Neutral citation: Liverpool City Council v Vital Infrastructure Asset Management Ltd [2022] EWHC 1235 (TCC)

NEC contract topics: Multiple contracts – Framework and call off contracts

Form of contract: Framework with NEC3 Engineering and Construction Contract

Main areas of law: jurisdiction of adjudicators, breach of natural justice in adjudication proceedings

 

Liverpool City Council (LCC) and Vital Infrastructure Asset Management Ltd (VIAM) entered into a framework agreement in May 2019 for planned highway works projects, valued under £500,000. The framework provided that each individual project would proceed under a separate call-off contract, each incorporating the NEC3 Engineering and Construction Contract with modifications. On 25 September 2021, LCC and VIAM entered into such a call-off contract for a project referred to as framework lot 1 - K1-006, for the sum of £488,992.41.

A dispute arose over LCC's failure to pay for VIAM’s maintenance of temporary fencing. VIAM commenced adjudication proceedings. The adjudicator awarded VIAM £128,500 plus interest and costs. LCC challenged the decision through Part 8 proceedings, contending the adjudicator lacked jurisdiction due to the dispute arising under two contracts (the “two contracts issue”), defective service of the adjudication notice (the “service issue”), and a decision on matters not referred to adjudication (the “nullity issue”). The judge allowed LCC to also pursue a fourth issue: whether there had been a breach of natural justice.

 

LCC submitted that the adjudicator had no jurisdiction because the dispute arose under both the framework agreement and the call-off contract. It also argued the notice of adjudication had not been properly served in accordance with the contract, and that the adjudicator exceeded his jurisdiction by deciding a dispute not referred to him. Additionally, LCC raised a further point: that the adjudicator reached a conclusion based on an argument not advanced by either party, denying LCC an opportunity to respond, which amounted to a breach of natural justice.

 

The court dismissed the “two contracts issue” and the “service issue”. It held that the contractual framework anticipated disputes might involve both the framework and the call-off contract and allowed for resolution under the call-off contract’s adjudication mechanism. The notice of adjudication, though addressed to the wrong individual, was sent to the correct address and was deemed to have been properly served.

The “nullity issue” was also rejected. The court found that the adjudicator had addressed the core dispute—whether LCC owed payment under the call-off contract. Although he may have chosen an interpretation not explicitly argued, this did not render the decision a nullity.

However, the court upheld the “natural justice” issue. The adjudicator inferred that LCC had implicitly accepted a typographical error in the Schedule of Rates in a compensation event notice, despite no such concession being made or argued. This finding had not been raised during the adjudication process and LCC was not given an opportunity to respond. The court determined that this failure amounted to a material breach of natural justice. Judge Stephen Davies stated that the adjudicator had “departed in a significant way” from fair procedure and had not convincingly explained why LCC was not allowed to address the point. As a result, the adjudicator’s decision was declared unenforceable.

 

This case affirms that disputes involving interlinked framework and call-off contracts may validly be referred under the call-off contract if properly structured. Additionally, the judgment highlights that technical defects in notice service will not invalidate adjudication where practical service is achieved and the recipient responds without prejudice.

Most significantly, the case is a reminder of the limits of adjudicators’ discretion. While not every issue must be answered explicitly, adjudicators must confine their decisions to the matters placed before them and ensure that parties are given a fair opportunity to respond to all substantive points considered. A failure to do so may render the decision unenforceable, regardless of the adjudicator’s intentions or the merits of their conclusion.