PP Construction Limited v Geoffrey Osborne Limited [2015] EWHC 325 (TCC)

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-cmck.com/Construction/Construction-Disputes

summary

A construction contract must include a written provision giving an adjudicator the right to correct a typographical or clerical error (the slip rule). Here the parties' contract provided that they had 14 days to request a correction under the slip rule, with the amended decision being issued within seven days of that request. For a request to be operative and to engage these time periods, the error must be identified with sufficient clarity that a reasonable adjudicator would understand that he had made an error, what the error was, why it was an error and what alteration was necessary.

Technology and Construction Court, Mr Justice Coulson

BACKGROUND

PP Construction Limited (“PP”) and Geoffrey Osborne Limited (“GOL”) entered into a contract on 17 January 2013 where GOL engaged PP to act as its subcontractor and to carry out ground works and works on the concrete frame at the Chichester Festival Theatre.

Within the contract, Clause 70(9) made express provision for the correction of errors in an award. The Clause provided that any correction of an error in an award must be made within 7 days from when the adjudicator either takes the initiative or a request is made by either party. The Clause also provided that “the adjudicator may on his own initiative or at the request of either party correct his decision so as to remove any clerical mistake, error or ambiguity provided that such initiative is taken or such request is made within 14 days of the notification of his decision to the parties”.

A dispute arose between PP and GOL regarding payment due to PP. The adjudicator, issued an award on 26 November 2014 directing GOL to pay PP £229,005 plus VAT and applicable interest. The adjudicator used PP’s valuation figure as a base, applying a 5% discount, and deducting a 2.5% retention as well as sums already paid by GOL.

PP emailed the adjudicator at 13:53 on 26 November 2014 stating that the calculation was incorrect and that the 5% discount should not have been made as PP’s valuation was already net of a 5% discount. PP stated that the adjudicator had therefore discounted the amount twice by 5%.

The adjudicator responded to PP on 28 November 2014 clarifying that there was no intention to discount by 5% twice and suggesting that PP identify the particular erroneous items in the award. PP emailed the adjudicator on 28 November 2014 providing an explanation of their calculations.

The adjudicator replied to PP on 30 November 2014 accepting that PP was correct to point out the clerical error and confirmed that 5% had been taken twice. The adjudicator concluded his email with “the correction will be issued as above once you cast an eye”.

PP then replied to the adjudicator on 4 December 2014 confirming the difference in calculation and requesting the adjudicator to issue his revised decision. On 5 December 2014, PP’s solicitors emailed the adjudicator again asking him to issue his revised decision. The adjudicator issued the revised award that day.

If the operative request for correction of the clerical error was the email on 26 November 2014 from PP to the adjudicator, then the revised award was issued more than the 7 days after the request provided for by Clause 70(9). If, however, the operative request was made on 28 November 2014, 4 December 2014 or 5 December 2014 the revised award was issued within the 7 days allowed by Clause 70(9).

GOL resists the application for summary judgement on the basis that the adjudicator’s correction was made out of time and was of no effect.

ISSUES

The Court was asked to decide:

Whether the email and attachment on 26 November 2014 were a “request” within the meaning of Clause 70(9)?
If the email and attachment on 26 November 2014 were not a “request” within the meaning of Clause 70(9), did PP issue a “request” within the meaning of the Clause at a later date?
If the email and attachment on 26 November 2014 were a “request” within the meaning of Clause 70(9):

was it open to PP to issue another request within the meaning of the Clause and, if it was,
did PP issue another request within the meaning of the Clause?

If the answers to issues (1), (2) and (3)(b) are “No”, did Mr Bingham correct his decision on his own initiative?

DECISION

The Court held that:

The dispute had crystallised. The court considered that Dawnus had asserted its claim by way of its interim application on 10 December, and that AECOM, on behalf of St A, had expressly rejected this claim in its response dated 19 December 2013. It held that, “[n]othing more is required for a dispute to have crystallised”. The court additionally noted that the long period of inactivity that followed AECOM’s promise to respond to the loss and expense claim also “clearly and obviously amounted to a rejection of Dawnus’ claim”.
The Adjudicator had power to determine the dispute. The process of pruning an original claim for the purposes of adjudication is not only permitted, but to be “encouraged”. In making this decision, the Court considered that the Adjudicator’s decision reflected an existing liability on St A to pay rather than creating a liability pay where none existed before. Further, the Court noted that St A was not prevented from raising any legitimate cross-claim by way of a defence to Dawnus’ limited claim in the adjudication (which St A had failed to do).
Therefore, summary judgment was granted to Dawnus in the sum of the Adjudicator's decision. Additionally, the relief claimed by St A, seeking declarations in respect of the Adjudicator’s lack of jurisdiction, was dismissed.

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-cmck.com/Construction/Construction-Disputes

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