A recent decision in the Scottish appeal courts has rejected an injunction to deprive a party of its statutory right to go to adjudication, holding that the courts should be slow to intervene in the process. In a clear and robust judgement, the court underlined the importance of the ability to adjudicate, emphasising that an injunction would represent a “significant innovation” on the contract and a “significant limitation” on the statutory right to adjudicate.
The case concerned a sub-contract to install ground source heat pumps, bore holes and underfloor heating systems at West Linton Primary School. The parties fell into dispute and in the period between June 2013 and March 2014 there were 9 adjudications. Of these, the sub-contractor commenced 8 and was partially successful in just 1, being awarded £17,028 against an application for £184,740.
The Court’s First Decision
Against this background, the contractor raised an action for interdict (the Scottish equivalent of an injunction) to prevent the sub-contractor from “commencing or insisting upon any adjudications… in relation to matters arising or purporting to arise under or in relation to a contract…”,basically a prohibition on starting any more adjudications under the sub-contract.
The case was heard at first instance and refused. In the course of the pleadings a colourful picture was painted by the contractor of the sub-contractor’s behaviour during the course of the 9 adjudications. The contractor claimed the sub-contractor was acting maliciously and in bad faith and that no true dispute was being pursued.
The court noted that while the case disclosed “a troubling picture” in relation to the sub-contractor’s behaviour, the court would only dismiss a claim on the basis of abuse of process in exceptional circumstances. To do so, the conduct in question would have to be “unreasonable and oppressive”. A key consideration was that the contractor was seeking to stop the sub-contractor from starting any adjudications under the contract, not just those in bad faith. The contractor had therefore not met the test for an interdict to be granted.
The contractor appealed the decision (to the Inner House of the Court of Session in Scotland). Amongst other things it argued:
- Drawing on support from other areas of law, the test allowing the court to intervene in a case of abuse of process was met;
- The court’s first decision had failed to give sufficient weight to the nature of the evidence of the sub-contractor’s behaviour, which had been amply vouched for by way of witness evidence and documents, showing that adjudication was being used for “ulterior and oppressive purposes”; and
- The balance of convenience favoured the contractor as the sub-contractor would still be capable of referring a dispute to litigation.
In refusing the appeal, the court recognised that there is a power to intervene in cases of an abuse of process, but that this power should be exercised sparingly “because it may involve the denial of a well-founded claim”. This proposition applied equally to adjudication and the circumstances of this case were consistent simply with a “a robust approach” on the part of the sub-contractor.
The appeal court agreed that the “key consideration” was that the interdict was sought to prevent the sub-contractor from bringing any future adjudication, no matter how genuine or well founded. Such an order would “constitute a significant innovation on the contractual dealings between the parties and a significant limitation on the right provided by Parliament in the 1996 Act”.
This decision comes down clearly favours those wishing to adjudicate and the statutory right to do so remains a powerful tool in construction contracts. Although not ruling out the court’s ability to prevent parties from pursuing adjudications which are unreasonable or oppressive, the decision shows that such orders will be difficult to obtain in practice.