Carillion Construction Ltd v Devonport Royal Dockyard

United Kingdom

The Court of Appeal has reaffirmed the approach of the courts to adjudicator’s decisions, namely that they are to be treated as enforceable, and will only be interfered with in rare situations. This is so even if the adjudicator has made obvious or highly arguable errors of fact or law.

The facts of this case were quite detailed, but in headline terms they concerned a dispute over a subcontractor’s entitlement to payment for performing works in upgrading a dock.

  • The terms of payment under the subcontract, and a related “alliance agreement” between the parties, used a “target cost” mechanism, so that the pain or gain of cost overruns or savings would be shared between them.
  • The project works were delayed, and there were disagreements between the main contractor and the subcontractor as to contractual responsibility for this delay.
  • This, in turn, spilled over so as to give rise to a dispute as to how the “target cost” mechanism was to be applied, in determining the final account value of the subcontractor’s works. The subcontractor referred this dispute to adjudication. The amount claimed by the subcontractor was more than £10m.

The subcontractor was successful in the adjudication, and was awarded around £10.6m by the adjudicator. The subcontractor sought summary judgment to enforce the adjudicator’s decision, but this application was opposed by the main contractor, who contended that the adjudicator’s decision should be set aside on the basis that it was made in excess of jurisdiction, in breach of the rules of natural justice, and that it was not otherwise compliant with the Housing Grants, Construction and Regeneration Act nor the Scheme for Construction Contracts. It was contended that the adjudicator had disregarded evidence that he ought to have taken into account, that he made errors in calculating the amount owing to the subcontractor, and that he had reached his decision on a basis for which neither party had contended, where he had not given the parties an opportunity of making submissions on the relevant point.

It was held by the trial judge (Jackson J) and then the Court of Appeal that the adjudicator’s decision was to be enforced. The criticisms made against the adjudicator’s decision by the main contractor were mainly characterised as being attacks on findings of fact or law made by the adjudicator, which as the Court of Appeal emphasised are not open to challenge on enforcement proceedings. The adjudicator had considered the arguments made by the parties, the evidence presented, and he had decided the dispute which was referred to him. As the Court of Appeal held:

“The objective which underlies the Act and the statutory scheme requires the courts to respect and enforce the adjudicator’s decision unless it is plain that the question which he had decided was not the question referred to him or the manner in which he has gone about his task is obviously unfair. It should only be in rare circumstances that the courts will interfere with the decision of an adjudicator. The courts should give no encouragement to the approach adopted by [the main contractor] in the present case; which…may, indeed, aptly be described as ‘simply scrabbling around to find some argument, however tenuous, to resist payment’”.

For full judgment please click here

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