Adjudication Update

In Balfour Beatty Construction Ltd v The Mayor and Burgesses of the London Borough of Lambeth, BB sought to enforce an adjudicator's decision in relation to an extension of time and loss and expense claim. Lambeth opposed this alleging bias and breach of contract in that the adjudicator had been assisted by others. The Referral did not include a critical path analysis in the accepted sense nor a reliable as-built programme. As a result, the adjudicator asked for further details from both sides and then, with the help of colleagues, checked that information and produced his own critical path analysis.

Despite HHJ LLoyd QC observing that,

"It is now well established that the purpose of adjudication is not to be thwarted by an overly sensitive concern for procedural niceties ... Adjudication under the HGCRA is necessarily crude in its resolution of disputes. Errors of fact and law do not vitiate the decision which has to be complied with, unless of course it was not authorised and thus made without jurisdiction",

he noted that

"some basic procedural principles have to be applied in order that each party is treated fairly."

HHJ Lloyd QC concluded that here the adjudicator not only took the initiative in ascertaining the facts but also applied his own knowledge and experience to an appreciation of them. Therefore the adjudicator did BB's work for them. Thus the adjudicator exceeded his jurisdiction by himself making good fundamental deficiencies in BB's claim, i.e. the lack of a critical path and the method of analysis adopted for demonstrating the criticality or otherwise of the Relevant Events. Further he had (re)constructed one party's case without giving the other party the chance to consider it. This was deemed a potentially serious breach of the requirement of impartiality such that the decision was not a decision, which the adjudicator was authorised to make. HHJ LLoyd QC also found that the adjudicator had informed the parties that he intended to use assistants to carry out some of his tasks, so this alternative case, unlike the main argument did not, on the facts, succeed.

A slightly different approach to HHJ LLoyd QC was taken by Lord Marnoch in Karl Construction (Scotland) Ltd v Sweeney Civil Engineering (Scotland) Ltd, when he had to consider the claim raised by Karl that there was a breach of natural justice on the basis that the adjudicator should have invited representation from the parties before departing from the parties' agreed position. Lord Marnoch commented that the process of adjudication was "far removed" from the traditional adversarial process, time was too short, and the adjudicator can take legal advice if he or she so wished. He therefore refused to allow this argument to avoid the implementation of the decision.

In Impresa Castelli SpA v Cola Holdings Ltd, HHJ Thornton QC had to consider various issues concerning the interpretation of a contract, which incorporated the 1981 JCT Standard form with Contractor's Design. These included whether the court had jurisdiction to consider a number of the claims in relation to defects. The contract had a complex dispute resolution procedure. This provided that certain disputes, (including whether the works were carried out in accordance with the contract), arising prior to Practical Completion, could not be referred to arbitration but adjudication. Following that adjudication, the result could be arbitrated but only once Practical Completion had been achieved. An "adjudication matter" could not be arbitrated upon unless there had been an adjudication first. Equally no adjudication could arise once practical completion had occurred.

Impresa said that the Cola's counterclaim, based on breaches of contract that lead to defective work, was covered by the adjudication provisions of the contract. As they had not been adjudicated, they could not be arbitrated (or litigated since it appears that the right to arbitrate had been waived). HHJ Thornton QC rejected this argument. First, the disputes about the existence and effect of the alleged defects came to light after termination of the Works. The dispute was about damages recoverable as a result of that termination. Second, the dispute related to whether works had been executed in accordance with the contract conditions and not whether the works were being executed in accordance with the contract conditions. The adjudication provisions in the contract related to works that were ongoing and not the state of works once that work had been completed or terminated.

Other Cases of Interest

The long running litigation arising out of the building of the Brompton Hospital has finally (and perhaps inevitably) reached the House of Lords. To recap, The Royal Brompton National Health Trust employed Taylor Woodrow as main contractor. Watkins Grey International was the project architect. TWL commenced arbitration proceedings and a settlement was agreed which included a payment to TWL and an agreement to indemnify TWL against any claim for contribution made against it by, amongst others, WGI. The Employer commenced proceedings in court against WGI, claiming that WGI were negligent in failing to give them adequate advice about the possible consequences in terms for claims for extensions of time and loss and expense and that WGI was negligent in the granting to TWL of extensions of time amounting to 43 weeks and two days.

WGI issued Part 20 proceedings to recover a contribution from TWL under s1(1) of the Civil Liability (Contribution) Act 1978. Amongst other things, WGI said that if they were negligent in granting extensions of time to TWL, accordingly TWL was not entitled to loss and expense and was liable for the deduction of liquidated damages, then as a consequence TWL is and/or was liable to the Employer in respect of the same damages.

TWL applied to strike out the Part 20 claim. The matter came before HHJ Hicks QC, who held that TWL was not liable in respect of the same damage as WGI. WGI appealed to the CA where the argument concentrated on WGI's claim for a contribution in respect of issues concerning extensions of time. The CA held that TWL's breach consisted of the failure to deliver the building on time, whereas the damage caused by WGI which occurred at the time of the certification of the extension, was the impairment of the ability of the Employer to obtain financial recompense in full from TWL. Accordingly, it was not a claim in respect of the same damage. WGI appealed to the HL who agreed with the CA saying the damage caused by TWL's failings under its contract (and any secondary handicap in the settlement arbitration negotiations) caused by negligent advice in respect of the contractor's claims and entitlements were not the "same damage" for the purposes of the Contribution Act.

The harm done by TWL's breach of contract was the product of delay in the completion of the contract. The harm done by the WGI's breach of contract was due to the certificates which WGI granted to the prejudice of the rights of the Employer under the contract. Thus the harm, or the damage, which was done in each case was different.

In John Doyle Construction Ltd v Laing Management (Scotland) Ltd, Lord MacFayden considered a claim for loss and expense brought by Doyle. Laing said that the Doyle claim was global and sought an order that it be struck out. It was agreed in principle that Doyle was entitled to advance a global claim for loss and expense. This was because of the assertion made by Doyle that despite their best efforts it was not possible to identify causal links between each cause of delay and disruption and the cost consequences of these. Notwithstanding this, the Judge, who commented that pleading a global claim was a "risky business", was nearly persuaded by the arguments put forward by Laing.

Laing asserted that John Doyle's claim depended on two key items, first that they were not responsible (to any material extent) for any increased cost in respect of which the global claim was advanced and second that Laing were responsible for all of the factors which contributed to the increased costs. Laing argued that if one of the events relied upon by Doyle was their responsibility (or perhaps not the responsibility of Laing) then the whole global claim would be undermined. Thus since one of the events pleaded by Doyle was a factor for which Laing was obviously not responsible, the global claim must fail.

Lord MacFadyen agreed that the logic of a global claim required that all the events which contribute to causing the global loss must be events for which Laing were liable. However it would have been wrong to exclude at a preliminary stage the possibility that there may be in the evidence a sufficient basis to find causal connections between individual losses and events, or to make a rational apportionment of part in relation to the causative events for which Laing was found to be responsible.

Secondly, the Judge said there was a second factor mitigating the rigour of the logic of global claims, namely that causation must be treated as "a common sense matter". Thus it would have been wrong to exclude the possibility that the evidence properly led at trial would afford a satisfactory basis for an award of some lesser sum than the full global claim.

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