NKT Cables A/S v SP Power Systems Ltd

Factual and Procedural Background

This action involves the Plaintiff seeking to enforce an adjudicator’s award following adjudication under the Housing Grants, Construction and Regeneration Act 1996, relating to a contract dated 25 November 2010 with the Defendant for the supply and installation of electricity cables in connection with the 2014 Commonwealth Games in Glasgow. A dispute arose regarding the outstanding balance under the contract. The Plaintiff referred the dispute to adjudication in May 2016, and Alan Joseph Turner was appointed adjudicator.

The adjudicator issued an Original Decision on 1 July 2016 awarding a principal sum of £1,851,408.53. However, a clerical error was identified in the calculation of the gross contract value, and the Plaintiff requested correction. The adjudicator issued an Amended Decision on the same day correcting the gross contract value and increasing the award to £2,143,712.28 by including agreed claims and agreed interest previously omitted.

The Defendant challenged the adjudicator’s power to amend the Original Decision, alleging breach of natural justice and failure to exhaust jurisdiction, arguing that substantive defences and alternative valuations were not properly considered. The Plaintiff sought enforcement of the Amended Decision, or alternatively the Original Decision.

Legal Issues Presented

1. Whether the adjudicator had power to correct a slip under regulation 22A of the Scheme for Construction Contracts (Scotland) Regulations 1998 as amended, or whether the unamended Scheme applied;
2. If the statutory slip rule was unavailable, whether a like power to amend was available by implication of law;
3. Whether the amendments made in the Amended Decision fell within the scope of the slip rule;
4. Whether the adjudicator acted in breach of natural justice in issuing the Amended Decision;
5. Whether the adjudicator failed to exhaust his jurisdiction by not addressing the Defendant’s substantive defences, alternative valuations, or by failing to provide adequate reasons.

Arguments of the Parties

Defendant's Arguments

• The Scheme applied in its unamended form due to the contract date, so the adjudicator had no power to amend the Original Decision, making the Amended Decision a nullity.
• No common law power to amend errors in Scottish adjudications exists; the adjudication scheme is sui generis and distinct from arbitration.
• The purported correction extended beyond a clerical slip and constituted a substantive recalculation, thus falling outside any slip rule.
• The adjudicator breached natural justice by failing to give the Defendant an opportunity to comment on the amendment, causing possible prejudice, including alleged double counting of interest.
• The adjudicator failed to exhaust jurisdiction by not addressing the Defendant’s substantive defences or alternative valuations, particularly in relation to variation order claims under clause 31.
• The adjudicator provided inadequate reasons for rejecting substantive defences, failing the test of intelligibility and completeness required for enforcement.

Plaintiff's Arguments

• The Scheme applied in its amended form as at the time of the Agreement to adjudicate, allowing the adjudicator to correct slips under regulation 22A.
• Alternatively, a power to correct accidental errors or omissions is implied by common law into the adjudication scheme as necessary to give business efficacy and reflects practical expectations of parties.
• The amendments made were within the scope of the slip rule, correcting a clerical error and omission of agreed claims and interest that parties expected to be included.
• No breach of natural justice occurred as the Defendant was aware of the correspondence and had the opportunity to respond but chose not to; alleged prejudice was not specified or significant.
• The adjudicator properly exhausted jurisdiction by addressing the core dispute, including substantive defences and alternative valuations, exercising wide discretion not to comment on every point in detail.
• The adjudicator’s reasons were intelligible and sufficient for the informed reader, consistent with the nature of adjudications as rough and ready interim determinations.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by considering whether the amended Scheme with regulation 22A (the slip rule) applied. It found that the Scheme applied in its unamended form because the contract predated the 2011 amendments and there were no transitional provisions. The reference to the Scheme in the parties’ agreement did not specify the amended version, and the adjudicator, as a specialist, was aware of the contract date.

Next, the court considered whether a slip rule power could be implied at common law. It accepted that implication was possible and desirable to ensure business efficacy and consistency with the UK-wide statutory scheme. The court applied established tests for implication, concluding that parties would unhesitatingly have agreed to a power allowing correction of accidental slips, consistent with the purpose of adjudication as a quick and rough interim dispute resolution.

The court then examined the scope of the slip rule, concluding it is confined to correcting clerical or typographical errors arising by accident or omission, not to substantive errors or pure omissions where the adjudicator failed to consider matters at all. It distinguished between correcting an error of expression and giving effect to second thoughts or new considerations.

Applying this to the facts, the court found the correction of the rogue figure on the final page was within the slip rule’s scope. However, the inclusion of the Agreed Claims and Agreed Interest in the Amended Decision was a substantive addition not previously considered by the adjudicator and thus outside the slip rule. The court relied on the reasoning in Bouygues, which held that intra vires errors not susceptible to correction under a slip rule must be accepted as a risk of adjudication.

On natural justice, the court held that if the slip rule applied, the narrow scope did not require parties be given an opportunity to comment on corrections. As the inclusion of the Agreed Claims and Interest was outside the slip rule, the natural justice challenge was not reached.

Regarding failure to exhaust jurisdiction, the court analysed the adjudicator’s treatment of the Defendant’s substantive defences and alternative valuations. It found the adjudicator addressed the time-bar defence and certain defences such as the cable issue but failed to engage with other substantive defences or provide reasons for rejecting them, especially in relation to variation order claims. The adjudicator also did not address the Defendant’s alternative valuations in detail, instead apparently relying on valuations by the Employer’s Representative rather than the Defendant’s own.

The court concluded that the adjudicator’s failure to address or give reasons for rejecting substantive defences (except cable) was a material failure to exhaust jurisdiction, rendering the decision unenforceable in those respects. The inadequacy of reasons compounded this failure.

Holding and Implications

The court held that the Defendant’s challenge to the Amended Decision succeeded because the adjudicator lacked power under the slip rule to include the Agreed Claims and Agreed Interest in the Amended Decision. The Amended Decision was therefore void in these respects.

The Plaintiff’s fallback on the Original Decision was also challenged successfully on grounds of failure to exhaust jurisdiction and inadequate reasons regarding substantive defences, rendering parts or all of the Original Decision unenforceable.

Accordingly, the adjudicator’s decisions cannot be enforced as they stand. The court reserved the question of whether partial reduction of the decisions is possible or whether they should be reduced in their entirety, and reserved expenses.