ABB Ltd v BAM Nuttall Ltd
Clause 11.1A of the sub-contract provided that no alterations or amendment could be made to the sub-contract except where expressly recorded in writing by a document expressed to be supplemental to the sub-contract and signed by the parties. The parties reached an oral agreement as to the price for the surveying and design work but disagreed over the scope of that agreement. The parties’ disagreement was as to whether the agreed price only covered design work carried up to a specified date (as contended for by the sub-contractor) or included all the surveying and design work except for additional design work necessary for reasons beyond the sub-contractor’s control (as contended for by the contractor).
The sub-contractor referred the dispute as to its payment entitlement for its design work to adjudication. The sub-contractor applied for a declaration that its primary contention with regard to what the agreed price covered was the correct one. The adjudicator in awarding a specified sum to the sub-contractor accepted its alternative contention that the parties did not reach a binding agreement on the scope of the £1.5 million lump sum “given” (i) Clauses 11A and 66 of the sub-contract (ii) The fact that the sub-contract did not appear to provide a mechanism for the agreement alleged and (iii) The disagreement between the parties as to the facts of the alleged binding agreement which suggested that they were never "ad idem".
Akenhead J held that the adjudicator was in serious breach of the rules of natural justice by deciding the key issue of what design services provided by the sub-contractor were covered by the lump sum agreed by parties by reference to and in reliance on clause 11.1A of the sub-contract, which (i) Neither party had referred to or relied upon and (ii) The adjudicator did not give the parties the opportunity to address him on. The basis expressed by the judge for reaching this conclusion was that this issue was at least of considerable potential importance to the outcome of the resolution of the dispute, could well have been decisive and was certainly not peripheral or irrelevant.