Simple game, tricky rules

The Construction Act contains half a dozen clauses that require the reader to raise their forefinger, put it on the top of their head and scratch. At the same time you are required to mutter, “What the blazes does this clause mean?” It’s a sort of parlour game.

My favourite is called Balderdash. Cleveland Bridge was the steelwork subcontractor to the Whessoe-Volker Stevin joint venture at the Milford Haven natural gas terminal. Their spat about the final account came to adjudication. Cleveland insisted on being paid another £365,000 and the good adjudicator person said yes, that’s what Whessoe-Volker must pay. They didn’t obey, so Cleveland took them to the High Court.

The first head-scratching bit of Balderdash is why, oh why does the Construction Act say that steelwork for the purpose of providing access to plant or machinery on a site for the production, transmission or processing of gas is not a construction contract. Whereas it would be on a site for the production of pettycoats, motor cars or bagpipes! Balderdash is the reason. Anyway, this steelwork by Cleveland Bridge does fall into this gas exception so the adjudicator can’t adjudicate … except the £4m subcontract is also for steelwork well within the bagpipe list of works that are construction contracts. So we have a contract for steelwork, part of which is within the Construction Act and part of which is not. And lo! the act says when that happens, the Construction Act rules applies to the bit that’s in but not to the bit that’s out. And everyone then shouts “Balderdash” and we all fall about giggling in the parlour.

When the adjudicator first arrived Whessoe-Volker told her to go away because all of the steelwork was about access to a gasworks. Dear me, no, she said, correctly. She then proceeded to decide that there was no full and final compromise settlement and ordered the £365k to be paid. But which part of the £365k is for the part of the steelwork that can be adjudicated and which part is not? The adjudicator’s formal decision gave no hint of any split or allocation. Can the court deploy the concept of severance? Tricky.

Mr Justice Ramsey got to grips with the problem. Any agreement between two parties that is in part within the Construction Act allows either party to call for an adjudicator for that part only. The adjudicator has no jurisdiction over the other part of the same contract. If the adjudicator specifically and correctly hives off the part in scope and decides that part, the decision about that dispute is binding. But if, as happened here, the adjudicator was persuaded in error to adjudicate across the whole of the contract, the judge has to decide if the court is entitled to sever.

This topic has cropped up in previous cases. The senior judge in the Technology & Construction Court said that where a decision is made, part of which is outside the adjudicator’s jurisdiction, the whole of the decision is unenforceable. “I do not think … the decision can be dissected to impose separate and severable obligations to be bound by the adjudicator’s decision on each of the component issues on which the adjudicator based that decision.”

The judge went on: “I do not consider that the court can or should intervene and say what the adjudicator may have found to be the value of the work relating to the element of the subcontract within [the adjudicator’s] jurisdiction.”

So, adjudication is a “warts and all” decision. You are not allowed to afterwards go to the court to have an adjudicator’s decision revised and replaced with what is or was thought to be right. You can bring the whole dispute to the court or arbitrator of course. Then the whole lot is heard afresh. But the court is not, meanwhile, allowed to dismantle or reconstruct a decision. The attack on the adjudicator’s decision either succeeds and sets it all aside, or fails and leaves it intact. The high court accepts that there is no room for the result of an adjudication to be partly made by the adjudicator and partly made by the court. The court’s role is to enforce the decision in accordance with the promise in the contract to obey the adjudicator … or not enforce at all.

Tony Bingham is a barrister and arbitrator at 3 Paper Buildings