In Bouygues v Dahl-Jensen, the Court of Appeal said:
“Adjudicators will make mistakes. Sometimes those mistakes will be glaringly obvious and disastrous in their consequences for the losing party.”
Even though the possibility of making mistakes was recognised by the Court of Appeal (and both parties, as they agreed that the adjudicator had made a mistake), the court went on to hold that if an adjudicator makes a mistake, the decision will still be enforced unless the adjudicator answered the wrong question.
We have lived with this principle for a long time. Most arguments on enforcement fail and so, in the last couple of years, we have started to see parties trying to get around this “enforcement principle” through the use of declarations (using CPR Part 8). One such case was heard by the TCC earlier this month.
WW Gear v McGee Group
In WW Gear v McGee Group the employer argued that the adjudicator had incorrectly interpreted a condition precedent in the parties’ contract. As a result, the adjudicator found against the employer and ruled that the contractor was entitled to make its loss and expense claim. (Although it is not clear from the judgment whether any sums were awarded to the contractor, or whether the adjudicator dealt only with legal issues, I suspect it was the latter.)
As the employer had referred the interpretation question to adjudication, one of the few options available to it was to ask the court to consider the same question and give a binding decision. That looks to me like the employer used the Part 8 process to avoid the consequences of the adjudicator’s decision.
It is arguable that this is both a tactical and efficient way of dealing with the question:
- If money had been awarded by the adjudicator, the employer would avoid payment of that award (assuming the court agreed with its interpretation of the condition precedent).
- If the adjudicator had only dealt with legal issues, the employer would still avoid the consequences of a further adjudication to determine how much was due on the contractor’s loss and expense claim. (Remember that adjudicators are bound by the decisions of previous adjudicators.)
On this occasion, Akenhead J applied the contract interpretation principles from Chartbrook v Persimmon, and held that the adjudicator had made a mistake when he decided that the condition precedent was “devoid of meaning” and of no effect.
As such, the parties (and any future adjudicator) are now bound by a court’s decision as to what their contract means.
One final thought
As Akenhead J also held that the parties had preserved the contractor’s rights to claim at common law for breach of express and implied terms, this may not be the end of the matter. After all, the declaration will not prevent the contractor from starting another adjudication (or court proceedings) to get at the money it thinks it is entitled to, although it may make drafting that claim a lot harder than simply relying on clause 4.21 was.
