22-03-2010
When will the Court “pierce the adjudicator’s veil?”
It is a well established principle that an adjudicator’s decision will be enforced by the Courts provided that the adjudicator has answered the correct question, even if that decision contained obvious errors or was wrong in fact and/or law. There are inevitably exceptions to the rule which could, to misquote a popular corporate phrase, pierce the adjudicator’s veil.
The case of Geoffrey Osborne Limited (“Osborne”) v Atkins Rail Limited (“Atkins”) clarifies when the Court will look behind an adjudicator’s decision to finally determine items in dispute rather than simply enforce it.
The facts
Atkins was the main contractor for certain safety rail upgrade work in the Basingstoke area. Osborne was employed as its subcontractor.
Predictably, Osborne issued a notice to adjudicate when it was not issued with an interim certificate for a large part of its subcontract works. The company asked the adjudicator to value the ground investigation and signalling works and to determine the payment to which Osborne was entitled as a result.
The adjudication decision
The adjudicator decided that Osborne was owed a sum of £504,000 in respect of these two items but had overlooked the fact that Atkins had included a sum of £912,000 for the same items in a previous interim certificate. This error resulted in Osborne being overpaid by £400,000.
Atkins invited the adjudicator to correct his decision but he refused to do so. Upon enforcement of the decision by Osborne, Atkins sought declarations from the Court that the adjudicator had “no jurisdiction to make the decision that he did and/or that the decision was plainly wrong and should be set aside and/or not enforced”.
The TCC application to overturn or set aside the decision
The starting point here was the case of Jarvis Facilities Limited v Alstom Signalling Limited. There are times when it is more appropriate for the Court to finally determine matters rather than enforce the adjudication decision and then for the parties to re-visit the dispute. This is often the case in serial adjudications or proceedings between the same parties.
The Construction Act does not however give a timeframe by when the Court should choose one action over the other.
Such an approach is often argued to be contrary to the case of Bouygues (UK) Limited v Dahl-Jensen in which the Court of Appeal agreed with the TCC that an adjudicator’s decision should be enforced despite containing a patent error.
Bouygues was distinguished here though. In that case, the challenge was based on the adjudicator lacking the necessary jurisdiction in awarding retention to a subcontractor as part of his decision. Crucially, this was not a dispute put before him. In contrast, Atkins’ challenge was not one of jurisdiction but that the decision itself was simply wrong.
In coming to his decision, the judge asked himself the following questions:
1) In the light of his assessments as to the value of the two claims, was the adjudicator entitled to order such sums either by law or by means of the scope of dispute referred to him?
The answer was that he was not – the adjudicator had ordered the difference between the sum claimed and the gross valuation of the works without taking into account the value of sums already certified and paid. This was clearly required in the subcontract.
2) Did the adjudicator's decision amount to a decision that he was not asked to make (i.e. outside his jurisdiction) or was it merely a wrong answer to a question that he was asked to decide (i.e. not outside jurisdiction)?
Having considered a finely balanced argument, the judge found that the adjudicator did make his decision within jurisdiction. He could not interpret the wording of the Notice to Adjudicate as not giving the adjudicator the power to award such sums as he saw fit.
3) If the first question was decided in Atkins’ favour, was it entitled to declaratory relief on its Part 8 application?
The outcome was somewhat of a hybrid judgment:
- Atkins was entitled to a declaration to the effect that the adjudicator was wrong to order payment without taking into account sums paid as at the date of the Notice to Adjudicate;
- Osborne’s application for summary judgment was granted insofar as it related to the adjudicator's award in respect of costs of £44,453.25 and the adjudicator’s fees; but
- On all other sums payable, the judge left those matters open to be dealt with at trial. He did however add that he would have decided them had he been given all relevant material to do so.
In summary, this case is important in clarifying when a Court will determine disputes rather than take the normal course of enforcing decisions; namely when:
- there is no substantial dispute as to fact. In this case, both parties admitted that the adjudicator had made an error;
- the challenge relates to the validity of the decision itself and not the adjudicator’s jurisdiction; and
- the Court has all necessary information infront of it to finally decide the items in dispute.
Practical tips
• For the enforcing party, the position remains the same as before. Unless you and your advisers can identify merit in any resisting defence based on an alleged excess of adjudicator jurisdiction, breach of natural justice or alleged financial impercuniosity which may amount to grounds for setting aside the award, then apply for summary judgment using the TCC abridged process and seek enforcement of the award.
• If you are the defending party, take the initiative and issue a Part 8 application for declarations that the enforcing party is not entitled to payment. Only do so if the substance of the adjudicator’s decision is plainly wrong and neither party disputes this fact. Make sure that the basis of arguing that the decision is plainly wrong can be proved in the material in front of the Court. Provide the Court with a full copy of the material originally given to the adjudicator.
• Both parties should bear in mind that the Court may be prepared to finally determine isolated areas of the dispute provided it is just and expedient to do so.
The case of Geoffrey Osborne Limited (“Osborne”) v Atkins Rail Limited (“Atkins”) clarifies when the Court will look behind an adjudicator’s decision to finally determine items in dispute rather than simply enforce it.
The facts
Atkins was the main contractor for certain safety rail upgrade work in the Basingstoke area. Osborne was employed as its subcontractor.
Predictably, Osborne issued a notice to adjudicate when it was not issued with an interim certificate for a large part of its subcontract works. The company asked the adjudicator to value the ground investigation and signalling works and to determine the payment to which Osborne was entitled as a result.
The adjudication decision
The adjudicator decided that Osborne was owed a sum of £504,000 in respect of these two items but had overlooked the fact that Atkins had included a sum of £912,000 for the same items in a previous interim certificate. This error resulted in Osborne being overpaid by £400,000.
Atkins invited the adjudicator to correct his decision but he refused to do so. Upon enforcement of the decision by Osborne, Atkins sought declarations from the Court that the adjudicator had “no jurisdiction to make the decision that he did and/or that the decision was plainly wrong and should be set aside and/or not enforced”.
The TCC application to overturn or set aside the decision
The starting point here was the case of Jarvis Facilities Limited v Alstom Signalling Limited. There are times when it is more appropriate for the Court to finally determine matters rather than enforce the adjudication decision and then for the parties to re-visit the dispute. This is often the case in serial adjudications or proceedings between the same parties.
The Construction Act does not however give a timeframe by when the Court should choose one action over the other.
Such an approach is often argued to be contrary to the case of Bouygues (UK) Limited v Dahl-Jensen in which the Court of Appeal agreed with the TCC that an adjudicator’s decision should be enforced despite containing a patent error.
Bouygues was distinguished here though. In that case, the challenge was based on the adjudicator lacking the necessary jurisdiction in awarding retention to a subcontractor as part of his decision. Crucially, this was not a dispute put before him. In contrast, Atkins’ challenge was not one of jurisdiction but that the decision itself was simply wrong.
In coming to his decision, the judge asked himself the following questions:
1) In the light of his assessments as to the value of the two claims, was the adjudicator entitled to order such sums either by law or by means of the scope of dispute referred to him?
The answer was that he was not – the adjudicator had ordered the difference between the sum claimed and the gross valuation of the works without taking into account the value of sums already certified and paid. This was clearly required in the subcontract.
2) Did the adjudicator's decision amount to a decision that he was not asked to make (i.e. outside his jurisdiction) or was it merely a wrong answer to a question that he was asked to decide (i.e. not outside jurisdiction)?
Having considered a finely balanced argument, the judge found that the adjudicator did make his decision within jurisdiction. He could not interpret the wording of the Notice to Adjudicate as not giving the adjudicator the power to award such sums as he saw fit.
3) If the first question was decided in Atkins’ favour, was it entitled to declaratory relief on its Part 8 application?
The outcome was somewhat of a hybrid judgment:
- Atkins was entitled to a declaration to the effect that the adjudicator was wrong to order payment without taking into account sums paid as at the date of the Notice to Adjudicate;
- Osborne’s application for summary judgment was granted insofar as it related to the adjudicator's award in respect of costs of £44,453.25 and the adjudicator’s fees; but
- On all other sums payable, the judge left those matters open to be dealt with at trial. He did however add that he would have decided them had he been given all relevant material to do so.
In summary, this case is important in clarifying when a Court will determine disputes rather than take the normal course of enforcing decisions; namely when:
- there is no substantial dispute as to fact. In this case, both parties admitted that the adjudicator had made an error;
- the challenge relates to the validity of the decision itself and not the adjudicator’s jurisdiction; and
- the Court has all necessary information infront of it to finally decide the items in dispute.
Practical tips
• For the enforcing party, the position remains the same as before. Unless you and your advisers can identify merit in any resisting defence based on an alleged excess of adjudicator jurisdiction, breach of natural justice or alleged financial impercuniosity which may amount to grounds for setting aside the award, then apply for summary judgment using the TCC abridged process and seek enforcement of the award.
• If you are the defending party, take the initiative and issue a Part 8 application for declarations that the enforcing party is not entitled to payment. Only do so if the substance of the adjudicator’s decision is plainly wrong and neither party disputes this fact. Make sure that the basis of arguing that the decision is plainly wrong can be proved in the material in front of the Court. Provide the Court with a full copy of the material originally given to the adjudicator.
• Both parties should bear in mind that the Court may be prepared to finally determine isolated areas of the dispute provided it is just and expedient to do so.
