The claimant Liverpool City Council {LCC) were adjudged liable at adjudication to pay the defendant (Vital) £128,500 for work under a maintenance contract for temporary fencing for highways.

The parties entered into a framework agreement under which each work project would be the subject of a separate call-off contract based on NEC3 as amended and supplemented by the provisions of schedule 9 of the framework agreement.

A number of issues arose which it was argued by LCC meant the adjudicator had no jurisdiction. The dispute resolution provisions of the framework agreement and call off contract were key to issues (7) and (2) as set out below.

The issues

(1) Whether there was more than one contract (the Two Contracts Issue)

(2) Whether the notice of adjudication had been properly served in accordance with the framework agreement (the Notice Issue)

(3) Had the adjudicator answered the wrong question (the Nullity Issue)

During the hearing the court suggested that the Nullity Issue might more properly be a natural justice issue. That then became:

(4) Whether the adjudicator had decided the case on a basis not advanced by Vital, the referring party in the adjudication (the Natural Justice Issue).

.(1) the Two Contracts Issue and (2) the Notice Issue The dispute resolution provisions of the framework agreement and call off contract were key to issues (1) and (2) which were dealt with together.

The notice of adjudication was sent to the Head of Procurement as specified in cl. 53 of the framework agreement. The ANB in the framework was RIBAyet Vital said it intended to ask ICE to appoint (it being the ANB under NEC3).

The inconsistency is apparent. The notice went on to say that the dispute had arisen under both the framework agreement and the call-off contract and identified the dispute resolution procedure as that under both the framework agreement and the calloff contract.

The ultimate relief claimed was the payment of money under the call-off contract but the staging posts to that included declarations as to matters under both contracts.

In the adjudication and in court LCC claimed the dispute arose under both the framework agreement and the call-off contract and that as the adjudicator could not decide more than one dispute at the same time, he was deprived of jurisdiction. The court did not agree for three reasons.

First the dispute resolution provisions agreed expressly contemplated that a dispute might raise questions under both contracts and under such circumstances could be referred under the call-off contract.

Second, the various declarations were staging posts on the way to the real issue which was whether Vital was entitled to £129,000 under the call-off contract.

Third, the terms of the framework were incorporated into the call-off contract. Linked with this was LCC’s submitted that the notice of adjudication had not been correctly served.

The court was glad to find that on a proper construction of all the provisions of both contracts the notice of adjudication was to be given and sent in accordance with the provisions of the framework agreement, noting that it was actually received by LCC and promptly acted upon.

.(3) The Nullity: Issue

LCC’s complaint was that the adjudicator had failed to answer the questions put in the notice of adjudication or had answered the wrong question. Specifically, he failed to engage with the individual declarations sought and instead assessed the value of work by reference to rates in the Bills of Quantities {BQ) under the call off contract.

On examination this narrow point was misconceived. The several issues comprised one dispute as to what sum LCC was obliged to pay. The basis of the decision was clearly set out. He decided there was a compensation event notice by reference to which the parties had agreed
there was an error in the schedule of rates {SoR) in the framework agreement.

The error was that a rate of “£2 per metre” should have been and meant “£2 per metre per day”. As a result there were then three different SoR rates by which the works might be valued. He opted for £2 per metre per day because he found that had been agreed.

Even if that finding was an error by the adjudicator it was within his jurisdiction and the court would not interfere.

.{~) The Natural Justice Issue
LCC now accepted that if the award was to be challenged it could only be on the grounds of a breach of the rules of natural justice. It therefore now contended that not only was it not true that LCC had agreed that there was a typographical error in the SoR that should be amended to read “£2 per metre per day”, the point had never been raised or put to it and it had been deprived of the chance to raise the answer that if this was an error, it could not be simply corrected by reference to the rate in the BQ call-off contract; even if it could be corrected, it could only corrected by applying the NEC defined cost approach as provided for in the NEC3 contract.

There was nothing in LCC’s response in the adjudication or in the compensation event notice that amounted to an admission that there was an error in the SoR

The difficulty the adjudicator faced was that Vital did not advance its case in the notice of adjudication or referral on the basis that there was a conflict between the SoR in the framework agreement and the BQ under the call-off contract, with the latter taking precedence.

The adjudicator drew this to the parties’ attention and set out three possible ways forward in an email of 20 May including ‘start again’. In the event neither party agreed to any of the options. Unhelpfully Vital rejected the analysis and insisted the adjudicator proceed in accordance with the case advanced in the adjudication.

The court clearly had some sympathy with the adjudicator who sought to overcome the difficulty difficulty in which he was placed by determining that LCC had implicitly if not explicitly conceded that the rate in the SoR was a mistake. However that was not Vital’s case and he did not give LCC fair notice of what he was considering and an opportunity to address it. Nor did he engage with LCC’s case in the response as to the order of precedence clause which prevented a mistake being corrected as alleged by Vital. These were described as “fundamental departures from the obligation to follow a fair procedure” nor had the adjudicator adopted any of the three options he put forward in his email of 20 May. LCC was deprived of the opportunity of arguing these points and was entitled to a declaration that the decision was unenforceable as matter of law. Although he made representations to the court with permission, the adjudicator was not a party to the proceedings and not bound by the decision. The administrators of Vital declined to take part.

Comment

It is fair to mention that the court accepted and stated that the adjudicator has acted from the best of motives in trying to determine the parties’ dispute.

That said it is a fundamental requirement that adjudicators give parties notice and an opportunity to address them if they intend to consider taking a course that has not been argued or canvassed, or is based on their own analysis of the provisions of the contract or issues before them.

This article was originally written and published on the internet by Ken Salmon of Slater Heelis.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.

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