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Posted September 11, 2019 | Published in General

The Court takes a knife to the adjudicator’s decision in Corebuild v Cleaver and chops down the decision in Willow v MTD

As frequent readers may be aware, the Courts are keen to enforce adjudicators’ decisions, even if they contain errors.  As Chadwick LJ put it back in 2006 in Carillion Construction Ltd v Devonport Royal Dockyard: “the need to have the right answer has been subordinated to the need to have the answer quickly”.  However, there are circumstances where the Courts will refuse to enforce all or part of an adjudicator’s decision.  This blog considers two recent cases where the Court looked at adjudicators’ decisions. 

Corebuild Ltd v Cleaver and Another

In Corebuild, the Court held that the adjudicator had gone off on a “frolic of his own” rendering the decision unenforceable because he had breached the rules of natural justice.  Corebuild demonstrates that while the Court will enforce an adjudicator’s decision if he or she gets the answer to the question wrong, it will refuse to enforce if he or she answers the wrong question entirely. 

The Employers, Mr Cleaver and Ms Omolska, engaged Corebuild Limited to carry out works to a residential property.  The Employers, via the Contract Administrator, had served the Contractor with notice that they would terminate the contract in 14 days if it continued to fail to progress the works.  When in the Contract Administrator’s view the situation did not improve, he served a further notice purporting to terminate the contract.

The Contractor argued that the Employers’ termination was wrongful and amounted to a repudiatory breach. The Employers argued that as they had relied upon the expertise of the Contract Administrator, the termination was not repudiatory, even if it was wrongful.  The Contractor did not dispute the Employers’ reliance on the Contract Administrator but argued that this was not relevant to the question of repudiation.

" Crucially, the allegations of fraud could not have been made during the adjudication itself as the fraud was only discovered afterwards following disclosure in the Main Action. "

The adjudicator determined the question on a completely different basis.  He decided there had been no reliance by the Employers on the Contract Administrator; he expected the Employers had sanctioned the termination. However, the question of the Employers’ reliance on the Contract Administrator had not been in dispute. Neither party had made submissions on this point.  The adjudicator decided the outcome of the adjudication against the Employers on a basis not argued for by the Contractor.  

The Court held that this was a clear breach of natural justice, falling within the principles in Cantillon v Urvasco.  The breach was material, it related to a decisive issue and, in fact, it was one of the examples of a clear breach given by Akenhead in Cantillon: the adjudicator decided the case on a basis not argued.

Willow v MTD

In Willow, the Court found that the adjudicator made an error in relation to part of his decision but was able to sever the part that contained the error and enforce the remainder of the decision.  In doing so, the Court applied the principles in Hutton v Wilson: if an adjudicator incorrectly decides a short self-contained issue that the losing party continues to contest, if it can be resolved in a short hearing with no oral evidence and if it would be unconscionable to ignore, then the CPR Part 8 procedure can be used to challenge the decision.

In 2015, Willow engaged MTD to design and build a hotel in Shoreditch.  The Project was delayed and the parties agreed in June 2017 to formalise various matters including a revised date for practical completion of 28 July 2017 (the “June Agreement”).  However, the works were not completed until 13 October 2017 and there were various disputes concerning payment and delay. 

MTD commenced an adjudication seeking sums claimed in its final application for payment.  Willow had served a pay less notice alleging defects and an entitlement to liquidated damages (“LDs”) due to MTD’s delay.  The adjudicator was required to construe the provisions in the June Agreement concerning Practical Completion.

MTD argued that the June Agreement required Practical Completion to be certified on 28 July 2017 provided that a list of outstanding works could be agreed.  Willow argued that on a true construction of the June Agreement, it was not required to certify practical completion simply upon the agreement of a list of outstanding works; rather MTD was required to achieve practical completion by 28 July 2017.

The adjudicator preferred MTD’s argument regarding the construction of the June Agreement and, since there was an agreed list of outstanding works, found that practical completion should have been certified on 28 July 2017, rejected Willow’s claim for LDs and ordered it to pay MTD £1.2m.

Willow issued Part 8 proceedings seeking a declaration of the true meaning of the June Agreement. Willow argued that its interpretation must be correct, otherwise MTD would have no incentive to finish the works before 28 July 2017.  The Court agreed that the adjudicator had answered this question incorrectly and decided that it could sever the good parts of the adjudicator’s decision from the bad and safely enforce the remaining part of the decision because the error did not taint the rest of it.  This resulted in the success of Willow’s claim for LDs. 

Comment

At first glance, the Court’s chopping down of the decision in Willow appears odd.  While the adjudicator did make an error, he only answered the right question wrongly, rather than the wrong question altogether.  He certainly didn’t go off on a frolic of his own as the adjudicator did in Corebuild v Cleaver, which the Court rightly took a knife to.  Notwithstanding this, the Court refused to enforce all of the decision in Willow.

While the approach in Carillion will apply in “99 cases out of 100” (Coulson J in Caledonian Modular Ltd v Mar City Developments Ltd 2015), the Court in Willow considered that this was one of those 1 in 100 cases where the Hutton principles applied and so the Court was able to chop down the bad part of the decision and enforce the rest of it.  

Whether it should have done so in the light of Hutton, however, is open to question.  In Hutton, Coulson J gave some examples of the situations where he considered the Part 8 procedure could be used. One of these was if an adjudicator’s construction of a contract clause is “beyond any rational justification”.  This test does not appear to have been applied in Willow (if it had been, it may well have produced a different outcome because it is a very high threshold to meet). This perhaps indicates an erosion of the principles set out by Coulson in Hutton, which may open the door for more Part 8 challenges to adjudication enforcements.

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