Atkins Ltd v Secretary of State for Transport

Section 68 of the Arbitration Act 1996 is a longstop remedy for serious procedural irregularity causing substantial injustice. It does not provide a route for challenging an arbitrator’s factual findings, legal reasoning or conclusions. A tribunal must deal with the issues put to it, but it need not address every argument or explain every step in its reasoning.

Under a lump-sum NEC3 contract, an unforeseen compensation event relating to a defect in the physical condition of a road network concerns an individual physical defect, such as a pothole, satisfying the contractual conditions. An aggregate excess volume of otherwise foreseeable potholes cannot itself constitute the relevant defect. The contractual notice and quotation provisions may assist in construing the clause, although they are not determinative.

Atkins Ltd challenged an interim arbitration award under sections 68 and 69 of the Arbitration Act 1996. The dispute arose under an NEC3-based highway maintenance contract with the Secretary of State for Transport.

An adjudicator had accepted in principle that potholes occurring after the contract date could qualify under clause 60.1(11) where they exceeded the number reasonably allowed for by an experienced contractor. The arbitrator rejected that conclusion, deciding that an excess volume of potholes could not constitute a defect in the physical condition of the area network.

The issues were whether the arbitrator had failed to determine the issue put to him, and whether his construction of clause 60.1(11) was obviously wrong or at least open to serious doubt.

1. Disposition. Atkins’ claims under sections 68 and 69 of the Arbitration Act 1996 were dismissed.
2. Section 68(2)(d) concerns a failure to deal with an issue put to the tribunal. It does not require the tribunal to set out every step in reaching its conclusion or to deal with every argument advanced. The court should not conduct a hypercritical or excessively syntactical analysis of the award. In any event, intervention requires an irregularity which has caused or will cause substantial injustice.
3. Clause 60.1(11) referred to an individual defect in the physical condition of the Area Network. A pothole could qualify if the contractual requirements were satisfied. The clause did not, however, treat an aggregate number or volume of potholes exceeding a notional allowance as a defect.
4. The fourth bullet point required the relevant individual defect to have had such a small chance of being present at the contract date that it would have been unreasonable to allow for it. That language could apply to an unforeseeable cause or origin of a pothole, such as an unknown construction or design defect, unforeseeable weather-related deterioration or failure of underground piping. It did not apply merely because the total number of potholes exceeded the number anticipated in the price.
5. The lump-sum structure and the parties’ allocation of commercial risk supported that construction. The notice, quotation and assessment provisions were relevant contextual pointers. They also demonstrated the practical difficulties in treating thousands of separately occurring potholes as a single compensation event, but were not independently determinative.
6. The arbitrator had identified and addressed the volume issue. The disagreement was with his reasoning and conclusion, not a failure to determine an issue. Permission to appeal under section 69 was refused because the decision was not obviously wrong and was not at least open to serious doubt.

• Arbitration: The adjudicator accepted Atkins’ Secondary Case in principle. Professor John Uff’s interim award dated 22 November 2012 rejected it.
• High Court (Technology and Construction Court): The applications under sections 68 and 69 of the Arbitration Act 1996 were dismissed.