| Date | 30 June 1999 |
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| Judgment | Odebrecht Oil and Gas -v- North Sea Production Company Ltd, TCC 10 May 1999 |
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| The Issue | The effect of interim assessments by experts or adjudicators upon subsequent assessments. |
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| Implication |
Parties will generally not be entitled to a re-adjudication of rights and obligations following an adjudication. However an adjudicator may be entitled to take all relevant issues freshly into account in subsequent interim assessments, including points of principle. |
printThe decision of an adjudicator appointed under the Housing Grants Construction and Regeneration Act is final and binding upon the parties unless and until the matter is otherwise resolved by agreement, arbitration or litigation. Thus a dispute which has been the subject of an adjudication can be determined afresh by an arbitrator or the court, but it is generally accepted that once an adjudicator has issued a binding decision, the disputed matters cannot be put before another adjudicator for a second bite at the cherry. Whilst all this makes perfectly good sense it will of course be difficult on some occasions to clearly separate those issues which have already been decided by an adjudicator, from fresh issues arising out of the same project. It is in the nature of adjudication that many decisions made by adjudicators will be interim. In other words, the decision may concern the rights and obligations of the parties at a given point in time on a project that might perhaps be ongoing. For example, the decision may only concern the amounts due in respect of an interim payment. In consequence, the same or similar issues may fall to be determined in subsequent adjudications in respect of subsequent interim payments. Whether the subsequent adjudication may properly proceed is not simply a question of whether fresh evidence is to be heard. For example a main contractor may argue abatement of an interim payment due to alleged defects in a subcontractor's work, but in front of an adjudicator may have failed to give proper evidence of the defects alleged. In such circumstances the adjudicator may well find the subcontractor entitled to the full amount of the interim payment. Is the main contractor entitled to raise a second adjudication in respect of a subsequent interim payment, with the intention of producing the evidence relating to defects that it failed to supply to the first adjudicator? Similarly, where in the first adjudication a point of principle is decided by the adjudicator concerning the interpretation of the contract, it is thought that adjudications in respect of subsequent interim payment would be bound by the decision of the first adjudicator in respect of that point of principle. An example might be where the adjudicator had made a decision as to whether a contractor's rates and prices included particular items of attendances, or on-costs. However, as lawyers enjoy saying, the matter is not free from difficulty. Similar issues arose in the recent case between Odebrecht Oil and Gas -v- North Sea Production Company Ltd. Whilst not relating directly to the role of an adjudicator parallels can be drawn. Odebrecht entered into contract with North Sea Production for the conversion of a tanker into a floating production storage and offtake facility. A performance bond was issued on its behalf by the New Hampshire Insurance company with a maximum aggregate liability of £102 million. In fairly standard terms the bond required the guarantor to satisfy and discharge the damages sustained by the employer as the result of any breach of contract by the contractor where such damages were established and ascertained in accordance with the main contract. In addition however, the performance bond provided that damages might be payable by the guarantor on the basis of an interim assessment to be either agreed between the parties, or determined by an independent expert. The expert was required to " determine as soon as practicable whether or not there has been a breach of contract by the contractor and if so what is the amount of the damages". Where the expert was unable to reach such a determination the bond provided that the expert should provide a written estimate of the amount of damages which would become payable under the terms of the bond. The expert was given powers at any subsequent time to revise his assessment or estimate of the damages. Mr Justice Dyson QC closely examined the terms of the bond to determine the manner in which the expert might have jurisdiction to deal with matters which had been considered in previous decisions. He was satisfied that the bond did not permit the revision by the expert of a previous finding of an issue of liability. The case in question was however concerned primarily with the assessment of damages. It was argued that Odebrecht could not raise for a second time an issue of principle concerning quantum upon which the expert had already ruled. An example would be where the expert had decided that in assessing the damages sustained by the client he could not take into account any future losses because damages sustained could only be referring to sums already and actually incurred. Mr Dyson did not agree with this argument. He could see no reason why a revision of the assessment of damages could not be based on a re-appraisal of legal arguments just as the revision could be based on a re-appraisal of the facts relating to the assessment. A distinction could not be made for holding that some quantum issues would be within the scope of the revised expert assessment and others would not. Accordingly there could be no restrictions on the employer's right under the bond to require the expert to review his assessment or estimate of damages. Such a review would embrace any fresh evidence in respect of the damages which was relevant to the determination, as well as a re-appraisal of relevant legal arguments about the assessment of damages. It seems an adjudicator's decision may not always be the last word on a dispute before the matter goes to an arbitrator or the court.
CJ-9926
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