Amey Wye Valley Ltd v County of Hereford District
This adjudication enforcement case illustrates the importance of
clarity and ease-of-use when using inflation clauses in your
contract. It also demonstrates that "an error in the
arithmetic by an adjudicator does not render the adjudicator's
decision unenforceable".Fluctuations and inflation provisions
have not been regularly used in private sector building contracts
for many years but in the post-Brexit/Trump era uncertainty in the
financial markets may lead to a rise in use of such provisions.
Users of such clauses may be rather rusty and so it will be even
more important to ensure that such provisions are workable in
The parties could not agree on how to apply a price increase
mechanism for the 10 year life of the contract. Amey commenced an
adjudication in 2013 asking the adjudicator to interpret how the
mechanism should be applied. The adjudicator did so but did not
decide the financial consequences of his interpretation. In 2015
Amey commenced a further adjudication, the consequence of which was
that Amey was ordered to repay HDC a whopping £9.5m together
with the adjudicator's fees. Amey then sought to enforce that
decision in the Court by way of Summary Judgment in which they were
the parties having agreed that the
second adjudicator had made an error in the spreadsheet he used to
arrive at the final figure which amounted to a potential
overpayment of between £1.9m and £2.5m; and
Amey's contention (which the
court dismissed) that the second adjudicator did not follow the
findings of the first and so had re-decided issues that had already
been dealt with by the first adjudicator (it being a well-known
principle that an adjudicator does not have jurisdiction to deal
matters that have previously been decided by an adjudicator).
The Court's decision may appear harsh given that the parties
agreed that there had been errors of fact but it reinforces the
Court's desire to uphold adjudicators' decisions despite
errors of fact or law. It is also a salient reminder to get your
inflation/price adjustment clauses clear or risk them being
determined (possibly incorrectly) by an adjudicator
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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An assignment of rights under a contract is normally restricted to the benefit of the contract. Where a party wishes to transfer both the benefit and burden of the contract this generally needs to be done by way of a novation.
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