Kirsti Olson: Severance of an adjudicator’s decision following a successful partial challenge



Kirsti Olson

Dentons UK and Middle East LLP partner Kirsti Olson outlines the details of the case of Dickie & Moore Limited v The Lauren McLeish Discretionary Trust, the use of pupils and the crystallisation of a dispute.

The Scottish courts have always taken the view that an adjudicator’s decision should be enforced, unless there is good reason not to. Challenges are scrutinised carefully. In the recent case of Dickie & Moore Limited v. The Lauren McLeish Discretionary Trust (12 September 2019 and 8 November 2019), part of an adjudicator’s decision was successfully challenged. The judge then had to decide whether the rest of the decision could still be enforced.

Background

The case related to the construction of a house near Armadale. The contract was based on a Scottish Building Contract with Quantities (2011 edition) standard form. The builder challenged the Architect’s Final Certificate and served an Adjudication Notice. The Adjudicator awarded the builder additional sums, together with an extension of time and loss and expense. The Trust did not pay, so the builder raised an enforcement action.

The Trust challenged the Adjudicator’s decision on a number of grounds. However, there were two key issues: (i) whether the Adjudicator had breached natural justice by allowing his pupil to assist him during the adjudication process; and (ii) whether the dispute relating to extension of time and loss and expense had crystallised before the Notice of Adjudication was served.

Lord Doherty issued his decision on those points in September 2019.

Pupil

With the parties’ agreement, the Adjudicator had a pupil – a prospective adjudicator seeking experience of a live adjudication process.

However, it became clear when the Adjudicator issued his fee note that the pupil had done more than observe. He had proofread the decision, checked the arithmetic, reached his own conclusions on several of the points raised (which the Adjudicator had not read), populated and adjusted a Scott Schedule and taken notes at meetings. The Trust argued that this was a breach of natural justice.

Lord Doherty was satisfied that the services provided by the pupil were essentially of an administrative and checking nature. He did not provide advice and all material decisions were taken by the Adjudicator himself. Whilst the Adjudicator should have told the parties what the pupil was doing, the judge found, in this case, that there had not been a material breach of natural justice.

The extension of time and loss and expense claims

In a previous valuation, a claim had been made for extension of time, prolongation costs and loss and expense. But the amounts involved and the grounds for those claims had been different from those later made in the Adjudication.

Lord Doherty said that an over-legalistic nit-picking comparison of the previous claim with the current claim should be avoided. However, he decided that the extension of time, prolongation and loss and expense claims in the Adjudication were of a different nature and order of magnitude to the previous disagreements. He decided that a dispute on the extension of time, prolongation costs and loss and expense claims put forward in the Adjudication had therefore not crystallised. The Adjudicator had no jurisdiction to make a decision on those issues.

Severance

The builder wanted to enforce the part of the Adjudicator’s decision that remained. Lord Doherty, therefore, had to consider whether the remainder of the decision could be severed from part of the decision that had been successfully challenged.

In a second decision, issued in November 2019, Lord Doherty decided that severance of an adjudicator’s decision is competent, provided that the core nucleus of the decision can be safely enforced. The judge decided, in this case, that the rest of the Adjudicator’s decision was untainted by the Adjudicator’s reasoning on the extension of time and loss and expense claims. The judge was therefore satisfied that there was a core nucleus of the decision that could be enforced.

Conclusion

It is to be hoped that adjudicators will not be discouraged from having pupils, as the training process is essential. But this case makes it clear that parties to an adjudication should be kept informed of what the pupil is doing, and that should not extend to the pupil having any influence over the adjudicator’s decision.

It is not uncommon for the dispute in an Adjudication Notice to be a more refined version of previous exchanges between the parties. But this case indicates that referring parties must be careful that the matters set out in the Adjudication Notice are not of a different nature or order of magnitude to those previously in dispute. If they are, a new dispute will have to be crystallised before the Notice of Adjudication is served.

Finally, this case confirms that severance of an adjudicator’s decision will be competent, if the core nucleus of a decision can be identified and enforced. This is something that should be borne in mind at the outset when an Adjudication Notice is drafted. Drafters should ensure that, so far as is possible, the conclusions that the adjudicator is being asked to reach are separate and not interdependent.

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