Carillion Utility Services Limited v SP Power Systems Limited [2011] CSOH 139

Under a framework agreement Carillion carried out the excavation, backfilling and reinstatement of works and installed electricity and ancillary cables for SP. Following an adjudicator's decision regarding  Carillion's entitlement to payment it took action to enforce the decision. SP challenged the adjudicator's decision asserting that he had failed to comply with the rules of natural justice in the method which adopted to quantify Carillion's claim.

SP claimed that the adjudicator did not adopt the method of quantification which Carillion had put forward and which SP criticised. Instead he had used his own experience of what would constitute reasonable commercial rates, made an assumption about the additional equipment used by Carillion and applied rates which he selected without giving the parties an opportunity to consider and comment on his proposed methodology and the material on which it was based.

Referring to the nine principles set out by Lord Drummond Young in his opinion in Costain Ltd v Strathclyde Builders Ltd Lord Hodge highlighted the following as the most relevant to the case in question;

"An adjudicator is normally given power to use his own knowledge and experience in deciding the question in dispute… If the adjudicator merely applies his knowledge in assessing the contentions, factual and legal, made by the parties, I do not think there is any requirement to obtain further comment. If, however, the adjudicator uses his own knowledge and experience in such a way as to advance and apply propositions of law or fact which have not been canvassed by the parties, it will normally be appropriate to make those propositions known to the parties and call for their comments. …"

Lord Hodge found that the adjudicator did not go off on a frolic of his own but used his own knowledge and experience to assess Carillion's claim based on the submissions of the parties. However an opportunity for injustice to occur was arose when he applied commercial rates which from his own experience he saw as reasonable but about which there appears to have been no evidence. The resultant calculation was a material and significant part of his decision. Accordingly the parties were entitled to know of this input into his reasoning and have a chance to comment on it.

Lord Hodge concluded that the adjudicator had breached the rules of natural justice in failing to give the parties notice of the commercial rate which he proposed and the way in which he proposed to apply it in reaching his conclusion.

Carillion sought the severing of the offending part of the decision over the rates and the upholding of the adjudicator's apportionment of fees and expenses. Lord Hodge considered that the decision which the adjudicator reached on the merits may have influenced his decision on the apportionment of his fees and expenses.He could not therefore see how he could sever the decision on expenses from the decision on the merits or alter the decision on the merits while leaving the expenses decision in place.

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