Adjudication is an interim-binding dispute resolution process which binds parties until the matter is finally determined by legal proceedings, arbitration or agreement. The courts have generally taken a robust view to the enforcement of an adjudicator’s decision and challenges by the losing party are rarely successful. This approach was emphasised by the recent Court of Session case, Morgan Sindall Construction and Infrastructure Limited v Westcrowns Contracting Services Limited.
This dispute related to liability for allegedly defective vinyl flooring installed by Westcrowns. After installation the vinyl began “bubbling and blistering” in a number of places. Westcrowns was informed in July 2013 and subsequent locations were noted in later correspondence.
Morgan Sindall argued that an incorrect primer had been used, it had been incorrectly applied and Westcrowns had not properly tested for the presence of moisture in the screed prior to laying the flooring.
The dispute was referred to adjudication. The adjudicator decided that the works had not been carried out in accordance with the subcontract and found Westcrowns was liable to pay Morgan Sindall £430,654, the cost of having the defect corrected by others.
Westcrowns failed to pay and enforcement proceedings were raised. Five grounds of challenge were put forward by Westcrowns being that the adjudicator (1) acted outwith his jurisdiction by deciding matters outside the scope of the dispute; (2) made a decision on more than one dispute; (3) left out of account a relevant consideration; (4) acted in a procedurally unfair way; and (5) failed to exhaust his jurisdiction or give reasons for his decision. Morgan Sindall argued each ground was unfounded and Westcrowns was barred from relying on the first ground as it hadn’t raised this challenge in the adjudication.
The Court’s Decision
In considering the first jurisdictional challenge, the court found in favour of Morgan Sindall, holding that Westcrowns was precluded from relying on it because they hadn’t raised it during the adjudication proceedings despite it being “plainly available to be taken during the adjudication”.
The court held that, in any event, the adjudicator had not decided matters outside the scope of the dispute. The proper approach to determining the scope of the dispute is to consider what a reasonable person in the position of the responding party, having the background knowledge available to all parties, would have understood the dispute to be. The court emphasised that they should not adopt an overly legalistic analysis of what the dispute is as such an approach is “unrealistic and not in accordance with commercial common sense.”
In relation to the second ground of challenge, the court emphasised the principle that “one dispute might encompass two or more causes of action, heads of claim or issues”.
Considering the third and fourth ground of challenge, the court found that any failure by the adjudicator to take account of relevant matters must be material, in the sense that it has a potentially significant effect on the overall result. The court decided that this was not the case here and held the adjudicator had not acted in a way that had been procedurally unfair.
Finally, the court found that, although the adjudicator had failed to address a set-off argument in his decision, given that the sum to be set off only amounted to £936 and the arguments were not properly set out, the failure was not material and did not cause substantial prejudice.
The case highlights the fundamental importance of raising jurisdictional challenges as early as possible in adjudication proceedings to ensure that parties do not lose their right to insist on the challenge at a later stage.
Numerous challenges were raised by Westcrowns but none stood up to scrutiny of the court. The decision emphasises that it is “only in rare circumstances that the courts will interfere with the decision of an adjudicator”.