Cantillon Ltd v Urvasco Ltd [2008] EWHC 282 (TCC)
[65]On the severability issue, I conclude, albeit obiter in the result, as follows:(a) The first step must be to ascertain what dispute or disputes has or have been referred to adjudication. One needs to see whether in fact or in effect there is in substance only one dispute or two and what any such dispute comprises.(b) It is open to a party to an adjudication agreement as here to seek to refer more than one dispute or difference to an adjudicator. If there is no objection to that by the other party or if the contract permits it, the adjudicator will have to resolve all referred disputes and differences. If there is objection, the adjudicator can only proceed with resolving more than one dispute or difference if the contract permits him to do so.(c) If the decision properly addresses more than one dispute or difference, a successful jurisdictional challenge on that part of the decision which deals with one such dispute or difference will not undermine the validity and enforceability of that part of the decision which deals with the other(s).(d) The same in logic must apply to the case where there is a non-compliance with the rules of natural justice which only affects the disposal of one dispute or difference.(e) There is a proviso to (c) and (d) above which is that, if the decision as drafted is simply not severable in practice, for instance on the wording, or if the breach of the rules of natural justice is so severe or all pervading that the remainder of the decision is tainted, the decision will not be enforced.(f) In all cases where there is a decision on one dispute or difference, and the adjudicator acts, materially, in excess of jurisdiction or in breach of the rules of natural justice, the decision will not be enforced by the Court. Discussion and decision 66 I must first determine what dispute, in relation to the 13 Weeks Claim, was referred to adjudication. In my judgment, it was a claim for loss and expense in respect of the 13 weeks extension of time which had been granted for the in-board piling variation which was disputed. One needs to look at that claim in the context of the fact that the extension had been granted prospectively, that is before the relevant piling had started. Unsurprisingly, but possibly not correctly as a matter of fact or law, Cantillon had quantified it on the basis apparently that, as the extension of time contractually extended the contractual Date of Completion, the quantum needed to relate to the extended period as opposed to a period which reflected when the piling was done. 67 It is not clear (or at least has not been highlighted) on the evidence on what basis Urvasco disputed the claim, prior to the adjudication; it is clear that they had paid £260,000 for loss and expense said to have been caused by the 13 weeks extension of time period, that is at the rate of £20,000 per week. One can, and I do, assume that the dispute, pre-adjudication, revolved around quantification, rather specifically than when the losses were incurred. 68 Whatever the basis of objection was prior to the Notice of Adjudication, it is clear that the defence in the Response was in substance: (a) the piling need not have taken as long as it did; (b) Cantillon was not on site any longer than it would have been in any event; as the critical path ran through other areas and work (other than the piling) and no prolongation costs were recoverable because they would all (or almost all) have been incurred even if the piling had not been required. (c) As Cantillon had quantified its 13 Weeks Claim by reference to Weeks 41- 53 (w/e 23 April to w/e 16 July 2006), there was no loss recoverable for any later period when the piling works were done. 69 It seems to me that, once these defences had been raised, the Adjudicator’s job (and jurisdiction), with regard to the 13 Weeks Claim, extended to addressing them and their consequences. Thus, he was required to rule on what overall (if any) critical delay was caused by the in-board piling, when and what, if any, losses flowed from the prolongation which he found. If these defences had been raised before the dispute crystallised, which I rather doubt, then it was part of the crystallised dispute referred to adjudication. If not, it was encompassed by the claim for 13 weeks of prolongation which was simply not accepted by Urvasco. As the authorities establish that the responding party can put forward any arguable defence in adjudication, whether propounded before the adjudication or not, it must follow that the adjudicator can rule not only on that defence but also upon the ramifications of that defence to the extent that it is successful in so far as it impacts upon the fundamental dispute. 70 Adjudication, like litigation or arbitration, is not a game in which a defending party can run a defence but effectively prevent the consequences of that defence from running if and to the extent that the defence is successful. The rules of natural justice will operate to prevent the adjudicator from “making the case” for the claiming party or from going off on a forensic “frolic” of his own without the defending party having an opportunity to address the “frolic”. 71 There can be no doubt that the defences of fact that Urvasco ran in the adjudication were ones which were predicated upon an as-built programme which demonstrated that the in-board piling work was done essentially later than the 13 week time period to which the extension of time related. That as-built programme was eventually and in essence agreed between the parties and their experts during the adjudication as confirmed at the meeting of 23 October 2007. The Adjudicator was not on a “frolic” of his own when he addressed what prolongation occurred and when, because he was simply addressing what the parties, and principally their programming experts, had put before him. Although he generally preferred the approach of Cantillon’s expert, Mr Dan, he can not be criticised for that. He rejected the evidence and argument of Urvasco and their expert that the critical path, as from 10 August 2006, did not run through the piling operation until November 2006. Although their primary case was that there was no delay or prolongation caused by the in-board piling variation, their alternative case was that any critical delay fell outside the period quantified, financially, by Cantillon. He was required in effect to deal with this case. 72 The question was then, if the Adjudicator can not be criticised jurisdictionally for making findings that the critical prolongation delay fell between 10 August and 14 November 2006, whether he could be criticised, jurisdictionally, for reducing that period to 9.71 weeks. For similar reasons, he can not be so criticised. He reduced the period to reflect exactly some of the complaints made by Urvasco about delay in execution of the in-board piling work by Cantillon; he had to address those complaints and factual defences. 73 One then moves to whether jurisdictionally the Adjudicator was entitled to address quantum for the period which he had properly (from a jurisdictional standpoint) found represented the actual period when the works were critically delayed by the piling variation. Although common sense is not always an accurate compass when addressing jurisdictional points, in this case it is. The consequence of Urvasco running the defences as to delay which they did was that, if and to the extent that they were successful, the quantum would inevitably (at least arguably) be different; thus, if the delays were shorter than the 13 weeks, there would be a lower weekly multiplier and if the delay occurred later the costs could well be different in that they might be lesser or greater. In effect, Urvasco implicitly accepted that this was at least possible by the very defence which they ran which was that, as no material piling work was done during the particular 13 weeks quantified by Cantillon, there was no loss. In effect, by taking what would in court proceedings be regarded as a pleading point, it recognised that there might be different losses during a later period. 74 It is of interest that Urvasco did not in their Response or Rejoinder argue, as such, that the Adjudicator had no jurisdiction to resolve the loss and expense claim for the 13 Weeks Claim. It argued that the sum claimed was “wrongfully claimed” and did “not arise in consequence of the introduction of the in-board piling”. This was a substantive defence with some shades of being a technical defence. 75 I have formed the view that the Adjudicator did have jurisdiction to find as he did that a later period of delay and prolongation applied to the in-board piling variation. The claim which he was addressing was one for loss and expense for 13 weeks said to be attributable to the in-board piling variation. It was not, and should not be considered to be, limited to a loss and expense claim for 13 specific calendar weeks. This becomes even clearer when Urvasco actually run a defence that the losses claimed can not be recovered because they relate, only upon Urvasco’s defence, to a later period. It offends reason that Urvasco could run that defence and avoid the consequences. 76 I now turn to the question of whether there was a breach of the rules of natural justice by the Adjudicator. I have formed the view that there was not: (a) If the adjudicator had jurisdiction to address the issue, it was up to the parties to put in such evidence as they thought fit to address the realistic permutations which might well apply. It is clear that Urvasco’s team was confident that, if there were any such costs payable, any prolongation costs would apply in the later period. (b) With the Referral, detailed records and other documentation about all the prolongation heads of cost was provided by Cantillon for the whole or virtually the whole of the contract period up towards the end of 2006. The same sort of exercise could have been done for the later period as it was for the earlier period. It is difficult therefore for Urvasco to say that it did not have the opportunity to address the quantum ramifications of there being a delay finding which reflected their own assertion that any prolongation occurred during the later period. The fact that they did not, and deliberately decided not to, take up that opportunity does not convert what happened in to some breach of the rules of natural justice. (c) The Adjudicator did not, deliberately or otherwise, mislead the parties as to what he was or was not going to do. If anything, he hinted broadly that he might be finding that any compensable delay could well relate to the period when the piling work was actually being done. (d) The fact that Cantillon on 23 October 2007 asked the Adjudicator to do something which was within his jurisdiction should have alerted Urvasco to the possibility that the Adjudicator might go down that route. (e) The remarks made at the time that the Adjudicator should not “make Cantillon’s case” for them were not in point. He was not making Cantillon’s case: he was assessing what was due to Cantillon on the evidence and argument. He was entitled to investigate the facts and evidence as presented. (f) There was time, as the parties well knew, after the 23 October 2007 for Urvasco to put in argument and indeed evidence about the later period. It was known that Dr Mastrandrea would take up to about 4 weeks to produce his decision. Urvasco for their own reasons decided not to put in any such argument or evidence even though, squarely, Cantillon had asked the Adjudicator on 23 and 24 October 2007 to ascertain the loss and expense by reference to the evidence and the prolongation period found by him. I will not speculate as the real reasons why Urvasco did not submit anything further. Dr Critchlow says that he believed that the point which he says that he made at the meeting of 23 October 2007 had got “home” with the Adjudicator. I do not have to decide whether he made that point at the meeting as he said or repeated it in effect in his email of three days later. However, the undisputed evidence of that meeting is that Dr Mastrandrea did not actually say anything indicating agreement or disagreement. The Urvasco’s team judgment that Dr Critchlow’s point had gone home obviously turned out to be a misjudgement. 77 The fact that the Adjudicator may have made some mistakes in his assessment of the loss and expense does not establish that he failed to have regard to the rules of natural justice. He had to do the best that he could on the available information. The parties both now accept that he allowed for various items of expenditure in the later period, which were not incurred during that period, such as craneage. All the relevant authorities establish that mistakes of fact or law will not prevent the enforcement of adjudicators’ decisions (e.g. Bouygues (UK) Ltd v Dahl- Jensen (UK) Ltd [2000] BLR 522). 78 That essentially disposes of the objections by Urvasco. Since the point of severability was raised and it is an issue of some importance and interest to the construction industry and professions, I will comment upon what I would have done if I had found that there had been a more than peripheral breach of the rules of natural justice by the Adjudicator. I would have given judgment in favour of Cantillon in respect of all other parts of the decision which could be said with confidence were unrelated to and untainted by any such breaches. The reasons are as follows: (a) On analysis, there were at least two disputes submitted here, namely that related to the 16 Weeks and to the 13 Weeks Claims. They were presented separately both before and in the Notice of Adjudication and the Referral. They were, logically and time-wise, separable claims relating to differing years and different factors said to have been causative of delay and cost. The quantum as presented by Cantillon was divisible into that relating to the two claims. (b). The Adjudicator dealt with them separately in his decision. (c) In this case, if there was a breach of natural justice even if more than peripheral, it was or would have been more of the inadvertent type rather than one which wholly undermined the decision and reliability of the Adjudicator. There was no hint or suggestion that his decision on all other matters was not anything other than fair, competent and reliable. (d) The decision is in fact arithmetically divisible. The sums due in respect of the 16 weeks claim are: (i) Prolongation (Appendix 1 to decision as amended by the Adjudicator): £125,825.04 (ii) Head Office Overheads (see Paragraph 8.28 of decision): £304,739.65. (iii) Finance on retention (13/ 29ths of £3,702.14): £1,659.58 (iv) Finance on loss and expense: one could either “pro-rata” this (16/25.71 of £22,978.03 = £14,299.82) or do a more detailed calculation by reference to the fact that the financing for the 16 weeks which occurred earlier will probably have attracted a larger share than that: if in doubt, one would allow the lower figure. So far as the deduction of “less amounts paid [to Cantillon] to date” identified by the Adjudicator, I would have called for more argument on this from the parties; this has been forthcoming in writing since the oral argument. I would probably have decided that there should be a deduction for the amount paid. Although the evidence before me and the Adjudicator was that the sum paid (of £260,000) was for the 13 Weeks Claim, it would be wrong to second guess the Adjudicator as to what he would have done with regard to this sum if he had allowed nothing for the 13 Weeks Claim. Thus, the minimum to be enforced separately would have been the sum of the figures set out above less the Adjudicator’s sum paid figure of £192,971, namely £253,553.09. It would be unnecessary to deal with the Adjudicator’s fees as they have been paid by the parties. Disposal[79]It follows that Cantillon is entitled to have the Adjudicator’s decision enforced and judgment should be entered for Cantillon for the sums found by the Adjudicator to be due which are unpaid.
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