HT-2025-LDS-000006 - [2025] EWHC 2173 (TCC)

Dealing first with the alleged breach of natural justice by the adjudicator for failing to go back to the parties to seek additional submissions in respect of the “fair and reasonable” rate and the single remeasurement, I do not accept the Defendant’s arguments that this was a breach of natural justice.

Firstly, both parties 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”. The Defendant asserted that this was not an invitation by the parties for the adjudicator to carry out his own independent valuations using new rates. Whilst I accept that the adjudicator could not go off on a frolic of his own, deciding rates without considering the submissions of the parties and the evidence submitted, I accept the Claimant’s argument the adjudicator 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, I find, much broader - that is the overall valuation of Application 37.

In my judgment, it is 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 which make up the payment application as a whole. However, in my judgment, it is acceptable for an adjudicator to come to a different view from the parties in respect of the value of a particular item which he considers “fair and reasonable” using the documentation provided and submissions made by the parties.

I do not accept that the various cases relied upon by the Defendant support the arguments made on the facts of this case. Each case is of course a matter of fact and degree but an adjudicator “cannot, and is not required to, consult the parties on every element of his thinking leading to a decision, even if some of the elements of his reasoning may be derived from, rather than expressly set out in, the parties’ submissions” (per Coulson J (as he then was) in Primus Build Limited v Pompey Centre Limited at paragraph 40). I do not accept that the adjudicator was filling a gap in the evidence. Both parties made submissions on rates. The adjudicator did not consider and use material which the parties instructed him not to consider.

I find that the issues had been fairly canvassed during the course of the adjudication. In addition, I also find that it is significant that in respect of each “fair and reasonable” value, and in respect of the single remeasurement, used to calculate the gross value of each Relevant Change by the adjudicator, that value was an intermediate position between those contended for by the parties, or was more favourable to the Defendant.

The Defendant accepted that if the adjudicator had simply accepted the position on value by either party, or used a crude “split the difference” rate, the Defendant could have no legitimate complaint.

I accept the submission made by the Claimant that it would be wrong to accept the Defendant’s granular approach to its arguments on breach of natural justice in circumstances where the parties sought a global valuation. That said, of course I accept that some explanation for reaching the global figure is required.

In my judgment, the decisions taken by the adjudicator, in respect of some of the Relevant Changes, to use a rate which he considered to be “fair and reasonable” was acceptable. I do not accept that it is a breach of natural justice for the adjudicator 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 is the within the range contended for by the parties. 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. They provided him with the materials to decide that valuation in accordance with clause 5 of the Contract and, by reference to or by analogy with the CSA which the parties provided to him, he provided a valuation within the range contended for by the parties, or which was more beneficial to the Defendant. I do not accept that it was necessary for the adjudicator to set out the details of the methodology used by him to come to his decision.

In addition, the Defendant must establish that any breach was both material and of considerable importance to the Defendant. I do not accept that the Defendant has been able to establish that any breach, if proved, was material in any event. It was accepted by the Defendant that the adjudicator could simply have adopted the rate proposed by the Defendant in its submissions. In those circumstances, I do not accept that the Defendant can 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 the Defendant’s own rate. In my judgment, this underlines the excessive granularity with which the Defendant seeks to undermine the adjudicator’s decision.

It is right that in respect of some sub issues the decision of the adjudicator meant that his “fair and reasonable” rate was more favourable to the Claimant than the Defendant. However, that was not always the position. For example, in respect of the adjudicator’s valuation of EAI#27, the use of his “fair and reasonable” rate meant that the adjudicator used a rate which was more favourable to the Defendant than the rate for which the Defendant contended. In that example, the complaint about the use of the “fair and reasonable” rate is a nonsense. As Ms Connors observed in her submissions, “… the Defendant cannot properly complain that it lost an opportunity to persuade the Adjudicator to order it to pay more than it was in fact ordered to pay”.

Further, I do not accept the Defendant’s arguments that the breach alleged is both material and of considerable importance to the Defendant because the overall difference between the parties gross valuations is £738,469.58. Whilst it is correct that was this the difference between the parties valuations in respect of the total value of all of the Relevant Changes, I do not accept that it is the accurate figure when considering the decision made by the adjudicator.

In my judgment, the Claimant’s submission that when analysed correctly, in all but two of the cases, the use of the “fair and reasonable” rate/new measurement was more advantageous to the Defendant than if the adjudicator had used either the Claimant’s rate, the Defendant’s rate or had crudely split the difference between those two rates, all of which both parties agree he could have done without further consultation.

Those two instances where a less favourable rate to the Defendant was used is significantly less than the gross valuation figure argued by the Defendant to be the appropriate figure to consider when considering materiality. The total value of the two items assessed using the less advantageous rate for the Defendant is less than £2,600, which is less than 0.2% of the adjudicator’s total valuation of the Relevant Changes. For example, EAI 27 comprised 10 separate items and the complaint in relation to the new rate affects just one of those items. In EAI 68B, the complaint related to one of five separate items.

I accept the submission made by the Claimant that those differences are vastly outweighed by the effect of the use of new rates which were more favourable to the Defendant than the rates which the adjudicator could have used without further consultation. The effect of such use has been to benefit the Defendant by more that £200,000. That being the position, the Defendant has not established that it would suffer substantial injustice such that there is a material breach.

In my judgment, there is 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? I 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? Should it be measured by a particular percentage? On what basis is the monetary amount or percentage assessed? Is it in respect of: