Herbosh -Kiere Marine Contractors Ltd v Dover Harbour Board

Enforcement of an adjudicator’s decision may be refused where the adjudicator determines the dispute on a materially different basis from that referred. The dispute is identified by examining how it developed, including the notice of adjudication and preceding correspondence. A general final-account reference does not necessarily authorise any valuation methodology. A departure from the parties’ common methodology breaches natural justice where the new approach is decisive or materially affects the result and the parties had no opportunity to address it. A mere error of fact or law is insufficient by itself.

Herbosch-Kiere Marine Contractors Ltd sought summary judgment to enforce an adjudicator’s decision concerning the final account for wreck-removal works carried out for Dover Harbour Board. The parties had presented their delay-related claims and valuation responses on a resource-by-resource basis, using contractual rates and allowing only for resources actually delayed.

The adjudicator instead calculated delay compensation and the pain/gain adjustment by applying a composite daily rate to the overall delay. Dover Harbour Board contended that this exceeded the adjudicator’s jurisdiction and breached natural justice because the approach had not been argued or put to the parties. The central issues were the scope of the reference and whether the departure from the parties’ methodology was material.

1. Applicable approach. A mere mistake of fact or law by an adjudicator does not ordinarily affect enforceability. The court should intervene where it is plain that the adjudicator decided a question not referred or proceeded in an obviously unfair manner. A challenge based on jurisdiction or natural justice must be clear, and any breach must be material.
2. Scope of the dispute. The dispute is identified primarily from the notice of adjudication, read with the preceding correspondence and the way the dispute developed. Here, the reference concerned a specific final-account claim. In relation to delay and pain/gain, both parties had adopted a resource-by-resource assessment using contractual rates. The reference did not include an alternative composite-rate methodology.
3. Natural justice. An adjudicator must give the parties an opportunity to address a point which is decisive or of considerable potential importance to the outcome. Adopting a wholly new method on the adjudicator’s own initiative may amount to going off on a frolic of his own. A different approach will not necessarily invalidate a decision if it makes no material difference, but materiality was established here.
4. Disposition. The composite-rate approach materially increased the sums allowed, including compensation for resources and periods not claimed. The adjudicator therefore exceeded the jurisdiction conferred by the reference and breached natural justice by deciding on an unargued basis without inviting submissions. The decision could not be enforced, and HKM’s claim was dismissed.