AWG Construction Services Ltd v Rockingham Motor Speedway Ltd [2004] EWCH 888

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An adjudicator has no jurisdiction to decide issues not referred to him for a decision within the referral notice. Without prejudice to this principle, a party must have a sufficient opportunity to consider any new material that is submitted during the adjudication. Where a decision relates to a number of disputes, the decisions on unchallenged claims should be enforced immediately.

Judge John Toulmin QC, Technology and Construction Court

5 April 2004

Rockingham Motor Speedway (“Rockingham”) entered into a contract with AWG Construction (“AWG”) for the design and construction of a new racing track, building and a grandstand, and certain tunnels, near Corby in Northamptonshire.

At the track’s first meeting, water seeped through on to the track’s surface, causing the race to be abandoned on safety grounds.

Rockingham served a withholding notice in the amount of £2.8 million, which it asserted would be the cost of remedial works to the track. Following discussions between the two parties, AWG undertook remedial works and Rockingham consequently released £2.4 million. However Rockingham continued to withhold £400,000 on the grounds that the remedial works had not dealt satisfactorily with the problem.

AWG commenced an adjudication to recover the £400,000 that it claimed was being wrongfully withheld. The adjudicator found in favour of AWG and ordered Rockingham to pay the £400,000.

The adjudication did not address Rockingham’s complaints concerning defects with the track. Consequently Rockingham commenced a second adjudication claiming £2.8 million as the cost of remedying the defects. By agreement, three separate disputes were referred to the adjudicator. With regard to the dispute concerning the race-track, (the “race-track issue”) the referral notice stated that AWG had been negligent in specifying a soil stabilisation method which proved to be unsuitable in that it had created an impermeable layer under the track surface; a granular sub-base rather than a stabilised sub-base should have been used instead. AWG argued that the use of a stabilised sub-base was not negligent. For example, tenders submitted by other contractors for the same works included the same design.  Rockingham then made further submissions to the adjudicator on 11 November 2003 (one week before the adjudicator was due to make his decision), this time asserting that a lack of drainage to the stabilised sub-base was actually the problem, rather than the stabilised sub-base itself. AWG asserted that this did not represent the case that had been originally referred to the adjudicator. AWG also argued that it had not been given sufficient time to respond to this new matter.

The adjudicator dismissed AWG’s concerns. The adjudicator issued his decision on 18  November 2003. With regard to the race-track issue, the adjudicator rejected Rockingham’s original case on design, but found against AWG on the wider case put forward by Rockingham on 11 November 2003. With regard to the other two disputes, the adjudicator found in favour of Rockingham and awarded Rockingham the sum of £54,328.73.

The matter then came before HHJ Toulmin in the TCC. AWG sought an order that the whole of the adjudicator’s decision should be set aside on the grounds that in relation to the race-track issue, the adjudicator only had jurisdiction to consider the initial matters raised by Rockingham in its referral notice, which did not include drainage. Alternatively, AWG argued that the adjudicator failed to act impartially and in compliance with the principles of natural justice by not providing AWG with sufficient time to respond to the drainage arguments. The other two disputes determined by the adjudicator were not challenged by AWG.

HHJ Toulmin found that the adjudicator’s consideration of the drainage issue was so different from the issues put forward in the referral notice that it was in essence a different adjudication. Because Rockingham’s submissions relating to drainage did not form part of the original referral, the adjudicator had acted outside of his jurisdiction. The court also held that, in failing to allow AWG a proper opportunity to give a fully considered response to the additional material, the adjudicator had acted unjustly and so had breached the principles of natural justice. Finally, the court also found that, where a decision relates to a number of disputes, there is no reason why the decisions on the unchallenged claims should not be enforced immediately. Hence the adjudicator’s decision on the two issues unrelated to the race-track issue should be enforced.

This summary was provided by CMS Cameron McKenna LLP.

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