The recent case of Axis M&E v Multiplex Construction deals with an unusual circumstance where the result of a correction under the ‘slip rule’ reversed the Adjudicator’s Decision entirely. and resulted in a change from an award of ‘nil’ to an award of over £650,000 in favour of the Claimant.
For the uninitiated, the rule allows an adjudicator to correct a typographical or calculation error in a decision, provided the error is brought to their attention within a certain time period. This is a right contained in S.108(3A) of the Construction Act (HGCRA) and is reflected in the Scheme for Construction Contracts.
The Original Dispute
Axis M&E UK Limited (Axis) was engaged by Multiplex Construction Europe Limited (Multiplex) as a mechanical and electrical subcontractor on a luxury residential development in Kensington.
Axis brought an adjudication regarding two issues relating to a payment application:
- The proper valuation of certain variations; and
- Multiplex’s right to deduct contra changes.
The Adjudicator considered the submissions of both parties and decided the issues accordingly. In his final calculation he determined the amount due to Axis was -£129,092.84. As this was a negative sum, the claim failed.
The Error
The Adjudicator determined that contra charges of c. £245,000 was due to be deducted. However, he deducted this from the sum certified by the Defendant, which already included deductions of c. £785,000 in contra charges.
This meant that by the Adjudicator’s calculation, contra charges of over £1,000,000 was due rather than the c. £245,000 he intended.
The confusion is somewhat understandable and it seems Axis’ own submission may have contributed. In issuing the amended Decision, the Adjudicator explained:
Payment Notice as signed by Mr Sharpe on 5th May 2018 showed that the total certified after deduction of contra-charges…gave a gross sum prior to retention of £19,922,737.09 and yet the Payment Notice signed by Mr Sharpe on 4 June 2018 showed the gross sum before deduction of retention as £19,282,680.04.
I therefore sent a number of emails to the parties to seek clarification of the amount paid and on the gross sum certified prior to retention, and I used the Claimant’s figure in reply to my emails in my Decision.
It was not clarified that that was after deduction of contra charges, and no explanation was given as to the difference between the two versions of the Payment Notice.
The Correction
The Adjudicator promptly corrected his decision, resulting in Axis being awarded c. £650,000 instead of nil, as well as reversing his decision on which party should pay his costs (making Multiplex liable) and determining that interest was due to be paid to Axis.
The amended Decision also included the following:
…whether or not this is a slip is not within my jurisdiction to decide…it will be for the parties or others to decide which decision shall apply.
Axis promptly applied to court to enforce the Amended Decision and Multiplex resisted payment, on the basis that the Amended Decision went beyond what was permitted by the slip rule.
The Court Case
The heart of the issue was whether the correction of the Decision by the adjudicator was merely “removing a typographical or clerical error arising by accident or omission”, which is permitted by the slip rule, or whether the Adjudicator somehow went beyond this and reconsidered his reasoning.
This goes to the important principle that an adjudicator cannot simply change his mind after issuing a Decision. The slip rule is not to be used by someone having ‘second thoughts’. The correction must be of a mistake by the Adjudicator which was ‘a genuine slip which failed to give effect to his first thoughts’.
The error arose due to some confusion as to the correct figure for the application, a matter on which the Adjudicator invited submissions.
According to Multiplex, the Adjudicator therefore had the opportunity to decide which figure to use when making his decision as to the amount due to Axis, and he did so after proper consideration. The Adjudicator formed an intention as to which figure to use and could not have second thoughts regarding this. Although he made a mistake of fact, it was not one he was entitled to correct through the slip rule.
The Decision
The Court sided with Axis.
The Judge found that the starting point was to consider the dispute which had been referred to the Adjudicator. This concerned the value of variations and the application of contra charges.
The Adjudicator’s decision was clear on these two topics and the Adjudicator reached clear conclusions.
The error came in the application of the arithmetic to give effect to his conclusions.
The Judge found that this was a correction of the sort falling within the slip rule, and Axis was successful with their application.
Points to Note
- This decision seems to be a victory for common sense and fairness. However, the fact that this matter got to the High Court in the first place shows the lengths that parties will go to in order to resist payment.
- Clear and accurate communication with the Adjudicator regarding the relevant facts and figures is important. In this case, the error and the subsequent litigation could have been avoided. Concise, clear and unambiguous submissions are paramount
- This case also shows that the Adjudicator’s Decision is not always the end of the story. Parties need to remain vigilant and subject the Decision to serious scrutiny.
- The fact that a mistake with consequences of this magnitude can be made in an adjudication may seem surprising, but it must be remembered that adjudication was always intended to provide ‘rough justice’. Axis was perhaps lucky that this was an error of the type that could be corrected and that the Adjudicator was willing to do so. This is not always case. The best defence against errors and ‘bad decisions’ is to ensure that all submissions are of the highest quality – based on a foundation of clear narratives and sound contractual positions, supported by evidence.
- Adjudicators, like the rest of us, are human after all.
The judgment in this case can be found here: Axis M&E Limited and Multiplex Construction Europe [2019] EWHC 169 (TCC)
Article written by Tom Lamb, Managing Director
Check out our Services and Case Studies, or Contact Us with any general enquiries to see how we can help.