GEOFFREY OSBORNE LTD V ATKINS RAIL LTD
Technology and Construction Court
Edwards-Stuart J
8 October 2009
THE FULL TEXT OF THE JUDGMENT OF EDWARDS-STUART J
1. There are two applications before the court. By a claim form issued on 6 August 2009 Geoffrey Osborne Limited (GOL) seeks to enforce an adjudication decision of a Mr Allen Dyer dated 15 July 2009, the net effect of which was to order Atkins Rail Limited (ARL) to pay GOL the sum of £504,385 (in this judgment all figures are in round pounds).
2. By a claim form issued on 11 August 2009 under Part 8 of the CPR ARL seeks declarations that Mr Dyer 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. Both applications are therefore essentially concerned with the same issue, namely whether the adjudicator's decision should be enforced. GOL, represented by Mr Christopher Lewis, contends that ARL has no realistic prospect of successfully resisting GOL's claim for enforcement so that GOL is entitled to summary judgment on its claim.
3. ARL, by contrast, represented by Mr Roger ter Haar QC and Mr Andrew Phillips, submits that the award is only binding unless and until overruled or set aside by the court, and that the court can and should decide on this application that it was wrong and set it aside. Alternatively, ARL submits that the adjudicator did not address the questions that were before him and therefore exceeded his jurisdiction.
4. ARL was the main contractor, pursuant to a contract with Network Rail Infrastructure Limited (as employer) ("the Main Contract"), for the design and construction of signalling and related civil works as part of the Basingstoke Area Infrastructure Upgrade Project. The works were to be commissioned in 3 separate stages, known as Stage 1, Stage 2 and Stage 3. ARL engaged GOL (as sub-contractor) to construct certain civil engineering works associated with the Main Contract, pursuant to a sub-contract in writing executed on 10 October 2006 ("the Sub-Contract").
5. The problem arises because, as is now common ground, the adjudicator made a significant error. By the Notice of Adjudication he was asked to assess the value of two items of work, for which assessments had been included in ARL's Interim Certificate No 35 and which were the subject of further claims in GOL's subsequent Payment Application No 36, and having done so, to order payment of an appropriate amount to ARL (I am deliberately using neutral language so as not to appear to prejudge the issues in dispute). The two items were a ground investigation carried out by GOL and variations in connection with the construction of signal control centre located to the rear of Basingstoke Station ("the SCC").
6. Unfortunately, having carefully assessed the value of the two items of work (and associated loss and expense) the adjudicator omitted to deduct the amounts already included in respect of those items in Certificate No 35, with the result that he concluded that GOL was owed £504,385 and ordered ARL to pay that sum. In fact, it was common ground between the parties that since there had been included in the total sum certified in Certificate No 35 some £912,147 in respect of the two claims in issue (namely £550,000 in respect of ground investigation and £362,147 for the variations in connection with the construction of the SCC), GOL was not owed the sum that the adjudicator ordered to be paid.
7. The position is complicated by the fact that Certificate No 35 showed a negative balance, namely that GOL's work had been overvalued so that instead of further sums being owed to GOL under the certificate, in fact GOL was said to owe ARL some £552,891. The upshot is that the correct result - on the adjudicator's own findings as to the value of the two claims and the other unchallenged figures in Certificate No 35 - was that GOL had been overpaid by over £400,000, rather than being owed some £500,000 odd. The difference between the two positions is both startling and stark.
8. Following the issue of the Decision, the adjudicator was invited by ARL to correct the relevant part of it by which he had ordered ARL to make a payment to GOL. By his letter dated 20 July 2009, the adjudicator declined to do this. He appears to have thought that ARL had specifically submitted that he was not to insert his valuations into Certificate No 35, with the result that the amounts paid or allowed within that certificate were to be ignored.
9. As a result, and perhaps understandably, ARL has taken every possible point in its efforts to resist the enforcement of this award.
The procedure adopted
10. Since the adjudicator's Decision is binding upon the parties until the matters decided by him have been finally determined by a court, ARL issued proceedings under Part 8 of the CPR in order to obtain a final determination in the form of an appropriate declaration to the effect that the Decision, or at least the relevant part of it relating to the order for the payment of money to GOL, was wrong and should be set aside. In effect, it amounts to a pre-emptive strike to defeat GOL's application to enforce the Decision.
11. In Jarvis Facilities Limited v Alstom Signalling Limited [2004] EWHC 1285 (TCC), HH Judge Humphrey LLoyd QC was faced with a similar situation. Alstom pre-empted Jarvis's application to enforce an adjudicator's award in its favour by immediately issuing Part 8 proceedings seeking declarations that Jarvis was not entitled to payment of the sums awarded by the adjudicator. Perhaps unsurprisingly, Jarvis protested at this novel approach by Alstom, but the learned judge overruled its protests. Since his observations at paragraphs 19 and 20 of the judgment are directly relevant to the situation in the present case, it seems to me to be worth quoting them in full. He said:
"19. . . . Obviously it has been clear since applications for enforcement were first made to this court that the intention of Parliament was that adjudicators' decisions should be honoured, even if the reasoning that justified the decision was erroneous in law or fact. However that policy only applies to decisions which were valid, in that they were decisions which the adjudicator was authorised to make: for example, that the adjudicator had the power to do so (sometimes termed the jurisdiction to do so) and that the decision was not vitiated by some material failure to comply with basic concepts of fairness (sometimes termed compliance with the rules of natural justice, whether in respect of independence or impartiality or in respect of procedural fairness). Accordingly, to speak of a right of enforcement of an adjudicator's decision is misleading; the right is always qualified or contingent. Moreover section 108(3) of the Act says that the decision is "binding until the dispute is finally determined by legal proceedings….". Naturally the Act assumes that such a final determination is likely to follow the decision. That is consistent with the concept of adjudication whereby a dispute would be resolved during the course of a contract and only resurrected for final determination, if required, at a later stage. "Pay now; argue later", as some are wont to say. In my judgment there is nothing in the Act (or the Scheme, if applicable) which requires a party who wishes to challenge a decision of an adjudicator to comply with it before being able to advance its case, any more than a party is precluded from subsequently challenging a decision, having complied with it (as Mr Bowdery suggested, at least [at] one stage). Unless a party is estopped from questioning the decision or has waived its right to do so, both of which would require clear evidence (and mere compliance is not) that party is free at any time to obtain a final determination of the dispute which has been provisionally resolved.
20. There is equally no reason why a challenge to a subsequent decision may not encompass or lead to that final determination in respect of an earlier decision, as sought by action 85 [Alstom's Part 8 proceedings]. In reality such a party is rarely in a position to act as Alstom has done, unless, for example, there have been successive adjudications and it is ready before the latest. If, however, before an application to enforce an adjudicator's decision is heard, the point decided by it is finally determined adversely to the party who is relying on the decision then that application and the action will fail. That might be so if the point related to a standard form of contract and the point was determined in proceedings between other parties. Any other conclusion would be verging on the absurd: to allow the application to enforce the decision and then to set it aside (assuming the defendant had its tackle in order to do so). The decision is binding only in so far as the dispute has not been finally determined. The Act does not say when the final determination may take place. In my judgment the Act does not lead to any such technical absurdity, nor is it permissible under the Civil Procedure Rules as it is directly contrary to the overriding objective and other provisions of Part 1. Once the court is seized of the case it has to take a course which saves expense and is expeditious. To proceed first to deal with the application for summary judgment, to allow it and then to track back and to determine the dispute that gave rise to it is not consistent with the principles of Part 1 of the CPR and it is not in the interests of both parties, when they can be satisfied in an expeditious and less expensive way. Similarly it may be prudent to defer an application to enforce or to stay a judgment if the point in dispute is to be decided soon. Transferring money for a limited period of time may not be sensible. Mr Bowdery suggested that to consider the point in question would effectively destroy the efficacy of adjudication. I disagree. Most adjudications are about issues of fact. In ordinary course of events, they will not be capable of being finally determined, even in this court or in a swift arbitration, before the application for summary judgment is normally heard. It is possible that, particularly where the point is one of law or otherwise capable of being tried early, a party might move with determination and speed and get in first, as it were (as Alstom has done). I do not believe that the court's powers are so circumscribed by the Act that, in an appropriate case, it cannot order that the dispute should be determined prior to or at the same time the application for enforcement is determined. It has happened before in this court. The interests of the parties are surely best served by such a determination and not by uncertainty. Alstom has a right to a determination of the points that it has raised, just as Jarvis has a right to have its application heard and to know if the decision is enforceable. The two can be decided at the same time."
[Emphasis added]
12. These observations were endorsed by Coulson J in Walter Lilly & Co Ltd v DMW Developments Ltd [2008] EWHC 3139 (TCC), with the express qualification that it is for an applicant in a Part 8 application to demonstrate that the question to be decided falls within the relatively tight confines of that procedure.
13. However, in an earlier case decided by Dyson J (as he then was) and upheld by the Court of Appeal, Bouygues (UK) Ltd v Dahl-Jensen (UK) Ltd [1999] EWHC 182 (TCC), [2000] BLR 49 and [2000] EWCA Civ 507, [2000] BLR 522 (CA), a Part 8 challenge by the aggrieved party to an adjudication was effectively not entertained. The facts of that case were very similar to those in this case in that the adjudicator mistakenly included within the sum he ordered to be paid the retention to which the sub-contractor was not at the time entitled under the terms of the sub-contract. There were three applications before the court:
First, the contractor's claim under Part 8 for declarations, inter alia, that (a) insofar as the adjudicator decided that the retention was payable to the sub-contractor the award was void and should be set aside and, instead, (b) that a particular sum was due from the sub-contractor to the contractor.
Second, the sub-contractor's application for summary judgment to enforce the award.
Third, the sub-contractor's application to stay the contractor's application for declaratory relief under section 9 of the Arbitration Act 1996.
14. Dyson J described the submission of Mr Stephen Furst QC, on behalf of the contractor, as being that the adjudicator's decision in effect to award the retention money to the sub-contractor was outside his jurisdiction, and therefore not binding on the parties. He then said, at paragraph 11:
"The fundamental issue that I have to decide is whether this submission is correct. Other issues have been raised but that is the key question."
15. Later in the judgment, and in relation to the applications before him, Dyson J simply said this, at paragraph 18:
"It will be convenient to start with [the sub-contractor's] application for summary judgment, since if that succeeds, the remaining applications fall away."
16. Thus it seems that the applications made under Part 8 were just a vehicle for another way of attacking the adjudicator's award on the grounds of lack of jurisdiction. In the Court of Appeal, the argument on this aspect concentrated on the same point. Again, it was not disputed that the award was wrong, but the question was whether that was a ground upon which its enforcement could be resisted. There was no suggestion that the contractor was asking the court to make a final decision on a point of law or fact decided by the adjudicator. Other points also arose in the course of the appeal, but they are not relevant to the issues before me.
17. I infer two things from the fairly brief account of the rival contentions in the reports of that case. First, that the contractor was not seeking to obtain the court's ruling on a point of law or fact decided by the adjudicator, but was simply asserting - both in defence to the claim for summary judgment and in support of its own application for declarations - that the adjudicator exceeded his jurisdiction because in effect he decided a question that was not referred to him. Second, that there must have been an arbitration clause in the sub-contract, with the result that any final determination of the issues decided by the adjudicator had to be by way of arbitration and not litigation. This could explain why the contractor could not and did not adopt the approach taken in the Jarvis case.
18. Accordingly I consider that I am not prevented by the decision in Bouygues from entertaining an application that the court should reach a final decision on a question decided by the adjudicator, provided of course that it is a question that does not involve any substantial dispute of fact and is one that I can finally determine on the material before me. Mr Lewis seemed prepared to accept that it is permissible to have a final resolution of a dispute referred to an adjudicator on a Part 8 application, but he submitted - if I understood him correctly - that the court had to be in a position to determine the whole of the dispute before it could embark on this exercise. Whilst I agree that the court must be in a position to answer whatever question is under consideration, I can see no reason why the court has to adopt an all or nothing approach to the decision. If there is part of an adjudicator's decision that can be isolated and determined by the court, then it seems to me that, if the court considers that it would be just and expedient for the court to do so, such a course would give effect to the overriding objective of the CPR.
The positions and contentions of the parties
19. Before I summarise the positions taken by each party it may be helpful to put the submissions into their legal context. The Courts have made it clear how challenges to adjudicators' decisions should be approached, and I take by way of example the following observations of Chadwick LJ in Carillion Construction Ltd v Devonport Royal Dockyard [2005] EWCA Civ 1358, [2006] BLR 15:
"85. 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 has decided was not the question referred to him or the manner in which he has gone about his task is obviously unfair. It should be only 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 DML in the present case; which (contrary to DML's outline submissions, to which we have referred in paragraph 66 of this judgment) may, indeed, aptly be described as 'simply scrabbling around to find some argument, however tenuous, to resist payment'.
86. It is only too easy in a complex case for a party who is dissatisfied with the decision of an adjudicator to comb through the adjudicator's reasons and identify points upon which to present a challenge under the labels 'excess of jurisdiction' or 'breach of natural justice'. It must be kept in mind that the majority of adjudicators are not chosen for their expertise as lawyers. Their skills are as likely (if not more likely) to lie in other disciplines. The task of the adjudicator is not to act as arbitrator or judge. The time constraints within which he is expected to operate are proof of that. The task of the adjudicator is to find an interim solution which meets the needs of the case. Parliament may be taken to have recognised that, in the absence of an interim solution, the contractor (or sub-contractor) or his sub-contractors will be driven into insolvency through a wrongful withholding of payments properly due. The statutory scheme provides a means of meeting the legitimate cash-flow requirements of contractors and their subcontractors. The need to have the 'right' answer has been subordinated to the need to have an answer quickly. The Scheme was not enacted in order to provide definitive answers to complex questions. Indeed, it may be open to doubt whether Parliament contemplated that disputes involving difficult questions of law would be referred to adjudication under the statutory scheme; or whether such disputes are suitable for adjudication under the Scheme. We have every sympathy for an adjudicator faced with the need to reach a decision in a case like the present.