02.07.2024

TCC confirms Slip Rule limits in Adjudications

The Technology and Construction Court (TCC) has confirmed the narrow parameters of the ‘slip rule’ in the UK, which allows adjudicators to amend their determination to correct for any clerical or typographical errors.  In McLaughlin & Harvey Ltd v LJJ Ltd [2024] EWHC 1032, the TCC held that an adjudicator’s revised decision went beyond that rule when allowing for prior deductions to avoid double recovery.  This was said to be a matter of substance that had not previously been argued, despite it being a correction.  Although this invalidated the revised determination, the original decision nevertheless remained enforceable.

Given the similarity of the slip rules in the UK’s Scheme for Construction Contracts (England and Wales) Regulations (UK Scheme) and the Construction Contracts Act 2002 (CCA), arguably a similar approach to that in McLaughlin might be adopted in New Zealand.

Background

McLaughlin & Harvey Ltd (Contractor) and LJJ Ltd (Subcontractor) entered into a subcontract for the mechanical, electrical and plumbing (MEP) installation of a refurbishment project.  Plainly, things did not go well as the parties adjudicated five times.  This decision concerned the Contractor’s attempt to enforce the fifth adjudication determination.

The Contractor commenced the fifth adjudication seeking a determination that the Subcontractor was to pay delay damages of £1,160,000 for failing to meet “Key Dates” (Key Date Damages).  The adjudicator awarded the Contractor £808,000 in Key Date Damages (Original Determination) and, per the slip rule in the UK Scheme, invited the parties to advise of any clerical or typographical errors.  

The Subcontractor responded that the Contractor had already deducted £954,285.71 in Key Date Damages, which it said needed to be taken into account to avoid double recovery.  This point was not raised by the Subcontractor during the adjudication.  The Contractor disagreed substantively, but also objected procedurally on the basis that this had not previously been argued and went further than being a mere clerical or typographical error. 

The adjudicator revised the Original Determination to prevent potential double recovery (Revised Determination), believing these corrections were within his statutory powers.  The Contractor disagreed and sought to enforce the Original Determination, which the Subcontractor opposed. 

Enforcement proceedings

Critically, for New Zealand purposes, the TCC concluded that the Revised Determination exceeded the slip rule in the UK Scheme (s 22A(1)), which states:

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

The slip rule is designed to ensure that a determination accurately reflects the adjudicator’s intention without the inconvenience and cost of requiring a formal appeal or review process to correct any uncontestable errors.  Corrections under the rule are typically limited to miscalculation, typos, or accidental omissions that do not alter the substantive reasoning or outcome of the determination.

In McLaughlin there were no relevant typographical errors, meaning the adjudicator was limited to considering whether the Revised Determination concerned the correction of a “clerical error”.

The TCC considered Axis M&E UK Ltd v Multiplex Construction Europe Ltd [2019] EWHC 169, which held that the slip rule does not encompass corrections relating to pure omissions that the adjudicator intended to include, but which were wholly omitted in reaching the determination.  Applying Axis, the TCC deduced that the Original Determination did not contain a clerical error.  The Subcontractor’s correction submissions related to a matter of substance that the adjudicator had not considered during the adjudication, and which could not be considered a mere “clerical error”.  The TCC was also alert to the statutory intention of construction adjudication, which mitigates against further rounds of submissions after a determination is initially issued.

It followed that the adjudicator exercised a power that he did not have when issuing the Revised Determination, meaning the Original Determination stood and was enforceable. 

Our comment

It is evident that the TCC was influenced by policy considerations as much as principles of statutory interpretation when reaching this decision.  The judgment emphasises the importance of maintaining the integrity and purpose of the adjudication process, which is to provide relatively quick and binding decisions. 

In New Zealand, the CCA contains a similar slip rule at s 47, which states:

Within 2 working days after the date on which a copy of the determination is given to the parties to the adjudication under section 46(3), an adjudicator may, on his or her own initiative, correct in the determination any errors in computation or any clerical or typographical errors or any errors of a similar nature.  [Emphasis added.]

The underlined words above also appear in the UK slip rule, reflecting the similarity between the two provisions.  However, there are differences insofar as New Zealand’s slip rule also contains the emboldened words above (Bold Words).

It seems the intention of the slip rule under both the UK Scheme and the CCA is broadly the same – to be able to correct plainly wrong and un-constable errors.  To that end, should a similar scenario arise in New Zealand, the same policy considerations would likely apply.  However, from a statutory interpretation perspective, the Bold Words potentially enlarge the ambit of s 47 to include a wider range of “slips” than may be permitted in the UK. 

It seems the critical fact in McLaughlin is that the prior deductions for Key Date Damages had evidently not been adequately considered before the Original Determination.  In other words, even if the Subcontractor had a valid point, the issue had not been fully or properly ventilated in the adjudication, and it was improper to then try to do so under the guise of the slip rule.  This appears to have tipped the balance from clerical error into substantive issue.

If you have any questions about CCA adjudications, please get in touch with our Construction Team or your usual contact at Hesketh Henry.

 

Disclaimer:  The information contained in this article is current at the date of publishing and is of a general nature.  It should be used as a guide only and not as a substitute for obtaining legal advice.  Specific legal advice should be sought where required.

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Kerry
Media contact - Kerry Browne
Please contact Kerry with any media enquiries and with any questions related to marketing or sponsorships on +64 9 375 8747 or via email.

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