Citation: [2025] EWHC 2173 (TCC)
On an application for summary judgment to enforce an adjudicator’s decision relating to issues arising under a design and build contract, the adjudicator had not breached the rules of natural justice by failing to seek further submissions when adopting a rate of pay which he considered to be “fair and reasonable” and had provided sufficient reasons for his decision.
Background
The Claimant (“Clegg”) was the contractor and the Defendant (“Prestige”) the employer under an amended JCT Design and Build contract dated 10 November 2022 for the construction of a leisure and retail centre in Bishop Auckland. Practical completion was achieved, and a dispute arose between the parties in respect of the valuation of the Clegg’s application for payment (“Application 37”). Application 37 was made on 27 August 2024. Prestige served a payment notice in respect of it on 30 August 2024. At that stage, the issues between the parties included the value of eight variations, which were agreed to be changes, but whose valuation in accordance with clause 5 of the contract was not agreed (“the Relevant Changes”), and the Clegg’s entitlement to extensions of time (“EOTs”) and prolongation costs.
Clegg referred the dispute to adjudication and nominated a Chartered Quantity Surveyor. Both parties agreed that, when deciding a valuation, the adjudicator should use the gross valuation sum “or such other sum as the adjudicator may decide”. The adjudicator decided that Prestige’s payment notice had undervalued the sum due to Clegg in respect of the eight changes. Prestige was ordered to pay the Clegg £541,880.12 plus VAT. The adjudicator used his own “fair and reasonable” rate to consider the value of the eight changes. The adjudicator explained that, under the instructions provided by the parties, he had jurisdiction to determine his own rate.
Prestige failed to pay the adjudication award, leading Clegg to seek summary judgment to enforce the adjudicator’s decision. Prestige submitted that it was a breach of natural justice for the adjudicator not to seek additional submissions from the parties to the adjudication in respect of the “fair and reasonable rate” which was applied. Clegg submitted that:
- the adjudicator was entitled to use his discretion when providing a valuation;
- the adjudicator’s use of discretion was not of considerable importance to the outcome of adjudication; and
- in any event, the rates used by the adjudicator resulting in a decision more favourable to Prestige than if the adjudicator had adopted Clegg’s rates.
The dispute between the parties comes down to whether it was a breach of natural justice for the adjudicator:
- to fail to go back to the parties and ask for further submissions when he decided to use a new “fair and reasonable” rate and a single new measurement in respect of his valuation of a few individual items when asked to provide a gross valuation of Application; and
- to fail to provide adequate reasons for his decision including to explain the decision he made on “fair and reasonable” rates and to explain the re-measurement he made for one item and enforced?
Decision (HHJ Kelly)
Judgment for the Claimant.
HHJ Kelly did not find the adjudicator in breach of natural justice for failing to go back to the parties to seek additional submissions in respect of the “fair and reasonable” rate and the single remeasurement. Both parties specifically invited the adjudicator to award the amount each of them submitted for the gross valuation or “such other sum as the adjudicator shall see fit”. The adjudicator was therefore within his remit to come to a different view to the parties in respect of the value of a particular item which he considered “fair and reasonable” using the submissions made by the parties.
The adjudicator was not required to consult the parties on “every element of his thinking, even if elements of his reasoning are derived from, rather than expressly set out in, the parties’ submissions” (per Coulson J in Primus Build Limited v Pompey Centre Limited at [40]. The adjudicator was also not obliged to seek further submissions relating to his adopted rate as the parties had already provided the adjudicator with the materials required to decide the appropriate valuation.
Further, Prestige has not been able to establish that any breach, if proved, was material in any event. Prestige could not establish that it has suffered a substantial injustice because it was not consulted about the use of a rate which was more favourable to it than its own rate.
At [35], HHJ Kelly observes the following:
“The reality is that the 1996 Act and Scheme can only be made to work in practice if some breaches of the rules of natural justice which have no demonstrable consequence are disregarded. The provisional nature of these decisions justifies ignoring non-material breaches.”
In short, the Defendant’s approach is too granular, and even if there was any technical breach, it would not in any event be material looking at the facts.
Representation
Jess Connors (39 Essex Chambers) for the Claimant, instructed by Browne Jacobson LLP.
Thomas Lazur (Keating Chambers) for the Defendant, instructed by Addleshaw Goddard.
