Anyone who regularly reads these pages will know what the case was all about. The adjudicator was asked to deal with a claim for £5m-odd and a counterclaim for a similar sum on a job where the contract had been determined.
He added up all the money that he thought the contractor should pay the subcontractor, took off the money that he thought the subcontractor should pay the contractor, and then took off the money that had already been paid. What was left was payable.
The trouble was that he had not taken off retention when he added up the total due to the subcontractor, and as the sums already paid had been net, the effect of the maths was to release retention. As a result, the main contractor was told to pay the subcontractor £208 000. If retention had not been released, it would have been £179 000.
Bouygues thought that this was a clerical error and asked the adjudicator to correct it. He wrote back and said that the calculations correctly reflected his intention and that he had not made a mistake. He declined to change it.
Mr Justice Dyson, in the Technology and Construction Court, said the release of retention was an error of arithmetic, and that as he had not been asked to release retention, and had apparently not deliberately decided to do so, he had answered the right question — albeit wrongly — and therefore the decision was within his jurisdiction.
If he had consciously decided to release retention, he would have been doing something that neither of the parties had asked him to do. That would have been outside his jurisdiction, and the court would not have enforced it.
The Court of Appeal took the same approach. Counsel for Bouygues argued that if the adjudicator maintained he had not made a clerical error, he must have intended to release the retention, in which case he had indeed gone outside his jurisdiction. The Court of Appeal said the adjudicator had not stated this as being his intention — he had only said he had not made an error — so his true intention could not be deduced from his denial of having made an clerical error.
Only one person will ever really know what the adjudicator had intended. That person is the adjudicator himself. He may have decided that it was appropriate to release the retention because, for the sake of argument, he thought that when a subcontract was determined there was no longer any right to continue deducting retention. Right or wrong, that approach might have been part of the answer to the question "How much is due?" That would still have been the "right" question for the purposes of jurisdiction. But nobody asked the adjudicator what he really meant to do, and the Court of Appeal made it quite clear it was a question that could never be asked. The court has to look at the decision of the adjudicator itself, and decide whether the adjudicator had strayed beyond his jurisdiction.
- The adjudicator could not consider whether retentions should be released per se
- But would he be within his jurisdiction if he released them in deciding the sum payable?
In these circumstances, is it dangerous to assume that the adjudicator made a mistake in his calculations? Commentators on the case have almost unanimously assumed the adjudicator did make a mistake, but it must be considered inherently improbable — bearing in mind he was assisted in his calculations by a well-known quantity surveyor — that he would have made such a serious mistake and then unequivocally confirmed it when asked to look at it again.
The important point for the Court of Appeal was there was nothing in the decision to demonstrate positively that the adjudicator had asked himself the question of whether or not retention should be released, which would have been the wrong question.
However — with the smallest shift of nuance — the decision of whether to release the retention, when taken as part of the question of what went into the pot and what was due, put the issue within his jurisdiction.
This adjudicator may go down in history, quite unjustifiably, as the adjudicator who cannot add up. His arithmetic may have been perfectly sound, though some may disagree with his views on retention.
The publication of the printed judgment also explains what really happened in cash terms. The brief note previously published explained the Court of Appeal's position with regard to insolvency, but did not say what it did about it.
The court had decided that when a claimant is in liquidation, the payment rules in the contract are to be read subject to insolvency law. Where there are sums of money due in both directions between the parties to the construction contract, an account has to be drawn up and only the balance paid.
The subcontractor in the Bouygues case was in liquidation, and although judgment had been given against Bouygues for the £208 000 — and the Court of Appeal affirmed that judgment — the adjudicator also decided that there should be a stay of execution, pending the drawing up of the account. That rather important point had been missed from the previous accounts published in the press.
Postscript
John Redmond is a partner at solicitor Laytons.
