Herbosh-Kiere Marine Contractors Limited v Dover Harbour Board [2012] EWHC 84(TCC)

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-lawnow.com/adjudication

Judgment date: 26.01.2012


An adjudicator had (1) exceeded his jurisdiction by applying a methodology in determining the dispute which formed no part of the dispute referred to him and (2) breached the rules of natural justice, doubtless unwittingly, by deciding the case not only on a basis that had  not been advocated by either party but also without giving each party the opportunity to make submissions at least on the method of assessment which the adjudicator considered that he should adopt.

Technology and Construction Court, Mr Justice Akenhead


Herbosh-Kiere Marine Contractors Ltd (“HKM”) entered into a contract with Dover Harbour Board (“DHB”) whereby HKM agreed to provide the equipment, including barges, personnel and supervision, to remove the remains of a former cargo ship and some debris from another ship from the seabed near Dover harbour.

The contract provided that if HKM was delayed in performing its obligations under the contract due to adverse weather, sea conditions or any other reason outside the control of HKM, HKM would receive additional time and compensation from DHB “per working day or pro rata - at the rates set out in Annex 1”.   Annex 1 contained a breakdown of the lump sum price to be paid to HKM under the contract into sums for separate resources, including in particular those for barge 1, barge 2 and supervision. It also contained a breakdown of what each resource comprised, with barge 2, for example, comprising the barge, a crawler crane, a demolition grab and a tug boat and crew. 

The contract also included a pain/gain share of time related to costs which involved the correlation between delay and the resources rates for barges 1 and 2 and the supervision.  This formula was designed to reward HKM if it finished earlier than it should and the opposite if it finished culpably late.
Clause 23 of the contract provided for disputes to be referred to adjudication.

The project overran by some three months and disputes arose on the final account.  On 23 June 2011 HKM put forward to DHB the final version of the account with narratives explaining why HKM contended that extensions of time generally should be increased.  The letter addressed delays attributable to various causes entitling HKM to time and money.  It went through every month of the project highlighting when and why additional extensions were required. The calculations for the money claimed against the various delay/disruption variations was calculated on a resource by resource basis.  Thus, the amount claimed in respect of each resource was dependant upon the actual delay alleged to have been caused to that resource by the delaying event concerned.  The pain/gain assessment was also set out on a resource by resource basis.

DHB responded by letters and a further valuations dated 7 and 13 July 2011. For items for which delay was accepted, DHB also calculated the claim on a resource by resource basis.  This response led to an additional £162,024.25 being certified and paid by DHB to HKM but HKM considered that further sums were due to it.

HKM served a Notice of Adjudication on 24 October 2011 claiming £634,440.14.  In their Notice, HKM stated that the dispute had arisen as a result of DHB’s letters of 7 and 13 July 2011 which rejected the final account produced by HKM.  HKM sought a determination that the correct value of the final account was the value contended for by HKM.  In its response DHB provided its overall valuation of the work done, allowing for a deduction for alleged inefficiency on the part of HKM.  DHB provided a breakdown of its valuation which calculated the amount due in relation to delay or disruption in effect on exactly the same basis as HKM had put forward.

In his decision, the adjudicator found that the total final account assessment was £3,704,422.37, which after deducting sums already paid by DHB, left a net amount due to HKM of £501,420.45 plus £1016.89 in interest plus VAT.  In reaching this decision, he assessed the pain deduction at £63,978, based upon a daily “resource rate” of £21,326.  He derived this daily rate by dividing the total value of the resources (plant and personnel) given in Annex 1 to the contract by the original anticipated contract duration (being 64 days).  He also assessed the extensions of time due and then applied the same daily resource rate to them to reach the amount due to HKM in respect of the delays without assessing the various resources separately. 

The adjudicator’s decision was not honoured by DHB.  HKM issued proceedings and applied for summary judgment to enforce the adjudicator’s decision.  Opposing this application, DHB alleged that the adjudicator had exceeded his jurisdiction by not basing his decision on the dispute as outlined in the correspondence between the parties in June and July 2011.  DHB argued that the Parties were in dispute regarding the periods of delay for specific resources and were not proceeding on the basis of the application of a composite overall rate to the overall delay. In the alterative, DHB argued that the adjudicator had acted materially unfairly as he did not advise the parties that he intended to apply a composite rate to the overall delay. 

In response, HKM submitted that the fundamental issue in dispute was the amount owed in the final account and even if the adjudicator had erred in his method of calculating the sums owed, a mistake should not undermine enforcement of his decision.


The Court was asked to address the following issues:

  • Whether the adjudicator exceeded his jurisdiction.
  • Whether the adjudicator had materially breached the rules of natural justice.


The Court held that:

  • the dispute undoubtedly related to the final account.  However, it was explained, clarified and limited by the terms of HKM’s letter dated 23 June 2011.  That letter was clearly put such that it was to be evaluated on the basis of the extent to which individual sets of resource were delayed by the events relied upon using the resource rates in or derived from Annex 1.  DHB’s letter of 13 July 2011 in effect accepted that basis of assessment but challenged the delay periods
  • the dispute did not encompass any assertion by either side that the appropriate method of assessment was simply a determination of the overall delay multiplied by a composite rate comprising or relating to three resources rates (one for barge 1, barge 2 and supervision) 
  • it was not an over-analytical approach to establish that the scope of the dispute was defined by reference to the specific letters relied upon by both parties as defining the dispute. The analysis was a relatively simple one. This was not a case in which what was being referred was some very general amorphous final account dispute. What was being referred was a specific final account claim, calculated on a certain basis in relation to delay related matters, to which there was no dispute broadly about the method of assessment, namely on a resource by resource basis, calculated at the contract rates
  • accordingly, the adjudicator had exceeded his jurisdiction by addressing and finding a method of assessment which formed no part of the dispute referred to him
  • the way in which the adjudicator decided of his own initiative to assess the quantum relating to delay and to pain/gain assessment made a significant financial difference in favour of HKM to the detriment of DHB
  • the adjudicator was incorrect to have calculated the final account in a way not advocated by the parties during the adjudication and for doing so without giving the parties the opportunity to comment
  • in using his own method of assessment, the adjudicator had gone off “on a frolic of his own” and had unwittingly breached the rules of natural justice
  • accordingly, the adjudicator’s decision could not be enforced and HKM’s claim must be dismissed.

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-lawnow.com/adjudication

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