Hyder Consulting (UK) Ltd v Carillion Construction Ltd

An adjudicator may adopt a legal or factual approach different from that advanced by either party where the issue was before him, the approach arises from the submissions, and the material used was available to the parties. He need not canvass every conclusion before issuing his decision. A failure to invite further submissions will justify refusing enforcement only where the adjudicator has fundamentally departed from fair procedure and the departure is decisive or materially important to the outcome. An adjudicator’s decision includes findings that are essential components of, or bases for, the award. A finding that is unnecessary because the result would be unchanged does not itself become binding between the parties.

Hyder Consulting (UK) Ltd applied for summary judgment to enforce an adjudicator’s decision ordering Carillion Construction Ltd to pay £3,104,399.74, interest and part of the adjudicator’s fees. The adjudication concerned fees payable under a design-services agreement, including Disallowed Costs and the operation of a pain/gain mechanism linked to a Target Cost.

Carillion alleged a breach of natural justice. It argued that the adjudicator had adopted an unnotified methodology and figures when assessing the revised Target Cost, without allowing submissions on them. The central issues were whether that procedure was unfair and, if so, whether it could have affected the result.

1. Enforcement. Summary judgment was entered for Hyder. Carillion’s challenge to the adjudicator’s decision failed.
2. Scope of an adjudicator’s binding decision. Under section 108(3) of the Housing Grants, Construction and Regeneration Act 1996, the binding decision consists of the actual award and any finding concerning the parties’ rights that is an essential component of, or basis for, that award. A finding is not binding merely because it appears in the adjudicator’s reasoning.
3. The adjudicator’s calculation of the revised Target Cost was not part of the binding decision. He had decided that the net fee claimed was below the Target Cost, so no pain/gain adjustment was required. Any Target Cost above the net fee would have produced the same award. Carillion therefore remained entitled to dispute that calculation in a later adjudication.
4. Natural justice. Adjudication is intended to be a rapid and interim method of dispute resolution. The adjudicator need not choose between the parties’ competing methodologies and may adopt an intermediate approach. Nor must he invite submissions on a different construction of a contractual provision where both parties had argued the construction issue and the conclusion was reached from material before them.
5. The relevant question was whether the adjudicator had gone beyond fair adjudication by adopting a new approach which the parties could not reasonably address, and whether that departure was decisive or of considerable potential importance. Here, the Target Cost issue was always part of the adjudication, the adjudicator had requested information to resolve it, and the figures used had been supplied by Hyder and were available for Carillion’s consideration. Carillion had also received additional time to respond.
6. Even assuming a procedural breach, Carillion had not shown material prejudice. The proposed corrections would not have reduced the Target Cost below the adjudicator’s assessment of the net fee. The result would therefore have been unchanged.

Costs were to be dealt with by agreement or determined after further argument.