In this case in the Scottish Court of Session the court has given some useful guidance as regards the severability of adjudicators’ decisions. Though a Scottish decision, it is likely to be followed by the courts in England and Wales and, as such, is of interest to anyone who may be considering applying for severance of an adjudicator’s decision.
In 2016 the Trustees of the Lauren McLeish Discretionary Trust (“the Trustees”) engaged Dickie & Moore (“D&M”) to build a large house in Lothian. Work started in 2017 and in October 2018 D&M submitted interim payment application no.17, claiming a gross valuation of £2,264,609.73.
In response, the Trustees issued a final adjustment statement proposing a valuation of £1,894,186.92. D&M challenged this on a number of grounds but later that same day the architect issued a final certificate that adopted the Trustees’ valuation.
D&M commenced adjudication. The Notice of Intention to Refer a Dispute to Adjudication (“the Notice”) was based upon application no.17 but, significantly, also included two new claims for extensions of time and loss and expense. It was common ground that the dispute set out in the Notice was more extensive than that included in interim application no.17.
The adjudication proceeded under a reservation of the Trustees’ objections to jurisdiction, which was challenged on a number of grounds. The adjudicator rejected this challenge to jurisdiction and made an award in D&M’s favour, directing each party to pay 50% of his fee. D&M sought to enforce the adjudicator’s decision in its favour. The Trustees challenged the adjudicator’s decision on four grounds, all of which failed save for the argument that the dispute had not crystallised before the Notice was served.
The court agreed with the Trustees that D&M’s claims for extensions of time and loss and expense as set out in the Notice were of a different nature and magnitude to the preceding claims set out in interim application no.17. As such, “a very material part” of the dispute described in the Notice had not crystallised before the Notice was served. The court raised but left open the issue as to whether that part of the adjudicator’s decision that dealt with a crystallised dispute could be severed so that part of the adjudication could be enforced. Following a further application by D&M to enforce the crystallised part of the adjudicator’s decision, the issue of severance was considered by Lord Doherty in the Outer House on 8 November 2019.
The parties’ positions
D&M argued that severance should be available in respect of the part of the award in relation to which the adjudicator had jurisdiction (i.e. the crystallised element of the dispute). It argued that there was in substance more than one dispute for the purposes of severance. In addition, the adjudicator’s approach as regards the crystallised aspects of the claim was unaffected by the jurisdictional error, and was dealt with separately and independently.
The Trustees contended that a single dispute had been referred to adjudication. The adjudicator had not had jurisdiction to determine that single dispute and, as such, should have declined jurisdiction in relation to it. It was not clear that certain aspects of the award were completely distinct from and had not been influenced by the adjudicator’s decision and reasoning as regards those issues that fell outside of his jurisdiction.
Lord Doherty decided that those aspects of the award that were deemed to have crystallised prior to the issue of the Notice were made separately and independently from the adjudicator’s decision as regards the non-crystallised parts of the dispute. Following the judgment in Cantillon Limited v Urvasco , he noted that there is no rigid rule when considering whether or not there is a single dispute or not - “it is substance rather than form which is important”.
Lord Doherty concluded that “severance is competent provided that a core nucleus of the decision can be safely enforced”. This was the case here, save in respect of the adjudicator’s fees and expenses, as it was impossible to say what alternative apportionment the adjudicator may have made. Accordingly, it is now open to D&M to enforce the crystallised aspects of the adjudicator’s award.
In severing the adjudicator’s decision, Lord Doherty commented that severing the non-binding parts so that the binding parts could be enforced was entirely supportive of the underlying policy of the Construction Act 1996 and the Scheme for Construction Contracts 1998, both of which envisage a speedy mechanism for resolving disputes. In cases where there is a clear “core nucleus” to be enforced, the UK courts are likely to follow the approach set out in Dickie & Moore and will sway towards severance in cases where jurisdiction is at issue in relation to some parts of the dispute