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Reminder not to approbate and reprobate in adjudication

We haven’t seen a case referring to approbation and reprobation for quite some time, at least not in a substantive sense (I know, I checked). Therefore, I read with interest HHJ McKenna’s judgment in Dawnus Construction Holdings Ltd v Marsh Life Ltd, where the court held that by inviting the adjudicator to exercise his powers under the slip rule, Marsh Life had:

“… waived or elected to abandon its right to challenge enforcement of the Decision since it had elected to treat the Decision as valid.”

How things might have been different if Marsh Life had made an express reservation of its rights.

Dawnus Construction Holdings Ltd v Marsh Life Ltd

The contractor, Dawnus Construction, was employed by Marsh Life to design and build a hotel and retail complex at Lifeboat Quay in Poole, Dorset. Work was due to start in September 2014 and complete in July 2015.

However, things did not go smoothly, in part because it transpired that SSE had a high voltage electricity cable on the site, but not where everyone thought it was. This lead to an exclusion zone on part of the site while the cable was re-routed. In turn, this meant the contractor’s works were delayed and “weather sensitive works” were pushed into the winter period, which caused more delays.

A number of disputes followed, which were referred to adjudication. The fourth adjudication was all about the contractor’s final account – its termination account – prepared after the parties’ contract was terminated “in disputed circumstances” in November 2016. At this stage, the project was effectively complete and a number of commercial tenants had moved in. Part of the contractor’s termination account related to its “SSE Cable” and “Winter Works” loss and expense claims.

The fourth adjudicator originally decided that the contractor was entitled to just over £972,000 plus VAT but, after both parties had made submissions about corrections under the slip rule, he issued a revised decision, awarding the contractor an increased sum of £1.038 million plus VAT.

Slip rule

As we all know, an adjudicator can correct a clerical or typographical error arising by accident or omission in the decision under the slip rule, either on his own initiative or at the request of one of the parties. The adjudicator has five days to do so (section 108(3A) of the Construction Act 1996 and paragraph 22A(1) of the Scheme for Construction Contracts 1998).

In Dawnus v Marsh Life, both parties invited the adjudicator to correct errors under the slip rule:

  • The contractor said there was a mathematical error, which would have the effect of increasing the net sum due to it.
  • The employer raised a number of issues, including alleged breaches of the rules of natural justice in that the adjudicator was said to have failed to take into account its defence to the loss and expense claims. This meant the adjudicator had included sums in the decision when certain items should have been “nil monies”.

The employer maintained its natural justice challenge in the enforcement proceedings that followed and the key question for the court was whether it was entitled to do so or whether it had approbated and reprobated.

Approbation and reprobation

Approbation and reprobation is sometimes referred to by the expression “blowing hot and cold”. I’m not sure exactly who coined that particular phrase, but we know that it is based on the doctrine of election. In the context of adjudication, it made its first appearance in Macob Civil Engineering v Morrison, where Dyson J (as he then was) said:

“What the defendant could not do was to assert that the decision was a decision for the purposes of being the subject of a reference to arbitration but was not a decision for the purposes of being binding and enforceable pending any revision by the arbitrator… once the defendant elected to treat the decision as one being capable of being referred to arbitration, he was bound also to treat it as a decision which was binding and enforceable unless revised by the arbitrator.”

It’s been considered in a number of judgments since, including in Shimizu Europe v Automajor, where HHJ Seymour QC said:

“… it cannot be right that it is open to a party to an adjudication simultaneously to approbate and to reprobate a decision of the adjudicator… either the whole of the relevant decision must be accepted or the whole of it must be contested…

… In my judgment by inviting Mr Haller to correct the award under the slip rule Berwins on behalf of Automajor accepted that the award was valid.”

We also know that if a party wants to ask the adjudicator to correct his decision under the slip rule, it is open to that party to make a reservation of its rights to challenge the adjudicator’s decision at a later date, whether on jurisdiction or natural justice grounds. Ramsey J confirmed this in Laker Vent Engineering v Jacobs, even if he did so “with some hesitation” because the reservation in question was in general terms.

What happened in Dawnus v Marsh Life?

This case is clearly a salutary lesson in the importance of a party reserving its rights when raising slips with the adjudicator.

However, I do have some sympathy with the employer because:

  • It seems that the alleged breach of natural justice turned on whether the adjudicator would correct his decision. Arguably it was only when the adjudicator rejected the employer’s slip arguments that the alleged breach was confirmed.
  • The adjudicator found that the employer owed the contractor over £1 million, which included heads of loss and expense, such as lost overheads and profit. Was the employer really approbating that decision?

In terms of the judge’s consideration of the natural justice breaches, it is evident that while the adjudicator appears to have misunderstood the employer’s defences to the loss and expense claims, the judge considered that he had nevertheless dealt with the claims and rejected the employer’s arguments. The judge did not actually say that this did not constitute a breach of the rules of natural justice (material or otherwise), but I think that it must be taken from the judgment that that was his conclusion.

It must be frustrating for any party when an adjudicator misunderstands their arguments, particularly where it can have serious financial consequences. However, looking at the bigger picture, it must be right that mistakes of fact or law cannot be challenged in enforcement proceedings unless they constitute a material breach of the rules of natural justice or an excess of jurisdiction. Otherwise parties dissatisfied with the outcome of their adjudication would simply challenge an adjudicator’s decision every time, and adjudication as a method of dispute resolution would quickly grind to a halt. The exception to this is obviously where the challenge meets the requirements of Part 8 but, as Coulson J made clear in Hutton Construction Ltd v Wilson Properties (London) Ltd, this will only be available in very limited circumstances.

MCMS Ltd Jonathan Cope

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