England and Wales High Court (Technology and Construction Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		8th October 2009

MR JUSTICE EDWARDS-STUART:

1. There are two applications before the court. By a claim form issued on 6 August 2009 Geoffrey Osborne Limited (GOL) seeks to enforce an adjudication decision of a Mr Allen Dyer dated 15 July 2009, the net effect of which was to order Atkins Rail Limited (ARL) to pay GOL the sum of £504,385 (in this judgment all figures are in round pounds).
2. By a claim form issued on 11 August 2009 under Part 8 of the CPR ARL seeks declarations that Mr Dyer had no jurisdiction to make the decision that he did and/or that the decision was plainly wrong and should be set aside and/or not enforced. Both applications are therefore essentially concerned with the same issue, namely whether the adjudicator's decision should be enforced. GOL, represented by Mr Christopher Lewis, contends that ARL has no realistic prospect of successfully resisting GOL's claim for enforcement so that GOL is entitled to summary judgment on its claim.
3. ARL, by contrast, represented by Mr Roger ter Haar QC and Mr Andrew Phillips, submits that the award is only binding unless and until overruled or set aside by the court, and that the court can and should decide on this application that it was wrong and set it aside. Alternatively, ARL submits that the adjudicator did not address the questions that were before him and therefore exceeded his jurisdiction.
4. ARL was the main contractor, pursuant to a contract with Network Rail Infrastructure Limited (as employer) ("the Main Contract"), for the design and construction of signalling and related civil works as part of the Basingstoke Area Infrastructure Upgrade Project. The works were to be commissioned in 3 separate stages, known as Stage 1, Stage 2 and Stage 3. ARL engaged GOL (as sub-contractor) to construct certain civil engineering works associated with the Main Contract, pursuant to a sub-contract in writing executed on 10 October 2006 ("the Sub-Contract").
5. The problem arises because, as is now common ground, the adjudicator made a significant error. By the Notice of Adjudication he was asked to assess the value of two items of work, for which assessments had been included in ARL's Interim Certificate No 35 and which were the subject of further claims in GOL's subsequent Payment Application No 36, and having done so, to order payment of an appropriate amount to ARL (I am deliberately using neutral language so as not to appear to prejudge the issues in dispute). The two items were a ground investigation carried out by GOL and variations in connection with the construction of signal control centre located to the rear of Basingstoke Station ("the SCC").
6. Unfortunately, having carefully assessed the value of the two items of work (and associated loss and expense) the adjudicator omitted to deduct the amounts already included in respect of those items in Certificate No 35, with the result that he concluded that GOL was owed £504,385 and ordered ARL to pay that sum. In fact, it was common ground between the parties that since there had been included in the total sum certified in Certificate No 35 some £912,147 in respect of the two claims in issue (namely £550,000 in respect of ground investigation and £362,147 for the variations in connection with the construction of the SCC), GOL was not owed the sum that the adjudicator ordered to be paid.
7. The position is complicated by the fact that Certificate No 35 showed a negative balance, namely that GOL's work had been overvalued so that instead of further sums being owed to GOL under the certificate, in fact GOL was said to owe ARL some £552,891. The upshot is that the correct result - on the adjudicator's own findings as to the value of the two claims and the other unchallenged figures in Certificate No 35 - was that GOL had been overpaid by over £400,000, rather than being owed some £500,000 odd. The difference between the two positions is both startling and stark.
8. Following the issue of the Decision, the adjudicator was invited by ARL to correct the relevant part of it by which he had ordered ARL to make a payment to GOL. By his letter dated 20 July 2009, the adjudicator declined to do this. He appears to have thought that ARL had specifically submitted that he was not to insert his valuations into Certificate No 35, with the result that the amounts paid or allowed within that certificate were to be ignored.
9. As a result, and perhaps understandably, ARL has taken every possible point in its efforts to resist the enforcement of this award.

The procedure adopted

10. Since the adjudicator's Decision is binding upon the parties until the matters decided by him have been finally determined by a court, ARL issued proceedings under Part 8 of the CPR in order to obtain a final determination in the form of an appropriate declaration to the effect that the Decision, or at least the relevant part of it relating to the order for the payment of money to GOL, was wrong and should be set aside. In effect, it amounts to a pre-emptive strike to defeat GOL's application to enforce the Decision.
11. In Jarvis Facilities Limited v Alstom Signalling Limited [2004] EWHC 1285 (TCC), HH Judge Humphrey LLoyd QC was faced with a similar situation. Alstom pre-empted Jarvis's application to enforce an adjudicator's award in its favour by immediately issuing Part 8 proceedings seeking declarations that Jarvis was not entitled to payment of the sums awarded by the adjudicator. Perhaps unsurprisingly, Jarvis protested at this novel approach by Alstom, but the learned judge overruled its protests. Since his observations at paragraphs 19 and 20 of the judgment are directly relevant to the situation in the present case, it seems to me to be worth quoting them in full. He said:

"19. . . . Obviously it has been clear since applications for enforcement were first made to this court that the intention of Parliament was that adjudicators' decisions should be honoured, even if the reasoning that justified the decision was erroneous in law or fact. However that policy only applies to decisions which were valid, in that they were decisions which the adjudicator was authorised to make: for example, that the adjudicator had the power to do so (sometimes termed the jurisdiction to do so) and that the decision was not vitiated by some material failure to comply with basic concepts of fairness (sometimes termed compliance with the rules of natural justice, whether in respect of independence or impartiality or in respect of procedural fairness). Accordingly, to speak of a right of enforcement of an adjudicator's decision is misleading; the right is always qualified or contingent. Moreover section 108(3) of the Act says that the decision is "binding until the dispute is finally determined by legal proceedings….". Naturally the Act assumes that such a final determination is likely to follow the decision. That is consistent with the concept of adjudication whereby a dispute would be resolved during the course of a contract and only resurrected for final determination, if required, at a later stage. "Pay now; argue later", as some are wont to say. In my judgment there is nothing in the Act (or the Scheme, if applicable) which requires a party who wishes to challenge a decision of an adjudicator to comply with it before being able to advance its case, any more than a party is precluded from subsequently challenging a decision, having complied with it (as Mr Bowdery suggested, at least [at] one stage). Unless a party is estopped from questioning the decision or has waived its right to do so, both of which would require clear evidence (and mere compliance is not) that party is free at any time to obtain a final determination of the dispute which has been provisionally resolved.

20. There is equally no reason why a challenge to a subsequent decision may not encompass or lead to that final determination in respect of an earlier decision, as sought by action 85 [Alstom's Part 8 proceedings]. In reality such a party is rarely in a position to act as Alstom has done, unless, for example, there have been successive adjudications and it is ready before the latest. If, however, before an application to enforce an adjudicator's decision is heard, the point decided by it is finally determined adversely to the party who is relying on the decision then that application and the action will fail. That might be so if the point related to a standard form of contract and the point was determined in proceedings between other parties. Any other conclusion would be verging on the absurd: to allow the application to enforce the decision and then to set it aside (assuming the defendant had its tackle in order to do so). The decision is binding only in so far as the dispute has not been finally determined. The Act does not say when the final determination may take place. In my judgment the Act does not lead to any such technical absurdity, nor is it permissible under the Civil Procedure Rules as it is directly contrary to the overriding objective and other provisions of Part 1. Once the court is seized of the case it has to take a course which saves expense and is expeditious. To proceed first to deal with the application for summary judgment, to allow it and then to track back and to determine the dispute that gave rise to it is not consistent with the principles of Part 1 of the CPR and it is not in the interests of both parties, when they can be satisfied in an expeditious and less expensive way. Similarly it may be prudent to defer an application to enforce or to stay a judgment if the point in dispute is to be decided soon. Transferring money for a limited period of time may not be sensible. Mr Bowdery suggested that to consider the point in question would effectively destroy the efficacy of adjudication. I disagree. Most adjudications are about issues of fact. In ordinary course of events, they will not be capable of being finally determined, even in this court or in a swift arbitration, before the application for summary judgment is normally heard. It is possible that, particularly where the point is one of law or otherwise capable of being tried early, a party might move with determination and speed and get in first, as it were (as Alstom has done). I do not believe that the court's powers are so circumscribed by the Act that, in an appropriate case, it cannot order that the dispute should be determined prior to or at the same time the application for enforcement is determined. It has happened before in this court. The interests of the parties are surely best served by such a determination and not by uncertainty. Alstom has a right to a determination of the points that it has raised, just as Jarvis has a right to have its application heard and to know if the decision is enforceable. The two can be decided at the same time."

[Emphasis added]

12. These observations were endorsed by Coulson J in Walter Lilly & Co Ltd v DMW Developments Ltd [2008] EWHC 3139 (TCC), with the express qualification that it is for an applicant in a Part 8 application to demonstrate that the question to be decided falls within the relatively tight confines of that procedure.
13. However, in an earlier case decided by Dyson J (as he then was) and upheld by the Court of Appeal, Bouygues (UK) Ltd v Dahl-Jensen (UK) Ltd [1999] EWHC 182 (TCC), [2000] BLR 49 and [2000] EWCA Civ 507, [2000] BLR 522 (CA), a Part 8 challenge by the aggrieved party to an adjudication was effectively not entertained. The facts of that case were very similar to those in this case in that the adjudicator mistakenly included within the sum he ordered to be paid the retention to which the sub-contractor was not at the time entitled under the terms of the sub-contract. There were three applications before the court. First, the contractor's claim under Part 8 for declarations, inter alia, that (a) insofar as the adjudicator decided that the retention was payable to the sub-contractor the award was void and should be set aside and, instead, (b) that a particular sum was due from the sub-contractor to the contractor. Second, the sub-contractor's application for summary judgment to enforce the award. Third, the sub-contractor's application to stay the contractor's application for declaratory relief under section 9 of the Arbitration Act 1996.
14. Dyson J described the submission of Mr Stephen Furst QC, on behalf of the contractor, as being that the adjudicator's decision in effect to award the retention money to the sub-contractor was outside his jurisdiction, and therefore not binding on the parties. He then said, at paragraph 11:

"The fundamental issue that I have to decide is whether this submission is correct. Other issues have been raised but that is the key question."

15. Later in the judgment, and in relation to the applications before him, Dyson J simply said this, at paragraph 18:

"It will be convenient to start with [the sub-contractor's] application for summary judgment, since if that succeeds, the remaining applications fall away."

16. Thus it seems that the applications made under Part 8 were just a vehicle for another way of attacking the adjudicator's award on the grounds of lack of jurisdiction. In the Court of Appeal, the argument on this aspect concentrated on the same point. Again, it was not disputed that the award was wrong, but the question was whether that was a ground upon which its enforcement could be resisted. There was no suggestion that the contractor was asking the court to make a final decision on a point of law or fact decided by the adjudicator. Other points also arose in the course of the appeal, but they are not relevant to the issues before me.
17. I infer two things from the fairly brief account of the rival contentions in the reports of that case. First, that the contractor was not seeking to obtain the court's ruling on a point of law or fact decided by the adjudicator, but was simply asserting - both in defence to the claim for summary judgment and in support of its own application for declarations - that the adjudicator exceeded his jurisdiction because in effect he decided a question that was not referred to him. Second, that there must have been an arbitration clause in the sub-contract, with the result that any final determination of the issues decided by the adjudicator had to be by way of arbitration and not litigation. This could explain why the contractor could not and did not adopt the approach taken in the Jarvis case.
18. Accordingly I consider that I am not prevented by the decision in Bouygues from entertaining an application that the court should reach a final decision on a question decided by the adjudicator, provided of course that it is a question that does not involve any substantial dispute of fact and is one that I can finally determine on the material before me. Mr Lewis seemed prepared to accept that it is permissible to have a final resolution of a dispute referred to an adjudicator on a Part 8 application, but he submitted - if I understood him correctly - that the court had to be in a position to determine the whole of the dispute before it could embark on this exercise. Whilst I agree that the court must be in a position to answer whatever question is under consideration, I can see no reason why the court has to adopt an all or nothing approach to the decision. If there is part of an adjudicator's decision that can be isolated and determined by the court, then it seems to me that, if the court considers that it would be just and expedient for the court to do so, such a course would give effect to the overriding objective of the CPR.

The positions and contentions of the parties

19. Before I summarise the positions taken by each party it may be helpful to put the submissions into their legal context. The Courts have made it clear how challenges to adjudicators' decisions should be approached, and I take by way of example the following observations of Chadwick LJ in Carillion Construction Ltd v Devonport Royal Dockyard [2005] EWCA Civ 1358, [2006] BLR 15:

"85. The objective which underlies the Act and the statutory scheme requires the courts to respect and enforce the adjudicator's decision unless it is plain that the question which he has decided was not the question referred to him or the manner in which he has gone about his task is obviously unfair. It should be only in rare circumstances that the courts will interfere with the decision of an adjudicator. The courts should give no encouragement to the approach adopted by DML in the present case; which (contrary to DML's outline submissions, to which we have referred in paragraph 66 of this judgment) may, indeed, aptly be described as 'simply scrabbling around to find some argument, however tenuous, to resist payment'.

86. It is only too easy in a complex case for a party who is dissatisfied with the decision of an adjudicator to comb through the adjudicator's reasons and identify points upon which to present a challenge under the labels 'excess of jurisdiction' or 'breach of natural justice'. It must be kept in mind that the majority of adjudicators are not chosen for their expertise as lawyers. Their skills are as likely (if not more likely) to lie in other disciplines. The task of the adjudicator is not to act as arbitrator or judge. The time constraints within which he is expected to operate are proof of that. The task of the adjudicator is to find an interim solution which meets the needs of the case. Parliament may be taken to have recognised that, in the absence of an interim solution, the contractor (or sub-contractor) or his sub-contractors will be driven into insolvency through a wrongful withholding of payments properly due. The statutory scheme provides a means of meeting the legitimate cash-flow requirements of contractors and their subcontractors. The need to have the 'right' answer has been subordinated to the need to have an answer quickly. The Scheme was not enacted in order to provide definitive answers to complex questions. Indeed, it may be open to doubt whether Parliament contemplated that disputes involving difficult questions of law would be referred to adjudication under the statutory scheme; or whether such disputes are suitable for adjudication under the Scheme. We have every sympathy for an adjudicator faced with the need to reach a decision in a case like the present.

87. In short, in the overwhelming majority of cases, the proper course for the party who is unsuccessful in an adjudication under the scheme must be to pay the amount that he has been ordered to pay by the adjudicator. If he does not accept the adjudicator's decision as correct (whether on the facts or in law), he can take legal or arbitration proceedings in order to establish the true position. To seek to challenge the adjudicator's decision on the ground that he has exceeded his jurisdiction or breached the rules of natural justice (save in the plainest cases) is likely to lead to a substantial waste of time and expense – as, we suspect, the costs incurred in the present case will demonstrate only too clearly."

20. I observe in passing that this passage does not affect the conclusion that I have reached in the previous section of this judgment. On the contrary, Chadwick LJ's comment that "If he does not accept the adjudicator's decision as correct (whether on the facts or in law), he can take legal or arbitration proceedings in order to establish the true position" seems to affirm the validity of the approach taken in the Jarvis case.
21. I have already noted that the facts of this case are very close to those in Bouygues, where the Court enforced the decision, notwithstanding the mistake, on the ground that the adjudicator had given a wrong answer to the right question and had not answered the wrong question.
22. In the light of these authorities I must remind myself that I must not be seduced by the beguiling submissions of ARL as to the injustice that has resulted from the error in the award into striving to find a way of restoring the status quo. On the other hand, the amount at stake as a result of the adjudicator's error is high by any standards and the court should be astute to ensure that enforcement of his award is justified according to the law.
23. For ARL, who opened the submissions, Mr ter Haar puts the case on his application for declarations under Part 8 of the CPR in three ways. By way of introduction he pointed out that there is no reason why the court cannot determine an issue raised by Part 8 proceedings at the same time as entertaining an application to enforce an award - assuming that it is one that meets the requirements of Part 8 proceedings by not involving any substantial dispute of fact - and, indeed, that the court can and should do so. As I have already indicated, I accept that such an approach may be appropriate provided of course that the court is being asked to determine an issue that was presented to and decided by the adjudicator and that the applicant has sought an appropriate declaration in the relief claimed.
24. Mr ter Haar's first point is very simple. Since everyone agrees that the adjudicator made an error as a result of which he ordered the payment of a sum of money that was not in truth owed, he submits that the court should so declare and set aside the award. He makes a similar point in relation to the adjudicator's award of costs against ARL and says that as a result of the first error he erred also in his approach to the question of costs. In effect, they amount to a submission that because what the adjudicator did was wrong, his award must be wrong and should be set aside. Attractive though these submissions are, I am firmly of the view that put in those wide terms they should be rejected.
25. The principal issue before the adjudicator was the true value of the two claims. If the decision as a whole is to be set aside in subsequent litigation, then that is an issue on which the court will have to make a final determination. On this application the court cannot, and is not being invited, to make such a determination. In my opinion it is not open to the court to set aside the entire decision because the adjudicator was wrong, it would have to go further and determine the correct value of the claims so that it could substitute other findings for those of the adjudicator. It cannot do that on these Part 8 proceedings.
26. In relation to the question of costs, it seems to me that it does not necessarily follow that because the adjudicator made a mistake about the sum that he ordered to be paid, he must have erred also when making the order as to costs. I will revert to this below.
27. However, there is a narrower way in which Mr ter Haar's first submission can be put, and that is to confine it to the part of the decision by which the adjudicator arrived at the sum to be paid without deducting the amounts already allowed against the claims in Certificate No 35. Since this is closely related to his second point, I will deal with it under that heading.
28. Mr ter Haar's second point is that the payment regime under the contract permits payment only under a certificate and that accordingly the adjudicator must consider all the items covered by the certificate before he can decide what payment (if any) is due. He submits that unless there is a sum shown to be due in an interim (or final) certificate, then no sum is due to the sub-contractor and no sum becomes payable. Since, he submits, GOL did not invite the adjudicator to revise Certificate No 35 (or to issue a further certificate) and the adjudicator did not do so, the adjudicator could not in law direct that any different sum was payable to GOL to that stated in Certificate No 35. Pausing there, it seems to me that both this point and the narrow version of Mr ter Haar's first point are ones that might be amenable to a determination on a Part 8 application. They raise no disputed questions of fact: the answers turn on the terms of the Notice of Adjudication and an analysis of GOL's rights under the sub-contract.
29. In the alternative, Mr ter Haar relies on the same argument in support of an excess of jurisdiction by the adjudicator so as to defeat GOL's application for enforcement. I will revert to all these arguments below.
30. Mr ter Haar's third point is that no interim certificate can be issued after the work has been taken over by ARL because, as his skeleton argument puts it, "there is no provision in the above scheme for interim certificates of payment after the Taking Over Certificate has been issued". In fact, as he accepts, no Taking Over certificate was ever issued, although there appears to have been a de facto taking over of the works in January 2008. However, after this date no less than 8 further Interim Certificates of payment were issued by ARL.
31. I can deal with this point quite shortly. I have no hesitation in rejecting it for the simple reason that no Taking Over certificate was issued prior to the issue of Interim Certificate No 35 and that the continued issue of interim certificates after the works were taken over completely undermines any submission that there has been some form of estoppel that would prevent GOL from relying on Certificate No 35.
32. However, since both parties have made detailed submissions on the construction of the relevant clauses in the sub-contract, it seems appropriate that I should express my own conclusions about that very shortly.
33. I gratefully adopt the following summary of the contractual provisions from ARL's skeleton argument. First, clause 40.1 (as amended) states that payment shall become due "in accordance with Clause 40.4" 14 days after issue of any payment certificate, whether interim or final. The scheme then set out in Clause 40.4 is as follows:

(1) Sub-clause (1)(a) provides for interim certificates under which 97% of the sum certified is to be paid. Thus 3% retention is held.

(2) Sub-clause (1)(b) says that a further 1.5% becomes due 14 days after the Taking Over Certificate, with the final date for payment of that amount being 42 days later.

(3) Sub-clause (1)(d) provides for payment of the balance of the Subcontract Price after issue of the final certificate.

34. The timing of the final certificate is dependent upon the Subcontractor making an application for the final certificate and the operation of clauses 39.9, 39.10 and 39.11.
35. Mr ter Haar submits that from this it can be seen that there is no provision in the above scheme for interim certificates of payment after the Taking Over Certificate has been issued. The next step in the scheme after the Taking Over Certificate and the release of one half of the retention is the final balancing payment made in response to an application for it.
36. For GOL, Mr Lewis points out that there is nothing in these clauses that contradicts the sub-contractor's primary entitlement to issue applications for payment at intervals of not less than 28 days. He submits that if Mr ter Haar is right, the sub-contractor cannot make any application for work done after a date 14 days before the issue of the Taking Over Certificate until he can present the final account, and that will not be until at least two years later. In addition, of course, he would not be able to make further applications if previous ones contained an undervalue or for work in relation to which the costs had not been established prior to the issue of the Taking Over Certificate.
37. It seems to me that there is a difficulty facing Mr ter Haar's submission. I do not see why the words "14 days after the Taking Over Certificate" cannot embrace the actual day that is 14 days after the certificate as well as any subsequent date between then and the issue of the final certificate. In other words that it is referring to a continuing period that starts with the date of the Taking Over Certificate. To construe the language in this way does not do it any violence and, in my judgment, would accord with the overall scheme of interim payments contained in the sub-contract as a whole.
38. Reverting to Mr ter Haar's first point, Mr Lewis, whose clients have candidly accepted that the adjudicator made the error described above, submits that the adjudicator did what he was asked to do but just got it wrong. Accordingly the court cannot interfere and must give summary judgment and enforce the award. He submits that this case is in fact no different from Bouygues, where the adjudicator made a simple mistake, declined to correct it and the Court enforced the decision, notwithstanding the mistake.
39. In relation to Mr ter Haar's second point, Mr Lewis submits either that the dispute referred was whether GOL was entitled to any further sum in relation to the ground investigation or the SCC claim - and that this was a perfectly proper dispute to refer to adjudication - or that it was in effect an application to review Certificate No 35.
40. Thus, having rejected Mr ter Haar's weaker points fairly summarily, what is left can be encapsulated in the following three issues:

(1) In the light of his assessments as to the value of the two claims was the adjudicator entitled as a matter of law to order the payment of money to GOL? Alternatively, was he entitled to do so in the light of the terms of the Notice of Adjudication?

(2) Did the adjudicator's decision that GOL was entitled to payment of the sums assessed in respect of the ground investigation and the SCC claims, subject only to deduction of the negative amount certified in Certificate No 35 (in other words, his error in failing to take into account (and deduct) the amounts already credited in Certificate No 35), amount to a decision that he was not asked to make or was it merely a wrong answer to a question that he was asked to decide?

(3) If the first question is decided in ARL's favour, is it entitled to declaratory relief on its Part 8 application?

41. When I turn to consider these two points in detail, it will be appropriate to look at the relevant parts of the Notice of Adjudication and the opening paragraph of the Award, which contains the actual decision, in order to see precisely what the Adjudicator was asked to do and what he actually did. I think that it is common ground that the inquiry must be directed at these two areas. To the extent that it is not, I consider that this is the right approach (see, for example, Balfour Beatty Construction v Lambeth [2002] EWHC 597 (TCC), per HHJ Humphrey LLoyd QC, at [5]).
42. The case has been argued very ably on both sides and I have to confess that I did not find some of these issues to be easy.

Was the adjudicator entitled in law to order the payment of £504,385 to GOL?

43. The payment regime under the sub-contract required GOL, at intervals of not less than 28 days, to submit requests for interim certificates of payment to ARL's representative. These requests have to be in the form of an invoice with certain supporting documentation.
44. By clause 39.3 of the sub-contract, within 14 days of the receipt of such an application which GOL was entitled to make ARL's representative is to issue an interim certificate of payment, which must specify the amount (if any) of the payment proposed and the basis on which it was calculated. By clause 40.1 (as amended) payment of that sum becomes due 14 days after issue of the certificate with the final date for payment being 42 days thereafter.
45. In the light of these provisions I accept, if it was really challenged, Mr ter Haar's submission that under the terms of this sub-contract GOL is only entitled to payment of the amount stated in a certificate. If GOL is not satisfied with the amount certified it can either refer the matter to adjudication or invite ARL's representative to correct the alleged error in the next certificate (which he can do under clause 39.6).
46. What in fact happened was that on 31 October 2008 ARL issued Certificate No 35, in which it had allowed £362,147 in respect of the SCC variations claim and £550,000 in respect of the ground investigation (although the sum of £550,000 does not appear as a separate figure, it was agreed that it was included within a figure of some £661,912 in respect of "Stage 3 - Routework - PCNs"). On 3 March 2009 GOL issued Payment Application No 36. This should have triggered the issue of Interim Certificate No 36 within 14 days, namely by 17 March 2009, but no certificate was issued and so on 19 March 2009 GOL issued the Notice of Adjudication.
47. To continue the story, on 8 April 2009 ARL issued a valuation, Certificate No 36, in response to payment application No 36 in the negative sum of £1,379,117. The valuations in respect of the SCC variations and the ground investigation had been reduced very substantially, by an amount of the order of £500,000.
48. At this point I need to set out the relevant terms of the Notice of Adjudication in full.

"The nature of the Dispute

6 A significant dispute has arisen between ARL and GOL in respect of GOL's financial entitlements under the subcontract. Two discrete elements of this dispute form the subject matter of this adjudication.

7 On 3 March 2009 GOL provided to ARL Interim Payment Application No 36 ("Application 36") in the gross sum of £24,365,783.91. In accordance with clause 39.3 of the subcontract by 17 March 2009 ARL should have issued a further interim certificate in response to Application No 36. However, in breach of clause 39.3 of the subcontract, ARL have failed to issue a further interim certificate and accordingly GOL are entitled to refer Application 36 to adjudication.

8 The subject matter of this adjudication relates only to GOL's applications in respect of the SCC and for the very extensive ground investigations GOL carried out pursuant to ARL's written instructions and no other element of Application 36. For the avoidance of doubt the Adjudicator is not at this stage asked to consider any other aspect of Application 36.

9 In relation to the SCC GOL have applied for £2,197.194.00 and ARL have to date certified the sum of £1,553,550.00, a difference of £643,644.00. The issues between the parties concerning the SCC relate to GOL's entitlement in respect of variations, GOL's entitlement to an extension of time and GOL's entitlement to the payment of prolongation costs.

10 In relation to ground investigations GOL have applied for £1,013,277.51 and to date ARL have certified the sum of £550,000.00 on account, a difference of £463,277.49. The issues between the parties concerning ground investigations relate to the valuation of the work carried out by GOL pursuant to various ARL written instructions.

Relief Sought

11 GOL seeks the following redress:

• A decision that in relation to the SCC GOL are entitled to a certified sum of £2,197,194.00 or such other sum as the Adjudicator thinks fit

• A decision that in relation to the SCC ARL will pay to GOL the sum of £643,644.00 or such other sum as the Adjudicator thinks fit on or before 13 May 2009

• A decision that in relation to the ground investigations GOL are entitled to a certified sum of £1,013,277.51 or such other sum as the Adjudicator thinks fit

• A decision that in relation to the ground investigations ARL will pay to GOL the sum of £463,277.49 or such other sum as the Adjudicator thinks fit on or before 13 May 2009

• A decision in accordance with Rule 27 (4) of the Railtrack Adjudication Rules that ARL shall bear GOL's costs of this reference in full or in such other proportion as the Adjudicator thinks fit

• A decision that ARL pay all the Adjudicator's costs of the adjudication"

49. When the first four bullet points of paragraph 11 are read with paragraphs 9 and 10, it is reasonably clear that GOL was inviting the adjudicator (a) to assess the true value of the two claims and (b) to order ARL to pay to GOL the difference between the amounts assessed by the adjudicator and the amounts already included within Certificate No 35. It follows that GOL was not intending to ask the adjudicator to order ARL to pay to GOL the total value of the claims as assessed without deducting the amounts already included in the last valuation, Certificate No 35. However, the words in the second and fourth bullet points of paragraph 11 of the Notice are very wide and are not limited to amounts that are net of any sums already paid or allowed.
50. The ground on which GOL claimed to be entitled to refer the dispute to adjudication was ARL's failure to issue an Interim Certificate within 14 days of Payment Application No 36. GOL was entitled to have its claims assessed with 14 days and this had not happened. It was therefore entitled to refer the matters covered by its application for payment to adjudication so that they could be assessed by an adjudicator. It is not now contended that ARL's failure to issue a certificate within the required 14 days did not give rise to a dispute (if it had been, I would have unhesitatingly held that it did).
51. I can see no reason why in these circumstances GOL must be forced to submit the entirety of the items covered by its payment application to adjudication, rather than only some of them. Although ARL's failure to respond within time effectively put all the items covered by GOL's payment application in dispute, in my judgment GOL was perfectly entitled to limit its referral to adjudication to certain items only. This is exactly what it did.
52. Once this has been done, the adjudicator can only consider and determine the claims that have been referred to him. Subject to one qualification, he is not entitled to consider any other claims in the payment application or the previous interim certificate that have not been referred to him. The only qualification to this that I can envisage would arise where two claims in the payment application are interlinked, with the result that a revaluation of one of them might have an impact on the value of the other. In a claim for variations, as there was here, one possible element of the amount claimed might be the costs of disruption to the unvaried work. So, for example, if a previous certificate had already allowed a sum for such disruption under a separate head which had not been referred to adjudication, then the adjudicator would have to take that into account when assessing the value of the claim referred. To this extent only do I accept Mr ter Haar's submission that the adjudicator must consider claims covered by the application or the previous interim certificate that have not been referred to adjudication. However, so far as I am aware the particular problem of overlapping claims did not arise in this instance.
53. Mr ter Haar made a further criticism of the procedure adopted by the adjudicator. At paragraph 25 of its skeleton argument ARL said this:

"This was an inappropriate methodology because by the time the adjudicator reached his decision, the figures in certificate No. 35 were no longer ARL's figures. They had been replaced by the larger negative figure in interim certificate No. 36."

54. I disagree with the first sentence of this extract. At the time when the dispute was referred Interim Certificate No 36 did not exist - that was why there was a dispute. As it happened, several of the valuations that were included in that certificate (including those for the ground works investigation and the SCC claims) had been reduced from the valuations given in Certificate No 35, but since none of the valuations in Certificate No 36 had been (or could have been) referred to the adjudicator on 19 March 2009 he was not concerned to consider them or to take them into account.
55. Thus it seems to me that the adjudicator was right to assess the value of the two claims that had been referred to him without embarking on valuations of any other claims.
56. However, in my judgment the position is not the same when it comes to a consideration of the sum that might be payable in consequence of the valuations arrived at by the adjudicator. It is, I would have thought, self evident that when considering what amount is payable in respect of the two claims the adjudicator must take into account the sums already paid (or allowed) against those claims to date. This is because, as Mr ter Haar pointed out, GOL's entitlement to payment arises only under certificates. An interim certificate has three main components for each claim included within it: the amount claimed, the amount assessed and the amount already paid or allowed. The sum payable is the total of the amounts assessed in the certificate less the amounts already paid or allowed. Thus any order for payment by the adjudicator consequent on his valuations of the two claims would have to take into account the amount already paid or allowed in respect of those claims. It must be remembered that the exercise being carried out by the adjudicator was to carry out the valuation of the claims that ARL should have but had not carried out in response to GOL's application for payment No 36, but of course limited to the two claims that had been referred to him.
57. In this context, Mr ter Haar drew my attention to paragraph 22 of the Railtrack PLC Adjudication Rules, to which the adjudication was subject, which provides that the decision of the adjudicator is to reflect "the legal entitlement of the parties". The Rules also permitted the adjudicator to open up, revise or review any certificate and to decide that a party to the dispute is liable to make a payment "under the contract": see paragraph 21(a) and (b).
58. I detected some inconsistency in Mr Lewis's response to Mr ter Haar's arguments on this aspect. At one point in the course of argument he suggested, admittedly in the alternative, that GOL could have been said to have been seeking to review or open up Certificate No 35. There was perhaps an echo of paragraph 30 of his skeleton argument, where he referred to GOL contending for sums greater than had been certified by ARL. This is true, but by the time of the adjudication GOL had amplified and increased its claims for the ground works investigation and the SCC as set out in its payment application No 36.
59. GOL was not inviting the adjudicator to open up or review Certificate No 35, nor did it have to. As I have said, its claim was for a valuation of two of the claims included within its payment application No 36. In the circumstances this was an entirely proper and appropriate course for GOL to take.
60. The adjudicator's Decision was in following terms (omitting the paragraph references):

1.1 GOL is entitled to recover the sum of £459,811.94 in respect of its SCC variations claim.

1.2 GOL is entitled . . . to recover total prolongation costs of £80,041.20 [in respect of the SCC works].

1.3 GOL is entitled to recover £515,263.88 in respect of ground investigation works.

1.4 GOL is therefore entitled to recover a gross figure of £1,055,116.82. The threshold is however £552,891.30. GOL is therefore entitled to recover a net figure of £502,225.52.

1.5 Interest at 0.43% on that figure was £2,159.57, making a total figure recoverable by GOL of £504,385.09.

1.6 I direct that the sum of £504,385.09 shall be paid by ARL to GOL within 7 days.

1.7 I assess GOL's legal costs and expenses in the sum of £63,504.65 and direct that ARL shall pay 70% of that sum, namely £44,453.25 within 7 days.

1.8 I assess my fees in the sum of £76,768.25 inclusive of VAT and those of Mr Linnett in the sum of £11,572.45 inclusive of VAT. The total of £88,340.70 should be paid to me as to 85% by ARL and as to 15% by GOL within 7 days.

61. The £552,891 which the adjudicator described as "the threshold" was the amount of the total negative valuation in Certificate No 35. What the adjudicator referred to as the "gross figure of £1,055,116.82" was his valuation of the two claims making no allowance for any sums paid or allowed to the date of the Notice of Adjudication. By simply directing ARL to pay the difference, the adjudicator had completely left out of account the £912,147 that had already been paid or allowed against the two claims in Certificate No 35.
62. For the reasons given above I consider that the adjudicator was wrong in law to make an order directing ARL to pay a sum in respect of the two claims that made no allowance for the £912,147 that had already been paid or allowed against the two claims. It follows that the last sentence of paragraph 1.4, paragraph 1.5 and paragraph 1.6 are inconsistent with my conclusions and did not reflect the legal entitlement of GOL. I will consider below whether ARL's Part 8 application entitles it to any relief in the light of this conclusion.
63. Since I am making no findings about his decisions in paragraphs 1.1, 1.2, 1.3 and the first sentence of paragraph 1.4, these decisions will stand in any event unless and until they are reviewed and varied in any subsequent litigation.
64. I will deal with the award of costs and the adjudicator's fees (in paragraphs 1.7 and 1.8 of the Decision) below.

Did the adjudicator have jurisdiction to order the payment of £504,385 to GOL?

65. In the light of my conclusions on Mr ter Haar's second point, this may become academic. But in case I am found to be wrong so far, I will deal with jurisdiction point briefly.
66. Mr Lewis argues that the adjudicator was required to determine the true value of GOL's two claims and then make an order for the payment to GOL in respect of each claim of either the amount claimed less the amount included in Certificate No 35, or to make an order for the payment of "such other sum as the Adjudicator thinks fit". He did not order payment of the amount assessed less the amount included in Certificate No 35, but instead he ordered payment of a different sum being the sum that he thought fit and that - submits Mr Lewis - was entirely within his remit. So whilst it may have been contemplated when paragraphs 8 to 11 of the Notice were read as a whole that the adjudicator would subtract the amount included in Certificate No 35, the Notice did not require him to do so (as I have already noted).
67. Mr ter Haar submits that the adjudicator was patently wrong to order a payment to GOL or, alternatively, that he answered a different question from the one posed by GOL. He submitted that neither party had argued that no account should be taken of the sums included in interim certificate 35, whereas it was common ground that regard should be paid to such sums. Thus in answering the question he posed himself, the adjudicator was answering a different question and one which he had no jurisdiction to answer.
68. Whilst I regard the arguments as fairly finely balanced, I consider that Mr Lewis's argument is to be preferred in that it is not really possible to distinguish the type of mistake made in this case from the mistake that was made in Bouygues. Whilst the exercise that GOL was inviting and expecting the adjudicator to carry out is quite clear from paragraphs 8 to 11 of the Notice, when read together, I find it a little hard to see how it can be said that the actual language used did not give the adjudicator the jurisdiction to order payment of such sum as he thought fit. If that is correct, then the fact that what he did was patently wrong does not assist ARL on an application to enforce the decision.
69. However, in fairness to the adjudicator I should mention one other matter. On re-reading the Decision following the argument I was troubled by what the adjudicator said at paragraphs 25 and 28. After referring to a discussion as to whether the negative figure to be deducted from any award should be the balance in Certificate No 35 or that in Certificate No 36, he summarised GOL's submission in paragraph 25 in these terms:

"Accordingly, I should instead take the figure of £552,891.30, being the figure by which ARL asserted that GOL had been overpaid in IC35, and if I determine that the two disputes referred to me have a value in excess of that figure I may decide that a payment is due to GOL."

Taken by itself that is unremarkable. However, at paragraph 28 he said:

"It therefore seems to me to be the preferable course to take the alleged overpayment figure in IC 35, which was the crystallized figure prior to commencement of the adjudication, based on an interim certificate which had been issued, and to award sums as due to GOL only if their total exceeds the figure of £552,891.30 contained in that certificate. I note that that is the alternative position adopted by ARL in paragraph 95 of the Response and that is therefore the methodology which I propose to adopt."

70. I am puzzled by the second of these passages. On one reading it looks as if both parties were accepting an approach that did not involve any deduction of the sums paid or allowed in Certificate No 35, and were inviting the adjudicator to deduct only the overall negative balance. It may be, therefore, that the adjudicator did in fact do what the parties had specifically asked him to do (or, at least, what he thought the parties had asked him to do). Although this is not a matter that was raised by either party at the hearing of the applications, it is a point upon which - if live, and all other things being equal - I would have wished to hear further argument. Even then, I am doubtful whether this is a question that could be resolved in the absence of evidence.
71. However, since my conclusion is already in favour of GOL on this aspect of the application, I need say no more.

Did the adjudicator have jurisdiction to make the costs order that he did?

72. By the final two bullet points of paragraph 11 of the Notice, the adjudicator was asked to order ARL to pay GOL's and the adjudicator's costs of the adjudication. This is a power conferred on him by paragraph 27(4) of the Railtrack PLC Adjudication Rules.
73. Since the adjudicator unquestionably had the jurisdiction to make a costs order, there would have to have been something very seriously wrong with the process by which he arrived at it before the court could consider interfering with it. The adjudicator set out his reasons for the orders he made in the final paragraphs of the Decision. Much of the discussion turned on the nature and extent of the arguments presented at the hearing and the relative degrees of success on the various points. Whilst it is true, as the adjudicator noted, that the ground investigation claim was found to be worth £515,000 as against the £550,000 that had been allowed in Certificate No. 35, that allowance had been withdrawn at the hearing (and in addition had been substantially reduced in Certificate No 36 issued on 8 April 2009).
74. It may well be that the adjudicator would have made a different order if he had concluded that money was not owing to GOL, but it is not obvious that he would have done so: after all, GOL still succeeded in reducing negative balance by over £130,000. Further, no submissions have been made to me as to precisely why it would have been an order that no reasonable adjudicator could have made if he had concluded that no payment was due to GOL in the light of the allowance (by then withdrawn) in Certificate No 35 - if that would have the correct test. Certainly, on the material available the court is in no real position to form any views as to what would have been an appropriate order and to substitute an order of its own.
75. In my judgment, therefore, there is no basis for interfering with the orders as to costs or the adjudicator's fees and I decline to do so. They must stand and GOL is entitled to summary judgment in respect of paragraphs 1.7 and 1.8 of the Decision.

Is ARL entitled to a declaration on its Part 8 application?

76. Since I have already held that the last sentence of paragraph 1.4 and paragraphs 1.5 and 1.6 of the Decision are inconsistent with my conclusions and do not reflect the legal entitlement of GOL, I must now consider whether ARL is entitled to any relief on its Part 8 application.
77. ARL seeks various declarations including the following: (i) the adjudicator had no jurisdiction to issue the Decision, (ii) that the adjudicator erred in law and/or in fact in his conclusions in his Decision, (iii) an order that the Decision be set aside and (iv) the sum of £1,379,117, alternatively £409,921. Of these two last figures, the former is the negative balance shown in Certificate No 36 and the latter is the reduced negative balance in Certificate No 35 after correctly taking into account the adjudicator's valuations of GOL's two claims.
78. I have already decided that ARL is not entitled to the first of the above declarations. As to the second, I accept that the adjudicator erred in law and/or in fact in his Decision, but I have also decided that this does not justify setting aside the Decision. This disposes of the third declaration. As to the fourth declaration, I cannot determine what sum was owed either to ARL or to GOL. That would require an investigation of the whole account. Accordingly that declaration cannot be made.
79. In paragraph 28 of the Particulars of Claim ARL pleaded that: "In ordering ARL to pay any sum to GOL, the Adjudicator ignored his own findings as to what ARL had credited GOL with in Certificate 35 and accordingly . . . was wrong in law". It seems to me that since ARL has identified specifically the error of law of which it complains, it should not be denied relief simply because the second declaration is worded in rather general terms.

Conclusions

80. I consider that, in the light of my conclusions in this judgment, ARL is entitled to a declaration to the effect that the adjudicator was wrong to order payment of sums to GOL in respect of his assessment of the value of its claims in payment application No 36 without taking into account and, if appropriate deducting from the amounts assessed, any sums that ARL had paid or allowed to GOL by the date of the Notice of Adjudication.
81. GOL's application for summary judgment is granted insofar as it relates to the adjudicator's award in respect of costs of £44,453.25, together with interest in an amount to be assessed if not agreed, and the order for the payment of the adjudicator's fees. Otherwise the application is refused. However, for the avoidance of any doubt, I am making no determination in respect of paragraphs 1.1 to 1.3, and the first sentence of paragraph 1.4 of the adjudicator's Decision. Those parts of the Decision will remain binding unless and until they are set aside or varied in subsequent litigation.
82. In the absence of agreement between the parties, I will hear counsel further on the precise form of the declaration that I am minded to grant and in relation to the costs of the application.
83. Finally, I cannot leave this judgment without expressing my admiration at the manner in which the adjudicator set about this difficult adjudication. He made one very short but significant error, possibly as a result of a misunderstanding, but in all other respects the Decision appears at first sight (I have not seen all parts of it) to be a model of its kind.