In the March 2017 case NKT Cables A/S v SP Power Systems Limited (NKT v SP) the Outer House of the Court of Session branded the adjudicative process "short and sharp, if rough and ready." The decision made clear that while expeditious decisions in adjudications are key, adjudicators must take care when issuing decisions in order to avoid: making errors that fall outside the Slip Rule or; a failure to exhaust jurisdiction.
NKT Cables raised an action to enforce an adjudicator's decision awarding NKT over £2 million in respect of works carried out at the Glasgow 2014 Commonwealth Games Athlete's Village. A quirk was that the adjudicator amended his original decision to correct an error. The error made a difference of nearly £300k. Lady Wolffe was broadly tasked with determining whether:
- the correction of the error fell within the ambit of the Slip Rule and in which case was enforceable; and
- the adjudicator exhausted his jurisdiction in relation to his consideration of SP's defences.
What makes adjudications "rough and ready"?
Whereas court proceedings can take years to resolve, disputes referred to adjudication will be determined in just four weeks, subject to any agreed extension of time. This type of dispute resolution process is ideal for the construction industry where cash flow issues are inherent and quick dispute resolution is key to contractors' healthy balance sheets. While condensing the decision making process is commercially friendly, a downside can be that parties and the adjudicator are not afforded the luxury of time to consider all potentially relevant points. Further, time pressures can encourage errors. Both of these issues came up in NKT v SP.
The Slip Rule
The Slip Rule was introduced to the Scheme for Construction Contracts in 2011. It enables an adjudicator, within five days of issuing a decision, to correct it to remove a clerical or typographical error arising by accident or omission. The boundaries of this rule were tested in NKT v SP with regards to the error in the adjudicator's decision.
Where the works predated the rule, the first question to determine was whether the Slip Rule could be implied at common law. Lady Wolffe said yes it could, notably stating that the alternative would substantially diminish the efficacy of the Scheme for adjudication if the adjudicator had no power to correct an error within a reasonable time.
Lady Wolffe then turned to determine whether the correction made by the adjudicator fell within the scope of the Slip Rule. The amendment made by the adjudicator was firstly to correct the awarded figure and secondly to include "Agreed Claims" and "Agreed Interest". Lady Wolffe considered these corrections to be two separate steps based on the language used in the adjudicator's cover email.
Lady Wolffe highlighted the purpose of the Slip Rule as correcting errors to express an adjudicator's "first thoughts and intentions". While the correction of the awarded figure fell within the Slip Rule the additional step of including the "Agreed Claims" and "Agreed Interest" did not as the adjudicator only sought to include these items upon a reminder from NKT. This correction did not therefore give effect to the adjudicator's "first thoughts and intentions".
Exhaustion of Jurisdiction
In NKT v SP there was a further matter to consider: whether the adjudicator had adequately exhausted his jurisdiction. Lady Wolffe made clear that notwithstanding the time pressure of the adjudication it is imperative that an adjudicator address all substantive defences, however briefly. Lady Wolffe considered there had been a failure to exhaust jurisdiction rendering the adjudicator's decision, or at best parts of the decision, unenforceable.
The irony in NKT v SP is that what was intended to provide a quick resolution to the dispute has now been put out by order and will fall to be determined in the Court of Session at a later date. A key take away is that while the expeditious adjudicative process is undoubtedly beneficial, parties must not lose sight of the importance of thorough preparation and ensuring the adjudicator is made fully aware and understands all points made by all parties.
This article was co-written by Shona McCusker.
Disclaimer
The material contained in this article is of the nature of general comment only and does not give advice on any particular matter. Recipients should not act on the basis of the information in this e-update without taking appropriate professional advice upon their own particular circumstances.
