In Clegg Food Projects Ltd v Prestige Car Direct Properties Ltd [2025] EWHC 2173 (TCC), England’s Technology and Construction Court granted the Claimant’s application for summary judgment to enforce an Adjudicator’s decision. The court rejected the Defendant’s assertions that there had been a breach of natural justice because the Adjudicator had used his own rates when assessing certain work items without consulting the parties first and by providing insufficient reasons.
The Dispute
The Claimant was the contractor and the Defendant the employer under an amended JCT Design and Build contract for the construction of a leisure and retail centre. Practical completion had taken place and a dispute arose regarding valuation of the Claimant’s application for payment (Application 37), in relation to which the Defendant served a payment notice. 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 (Relevant Changes), and the Claimant’s entitlement to extensions of time (EOTs) and prolongation costs. The Defendant claimed liquidated damages in respect of delays (LADs) and the Claimant disputed the Defendant’s entitlement to such.
Adjudicator’s Decision
The Claimant referred the dispute to adjudication and the Adjudicator rendered his decision that (a) the Defendant’s payment notice had undervalued the amount due to the Claimant in respect of the Relevant Changes, (b) the Claimant was entitled to EOTs, (c) as a result of the entitlement to the EOTs, the Defendant’s entitlement to LADs was reduced, and (d) the Claimant was entitled to suspension costs and thickening costs. After deduction of the LADs, the Defendant was ordered to pay the Claimant £541,880.12 plus interest and Adjudicator fees.
In his decision, the Adjudicator gave reasons for his decision in respect of the EOTs and LADs, which set out broadly the submissions made by both parties before coming to his decision. The Adjudicator then went on to consider the value of the Relevant Changes, again setting out the parties’ submissions in respect of each Relevant Change, before giving his reasons for the amounts he decided were due. Where the Adjudicator decided to use his own “fair and reasonable” rate, after setting out the positions of each party, he explained that he had considered the work involved in respect of each of those disputed values, using his own “first principles view” of the work involved. Then he considered the valuation rules in clause 5 of the Contract and set out the rate. In relation to the single remeasurement, he explained his reasons for the remeasurement.
Application for summary judgment to enforce Adjudicator’s award
The Defendant failed to pay the adjudication award and so the Claimant applied for summary judgment to enforce the award. The Defendant argued that there had been a breach of natural justice in the Adjudicator applying his “fair and reasonable rate”, without informing the parties of the method he proposed to use and without giving them the opportunity to make submissions on the new method. As a result, the Defendant asserted that the Adjudicator’s decision was not enforceable.
Breach of nature justice?
The questions to be determined by the court were whether it was a breach of natural justice for the Adjudicator:
(a) 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 37; and
(b) to fail to provide adequate reasons for his decision, including explaining the decision made on “fair and reasonable” rates and the re-measurement he made for one item.
Court’s decision
Failure to seek additional submissions in respect of the “fair and reasonable” rate and single remeasurement?
The court held that the Adjudicator’s decisions in respect of some of the Relevant Changes, to use a rate which he considered to be “fair and reasonable”, was acceptable and it was not a breach of natural justice for him to fail to seek further submissions when coming to a decision after considering the materials provided by the parties and then determining that the appropriate rate was within the range contended for by the parties. It said:
- The parties chose to instruct a Chartered Quantity Surveyor to assess the parties’ submissions and decide the gross valuation for Application 37, which would involve deciding disputes about Relevant Changes.
- Both parties had specifically invited the Adjudicator to award the amount each of them submitted for the gross valuation or “such other sums as the adjudicator shall see fit”.
- Whilst the Adjudicator could not go off on a frolic of his own, deciding rates without considering the parties’ submissions and evidence submitted, he was not tasked with making declarations as to the individual rates to use when valuing the sub items within the Relevant Changes. The decision he was asked to make was much broader – that is the overall valuation of Application 37.
- It was relevant that the Adjudicator was asked to provide an overall gross valuation of Application 37. Inevitably, an Adjudicator given that task has to look at the individual items making up the payment application as a whole. However, it was acceptable for an Adjudicator to come to a different view from the parties in respect of the value of a particular item which he considered “fair and reasonable”, using the documentation provided and parties’ submissions.
- There was a further difficulty with the approach argued for by the Defendant. At what point does a variation by an Adjudicator from the Claimant’s rate, the Defendant’s rate or a broad “split the difference” rate require consultation? Does any deviation at all from the unobjectionable rates require consultation? The court would expect any party to answer “of course not” to that question.
- The difficulty then becomes: when does a variation become one which should be referred for consultation? Should the variation be measured in money, by a particular percentage? On what basis is the monetary amount or percentage assessed? Is it in respect of: (i) the individual item or sub item being varied? (ii) the claim for the whole of an individual item? (iii) the value of the entirety of the gross valuation of the interim payment being assessed? Or (iv) some other basis? The very fact that those questions would need to be posed by itself indicated that the Defendant’s approach was excessively granular.
- These cases are invariably fact sensitive and it is only in an exceptional case that the court would consider a breach to be sufficiently serious that the court would decline to enforce a decision. This was not such an exceptional case.
Failure to provide adequate reasons for decision?
The court did not accept that the Adjudicator had failed to provide sufficient reasons in his decision. Again, the court found the Defendant’s approach simply too granular and unrealistic. It said:
- The Defendant relied upon the fact that within days, the Adjudicator provided additional workings and, even then, the Defendant asserted it could not understand adequately the reasons for the Adjudicator’s decision. Just because the Adjudicator provided his workings and answered questions in relation to his reasoning when asked directly by the Defendant did not mean that his initial decision was such as to amount to a failure to provide adequate reasons.
- If the Adjudicator had been asked to declare the value of each and every item and sub item, the Defendant’s arguments would have been stronger. However, against the background of a broad-brush process, where the overall values arrived at for the different elements of Application 37 were set out, there was sufficient detail in the 88-page decision to enable the parties to understand how the Adjudicator came to his decision in the round.
- The court accepted that the reasons provided were broad brush, making references throughout using footnotes to submissions and documents. Fuller reasons could have been set out, but that did not mean the reasons given were inadequate. The reasons given could not possibly be said to be “so incoherent that it makes it impossible for the reasonable reader to make sense of them”. Detailed reasons, workings and explanations did not have to be given in respect of each individual sub item when the dispute put to the Adjudicator was one concerning a global valuation.
The court said that even if it was wrong on this point and the decision was unintelligible by reason of the inadequacy of the reasons given in the decision, it did not accept that the Defendant was able to demonstrate that it suffered substantial prejudice when looking at the facts.
Comments
Although the procedure for enforcing an adjudicator’s determination under the Security of Payment Ordinance (SOPO) in Hong Kong is by converting it into a judgment of the Court, not by summary judgment, the principles which the Court will follow in deciding whether to enforce an adjudicator’s determination should be similar. Breach of natural justice, if established, should be a good ground for setting aside an adjudicator’s determination.
This case illustrates that it is difficult to set aside an adjudicator’s determination. The scenario of this UK case should be quite common in claims under the SOPO. It is a standard phrase in the relief sought to ask the adjudicator to award “such other sums as the adjudicator shall see fit”. Here, the adjudicator was only asked to make an overall valuation of the Claimant’s claim, not a detailed valuation of each item of the claim.
For further information, please contact:
KK Cheung, Partner, Deacons
K.K.Cheung@deacons.com
