26 August 2024

McLaughlin and Harvey Ltd v LJJ Ltd [2024] EWHC 1032 (TCC) concerned the enforcement of a decision that a subcontractor should pay a main contractor more than £800,000 in damages due to the subcontractor’s failure to meet key dates in a subcontract. In particular, the decision concerned the scope of Paragraph 22A (1) of the Scheme for Construction Contracts 1998 – colloquially known as the ‘slip rule’ – which states that:

“The adjudicator may on his own initiative or on the application of a party correct his decision so as to remove a clerical or typographical error arising by accident or omission”.

In this instance, when the adjudicator issued his decision, he invited the main contractor and subcontractor to notify him of any "clerical or typographical errors".

The subcontractor duly responded. However, in doing so they went far beyond this narrow direction and made submissions regarding disputed factual matters and stated that it was in the interest of natural justice that these further submissions be considered. The adjudicator invited the main contractor to respond.  They did so, objecting to the subcontractor’s response on the basis that it did not relate to clerical or typographical errors (i.e. it was outside the scope of the slip rule, which is generally applied to incorrect calculations, dates or names).

This prompted the sub-contractor to make an additional submission, introducing a new legal argument that an award of damages would lead to double recovery for the main contractor because the main contractor had already deducted the relevant damages from payments to the subcontractor.

Following these further submissions, the Adjudicator issued a ‘corrected’ decision which stated that the sum of £808,000 was to be paid to the main contractor “if not already allowed” (i.e. there needed to be further investigation to determine if damages had been deducted from payments already).

The main contractor commenced court proceedings in the TCC seeking enforcement of the original decision, without the additional wording the adjudicator had inserted in the ‘corrected’ decision. This was challenged by the sub-contractor on the basis that: (a) the original decision was superseded by the adjudicator’s ‘corrected’ decision and (b) even if this amendment was outside the scope of the ‘slip rule’, it was an error of law which the Court should not interfere with.

The TCC rejected the argument that the original decision had been superseded.  The judge noted that there had been no typographical or clerical errors in the decision and stated that the submissions from the sub-contractor had “prompted the Adjudicator to add words in relation to something that the Adjudicator possibly intended to include or take account of but which he had omitted in reaching his decision”. He concluded that the slip rule did not entitle the adjudicator to qualify or clarify his decision in this way.    

The TCC also rejected argument (b).  The key question was whether the adjudicator had sought to exercise a power which he did not have, or had exercised one of his powers incorrectly. The TCC held that the adjudicator was seeking to exercise a power which he did not and could not have. Adrian Williamson KC stated:

…if the Adjudicator did have such powers, then in every adjudication the issue of a decision would not represent the end of the process, but merely herald further rounds of submissions from the losing party or, perhaps, both parties. Furthermore, That is certainly not the intention of the Housing Grants, Construction and Regeneration Act 1996 (as amended) or the Scheme”.

This decision emphasises the crucial distinction between the correction of clerical and typographical errors and the clarification or qualification of an adjudicator’s decision. It demonstrates that a party responding to an adjudication must ensure all relevant factual and legal arguments in defence are put to the adjudicator, and the party starting the adjudication, before the adjudicator prepares their decision. This is particularly true where, given the time and expense associated with obtaining final determination in the courts, an adjudicator’s decision often becomes the final word on the matter.

Kate Ross, Trainee Solicitor: kro@bto.co.uk / 0141 221 8012