Carillion Construction Ltd v Devonport Royal Dockyard

Construction adjudication is an interim process. An adjudicator’s decision remains binding and enforceable despite errors of fact, law or procedure, provided the adjudicator answered the dispute referred. Enforcement may be refused where the adjudicator exceeded jurisdiction or committed a serious breach of natural justice. Courts should examine technical challenges sceptically, bearing in mind the statutory purpose of speedy payment. An adjudicator need not put provisional conclusions to the parties except in an exceptional case. Where reasons are requested, a brief statement is sufficient if it identifies the issues decided and the conclusions reached. Paragraph 20(c) of the Scheme for Construction Contracts gives the adjudicator a freestanding power to award interest, subject to any contractual term relating to interest.

Carillion and Devonport Royal Dockyard were parties to construction and alliance agreements concerning works at Devonport dockyard. An adjudicator awarded Carillion further sums, including amounts for the target cost, defects, a bonus, a fee and interest.

Devonport commenced proceedings challenging the adjudicator’s jurisdiction, the fairness of the target-cost and defects decisions, the adequacy of the reasons, and the power to award interest. Carillion sought enforcement of the adjudicator’s decision. The central issues were whether the adjudicator had answered the dispute referred, whether any procedural defects were sufficiently serious to prevent enforcement, and whether paragraph 20(c) of the Scheme authorised an award of interest.

1. Enforcement framework. The statutory adjudication scheme determines who should hold disputed funds provisionally pending final resolution. The decision must generally be enforced even if it contains errors of fact, law or procedure. The critical distinction is between answering the right question wrongly and answering a question which was not referred. The former remains binding; the latter is outside jurisdiction. Serious breaches of natural justice may also prevent enforcement.
2. Target cost. The adjudicator was entitled to assess the target cost at £113,953,000. The notice of adjudication and referral required him to determine the primary sum due, which necessarily involved assessing the target cost. Both parties had addressed the issue with extensive evidence. Any error in the assessment was an error within jurisdiction and did not invalidate the decision.
3. Natural justice and evidence. The adjudicator was entitled to conclude that negotiations between Devonport and the Ministry of Defence were legally irrelevant, and therefore to disregard them. He was also entitled not to adopt an alternative expert calculation which he rejected. There was no obligation to address every argument expressly where the decision showed which arguments were accepted and how the figures were calculated. It was not necessary to invite further submissions on the adjudicator’s modest reduction of the defects allowance, which was an evaluative assessment of the expert evidence and materially different from the exceptional circumstances in Balfour Beatty Construction Ltd v Lambeth LBC [2002] BLR 288.
4. Reasons. The reasons on defects were adequate. They explained why the expanded claim was rejected and why a reduction was made to the original claim. Only absent or unintelligible reasons causing substantial prejudice would justify refusing enforcement.
5. Interest. Paragraph 20(c) of the Scheme conferred a freestanding power to award interest. The reference to having regard to any contractual term meant that an express contractual provision had to be respected, not that the power existed only where the contract separately provided for interest.
6. All four challenges failed. Judgment was entered for Carillion in both actions, and the adjudicator’s decision was ordered to be enforced.

Not stated in the judgment. The decision was a first-instance determination of two linked enforcement proceedings in the Technology and Construction Court.