A recent judgement from the Outer House of the Court of Session, Scotland, held that severance (i.e. part enforcement) of an adjudicator’s decision was competent where only some parts of the dispute had crystallised. The key question for the courts is whether there is a “core nucleus” of the decision that can safely be enforced.
In 2016, Dickie & Moore Limited (“D&M”) entered into a building contract with the Trustees of the Lauren McLeish Discretionary Trust (“the Trust”) for the construction of a large residential property in Scotland. The adjudication involved a variety of disputed items, including claims for an extension of time and related loss and expense, as well as for the overall value of the Final Account and deductions. The adjudicator issued his decision (“the Decision”) on the entirety of the dispute.
The Trust refused to comply, and defended the court enforcement proceedings that followed. The Trust argued that the Decision was unenforceable as the adjudicator lacked jurisdiction to decide the dispute. One of the key reasons argued for the Trust was that the dispute had not yet crystallised. Lord Doherty, in the Court of Session, found that the claims for an extension of time and associated loss and expense had not crystallised before the service of the Notice of Adjudication. He therefore held that the referral on those matters was premature, and the adjudicator lacked jurisdiction to decide them. The question then was, where did this leave the Decision overall?
The Parties’ Positions
D&M argued that although parts of the dispute decided by the adjudicator had not crystallised, the adjudicator did have jurisdiction to decide the remainder of the dispute. Therefore, leaving aside the extension of time and loss and expense claims, the Decision could be enforced regarding the other claims that it decided separately. D&M submitted the Decision could be considered as dealing with two disputes, one that had crystallised and was capable of being enforced, and another which had not crystallised and therefore could not be enforced.
The Trust argued that a single dispute had been referred to adjudication. The Trust’s position was that the whole claim was “tainted” due to the finding that the claim for extension of time and loss and expense had not crystallised. Therefore, the entire Decision should not be enforced.
Lord Doherty considered the various Scottish and English judgements relevant to severability of adjudicator’s decisions; some that support this and some that do not. He held:
- Akenhead J’s obiter comments in Cantillon Ltd v Urvasco Ltd should be viewed as setting guiding principles, rather than rigid rules. It is not essential that there be more than one dispute for severability to be competent. Although the Scheme for Construction Contracts (Scotland) Regulations 1998 (“the Scheme”) only allows one dispute to be referred at a time, that one dispute could, on closer analysis, be looked at as more than one dispute when it came to determining if severance was achievable.
- Paragraph 20(1) of the Scheme compels adjudicators only to decide matters in dispute that are within their jurisdiction. Lord Doherty stated that “[w]here an adjudicator’s decision is partly within and partly outwith jurisdiction only the part within jurisdiction can be binding”.
- To exclude the possibility of severance altogether in cases involving only a single dispute would lead to “disproportionate and unjust results in a not insignificant number of cases” as success, even in relation to a small part of the decision, would extinguish the entirety of the claim.
- The key question for the court is whether there is a “core nucleus” of the decision that can be safely enforced. This was present in this case and the extension of time award could be severed from the whole, with the remainder of the decision being safely enforced.
- The adjudicator’s award as to expenses could not be safely enforced as the adjudicator may have taken a different position regarding apportionment if he had reached the same result as the court.
Many industry practitioners will welcome Lord Doherty’s approach as being flexible and pragmatic. It is encouraging to see the Court supporting the adjudication process in line with the statutory aim of adjudication decisions having temporary binding effect, to the extent possible.
The approach advocated is not without complexity; the court must now decide what constitutes the “core nucleus” of the decision. Still, as Lord Doherty notes, although the total exclusion of severance would increase certainty, it may also lead to unjust results.
A further point to note is that this decision follows the current trend of English case law regarding severability. This is helpful, given the common statutory provisions and similar Scheme provisions that apply across the UK. In conclusion, it is likely that severance will become more common in future adjudication enforcement cases.