| Date | 9 June 2004 |
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| Judgment | AWG Construction Services Ltd v Rockingham Motor Speedway Ltd, TCC 30 April 2004 |
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| The Issue | Jurisdiction and procedural challenges in adjudication. |
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| Implication |
The introduction of alternative arguments in support of a case during the course of an adjudication may render adjudication unsuitable if the responding party cannot be given sufficient time to respond. |
printIn August 2000, Rockingham Motor Speedway entered into a contract with AWG Construction, who at that time were known as Morrison Construction, for the design and construction of a new motor racing track near Corby in Northamptonshire. The project consisted of the construction of two race tracks, an Oval track for the purpose of staging high speed motor racing modelled on American-style Indy car racing and a conventional road racing circuit contained within the Oval. In addition, AWG agreed to design and build a four-storey grandstand building at the tracks and two pedestrian underpasses running under the Oval allowing access to the pit area. The works were completed approximately one year later and in September 2001 the Oval hosted its first race. Unfortunately, serious problems were discovered with the track. Seepage of water through to the surface of the track caused disruption to the race, which eventually had to be abandoned as it was considered to be too dangerous for high speed motor racing. Facing a substantial payment certificate for monies due to AWG, Rockingham served a withholding notice in the amount of £2.8 million which it contended would be the cost of remedial works to the track. Discussions took place and eventually, by April 2002, remedial works to the track had been undertaken by AWG. Rockingham released £2.4 million but continued to withhold approximately £400,000, disputing that the remedial works had dealt satisfactorily with the problem. In September 2002 a second race meeting was held at the Oval. The race went ahead without problems. Rockingham maintained however that this was because of favourable weather conditions, such that the rectification works had not been tested. AWG disagreed and said that the problem had been solved. Rockingham continued to withhold £400,000, maintaining that defects in the drainage had not been cured and that in any event it was entitled to be compensated for financial losses caused by the cancellation of the first race. By May 2003, those disputes had still not been resolved and AWG commenced adjudication to recover the £400,000 which it claimed was being wrongfully withheld. The adjudicator held in favour of AWG and ordered Rockingham to pay the £400,000. That adjudication had not dealt with Rockingham's wider complaints concerning defects, and it was inevitable therefore that a second adjudication would soon be commenced by Rockingham in respect of its claims for costs and losses as a consequence of the defects in the track. In October 2003, Rockingham commenced a second adjudication claiming approximately £2.8 million as the cost of remedying the defects. The referral notice explained that the subsoil on the site was clay, which was less permeable than other soils. Rockingham contended that the soil stabilisation method used by AWG was unsuitable in that it had created an impermeable layer under the road surfacing layer in circumstance where a granular sub-base should have been used. AWG responded to the effect that its use of the stabilised sub base was not negligent and emphasised that other contractors who had tendered for the works had proposed to use the same design. At this point Rockingham made further submissions to the adjudicator maintaining that it was not the stabilised sub-base itself that was the root cause of the problem, but the absence of drainage to that layer. AWG contended that the referring party's case had changed and that it was not being given sufficient time to respond to the new case. Ignoring AWG's protestations, the adjudicator held in favour of Rockingham on its wider case that AWG had been negligent in taking no account of the design of drainage to the sub base. He did however hold that the change in the design from a granular sub base material to a stabilised soil was not in itself the root cause of the problem. The matter then came before His Honour Judge Toulmin QC in the Technology and Construction Court. AWG sought an order that the adjudicator's decision should be set aside on the ground that he had no jurisdiction to consider the additional questions of drainage. He should have restricted himself to the initial matters raised by Rockingham in the notice of adjudication. Alternatively, AWG argued that the adjudicator had failed to act impartially in dealing with these additional matters in circumstances where AWG had not had sufficient time to respond. Judge Toulmin concluded that the case in which the adjudicator had found in favour of Rockingham was so different from that put forward in the referral notice that it was in essence a different adjudication. He agreed with AWG's submission that the need for additional drainage had not formed part of the original referral and therefore the adjudicator had answered a question which had not been referred to him. Moreover, there was clear injustice in a procedure in which the adjudicator had failed to afford AWG a proper opportunity to give a fully considered response to the additional material. He granted an order that the adjudicator's decision should be set aside on the grounds that he did not have jurisdiction to make such a decision and that he had failed to comply with the principles of natural justice.
CJ-0423
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