Amey Wye Valley Ltd v County of Hereford District Council.
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 practice.
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 successful despite:
- 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).
Comment:
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
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