BABCOCK MARINE (CLYDE) LTD AGAINST HS BARRIER COATINGS LTD [2019] ScotCS CSOH

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	Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> BABCOCK MARINE (CLYDE) LTD AGAINST HS BARRIER COATINGS LTD [2019] ScotCS CSOH_110 (27 December 2019) URL: http://www.bailii.org/scot/cases/ScotCS/2019/2019_CSOH_110.html Cite as: [2019] ScotCS CSOH_110, [2019] CSOH 110, 2020 GWD 2-27

Defender: Walker QC, Steel; Balfour + Manson LLP (for Hill Dickinson LLP)

[1] In this commercial action the pursuer seeks payment of sums which an adjudicator

has ordered the defender to pay to it. The defender resists payment on four grounds. Each

party has a preliminary plea to the relevancy of the other party’s averments. The matter

came before me for a debate which was conducted having regard to the pleadings, the

adjudicator’s decision, and the other documents forming part of the adjudication process.

[2] In December 2014 the pursuer contracted with the defender for the defender to carry

out re-preservation of shiplift docking cradles at HM Naval Base Clyde. The work was to

involve dismantling cradle components, removing legacy coating, preparing the metal

surface for painting, and painting and reassembling the components. The total contract

price was £800,000. The contract incorporated the NEC3 Engineering and Construction

Short Contract (June 2005) with bespoke Z clause amendments. It made provision

(clauses 60 to 63) for the price to be increased on the occurrence of specified compensation

events. It is a "construction contract" as defined by Section 104 of the Housing Grants,

Construction and Regeneration Act 1996 ("the 1996 Act"). Clause Z17 provided for any

dispute to be referred to adjudication in accordance with clauses 93.2, 93.3 and 93.4 of the

90.2 Either Party may terminate if the other Party has become insolvent or its

90.3 The Employer may terminate if the Employer has notified the Contractor that the

Contractor has defaulted in one of the following ways and the Contractor has not

 Substantially failed to comply with this contract (Reason 2).

 Substantially broken a health or safety regulation (Reason 4).

 the cost of Plant and Materials provided by the Contractor which are on

92.3 If ... the Employer terminates for Reason 5, the amount due on termination also

includes 5% of any excess of a forecast of the amount due at Completion had there

been no termination over the amount due on termination assessed as for normal

Clause 93.1 (as replaced by clause Z 17) provides for a tiered dispute resolution process:

"A dispute arising under or in connection with this contract is notified to the

Employer's and Contractor's commercial management organisations who shall use all

reasonable endeavours to resolve through negotiation. If the dispute is not resolved

within three days the matter shall be escalated to commercial senior management

who shall have 3 days to resolve. If the dispute is not resolved the matter shall be

escalated to commercial directors, who shall have 3 days to resolve. If resolution

fails, the dispute shall be decided by the Adjudicator in accordance with clauses 93.2,

“(1) The parties appoint the Adjudicator under the NEC Adjudicator’s Contract

Clause 94.1 provides for the parties to refer a dispute to adjudication at any time where the

1996 Act applies. It is common ground that the NEC Adjudicator’s Contract which was

[4] Clause 2.3 of the NEC Adjudicator’s Contract (April 2013 edition) provided:

“After notifying the parties of his intention, the Adjudicator may obtain from others

help that he considers necessary in reaching his decision. Before making his

decision, the Adjudicator provides the parties with a copy of any information or

[5] On being appointed the adjudicator wrote to the parties by letter dated 11 February

2019 confirming acceptance of the appointment. He enclosed with the letter a document

headed “Terms and Conditions of Appointment” (“the Terms”). Paragraph 14 of the Terms

“14. If I require quantity surveying input during the Adjudication I will utilise the

resources of Bunton Consulting Partnership. This matter is at my absolute discretion

and I will not require the consent of the parties. A senior QS will be charged

at £85 per hour plus expenses and a junior QS at £55 per hour plus expenses.”

The carrying out of the contract works and the agreement to vary the contract

[6] After the works commenced on site there were several disagreements between the

parties. The pursuer was dissatisfied with progress. For its part, the defender claimed that it

was entitled to additional payment under the contract for compensation events. By

22 December 2016 the defender had intimated claims for seven compensation events (CE1

to CE7). Before that date the parties had agreed that the total contract price be increased

by £20,056.11 in respect of CE7. On 22 December 2016 they entered into a Settlement

Agreement (“the Agreement”) which settled disputed matters up to that date (including the

compensation events) apart from the extra over cost of treating six larger strongbacks. In

terms of the Agreement the total contract price was revised from £820,056.11 to £1,070.056.11.

The revised value included a £20,000 provisional sum in respect of the additional cost of the

[7] Although progress was slow the sums claimed by the defender escalated. The

pursuer terminated the contract on 15 June 2018 on the ground of Reason 5. On 25 June 2018

the defender prepared and submitted a Termination Application (Payment Notice 31) (7/5 of

process) which applied for payment of £967,549.42 plus VAT. On 10 September 2019 the

[8] On 10 September 2018 the defender served notice of intention to refer a dispute to

adjudication. The principal issues to be adjudicated upon were (i) whether the Termination

Application was a valid payment notice in terms of the contract; and (ii) whether notices issued

by the pursuer dated 19 July 2018 and 9 August 2018 were valid pay less notices. The wider

question of “the veracity of either party’s assessments” (see para 11.4 of Mr Donny Mackinnon’s

decision dated 14 November 2018 (7/8 of process)) had not been referred to adjudication.

Mr Mackinnon held that the Termination Application was a valid payment notice and that the

notices of 19 July 2018 and 9 August 2018 were not valid pay less notices. The defender was

entitled to payment in full of the sum claimed plus interest and fees. On 3 December 2018

Mr Mackinnon amended the decision (reducing the interest payable by the pursuer). On 7 and

13 December 2018 the pursuer paid the defender the sums awarded. Both parties issued notices

[9] The parties remained in dispute as to the true and proper valuation of the works as at

the date of termination. In February 2019 the pursuer referred that dispute to adjudication

and requested that the adjudicator give reasons for his decision. Mr Len C H Bunton was

[10] The three principal elements of the valuation which were in dispute were (i) the

value of the base scope works; (ii) what, if any, value should be attributed to compensation

[11] The pursuer maintained that the value of the base scope works at the date of

termination was £447,263.62. The defender maintained it was £643,101.47. In arriving at its

figure the defender relied upon a report (7/7 of process) prepared by Mr Cookson, who is a

chartered quantity surveyor and a chartered builder. Mr Cookson’s figure was only very

slightly higher (0.7%) than the base scope works figure of £638,553.21 which the defender

[12] The pursuer’s primary position was that no sum was due in respect of the claimed

compensation events CE8-CE13. Its fall-back position was that only a total of £130,384.15

was due (ie £24,713.38 for CE8; £13,083.76 for CE9; £78,021.18 for CE12; and £14,565.43

for CE13 (which, in fact, resulted in a total of £130,383.75)). In the Termination Application

the defender had claimed that a total of £690,155.18 was due for compensation events

CE8-CE13, whereas in the second adjudication it relied on Mr Cookson’s valuation

of CE8-CE13 and it claimed £1,003,498.22 (on the basis of a price list assessment)

[13] The pursuer’s primary position was that the sum for demobilisation costs

was £39,064.02, and that £32,807.80 was due for excess of forecast at completion. In the

Termination Application the defender had claimed £160,446.75 for demobilisation costs

and £75,773.59 for excess of forecast at completion; whereas in the adjudication it advanced

Mr Cookson’s valuations (which were £87,350.63 for demobilisation costs, and £90,436.26

(on a price list assessment basis) or £100,599.01 (on a defined cost assessment basis) for

[14] Mr Bunton issued his decision on 22 March 2019. The decision incorporated a note of

reasons and a Scott Schedule (in the form of an Excel spreadsheet). For present purposes it

is sufficient to indicate what Mr Bunton decided in relation to base scope works,

compensation events and termination costs. He held that the value of the base scope works

was £447,263.62. He decided that the price should be increased by £690,155.18 because of

compensation events CE8-CE13. In relation to termination costs, he decided that

demobilisation costs were £39,064.02 and that the excess of forecast at completion

[15] Mr Bunton sent the parties his decision under cover of a letter dated 22 March 2019.

He also sent each party a Fee Account. One of the entries in the Fee Account was:

[16] The pursuer raised proceedings in England and Wales to enforce Mr Bunton’s award

(on the basis that the defender was domiciled there). The defender resisted enforcement,

pleading inter alia that the court did not have jurisdiction; and that if it did the action should

be stayed on the ground of forum non conveniens. On 28 June 2019 Mrs Justice O’Farrell held

that while the courts in Scotland and England and Wales both had jurisdiction, Scotland was

the more appropriate forum. She granted a stay of the English proceedings (Babcock Marine

(Clyde) Limited v HS Barrier Coatings Limited [2019] BLR 495, [2019] EWHC 1659 (TCC)).

[17] The present action was raised on 31 July 2019. Defences were lodged on 29 August

2019. At the preliminary hearing on 13 September 2019 I allowed the pursuer seven days to

adjust its pleadings, seven days for the defender to adjust in response, and a further seven

days mutual adjustment. The debate was fixed for 25 October 2019. On 21 October I

granted the pursuer’s unopposed motion to extend the period of mutual adjustment until

[18] In the defences the defender avers that the adjudicator failed to exhaust his

jurisdiction; and that because of the way that the adjudication was conducted there has been

a breach of natural justice. Since the alleged failures are all set out in my summary of

Mr Walker’s submissions I do not repeat them here. The defender maintains that it is not

[19] By adjustment intimated on 27 September 2019 the defender made reference for the

first time to the adjudicator having engaged the services of a quantity surveyor who

“purportedly provided 28 hours assistance to the Adjudicator”. By further adjustment

“To the extent that the defender was not advised of the appointment of the QS and

the nature of the assistance provided by him, an opportunity has been afforded for

injustice to be done and there is a breach of natural justice. The decision should be

held as unenforceable and falls to be reduced ope exceptionis.”

[20] On 1 October 2019, shortly after the defender intimated its adjustments raising the

issue of the quantity surveyor assistance, the pursuer’s solicitors sought to obtain

clarification from the adjudicator of the nature of that assistance. By email dated 2 October

2019 the adjudicator replied that in terms of paragraph 14 of the Terms the engagement of

quantity surveying assistance had been entirely at his discretion and that he had not

required to advise the parties of it. He pointed out that the parties had known since

22 March 2019 that he had obtained such assistance and that no issue had been taken with it.

While at the time of reply he was out of his office and was not able to review the

“I cannot, at this stage ... recall exactly what assistance was provided. However,

based on my past and extensive experience as an Adjudicator, this would probably

involve clerical and administrative assistance, checking that the parties (sic)

submissions contained the documents set out in any inventory, checking the parties

(sic) calculations in relation to variations etc, assisting me in checking if the parties

have submitted vouching information in relation to variations etc, double checking

figures after my calculations, and populating the Scott Schedule with values I had

decided, and assistance in proof reading, (sic) a very lengthy and detailed Decision.

For example, I can see that on 19 and 22 March 2019, the day before my decision was

issued, 14 hours were taken up in checking that the figures from my Decision were

populated into the Scott Schedule, and this would be checked by me, and an assistant

[21] Mr Walker recognised that decisions of adjudicators should be enforced unless there

is good reason to refuse enforcement (Atholl Developments (Slackbuie) Ltd, Petitioners 2011

SCLR 637, per Lord Glennie at para 17). He submitted that there were good reasons here.

[22] First, while it was clear that the adjudicator had preferred the pursuer’s base scope

works valuation to the valuation put forward by the defender, he had not explained why he

had preferred it. The defender was entitled to know why the adjudicator had decided the

matter the way that he had. Reference was made to Atholl Developments (Slackbuie) Ltd,

Petitioners, supra, per Lord Glennie at para 17; Balfour Beatty Engineering Services (HY) Ltd v

Shepherd Construction Ltd [2009] EWHC 2218 (TCC) per Akenhead J at para 48;

DC Community Partnerships Limited v Renfrewshire Council [2017] CSOH 143, per

Lord Doherty at para 26; Gillies Ramsay Diamond v PJW Enterprises Ltd 2004 SC 430, per

Lord Justice-Clerk Gill at para 31. The failure to give reasons was a material failure. By

failing to give adequate reasons the adjudicator had failed to exhaust his jurisdiction.

[23] Second, the adjudicator had failed to consider a material line of defence (Pilon Limited

v Breyer Group plc [2010] BLR 452, per Coulson J at para 22; Connaught Partnerships Limited v

Perth and Kinross Council 2014 SLT 608, per Lord Malcolm at paras 18-21). He had refused to

consider the Cookson report’s position on base scope works because he thought

(erroneously) that it was not competent for the defender to advance a base scope works

valuation which was higher than the base scope works valuation in the Termination

Application. Accordingly, he had failed to consider a material defence. Separatim, he had

failed to give proper reasons for deciding as he did. Those were failures to exhaust his

jurisdiction. Separatim, in deciding it was incompetent for the defender to rely on the

Cookson report the adjudicator acted in breach of natural justice because that possibility had

not been put in issue (Costain Limited v Strathclyde Builders Limited 2004 SLT 102, per

Lord Drummond Young at paras 23-24; Corebuild Ltd v Cleaver [2019] BLR 505;

[24] Third, the adjudicator had not explained the basis upon which he had arrived at his

termination costs figure. In relation to demobilisation costs it might be inferred (para 292)

that he had rejected the project leader claim because it was not something which had been

included in the price list and there was no vouching of the sum claimed. However, there

was no further explanation of why he had preferred the pursuer’s demobilisation costs

figure. The excess of forecast figure at completion of £93,867.67 seemed to have been based

on 5% of £1,877,353.40 (para 295), but the adjudicator had not said how that latter figure had

been calculated. Once again he had failed to give reasons. That was a material failure. In

[25] Fourth, the adjudicator had engaged the services of a quantity surveyor who, it seemed,

had provided 28 hours of assistance to him in the adjudication. The parties were not informed

during the adjudication of the fact that quantity surveying assistance had been engaged, nor

was the nature of the assistance disclosed. An opportunity had been afforded for injustice to be

done (Barrs v British Wool Marketing Board 1957 SC 72, per Lord President Clyde at p 82). The

defender would insist on this ground if none of the other grounds of challenge was successful.

In that event it would be necessary to inquire into the precise nature of the services provided by

the quantity surveyor in order to determine whether the breach of natural justice had in fact

[26] Mr Richardson submitted that the defender’s averments were irrelevant and that

[27] It was well settled that one of the purposes of the 1996 Act was to enable parties to

obtain a speedy decision from an adjudicator. The courts should lend their assistance to the

prompt enforcement of decisions made by adjudicators within the scope of their jurisdiction

(The Construction Centre Group Limited v Highland Council 2003 SC 464, per the Opinion of the

Court delivered by Lord Hamilton at para 14). Paragraphs 85 to 87 of the judgment of the

court in Carillion Construction Ltd v Devonport Royal Dockyard Ltd [2006] BLR 15 (delivered by

“85. The objective which underlies the Act and the statutory scheme requires the

courts to respect and enforce the adjudicator's decision unless it is plain that the

question which he has decided was not the question referred to him or the manner in

which he has gone about his task is obviously unfair. It should be only in rare

circumstances that the courts will interfere with the decision of an adjudicator. The

courts should give no encouragement to the approach adopted by DML in the

present case; which ... may, indeed, aptly be described as ‘simply scrabbling around

86. It is only too easy in a complex case for a party who is dissatisfied with the

decision of an adjudicator to comb through the adjudicator's reasons and identify

points upon which to present a challenge under the labels ‘excess of jurisdiction’ or

‘breach of natural justice’. It must be kept in mind that the majority of adjudicators

are not chosen for their expertise as lawyers. Their skills are as likely (if not more

likely) to lie in other disciplines. The task of the adjudicator is not to act as arbitrator

or judge. The time constraints within which he is expected to operate are proof of

that. The task of the adjudicator is to find an interim solution which meets the needs

87. In short, in the overwhelming majority of cases, the proper course for the party

who is unsuccessful in adjudication under the scheme must be to pay the amount

that he has been ordered to pay by the adjudicator. If he does not accept the

adjudicator's decision as correct (whether on the facts or in law), he can take legal or

arbitration proceedings in order to establish the true position. To seek to challenge

the adjudicator's decision on the ground that he has exceeded his jurisdiction or

breached the rules of natural justice (save in the plainest cases) is likely to lead to a

substantial waste of time and expense — as, we suspect, the costs incurred in the

[28] The court should allow considerable leeway in relation to an adjudicator’s reasons

(Miller Construction (UK) Limited v Building Design Partnership Limited [2014] CSOH 80, per

Lord Malcolm at para 17). Brief reasons will suffice. In Carillion Construction Ltd v Devonport

Royal Dockyard Ltd, supra, the Court of Appeal set out (at para 53) Jackson J’s observations at

“53. The judge then went on, at paragraph 81 of his judgment, to state five

propositions which, as he said, bore upon the issues which he had to decide:

‘1. If an adjudicator declines to consider evidence which, on his analysis of

the facts or the law, is irrelevant, that is neither (a) a breach of the rules of

natural justice nor (b) a failure to consider relevant material which

paragraph 17 of the Scheme. If the adjudicator's analysis of the facts or the

law was erroneous, it may follow that he ought to have considered the

evidence in question. The possibility of such error is inherent in the

adjudication system. It is not a ground for refusing to enforce the

adjudicator's decision. I reach this conclusion on the basis of the Court of

Appeal decisions mentioned earlier. This conclusion is also supported by the

reasoning of Mr Justice Steyn in the context of arbitration in Bill Biakh v

4. During argument, my attention has been drawn to certain decisions on the

duty to give reasons in a planning context. See in particular Save Britain's

Heritage v No 1 Poultry Limited, [1991] 1 WLR 153 and South Bucks DC and

another v Porter (No 2) [2004] 1 WLR 1953. In my view, the principles stated in

these cases are only of limited relevance to adjudicators' decisions. I reach

(a) Adjudicators' decisions do not finally determine the rights of the parties

(b) If reasons are given and they prove to be erroneous, that does not

5. If an adjudicator is requested to give reasons pursuant to paragraph 22 of

the Scheme, in my view a brief statement of those reasons will suffice. The

reasons should be sufficient to show that the adjudicator has dealt with the

issues remitted to him and what his conclusions are on those issues. It will

only be in extreme circumstances, such as those described by [the]

Lord Justice Clerk in Gillies Ramsay [Diamond], that the court will decline to

enforce an otherwise valid adjudicator's decision because of the inadequacy

of the reasons given. The complainant would need to show that the reasons

were absent or unintelligible and that, as a result, he had suffered substantial

The Court of Appeal went on (at para 84) to approve Jackson J’s observations:

“84. It will be apparent, from what we have said in giving our reasons for refusing

permission to appeal, that we are in broad agreement with the propositions which

the judge set out at paragraph 81 of his judgment and which we have ourselves set

out at paragraph 53 in this judgment. Those propositions are indicative of the

approach which courts should adopt when required to address a challenge to the

Reasons will be sufficient if they show that the adjudicator has dealt with the issues. Unless

reasons are absent or unintelligible and that causes substantial prejudice the court should

not interfere. In some cases the acceptance by an adjudicator of one position will be

sufficient to indicate the reasons for rejecting the other position (DC Community Partnerships

Limited v Renfrewshire Council, supra, per Lord Doherty at para 26; SW Global Resourcing Ltd v

Morris & Spottiswood Limited [2012] CSOH 200, per Lord Hodge at para 17).

[29] The difference between the parties in relation to the valuation of the base scope

works had not been to the fore at the adjudication. The defender’s figures had been set out

in appendices 55 and 56 to Mr Cookson’s report. There had been no discussion of them in

the body of the report. However, the difference had been focussed for the adjudicator (eg in

the pursuer’s Reply (7/14 of process) at paragraphs 5.4 to 5.7 and in the defender’s rejoinder

(7/15 of process)). The pursuer’s position had been that the difference arose because before

termination the defender had been overpaid for preliminaries. The defender denied that

there had been overpayment, or (if there had been) that the pursuer was entitled to take

account of it when valuing the base scope works. The adjudicator accepted the pursuer’s

figures. It was implicit that he had accepted that there had been overpayment before

termination. In the circumstances acceptance by the adjudicator of the pursuer’s position

had sufficiently disclosed his reasoning for rejecting the defender’s alternative position.

[30] It was erroneous to suggest that the adjudicator had failed to consider the position

advanced in the Cookson report and appendices when he was valuing the base scope works.

It was clear from his decision and reasons that he had fully considered the Cookson report

and appendices in relation to all of the disputed matters. The foundation for this aspect of

the defender’s argument was paragraph 183 of the adjudicator’s note of reasons. That

paragraph occurred during the adjudicator’s consideration of the parties’ opposing positions

on quantification of the CE8 claim. The adjudicator had been critical of the absence of

records and vouching supporting Mr Cookson’s assessments. Those were the circumstances

in which he had decided not to go beyond what the defender had claimed for the

compensation events in the Termination Application. He had not failed to consider

Mr Cookson’s report in the context of compensation events, and there was no basis

whatsoever for concluding that he had failed to consider the report and appendices in

relation to the base scope works. He had not considered himself capped by each of the

elements in the Termination Application. His base scope excess of forecast at completion

figure (£93,867.67) was higher than the corresponding figure in the Termination Application

(£75,773.59). In any case, even if on a fair reading of paragraph 183 the adjudicator was

saying that he considered claims were capped at the claims which had been made in the

Termination Application, the cap for the base scope works (£638,553.21) would have been

very far in excess of the adjudicator’s view of the value of those works (£447,263.62).

[31] The criticism of the adjudicator’s reasons relating to termination costs was

unwarranted. The dispute in relation to demobilisation costs had been clearly focussed in

the adjudication. The pursuer had itemised the build-up of its valuation. It had proposed a

total value of £39,064.02. Mr Cookson had not supported parts of the claim for £160,446.75

which the defender had submitted in the Termination Application (paragraphs 16.35

to 16.47 of his report). He had maintained that this aspect of the claim should be £87,350.63

(being £27,443.50 for redundancy notice and £59,907.13 for other demobilisation costs).

While the contract programme had allowed for about one week demobilisation, Mr Cookson

had considered it appropriate to allow five weeks. He allowed £25,250 for project leader

costs. The pursuer’s criticisms of the defender’s claim had been set out in, eg, the Reply at

paragraph 2.7; paragraph 5.1(f), (j), (k) and (l); and paragraphs 5.10 to 5.15. It was clear that

the adjudicator had taken the criticisms on board because he had found in favour of the

pursuer’s demobilisation figure. It was reasonably clear from paragraph 295 that he had not

accepted that any sum ought to be due for project leader costs, and that he thought

demobilisation claims ought to have been vouched to show actual costs incurred. In the

whole circumstances it had not been necessary for him to say more than he did in relation to

[32] Nor had the adjudicator needed to say more than he did about excess of forecast to

completion. There was no dispute as to the methodology to be used - that was clearly set

out in clause 92.3. This was not a case of a method being used which was a surprise for the

parties. Rather, the formula had been applied in light of the other findings which the

adjudicator had made. The sum awarded under this head had been higher than the sum for

which the pursuer had contended because the adjudicator had awarded considerably more

for compensation events than the pursuer had suggested. There was no mystery about the

calculation of the excess of forecast sum. The multiplicand was £1,877,353.40

(paragraph 295). How that figure had been arrived at was apparent from the Scott Schedule.

The forecast of the amount due at completion had there been no termination

was £3,053,836.21. The amount due on termination which was to be deducted was the sum

of three figures - £447,263.62 (base scope works), £690,155.18 (compensation events)

and £39,064.02 (demobilisation costs). Five per cent of £1,877,353.40 was £93,867.67.

[33] The defender’s averments about the assistance which the adjudicator obtained from

a quantity surveyor were irrelevant. The presumption of propriety ought to be applied

(Atholl Developments (Slackbuie) Limited, Petitioner, supra, at para 17, and SW Global Resourcing

Ltd v Morris & Spottiswood Limited, supra, at para 13). Where an adjudicator obtained

assistance of a clerical or administrative nature without telling the parties that did not result

in a breach of natural justice (Dickie & Moore Limited v Trustees of The Lauren McLeish

Discretionary Trust [2019] CSOH 71 and John Sisk & Son Limited v Duro Felguera UK Limited

Adjudicator’s Contract the adjudicator was entitled to obtain such help as he considered

necessary provided that he notified the parties. Here, the adjudicator had notified the

parties by sending them the Terms. Paragraph 14 of the Terms had alerted them to the fact

that the adjudicator could obtain quantity surveying input without further notice. Neither

party had queried the Terms. Accordingly, contrary to the defender’s averments, the

defender had been advised of the adjudicator’s intentions. It may reasonably be inferred

from the fact that the adjudicator did not provide any information or advice to the parties

that the quantity surveyor assistance was merely clerical and/or administrative.

[34] Mr Walker responded to Mr Richardson’s submissions on Ground 4. The defender’s

averments were not irrelevant. On the face of things matters had not been done properly.

The adjudicator had not complied with either of the requirements of clause 2.3 of the NEC

Adjudicator’s Agreement. There had not been notification of his intention to obtain the

assistance which he obtained from the quantity surveyor. Paragraph 14 of the Terms had

not been notification of his intention to obtain that assistance. In any case, he had not

provided the parties with a copy of any information or advice from the quantity surveyor

and invited their comments on it. Inquiry was necessary to ascertain the nature of the

assistance which had been given in order to determine the materiality or otherwise of the

[35] There was no real dispute as to the relevant law. Where, as here, an adjudicator was

required to give reasons they could be brief, and they need not deal with every point.

Adjudicators’ reasons are not to be judged by the standards applied to judges or arbiters. A

reasonable person informed as to the context of the dispute who reads the decision ought to

be able to discern from it what the adjudicator has decided, and why he has decided it.

Here, there is no doubt that the reasonable reader would be clear that the adjudicator had

decided that the value of the base scope works was £447,263.62. Would he be able to discern

[36] The reasonable reader would know that the difference between the parties’

valuations for base scope works had been focussed in the material before the adjudicator

(eg in the Referral at paragraph 10.7(a)(iii) (7/12 of process), in the pursuer’s Reply (7/14 of

process) at paragraphs 5.4 to 5.7, and in the defender’s Rejoinder (7/15 of process)). The

pursuer’s position had been that the difference arose because before termination the

defender had been overpaid for preliminaries. The defender denied that there had been

overpayment or, if there had been, that the pursuer was entitled to take account of it when

valuing the base scope works. The adjudicator accepted the pursuer’s figures. In my

opinion this is an instance of an issue where the acceptance by an adjudicator of one position

is sufficient to indicate the reasons for rejecting the other position (SW Global Resourcing Ltd

v Morris & Spottiswood Limited, supra, per Lord Hodge at para 17; DC Community Partnerships

Limited v Renfrewshire Council, supra, per Lord Doherty at para 26). I think it is implicit that

the adjudicator accepted that there had been overpayment before termination and that

account ought to be taken of that. In my view, acceptance by the adjudicator of the

pursuer’s position sufficiently disclosed his reasoning for rejecting the defender’s alternative

[37] I am not persuaded that the adjudicator failed to consider the position advanced in

the Cookson report and appendices when he was valuing base scope works. On the

contrary, in my view his reasons suggest that he considered the Cookson report and

[38] I do not think that Mr Walker’s suggested reading of paragraph 183 is correct. The

context of that paragraph, of course, was not the base scope works. It was part of the

adjudicator’s discussion of the quantification of the CE8 claim. In the immediately

preceding paragraphs the adjudicator had been critical of the absence of records and

vouching supporting Mr Cookson’s assessments. Those were the circumstances in which he

decided not to go beyond what the defender had assessed for the compensation events in

the Termination Application. So in relation to compensation events the adjudicator did not

fail to consider Mr Cookson’s report. Rather, he did not find it to be of much assistance

because Mr Cookson’s opinions were not based upon the sort of evidence (site

records/actual costs) he would have expected in the circumstances.

[39] It is no part of the defender’s case that the adjudicator failed to have regard to the

Cookson report in the context of compensation events. The adjudicator is not said to have

failed to exhaust his jurisdiction in respect of that part of his decision. Yet, paradoxically,

Mr Walker seeks to rely upon something said in relation to that aspect of the case to support

the proposition that the adjudicator treated the Cookson report as being forbidden territory

(at least in so far as the base scope works sum in the report exceeded the base scope works

sum in the Termination Application) when he came to consider the base scope works.

[40] I reject Mr Walker’s proposition. First, as already noted, I disagree with his reading

of paragraph 183. Second, as a matter of fact, the adjudicator cannot have considered

himself capped by each of the elements in the Termination Application because his base

scope excess of forecast at completion figure (£93,867.67) is higher than the corresponding

figure in the Termination Application (£75,773.59). Third, there was really no material

difference (about 0.7%) between the Termination Application base scope works

figure (£638,553.21) and the Cookson base scope works figure (£643,101.47). Even if on a fair

reading of paragraph 183 the adjudicator was saying that he considered all claims were

capped at the claims which had been made in the Termination Application, the cap for the

base scope works would have been very far in excess of the adjudicator’s view of the value

[41] It follows from my rejection of Mr Walker’s proposition that I reject the contentions

which were based upon it viz that the adjudicator (i) failed to consider a material defence;

and (ii) acted in material breach of natural justice by not raising with the parties that he

[42] It seems clear that the dispute in relation to demobilisation costs was well focussed

during the adjudication. The pursuer itemised the elements it accepted - its total value for

demobilisation costs was £39,064.02. Mr Cookson departed materially from the

demobilisation costs claim which the defender had submitted in the Termination

Application (paragraphs 16.35 to 16.47 of his report). He maintained that the demobilisation

costs element of the termination costs should be £87,350.63 (£27,443.50 for redundancy

notice and £59,907.13 for other demobilisation costs). He recognised the contract

programme had allowed about one week for demobilisation, but he considered five weeks

to be justified. He allowed £25,250 for project leader costs, notwithstanding that no sum for

a project leader had been included in the contract price list. The pursuer’s criticisms of the

defender’s demobilisation costs claim were set out in the Reply at paragraphs 2.7, 5.1(f), (j),

[43] The adjudicator valued demobilisation costs at the figure suggested by the pursuer.

Once again, in my opinion it is implicit that the adjudicator agreed with the pursuer’s

criticisms of the defender’s figure. I think it is tolerably clear from paragraph 295 (i) that he

did not accept that any sum ought to be due for project leader costs (which were a

substantial part of the difference between the figures of £39,064.02 and £87,350.63); and

(ii) that he thought demobilisation claims ought to have been vouched and based on actual

costs incurred. In my opinion in the whole circumstances it was not necessary for the

adjudicator to say more than he did in relation to demobilisation costs.

[44] I am also satisfied that the adjudicator did not require to say more than he did about

excess of forecast to completion. There was no dispute as to the methodology. Clause 92.3

prescribed that. The adjudicator’s calculation and the result were no more than the

application of that methodology to the relevant findings which he had made. There was no

mystery about the calculation. The multiplicand was £1,877,353.40 (paragraph 295). The

Scott Schedule showed the constituent elements of that sum. The forecast of the amount due

at completion had there been no termination was £3,053,836.21. The payments deducted

from that sum were £447,263.62 (base scope works), £690,155.18 (compensation events)

and £39,064.02 (demobilisation costs). Five per cent of £1,877,353.40 was £93,867.67.

[46] I did not understand there to be any dispute about the applicable law. In reaching

his decision the adjudicator required to comply with the rules of natural justice (Costain

Limited v Strathclyde Builders Limited 2004 SLT 102; Carillion Utility Services Limited v SP

Power Systems Limited [2011] CSOH 139; Highland and Islands Airports Limited v Shetland

Islands Council [2012] CSOH 12). The test is not “Has an unjust result been reached?” but

“Was there an opportunity afforded for injustice to be done?” (Barrs v British Wool Marketing

Board, supra, per Lord President Clyde at p 82). However, immaterial breaches of natural

justice will not render a decision unenforceable: the provisional nature of an adjudicator’s

decision justifies ignoring non-material breaches (Balfour Beatty Construction Ltd v The Mayor

and Burgesses of the Borough of Lambeth [2002] EWHC 597 (TCC), [2002] BLR 288, per

HH Judge Lloyd QC at para 27; Dickie & Moore Limited v McLeish & Ors, supra, per

[47] The defender does not accept that the Terms were incorporated into the parties’

contract with the adjudicator. Mr Richardson did not suggest that the court should hold at

this stage that the defender’s averments to that effect are irrelevant. The defender’s case is

that it was incumbent upon the adjudicator to inform the parties during the adjudication

(i) that he was obtaining quantity surveying assistance; and (ii) of the nature of that

assistance. He avers that neither of these things was done, and that as a result there has

been a breach of natural justice. The question is, can it be said at this stage, without inquiry,

that this defence is bound to fail (Jamieson v Jamieson 1952 SC (HL) 44, per Lord Normand at

p 50, Lord Reid at p 63; Henderson v 3052775 Nova Scotia Ltd 2006 SC (HL) 85, per

[48] Mr Richardson maintains that the court should reach that conclusion. He says that

paragraph 14 of the Terms informed the parties that the adjudicator intended to obtain

quantity surveying assistance (and that communication of that paragraph to the parties was

compliance with the first of the adjudicator’s obligations under clause 2.3 of the NEC

Adjudicator’s Contract). Mr Richardson did not suggest that the adjudicator informed the

parties of the nature of the assistance; but he contended that the court should infer from the

absence of such a communication that the assistance provided was merely administrative or

clerical, and not the sort of assistance which called for disclosure and comment by the

parties. That, he submitted, would be an appropriate application of the presumption of

[49] In my opinion neither of these submissions is compelling. Paragraph 14 did not

communicate an intention on the part of the adjudicator to employ quantity surveying

assistance. Rather, it purported to make provision for what would happen if it subsequently

transpired that the adjudicator considered that he needed quantity surveying input during

the adjudication. Moreover, in my view it would be going too far too fast to infer at this

stage that the assistance provided by the surveyor was of a type which did not require to be

[50] If the surveyor’s assistance here was indeed merely of a clerical, administrative and

checking nature I think it moot whether that would have engaged the obligations in

clause 2.3 of the NEC Adjudicator’s Contract. It is arguable that clause 2.3 concerns matters

which are likely to be material to the decision-making process (“help that he considers

necessary in reaching his decision”), such as quantity surveying opinion or advice upon

which an adjudicator proposes to rely. It is not hard to see that with material of that sort

fairness requires that it be disclosed to enable the parties to comment on it. However, I

incline to the view that even if the assistance provided by the surveyor was merely clerical

and administrative, natural justice required (i) that the adjudicator ought to have told the

parties that the surveyor had been engaged; and (ii) that while detailed disclosure for

comment would not have been necessary, the adjudicator ought to have indicated (at least in

brief, broad terms) just what it was that the surveyor was doing (Dickie & Moore Limited v

[51] Be that as it may, the critical question here is whether there has been a material breach

of natural justice. In my opinion I am not in a position, without inquiry, to conclude that

there has not been a material breach of natural justice. I am not persuaded that I can

determine on the pleadings that this defence is bound to fail even if the defender proves all

[52] Before passing from this ground I observe that it is highly regrettable that, after it

became aware of the fact that a surveyor had been engaged, the defender took six months to

raise the present complaint. It is wholly unsurprising that the adjudicator and the pursuer

have expressed frustration at that delay. I agree with them that the point ought to have been

raised much earlier. Ordinarily, by the stage of an enforcement hearing such as this I would

have expected a defender taking such a point to have investigated the matter by

precognoscing the adjudicator and the surveyor so that it was in a position to make specific

averments as to the nature of the services which the surveyor provided. While I have

concluded that it is in the interests of justice that there should be an inquiry here, I think it

right to stress that objections to an adjudicator’s decision ought to be raised expeditiously. I

also caution that defenders should not assume that the court would reach the same

conclusion as it has here in similar circumstances in the future if, despite these words of

[53] I shall put the case out by order (i) to discuss an appropriate interlocutor to give

effect to my decision; (ii) to discuss further procedure; and (iii) to consider any motion for

expenses which may be made.

Scottish Court of Session Decisions