Reference:  CSOH 2Date: 12 January 2021
Judge: Lord TyreLink: https://www.scotcourts.gov.uk/docs/default-source/cos-general-docs/pdf-docs-for-opinions/2021cs0h02.pdf?sfvrsn=0
Keywords: Adjudicators’ decisions; Enforcement; Jurisdiction; Scotland
This was a Scottish action in the Outer House of the Court of Session to enforce an adjudicator’s decision. In about February 2018, the parties entered into a contract whereby Barhale Limited (“the Pursuer”) agreed to carry out certain works, including constructing foundations in an area of made ground, at an electricity sub-station in Currie, Edinburgh. The contract terms included the NEC3 Engineering and Construction Contract, Main Option B, Third edition, and the Contract Data provided that the Civil Engineering Standard Method of Measurement, 3rd edition (CESMM3) was the method of measurement to be used. To construct the foundations, the Pursuer had to carry out excavations and remove the ground down to a minimum excavation level indicated on drawings in the Works Information. It then had to bring the levels back up using imported fill, building the foundations as it went. The Pursuer excavated an area greater than the area of the foundations to be constructed, down to a level where there was adequate bearing capacity. A dispute arose between the parties as to the amount due to the Pursuer for the excavation and filling work carried out.
The parties adopted different approaches to the remeasurement exercise. The adjudicator accepted the Pursuer’s case, finding that the Pursuer was entitled to an additional £196,606.33 for the bulk excavation, disposal and filling work. In the enforcement proceedings, SP Transmission PLC (“the Defender”) submitted that the case fell within one of the limited but well-recognised categories in which enforcement of an adjudicator’s decision should be refused.
The Defender argued that the adjudicator had failed to exhaust his jurisdiction because he had not considered the Defender’s remeasurement argument (that even if the Pursuer was correct that the Works Information required a bulk excavation, disposal and filling, CESMM3 was applicable and restricted the volume measured for the excavation and filling to the volume occupied by (including beneath) or vertically above any part of the foundation). The Defender argued that this had been a significant point in dispute during the adjudication and had been highlighted as such in the Defender’s written submissions and expressly drawn to the adjudicator’s attention in email correspondence. However, the adjudicator had determined that a bulk excavation was required by the contract and then awarded the Pursuer’s claim in full and dismissed the counterclaim.
There was English case law to the effect that a failure by an adjudicator to address a question referred to him might render his decision unenforceable, but only if the failure was deliberate. However, this appeared to consist of cases in which the ground of challenge was a breach of natural justice instead of failure to exhaust jurisdiction. The Scottish courts had not gone down the line of distinguishing between deliberate and inadvertent failure, perhaps because the usual ground of challenge was the failure to exhaust jurisdiction. The Defender argued that there was no good reason to distinguish between deliberate and inadvertent failure. Still, if it was considered appropriate to make such a distinction, the failure was to be regarded as deliberate in this case.
The Pursuer argued that the adjudicator’s decision should be enforced. They said that it was obvious that the adjudicator had addressed the Defender’s remeasurement argument – the scope of the Pursuer’s instruction was the primary issue. Still, the adjudicator had treated the issues of “scope of instruction” and “entitlement to payment” as inextricably linked. The Pursuer also said that rejection of the Defender’s argument was implicit in the adjudicator’s decision on the central issue referred to him, which was to accept that the works should be measured and valued following the basis proposed in the Pursuer’s referral. Even if the adjudicator had not considered a relevant defence argument, the Pursuer said that this was not a case of deliberate exclusion.
On that basis, and in light of the line of English authority on inadvertent failure to exhaust jurisdiction, the Pursuer argued that the decision should be enforced. The judge held that the adjudicator did not effectively address how the bulk excavation work was measured in terms of CESMM3.
This was one of the issues for determination and a critical issue raised by the Defender. In failing to address the Defender’s argument when reaching his decision, the adjudicator had failed to exhaust his jurisdiction. Accordingly, the adjudicator’s decision was held to be unenforceable. Lord Tyre thought it unnecessary to characterise the failure as deliberate before finding that the decision was unenforceable but would have been minded to categorise it as such in this case. In support, he highlighted that on two separate occasions, the Defender had told the adjudicator that he had to decide the issue of the applicable contractual method of measurement and, in particular, on one of those occasions, this had elicited a “terse response” from the adjudicator.
This judgment looks at when an adjudicator’s failure to consider an issue put to it by the parties may render its decision unenforceable, particularly looking at the distinction between deliberate and inadvertent failures. The judgement highlights the difference in the Scottish and English law positions. In Scotland, a failure by an adjudicator to consider a question referred to it is typically characterised as a failure to exhaust jurisdiction, whereas, in England, it is usually considered a breach of the rules of natural justice.