his decision in the light of that mistake.”

The court had upheld this. In language reminiscent of the adjudication enforcement cases referred to above, Langley J said:

“The authorities draw distinctions between errors affecting the expression of the tribunal’s thought (which can be corrected) and errors in the tribunal’s thought process (which cannot) and to not permitting corrections to reflect ‘second thoughts’… I do not think these principles preclude the tribunal from addressing the question whether the corrected figure may reveal other errors. If an error properly falls to be corrected, how it is to be corrected and its consequences is always likely to involve some new consideration.”

In Axis, the judge put it rather nicely by describing the original error as a “gateway error”. Once the door had been opened to correcting the original error, it was in the interests of justice that any “corrections consequent upon the correction of that gateway error [were] made”. He could see no reason to distinguish between arbitration law and the case before him.

As I’ve said before, while using the slip rule should be an act of last resort for the adjudicator, it is reassuring to know that there is a last resort. It is also reassuring to know that in administering the effects of correcting a slip, it is possible to change the fees position (I recall having to alter apportionment of fees following a correction in the past).

 

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