Carillion Construction Ltd v Devonport Royal Dockyard Ltd

An adjudicator’s decision under the Housing Grants, Construction and Regeneration Act 1996 is an interim, binding determination. The court should enforce it despite errors of fact, law or procedure. It should intervene only where the adjudicator has plainly decided a dispute not referred, or has acted in a manner that is obviously and seriously unfair.

The notice of adjudication identifies the dispute and defines the adjudicator’s jurisdiction. A brief reasoned decision is sufficient if it shows that the adjudicator addressed the remitted issues and reached conclusions. Under paragraph 20(c) of the Scheme, an adjudicator has no free-standing power to award interest, but may do so where interest is referred, agreed to be within the adjudication, or necessarily connected with the dispute.

Carillion Construction Ltd referred a dispute arising from a target-cost construction subcontract to adjudication. The adjudicator awarded further payment, a bonus, a fee and interest. Devonport Royal Dockyard Ltd challenged enforcement, alleging excess of jurisdiction, breaches of natural justice, inadequate reasons and a want of power to award interest.

Jackson J upheld the decision, dismissed Devonport’s claim and gave Carillion summary judgment: [2005] EWHC 778 (TCC). Devonport sought permission to appeal. The central issues were whether the target-cost questions fell within the adjudication, whether the adjudicator’s process made the decision unenforceable, and whether interest was within the adjudicator’s jurisdiction.

1. Appeal dismissed. Permission to appeal was refused on all grounds except interest. Although permission was granted on that issue, the appeal failed.

2. The notice of adjudication, rather than the referral notice, identifies and describes the dispute. The questions whether target cost could be determined after the contractual machinery failed, and what figure should be used, were central to the dispute referred. The adjudicator therefore had jurisdiction to decide them.

3. An adjudicator’s decision must ordinarily be enforced even if it contains errors of fact, law or procedure. The court will intervene only where it is plain that the adjudicator decided a question not referred, or the process was obviously unfair. The adjudicator had been invited to assess target cost using the relevant calculation and Devonport had an opportunity to address that methodology. His rejection of material which, on his legal analysis, he regarded as irrelevant, and his failure to address every defence argument separately, did not breach natural justice.

4. The adjudicator’s treatment of the defects claim and the discount applied to it were evaluative matters within the adjudication. His reasons sufficiently explained why he rejected the expanded claim and why he applied the reduction. Where reasons are requested under the Scheme of Construction Contracts (England and Wales) Regulations 1998, brief reasons suffice if they show that the issues remitted were addressed and the conclusions reached. Inadequate reasons prevent enforcement only in extreme circumstances where they are absent or unintelligible and cause substantial prejudice.

5. Paragraph 20(c) of the Scheme does not confer a free-standing power to award interest. Read with paragraph 20 as a whole, it permits an interest decision only where interest is a referred matter, is agreed to be within the adjudication, or is necessarily connected with the dispute. Here Carillion expressly referred interest and Devonport acquiesced in that reference. The parties therefore conferred jurisdiction to award interest, so the judge’s enforcement order stood.

• Court of Appeal (Civil Division). Permission to appeal was refused save on interest. The appeal on interest was dismissed: [2005] EWCA Civ 1358.
• Technology and Construction Court (Jackson J). The judge upheld the adjudicator’s decision, dismissed Devonport’s proceedings and gave Carillion summary judgment: [2005] EWHC 778 (TCC).