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Court of Session finds adjudicator didn’t go off on a frolic

Spring may be a time for lambs to frolic in the fields but, it seems, it isn’t a time for adjudicators to frolic, at least not on this occasion. If you are wondering what an earth I’m talking about, take a look at Lord Malcolm’s judgment in Miller Construction (UK) Ltd v Building Design Partnership Ltd.

This is the second time in a few weeks that we’ve blogged about a Scottish case (you may recall that Matt recently blogged about Lord Woolman’s judgment in T Clarke v MMAXX Underfloor Heating). On both occasions the court has supported the adjudication process. That’s quite encouraging since I must confess to getting a wee bit disheartened about blogging on Scottish cases where the court didn’t support adjudication (for example, see my posts dated 23 April 2013 and 19 April 2011).

Anyway, I digress and so back to Miller v BDP.

Miller v BDP

This case was all about air conditioning. Miller Construction was appointed as the design and build contractor for a new facility at Motherwell College. BDP was the lead consultant and architect, and its services included acoustic and building services engineering (which included the ventilation system). (Although the judgment doesn’t say so, it’s appointment must have been novated to the contractor.)

Following completion, complaints were made about stuffy classrooms. I wonder if that means too many students were falling asleep during lectures?

After investigation, it was discovered that the College’s new ventilation system did not comply with the contract’s fresh air flow rate, mainly because there had been a change from Passivent units to Renson units. A new system was subsequently installed at a cost of £448,089 plus VAT.

The contractor went after the consultant to recover this money. It started an adjudication claiming that, as the consultant was responsible for design, it had failed to exercise the standard of skill and care expected of an ordinarily competent mechanical and electrical engineer or lead consultant. The consultant denied this.

However, the adjudicator decided that each party was liable for 50% of the replacement cost as neither party could place all the blame on the other. He awarded the contractor just over £224,000 because he found that:

  • Both parties were involved in managing the installation of the original ventilation system, but the consultant had not been involved in the selection of the Renson units.
  • While the consultant had not failed to exercise the standard of skill and care expected from a reasonably competent lead consultant, it did have a contractual responsibility for the effectiveness of the system as a whole.

When it came to the (inevitable) enforcement proceedings, the consultant argued that the adjudicator’s decision should not be enforced because:

  • His reasoning was muddled and confused.
  • He had gone off on a frolic of his own, which was a breach of the rules of natural justice. It was alleged that the adjudicator had decided the dispute on a basis that had not been put to the parties, namely that while he rejected the claim that the consultant had been professionally negligent, he then found against the consultant “on some notion of responsibility regarding the installation of the ventilation system”.

Court of Session decides

Lord Malcolm disposed pretty swiftly with the argument that the decision was muddled and confused, finding that the reasoning was “clear, coherent and readily understandable”.

The real thorny issue was whether the adjudicator had gone off on a frolic because he had held against the consultant on the basis of which party bore “responsibility”, and not on the contractor’s case, which was limited to an allegation of professional negligence. The consultant said it should have been given the opportunity to comment on the adjudicator’s approach, hence there was a substantial breach of the rules of natural justice.

I have some sympathy with the consultant, as did Lord Malcolm, given that the adjudicator found that it was the contractor who had changed the type of air conditioning units in order to save cost and that the consultant was not professionally negligent. However, Lord Malcolm made the point that he was not considering the merits of the adjudicator’s decision, merely whether the adjudicator was entitled to reach the decision he did.

Lord Malcolm was firmly of the view that the adjudicator was entitled to make the decision he did. The consultant took:

  • “…too narrow a view” of the issues in the adjudication and the scope of the adjudicator’s decision-making powers.
  •  “…an overly strict view of the adjudicator’s use of the phrase ‘installation of the system'”.

I thought that Lord Malcolm’s comments in paragraph 17 of the judgment are interesting, namely that:

“It is well established… that an adjudicator is given considerable leeway… an adjudicator is not required to adopt one or other of the parties’ submissions. He can take an intermediate position without giving notice of his intention to do so.”

I think that works when an adjudicator is deciding whether, for example, a variation is worth £30,000 or £40,000 and finds that it is actually worth, say £33,000. However, I am not sure that principle is so relevant when dealing with questions of professional negligence, as in this case. Here the consultant was found not to be professionally negligent but, in the words of Lord Malcolm, it “could not simply wash [its] hands of the subsequent failure to meet the contractual requirement as to air flow”. So, while it didn’t choose the type of air conditioning unit that was installed, it still “retained a degree of accountability for the performance of the ventilation system as a whole”. That seems to me like an uncomfortable half-way house.

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