Engineering consultant – Agreement – Fees – parties entering into agreement for provision of design works – Dispute over fees referred to adjudicator – Claimant applying for summary judgment to enforce adjudicator’s award – Whether adjudicator breaching rules of natural justice — Claim allowed
The defendant engineering contractor appointed the claimant engineering consultant to carry out design works for a rail project that would form part of the improvement works for the London transport system for the 2012 Olympic Games. A dispute arose between the parties concerning the fees to which the claimant was entitled, in particular in respect of the amount for disallowed costs, which was referred to adjudication.
The agreement between the parties included a pain/gain share provision by which the claimant would be entitled to 50% of the amount by which its cost fell below the agreed target cost or by which it would be obliged to pay 50% of any excess. By clause 9.5 of the agreement, if the defendant required services additional to those identified in the agreement, the claimant would charge agreed rates. In the event, significant additions and variations were made to the original scope of the claimant’s work and the parties failed to agree appropriate revisions to the target cost to reflect those changes. An issue arose as to whether the target cost remained applicable and what its final value should be.
The adjudicator ordered the defendant to pay the claimant £3,104,399.74 plus interest and 50% of his fees, in respect of the claimant’s claim for the balance of fees due under the agreement. The defendant failed to pay and the claimant applied for summary judgment to enforce the adjudicator’s decision. The defendant resisted the application on the ground that the adjudicator had breached the rules of natural justice by failing to notify the parties of the methodology he had proposed to use when calculating a value for the target cost under the agreement and the figures used to make that calculation.
Held: The claim was allowed.
The court would not usually intervene unless the adjudicator had fundamentally disregarded the rules of engagement, such that the outcome was significantly affected. An adjudicator was not obliged to choose between one set of submissions or the other: he could adopt his own approach if he rejected the submissions of both parties. In the instant case, the defendant had not demonstrated that the adjudicator’s failure to allow the defendant to comment on his methodology in calculating his valuation of the target cost breached the rules of natural justice: Balfour Beatty Construction Ltd v Lambeth London Borough Council [2002] EWHC 597 (TCC); [2002] BLR 288, Cantillon Ltd v Urvasco Ltd [2008] EWHC 282 (TCC), [2008] BLR 250 and Primus Build Ltd v Pompey Centre Ltd [2009] EWHC 1487 (TCC); [2009] BLR 437 considered.
The calculation of the target cost had always been an issue in the adjudication, even though it might have been only part of the claimant’s alternative case. Each party had made more than one submission concerning the relevant terms of the agreement between the parties in respect of the calculation of the target cost.
The defendant had produced information to enable the adjudicator to reach a conclusion about the target cost and the latter had not used any information that the defendant had not had an opportunity to consider. The adjudicator’s calculation of the target cost had been driven primarily by his construction of clause 9.5 of the agreement, on which both parties had made submissions and the adjudicator expressly rejected the defendant’s submission that the relevant provisions of the main contract in respect of the target cost and formed part of the agreement between the parties.
The adjudicator had not been obliged to seek the parties’ views on his construction of clause 9.5. If a judge or adjudicator had heard full argument on the construction of a clause or provisions in a contract and reached a conclusion that differed from the parties’ submissions, he was not obliged to canvass that view with the parties before making his decision.
Had natural justice been breached, the court was not persuaded that the adjudicator’s failure to notify the defendant of his proposed methodology and the figures that he proposed to adopt would have made any difference to the outcome. Nothing that the defendant was likely to say would have caused the adjudicator to reduce his assessment of the target cost to a value lower than his assessment of the net fee claimed.
David Streatfeild-James QC (instructed by Wragge & Co LLP, of Birmingham) appeared for the claimant; Fionnuala McCredie (instructed by Reynolds Porter Chamberlain) appeared for the defendant.
Eileen O’Grady, barrister