PP Construction Ltd v Geoffrey Osborne Ltd

The Claimant (“PP”) applies for summary judgment in the sum of £112,997.95 plus interest relying upon a correction made by an adjudicator, Mr Tony Bingham, on 5 December 2014 to an Award he had previously made on 26 November 2014. The Defendant (“GOL”) resists the application on the basis that Mr Bingham’s correction was made out of time and is of no effect.

For the reasons set out below, I conclude that PP is entitled to the summary judgment for which it applies.

By a contract made on 17 January 2013 GOL engaged PP to act as its subcontractor and to carry out groundworks and works on the concrete frame at the Chichester Festival Theatre.

It is now common ground that the contract provided for disputes to be referred to adjudication and that Clause 70 of the Contract Conditions made express provision for the correction of errors in an award, as follows:

“(9)

The adjudicator may on his own initiative or at the request of either party correct his decision so as to remove any clerical mistake, error or ambiguity provided that such initiative is taken or such request is made within 14 days of the notification of his decision to the parties. Any such correction shall be made and notified to the parties within 7 days from when such initiative is taken or such request is made as the case may be and for the avoidance of any doubt, the parties shall be deemed to have agreed that any such correction forms part of the decision of the adjudicator. ”

Clause 70(9) differs markedly from the standard provision for correction of accidental clerical or typographic errors under Clause 20A of the Scheme for Construction Contracts (England and Wales) Regulations 1998 (Amendment) (England) Regulations 2011, which requires any correction of a decision to be made within five days of the delivery of the decision to the parties.

When a dispute arose over payments alleged to be due to PP, Mr Bingham was appointed adjudicator. He issued his Award on 26 November 2014, by which he directed GOL to pay PP £229,005 plus VAT and applicable interest. He reached that figure by a calculation set out at pages 27-30 of his decision. As part of his calculation, he brought into account the sum of £2,235,910 which he derived from PP’s valuation of its works. After various adjustments to PP’s valuation figure, he arrived at the figure of £2,146,604. He then applied a 5% discount to that figure, so as to arrive at £2,039,274, from which he deducted 2.5% retention and the sums already paid by GOL. This calculation produced the final figure of £229,005.23, net of VAT and interest, which is what Mr Bingham originally awarded to be paid by GOL to PP.

PP immediately identified that Mr Bingham’s deduction of the 5% discount from the figure of £2,146,604 was incorrect because the figure of £2,235,910 (from which the figure of £2,146,604 was derived) was a figure that was already net of a 5% deduction and there should have been only one 5% reduction, not two. PP’s solicitors therefore sent an email to Mr Bingham timed at 13:53 on 26 November 2014 in which they attempted to point this out.

The relevant text of the email stated:

“PPCL has reviewed the arithmetic to your Decision and believes there is a slip therein which it asked [sic] that you correct.

You have valued the account in the sum of £2,235,910.12 prior to any discount being taken however PPCL has already taken £99,898.33 off the measured and additional measured sections. It follows, with respect, that you have taken the discount of 5% twice in some areas.

Attached is an amended Variation 20 which can be found in Folder 2 of 4 section 15. PPCL has added the Adjudicator’s Awards including the deductions and referencing each item in the Award.

Therefore using the Adjudicator’s figures there is an error of £92,530 excluding the interest.

PPCL, therefore, requests that you correct the above slips.”

Pausing there, the following points arise on the text of the email. First, the first paragraph refers to one slip; but the last paragraph refers to “the above slips” (plural). Second, the email asserts that “you have taken the 5% discount twice in some areas” without identifying the areas where it was said it had been taken twice. Third, the reference to the Amended Valuation 20 in the third paragraph set out above shows that the Amended Valuation is meant to be incorporated as part of the request that is being made and is intended to show precisely how and where the Award is wrong. Fourth, the text of the email does not set out expressly the calculation underlying the figure of £92,530.

The attachment set out on its left hand side constituent figures that contributed to the figure of £2,235,910. On close inspection it can be seen that there are two constituent figures which involve discounting by 5%. One appears at the end of what looks like a summary of the build-up of the original sub-contract price; the other appears at the end of a section relating to additional preliminaries and measured works. To the right hand side of the attachment are various figures under the heading “Adjudicators’ Reference”. The figures adopt the £2,235,910 (which is cross-referred to page 27 of the Award) and then demonstrate how the adjudicator has taken that figure and deducted a further 5% discount (again cross-referred to the relevant pages of the Award).

I use the words “close inspection” for two reasons. First, on the assumption that the attachment can be read, it requires close inspection to identify the 5% discounts and how they have been incorporated in the calculations and how they lead to the figure of £92,530 mentioned in the text of the email, not least because the figure of £92,530 does not appear in the attachment. Second, the attachment as presented in the hearing bundle was virtually indecipherable, to the extent that my first reaction on being asked to read it was to reach for a magnifying glass. Even with an exemplary glass, some figures are still unclear.

The evidence suggests that it is not merely the copy in the Court’s hearing bundle that is inadequate because, after an initial holding response later on 26 November, Mr Bingham’s response to the email from PP’s solicitors was sent on 28 November 2014 and was:

“Certainly there is no intention to take 5% twice.

RS [i.e. PP’s solicitor]: the attachment is not clear. Suggest you take me to the particular items in the award.”

This strongly supports the inference that the attachment as sent to Mr Bingham was indecipherable because, as a very experienced adjudicator in this field, he could not have had substantial difficulty in understanding the nature of the calculation in the attachment if he had been able to read it; and, specifically, the attachment identifies the pages of his Award where the relevant items had appeared, even if not where the particular items appeared on the identified pages. There is no other evidence about the legibility of the attachment other than the poor quality of the Court’s copy and Mr Bingham’s response on 28 November.

PP’s solicitors replied to Mr Bingham on the same day by email, providing another copy of the attachment and a further explanation in the body of the email:

“In the application which is the subject of the dispute PPC applied for the sum of £2,235.910.12, which after the deduction of 2.5% retention (in the sum of £55,897.75) and that previously paid (in the sum of £1,759,286.88) left the net sum due of £420,725.48. The sum sought of £420,725.48 was after the deduction of the 5% discount in the sums of £74,965.98 and £24,932.35. This is shown in the column headed “This Valuation” in the PDJ attached hereto.

In reaching your Decision you have deducted amounts from that applied for by PPC.

PPC has set down in the column headed “PPC Valuation” in the attached PDF the amounts it applied for before discount being deducted being in the sum of £2,335.808.44. In your Decision, however, at page 27 of 30 at paragraph 33 you have used the sum of £2,235,910” which was after the deduction of 5% discount (in the sums of £74,965.98 and £24,932.35 as above). It is the difference between these two sums (£2,235,910.00 and £2,335.808.44) that equates to the slip.

You have decided that the sums of £73,117.00, £6,189.00 and £10,000.00 are not due. If these sums are deducted from the sum of £2,335.808.44 (before the deduction of discount) this leaves a sum of £2,246,502.44.

If one then deducts 5% discount from £2,246,502.44 (being £112,335.12) and retention at 2.5% (being £53,354.43) this leaves a sum of £2,080,822.89.

Then taking from the sum of £2,080,822.89 the previous paid of £1,759,286.88 leaves a sum due of £321,536.12.

We hope that the above provides the necessary clarification.”

While the copy of this second attachment in the Court’s file is of slightly better quality than the first, there is no evidence about the quality of the second attachment as received by Mr Bingham other than that he did not subsequently ask for further clarification.

On 30 November 2014 Mr Bingham replied, accepting that PP was correct to point to a clerical error (namely that 5% had been taken twice) and that it was a slip to be corrected. He then set out what he described as “the correct approach (draft for comment here)”. His revised calculation led to a balance of £321,536 and interest which he calculated as being £5,616 to 3 December 2014 and running from that date at £76.19 per day on the aggregated sum of £327,152.00. He concluded his email:

“Nothing in this correction is a rethink of any decision. If the award had been set out as above there would be no clerical error.

The correction will be issued as above once you cast an eye.”

It is common ground (and if it were not common ground I would find) that, because it was referred to as a draft for comment and because Mr Bingham said he would issue the correction “once you have cast an eye”, the email of 30 November is not itself a correction of the clerical mistake within the meaning of clause 70(9).

On 4 December 2014 PP’s solicitors replied to Mr Bingham:

“Further to our email dated 1 December and confirmation of our agreement to the correction of the slip to your Decision, please can you issue your revised Decision.”

It is a peculiar feature of the case that no email of 1 December 2014 was received by Mr Bingham or by GOL’s solicitors. In these circumstances, PP rightly accepts that the possibility of an email having been drafted is irrelevant and that it was not sent.

On 5 December 2014, PP’s solicitors chased Mr Bingham by a further email, apologising for chasing him and asking him to issue his revised Decision. Mr Bingham issued his “Slip Award” that day, which incorporated the calculation he had sent to the parties in draft on 30 November 2014 and substituted (a) the sum of £321,536 for his previous award of £229,005.23 and (b) interest in the sum of £5,616 for his previous award of £3,999.75. GOL has paid the sums required to be paid by the original award but has not paid the difference between those sums and the substituted sums included in the Slip Award. Hence these proceedings and this application for summary judgment.

It only remains to be said that there was considerable confusion about the proper contractual basis for the adjudication in PP’s pleadings and until the exchange of skeleton arguments for this hearing. However, by the time of the hearing, it was common ground that Clause 70(9) is the provision applicable to the correcting of clerical mistakes. In addition, it has not been suggested that Mr Bingham’s original error was anything other than a clerical mistake.

The potentially critical events and timings that form the backdrop for the parties’ submissions are therefore:

If, therefore, the operative request for correction of the clerical error was the email on 26 November 2014, then Mr Bingham’s “Slip Award” was issued more than the 7 days after the request provided for by Clause 70(9). If, however, the operative request was made on 28 November 2014, 4 December 2014 or 5 December 2014 the “Slip Award” was issued within the 7 days allowed by Clause 70(9). In any event, it was issued within the 14 days specified by Clause 70(9) as being the time within which a request or initiative by the adjudicator had to occur; and within the 21 days which is the possible maximum time reached by aggregating the 14 days allowed for a request or initiative and the 7 days allowed after such a request or initiative on the 14^th day.

It follows from the summary provided above that the issues raised by GOL are:

GOL submitted that, in order to qualify as a “request” within the meaning of Clause 70(9), it must identify the clerical mistake that is the subject of the request and must request the adjudicator to correct it. This formulation is not controversial. GOL also submitted that, when deciding whether an operative request (by which I mean a “request” within the meaning of Clause 70(9)) has been made, the Court should adopt an objective interpretation of the materials that are said to constitute the request and should not adopt a subjective approach based on whether the adjudicator in question recognised that what he received was meant to be and was an operative request. There is force in this submission since a definition of “request” that required the Court to investigate the qualifications, abilities and understandings of the adjudicator in question seems undesirable. The better approach is, to my mind, that an operative request must identify the clerical error with sufficient clarity that a reasonable adjudicator who holds himself out as competent to deal with the adjudication in hand should be able to understand precisely where in his adjudication he has made a clerical error, what that error is, why it is an error and what alteration is required.

Adopting this approach, the email and attachment of 26 November 2014 did not constitute an operative request. It is evident from the terms of the email itself that the attachment was intended to be an integral part of the request and that it was the attachment that was meant to identify precisely where in the Award the error was to be found, what that error was and what alteration was required. On the limited evidence that is available and for the reasons set out in [10-12] above, I find that the attachment as presented to Mr Bingham was unclear so that he could not read it. Since neither party suggests that Mr Bingham is not a suitably qualified and competent adjudicator, his inability to read the attachment as presented to him is evidence of its inadequacy for the purposes of a competent adjudicator. On all of this evidence, I find that the attachment as presented to Mr Bingham was unclear so that a reasonable adjudicator who held himself out as competent to deal with the adjudication in hand would be and was justified in concluding that he could not reliably decipher it. That of itself means that the email and attachment did not constitute an operative request: the attachment was intended to be an integral part of the whole but the whole could not be understood. It is possible in some circumstances that the illegibility of part of a purported request might be insignificant so that it could be ignored by the reasonable adjudicator; but that is not the case here. Not only was it clear that the attachment was meant to be the part of the request that provided the detailed explanation of what had gone wrong with the identification of the relevant parts of the Award, the text of the email taken on its own was unsatisfactory in the respects set out in [8] above and did not justify a conclusion that the terms of the attachment could be ignored.

GOL submits that Mr Bingham’s response on 28 November 2014 shows that the email and attachment were suitably clear and that Mr Bingham understood the essential terms that would constitute an operative request. I disagree. His response merely identifies that he understood the purported request to involve an assertion that he had taken a second 5% discount and that it was not his intention to do so. That is not a sufficient understanding on his part, as he evidently appreciated in asking for clarification that identified the relevant parts of his Award where the error was to be found.

The answer to issue (i) is that the email and attachment sent by PP on 26 November 2014 did not constitute a “request” within the meaning of Clause 70(9).

The email and attachment on 28 November 2014 satisfied all the requirements of an operative request: it would enable any reasonably competent adjudicator to understand precisely where in his adjudication he had made a clerical error, what that error was, why it was an error and what alteration was required.

In these circumstances, it is not necessary to decide whether either or both of the emails of 4 December and 5 December 2014 were or were capable of being operative requests, since it is common ground that if the email and attachment of 28 November was an operative request, Mr Bingham corrected the error in time on 5 December 2014. However, if it had been necessary to do so, I would have held that each of the emails of 4 and 5 December was capable of satisfying the formalities of an operative request when read in the context of what had gone before because each adopted Mr Bingham’s draft calculation as the basis for a requested decision and the draft calculation identified the necessary constituents of an operative request with sufficient precision.

The answer to issue (ii) is that the email and attachment sent by PP on 28 November 2014 constituted a “request” within the meaning of Clause 70(9). And the emails of 4 and 5 December were in a form that was capable of being a “request” within the meaning of Clause 70(9) when read in context.

was it open to PP to issue another request within the meaning of the Clause and, if it was,

did PP issue another request within the meaning of the Clause?

Because of my finding on issue (i), this issue does not arise. However, GOL advanced an interesting argument on the assumption that the email and attachment on 26 November 2014 were an operative request. It submitted that the email and attachment on 28 November should be regarded as a mere clarification and not a new request falling within Clause 70(9) and that, as a matter of construction of Clause 70(9), it was not open to PP to issue further operative requests once it had issued the first one.

Clause 70(9) does not expressly prohibit the making of more than one operative request. If, therefore, GOL’s construction is to be accepted, it must be on the basis that there is an implied term to that effect or that Clause 70(9) read in the context of the wider contractual matrix falls to be read in that way.

As always, it is material to look at the consequences of this interpretation of Clause 70(9) when considering alternative interpretations. If GOL is right, then the failure of an adjudicator to make the correction within 7 days of the original operative request would have the effect of precluding correction of a clerical error, even if the failure to make the correction falls well within the 14 days which Clause 70(9) expressly allows for making an operative request. The justification for this draconian outcome is said to be that the need for certainty and speedy resolution is paramount in the adjudication process. Because of that need, and as a matter of legal policy, GOL submits that Clause 70(9) should be interpreted so that once an operative request has been made, nothing can extend the period for the making of a correction beyond 7 days from that request. In addition, GOL submits that it would be undesirable if PP could simply extend the time for correcting a clerical error by issuing daily “requests” up to and including the 14^th day. For these reasons, GOL submits that, once one operative request has been made to correct an error, no further operative request can be made in any circumstances.

In resisting this argument, PP points to the fact that Clause 70(9) contemplates up to 21 days for the process of correcting clerical errors and submits that any resolution within 21 days is preferable to leaving uncorrected an error which could be corrected within 21 days even if it has not been corrected within 7 days of the original operative request. It also points to the fact that, if GOL’s interpretation were correct, the consequence of a mere failure by the adjudicator to correct his award in due time would be that the parties would have to resort to the time and expense of an arbitration in order to correct his error, which is an undesirable clog and imposition of needless proceedings and expense.

It is correct that speed and certainty are, in general, meant to be the hallmark of the adjudication process and that this applies to bespoke adjudications just as to adjudications subject to the statutory Scheme. I accept that issuing daily requests so as to extend the time limit would be a bizarre course of conduct. There is also some force in GOL’s submission that there should be no further operative request if the adjudicator had already ruled against a party on its initial operative request. It would not be correct to describe the effect of the first refusal as an issue estoppel, but the undesirability of repeated requests to the adjudicator when he has made a decision provide some support for an interpretation that would forbid that possibility. It would of course be less objectionable if the effect of a second request were to enable the adjudicator to understand that his previous refusal to correct the error was itself wrong. However, that is not what happened here. On GOL’s case, the most that could be said would be that, having received an operative request on day 1, Mr Bingham had not replied substantively at all within 7 days so as to rule on the request one way or another. So no question of seeking to go behind a positive decision arises; and the desirability of remedying clerical errors remains.

Turning to the primary tools of contractual construction, I can see nothing either in the terms of Clause 70(9) or the wider contractual matrix which would justify the draconian construction for which GOL contends. Clause 70(9) is consistent with the possibility of more than one operative request being made and, in my judgment, the commercial advantages of permitting another request to be made in circumstances where, for example, the adjudicator has simply failed to respond to an original request in time at least equal the disadvantages. Turning to the wider contractual context, GOL has not identified any feature of the wider context which indicates that its construction should be adopted. Looked at more generally still, it cannot be said that an interpretation which maintains the longstop date of 21 days from delivery of the original Award undermines the principles of speed or certainty.

For similar reasons, I would reject the implication of a term such as that for which GOL would have to contend. It cannot be said that Clause 70(9) is unworkable as it stands or that commercial efficacy requires the implication of a term. An additional difficulty for GOL is that it has not formulated a term with any certainty or precision, which would itself be a fatal bar to implication.

If, therefore, I had concluded that the email and attachment of 26 November was an operative request and that Mr Bingham had failed to respond in time, I would also have held that there was no contractual impediment to treating the email of either 4 or 5 December (or both of them) as an operative request. It follows that, on this basis also, Mr Bingham answered in time.

The answer to issue (iii) is that if the email and attachment on 26 November 2014 were a “request” within the meaning of Clause 70(9), (a) it was open to PP to issue another request within the meaning of the Clause (at least after the failure to reply within time) and (b) PP issued another request within the meaning of the Clause on 4 and/or 5 December 2014.

There will be summary judgment for PP as requested.