The decision of the Inner House of the Court of Session in the case of The Lauren McLeish Discretionary Trust v Dickie and Moore has clarified the circumstances in which an adjudication decision can be enforced in part.
The case was considered in the Outer House last year, discussed in our articles here and here. In this article, we look at the status of the law following the outcome of Dickie and Moore’s appeal to the Inner House.
Severability: the issue at the heart of the case
Please refer to our previous articles for the full background to the case.
To recap, the Outer House initially found that aspects of a dispute between the parties had not crystallised prior to the commencement of an adjudication. As a result, the adjudicator did not have jurisdiction in respect of those aspects. The adjudication decision therefore could not be enforced, at least in part.
The Outer House then considered whether the other parts of the decision – which related to aspects of the dispute that had crystallised – could be enforced. Could the constituent parts of the decision be severed from one another to enable enforcement in part, or was the entire decision tainted?
The answer given by the Outer House was that the valid parts of a decision could be severed from the invalid parts, and the decision could therefore be enforced in part.
The appeal to the Inner House
The Inner House agreed both with the decision and the reasoning of the Outer House.
In setting out its decision, the Inner House examined the case law on severability in Scotland and in England and made some helpful remarks about the correct approach to be taken. The Inner House noted:
- It is important to take into account the policy considerations that underpin adjudication (such as the need to provide an efficient dispute resolution procedure to protect cash flow during construction projects). The courts “should adopt a practical and flexible approach that seeks to enforce the valid parts of the decision unless they are significantly tainted by the adjudicator's reasoning in relation to the invalid parts”.
- When applying that approach, “the court should make the assumption that the parts of the decision that are invalid, for example because the dispute had not crystallized, did not exist. On that basis, it should then consider whether the remainder of the decision can be enforced without its being tainted by the invalid part of the decision.”
- If the adjudicator’s reasoning in the invalid part of a decision has “a significant effect” on the reasoning in the other part, “it is likely that severance will be impossible, with the result that the whole decision must fall.”
- The type of jurisdictional issue in question is significant. If the adjudicator lacked jurisdiction because of a breach of natural justice there will “inevitably” be an element of doubt cast over the whole of the adjudicator’s reasoning, making it unlikely that severance will be possible.
The Inner House decision has made clear that in certain circumstances adjudication decisions can be enforced in part, provided that the reasoning of the adjudicator has not been significantly affected by the invalid part.
The approach the Scottish courts will take is “flexible and practical” and will pay heed to the policy considerations that underpin the adjudication process. This approach is in line with recent English case law.
The decision of the Inner House is likely to give confidence to parties seeking to enforce an adjudication decision in circumstances where there is doubt as to the jurisdiction of the adjudicator.