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Is a wrong decision binding?


Like anyone else, adjudicators sometimes make mistakes, but case law clearly says their decisions are binding under the Construction Act, even if 'wrong'. Jeremy Winter looks at a new case that might open the door to challenges to such decisions

'HARD cases make bad law' is an old saying in the legal world.

A pretty good illustration of that maxim is provided by the judgment in the case of Joinery Plus (in administration) v Laing, which was heard in the Technology and Construction Court in January.

Joinery Plus did two jobs as subcontractor for Laing, one at a hotel in Harrow Road, London W2, on a contract based on the DOM/2 conditions of subcontract and the other on the Old Admiralty Building in London SW1, where the contract was the JCT Works Contract form.

Disputes arose on both the contracts and Joinery Plus referred them both to adjudication.

The Royal Institute of Chartered Surveyors (RICS) appointed the same person to act as adjudicator on both disputes. He reached an uncontroversial decision in favour of Joinery Plus on the Old Admiralty job.

On the hotel job the adjudicator issued a decision, giving his reasons, that concluded that Laing owed Joinery Plus around £58,000.

But the reasons he gave clearly indicated that he thought the relevant contract conditions were the JCT Works Contract, when in fact they were the DOM/2 conditions.

The adjudicator admitted his error in later correspondence, saying he had used his earlier decision on the Old Admiralty Building as the basis from which his second decision was drafted.

Joinery Plus was unhappy and complained to the RICS but nevertheless accepted Laing's cheque in payment of the decision, saying it was accepted as payment on account towards the full entitlement. Joinery Plus then went to court seeking a declaration that the adjudicator's decision was a nullity.

Looked at in isolation, Joinery Plus had a point. How could it possibly be right that it should be bound by a decision in which the adjudicator had made such a fundamental error as to apply the wrong contract conditions?

The fact is, however, that there is clear case law that says that, in adjudications, we generally have to live with mistakes like this.

In Bouygues v Dahl-Jensen (July, 2000), the adjudicator made an obvious arithmetical error in his decision, the result of which was so serious that, instead of Dahl-Jensen owing Bouygues money, Bouygues apparently owed Dahl-Jensen.

The Court of Appeal swept aside Bouygues' protests that it would be unjust to allow enforcement of the decision, saying that the possibility of such injustice was inherent in the statutory adjudication process.

This was despite the fact that DahlJensen was in liquidation, and there was little chance that Bouygues would get its money back.

The test (used in the Bouygues case and many others since) is this: did the adjudicator answer the question that was put to him?

If yes, his decision will be binding, even if it is wrong. If he has answered the wrong question, his decision will be a nullity.

Bouygues was about arithmetical errors. Is the position any different where there is a contractual error?

The Court of Appeal tackled this issue in C&B Scene v Isobars (January, 2002). There, the adjudicator apparently made an important mistake about one clause in the contract.

The Court of Appeal, assuming for the purposes of its decision that the adjudicator had applied the wrong contract provision, said it did not matter: the adjudicator had answered the right question, so even though he may have been wrong as to the relevant contract provision, his decision was still binding.

The judge in the Joinery Plus case recognised that this case law was binding on him.

After a careful analysis of the law and the issues that were referred to and decided by the adjudicator, the judge decided that 'the adjudicator's errors went to the heart of his jurisdiction which was to decide the referred dispute under the actual construction contract between the parties' and so the decision was a nullity.

But that is not the test. The test is to look to see whether the adjudicator answered the question that was put to him.

It is clear from the judgement that he did.

Joinery Plus had a global loss and expense claim, which Laing said lacked any link between defaults alleged and loss claimed.

The adjudicator essentially agreed with Laing's argument, though he awarded the £58,000 for certain specific items of loss and expense.

He answered the question but by reference to the wrong contract conditions. It seems unlikely that his decision would have been any different even if the right contract had been applied (so the error, even though more glaring than the one assumed to have been made in the C&B case, may not have been as serious).

Laing is apparently taking its case to the Court of Appeal.

The outcome will be interesting. But in the meantime it should not be thought that the decision in Joinery Plus opens up new and wider opportunities to overturn adjudicators' decisions on the grounds that they contain major mistakes.

Key points

Adjudication decisions under the Construction Act are usually enforceable, even if they contain serious mistakes.

The test is this: did the adjudicator answer the question put to him? If yes, the decision is binding, even if wrong.

If no, the decision is a nullity.

A recent court judgment seems to expand the scope for challenging adjudicators' decisions. But the judgment is under appeal and may be wrong.

This and other articles written by Jeremy Winter for Construction News can be found on Baker & McKenzie's website at www. bakernet. com