TCC issues guidance to ensure that adjudicators do not slip up when exercising their powers under the ‘slip rule’ to correct errors in a decision

In McLaughlin & Harvey Ltd v LJJ Ltd [2024] EWHC 1032 (TCC), the Court considered an adjudicator’s use of the ‘slip rule’ to correct a decision which addressed a factual point that had not been considered as part of the original decision.

McLaughlin & Harvey Limited (“MHL”) were appointed as the main contractor for the fit-out and refurbishment of Christchurch Court in London. MHL appointed LJJ Limited (“LJJ”) as subcontractor to carry out the MEP installations for the project.

There had been no less than five adjudications between MHL and LJJ in relation to the subcontract. These proceedings concerned MHL’s attempt to enforce the decision in the fifth adjudication.

The Judgment provides some helpful guidance on the use of the ‘slip rule’ by adjudicators and acts as a timely reminder of both the policy and purpose of statutory adjudications, and the need to have quick and certain decisions.

Background

On 12 September 2023, MHL served a Notice of Intention to Refer the dispute to adjudication. It sought damages arising from LJJ’s alleged failure to meet Key Dates (as defined in the subcontract) in the sum of £1,160,000.

The adjudicator provided his decision on 31 October 2023 and directed LJJ to pay MHL the sum of £808,000 (the “Original Decision”) in damages. At the same time, the adjudicator issued a note to the parties inviting them to notify him of any “clerical or typographical errors”

LJJ responded to this request and argued that MHL had already exercised its right to deduct Key Date damages in the sum of £954,285.71 as part of an interim payment cycle. LJJ argued that the benefit MHL had received from already applying this deduction ought to have been considered as part of the adjudicator’s decision. Curiously, LJJ’s correspondence with the adjudicator acknowledged that it was making “submissions” on the amount. The TCC observed in the enforcement proceedings that these were submissions on matters of fact, which had not been raised during the adjudication.

MHL objected to LJJ’s submissions on the basis that they were not clerical or typographical errors and therefore the adjudicator had no power to make changes to the decision.

Shortly after, LJJ wrote to the adjudicator and provided further submissions. Again, in the enforcement proceedings the TCC noted that LJJ’s correspondence amounted to submissions on matters of fact or law.

Despite MHL’s objections to LJJ making the submissions after a decision was issued, the adjudicator, realising that the wording in his Original Decision could potentially result in a double recovery of Key Date damages by MHL, issued a revised decision on 4 November 2023 (the “Revised Decision”).

In his covering note to the parties, the adjudicator said that he was “… of the view that those corrections are within that power for the reasons stated in [the adjudicator’s] email of earlier today. Indeed, as LJJ submits, these corrections have similarities to those that the court in Bloor Construction (UK) Ltd v Bowmer & Kirkland (London) Ltd [2000] BLR 314 considered were within an Adjudicator’s power; albeit in that case under an implied slip rule.”.

Enforcement proceedings

MHL applied for summary judgment to enforce the adjudicator’s Original Decision.

LJJ sought to resist the enforcement of the Original Decision on four grounds, the two most significant being:

• The Revised Decision superseded the Original Decision; and
• If the adjudicator erred in law in issuing the Revised Decision, this was within his jurisdiction and the Court should not interfere.

Did the Revised Decision supersede the Original Decision?

The Judge considered adjudicators’ powers under the Scheme for Construction Contracts 1998 (the “Scheme”). Paragraph 22A(1) provides that an adjudicator may remove “a clerical error or typographical error arising by accident or omission”. It is generally accepted that this might include a typo, an obvious calculation, or naming error (as opposed to going to the logic or intent behind a decision). This is known as the ‘slip rule’.

It was common ground between the parties in the enforcement proceedings that LLJ’s submissions to the adjudicator did not relate to typographical errors. The Judge was therefore only required to consider whether the submissions concerned a ‘clerical error’ in the decision.

The Judge considered previous authority on the point, in particular the decision in Axis M&E UK Limited v Multiplex Construction Europe Limited [2019] EWHC 169 (TCC), where the Court noted an adjudicator’s power does not extend to correcting errors “going to the reason or intention forming the basis of that decision”. Further, this power was not intended to enable an adjudicator to correct omissions “…that the adjudicator intended to include or take account of but which he has wholly omitted in reaching his decision”.

The Judge concluded that there were no clerical errors in the Original Decision. Rather, the changes that had been included in the Revised Decision, to try and prevent MHL from making a double recovery of Key Date damages, were matters of substance which the adjudicator had not adequately considered as part of the Original Decision. This meant that the adjudicator had exceeded his powers to correct a decision under paragraph 22A(1) of the Scheme.

Was the adjudicator’s error within jurisdiction, such that the Court will not interfere?

In considering this point, the Judge referred to the adjudicator being alerted to the limitations of his powers to correct a decision under paragraph 22A of the Scheme, prior to issuing the Revised Decision. The adjudicator opted to issue the Revised Decision in any event.

The Judge considered the cases of Lesotho Highland Development Authority v Impreligo SpA [2006] 1 A.C. 221 (“Lesotho”) and O’Donnell Developments Limited v Build Ability Limited [2009] EWHC 3388 (TCC) (“O’Donnell”).

In Lesotho, which was considered in the context of an arbitration rather than an adjudication, it was observed that when assessing if an arbitrator had exceeded their powers, the decision should be based upon “whether the tribunal purported to exercise a power which it did not have or whether it erroneously exercised a power that it did have”.

The Court in O’Donnell emphasised that this action reflects the adjudicator giving proper effect to his “first thoughts and intention”, rather than to “give effect to second thoughts or intentions”.

In Axis M&E, the Court suggested that if an adjudicator is asked to correct a slip under the ‘slip rule’, which concerns an error of fact or law, this would not take the slip rule out of the judication.

The Judge in the present case concluded that O’Donnell was not binding due to the obiter nature of the Court’s comments in the decision. The Judge adopted an approach which was consistent with Axis M&E and noted that the present case concerned an adjudicator exercising a power that he did not have. Despite the adjudicator being limited to correcting clerical or typographical errors, he sought to qualify or clarify his decision and exceed his powers in doing so.

The Judge concluded that if adjudicators had powers to qualify or clarify a decision, based on subsequent submissions by the parties, this would not conclude the process as the parties could simply submit a further round of submissions. This would not reflect the intention of the Housing Grants, Construction and Regeneration Act 1996 (as amended) or the Scheme.

The Court concluded that the Original Decision was enforceable and MHL was entitled to summary judgment to enforce the Decision which had awarded MHL the sum of £808,000.

Commentary

This case clarifies the narrow parameters of the ‘slip rule’ and acts as a timely reminder for adjudicators on the limits of their powers and importance of not exceeding them.

There also appears to be an element of policy behind the Judgment.  As the case indicates, if the Court had allowed the Revised Decision to supersede the Original Decision, this could have opened the floodgates to parties endlessly making submissions or seeking to change adjudicator’s decisions post-issue. Such an approach would clearly contradict the purpose of the adjudication system which seeks to determine disputes in a quick and inexpensive way.

The rationale behind the Scheme is to provide parties with an interim binding decision within 28 days of a dispute being referred to adjudication, given cashflow is critical on live construction projects.

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