Severance of Adjudicator's Award in Construction Contracts: The Precedent of Dickie & Moore Ltd v Ronald James McLeish and Others [2020] CSIH 38

Introduction

The case of DICKIE & MOORE LIMITED vs. RONALD JAMES McLEISH AND OTHERS ([2020] CSIH 38) addresses critical issues concerning the enforcement of adjudicator's awards in construction contracts under the Scottish legal framework. The dispute arose from a building contract between Dickie & Moore Ltd (the pursuer) and Ronald James McLeish, Mrs. Diane McLeish, and Catriona Watt as Trustees of the Lauren McLeish Discretionary Trust (the defenders). The parties entered into a Standard Building Contract with Quantities in 2016 for constructing a large house. Problems emerged around deductions in the final adjustment statement and led to adjudication proceedings aimed at enforcing the adjudicator's decision and recovering fees and expenses.

Summary of the Judgment

The pursuer sought to enforce the adjudicator's award, which included the entitlement to payment of £324,492.60, interest, an additional extension of time, loss and expense, and adjustments to the works final account by rejecting certain deductions deemed unjustified. The defenders contested the adjudicator's jurisdiction, arguing that parts of the dispute had not crystallized prior to the adjudication notice, thereby rendering those parts beyond the adjudicator's authority.

Initially, the commercial judge rejected the defenders' jurisdictional challenges except for the claim that part of the dispute had not crystallized, specifically relating to extension of time and consequential loss and expense. Consequently, the commercial judge permitted the severance of the adjudicator's decision, allowing the enforcement of the valid parts while excluding the portions lacking jurisdiction.

The defenders' subsequent challenge to this decision was ultimately dismissed, affirming the commercial judge's ruling on the feasibility of severing the adjudicator's award.

Analysis

Precedents Cited

The judgment extensively referenced several key cases that have shaped the understanding of severance in adjudicator's awards:

Cantillon Ltd v Urvasco Ltd [2008] BLR 250: Established that when an adjudicator addresses multiple disputes, a successful jurisdictional challenge on one does not necessarily invalidate the entire decision.
Bovis Lend Lease v The Trustees of the London Clinic [2009] EWHC 64 (TCC): Supported the notion that parts of a decision within jurisdiction could be enforced independently.
Carillion Utility Services Ltd v SP Power Systems Ltd [2012] SLT 119: Highlighted that contractual agreements to be bound by adjudicator decisions include any court-reviewed decisions.
Willow Corp SARL v MTD Constructors Ltd [2019] EWHC 1591 (TCC): Suggested a practical test focusing on whether a "core nucleus" of the decision remains enforceable.

These precedents collectively influenced the court's approach to determining whether an adjudicator's award could be partially enforced through severance.

Legal Reasoning

Central to the court’s reasoning was the concept of "severance" — the ability to separate valid parts of an adjudicator's award from those parts that were outside the adjudicator's jurisdiction. The commercial judge emphasized a flexible, practical approach over rigid adherence to precedent, citing policy considerations inherent to the adjudication process. The primary goal is to ensure that adjudicator's awards, intended to provide swift and provisional resolutions, remain enforceable even if parts of the decision are flawed.

The court assessed whether the invalid portions of the award (related to extension of time and loss and expense) influenced the valid parts. Given that other elements of the dispute, such as payments for measured and additional works, were independent, the court found it appropriate to enforce these valid segments separately.

Impact

This judgment sets a significant precedent in Scottish construction law by affirming that severance of an adjudicator's award is permissible when it can be demonstrated that parts of the decision were beyond the adjudicator's jurisdiction without affecting the enforceability of the remaining valid decisions. It underscores the importance of flexibility in enforcing adjudicator awards, thereby promoting the effectiveness and reliability of adjudication as a dispute resolution mechanism in the construction industry.

Complex Concepts Simplified

Severance

Severance refers to the legal process of separating valid portions of a judicial or adjudicative decision from those that are invalid or outside the jurisdiction. In the context of this case, it allowed the enforcement of parts of the adjudicator's award that were within jurisdiction while excluding the flawed sections.

Crystallization of Disputes

Crystallization refers to the point at which a dispute becomes sufficiently clear and formalized to be subject to adjudication or other dispute resolution mechanisms. If a dispute has not crystallized before an adjudication notice is served, it may be deemed outside the adjudicator's jurisdiction.

Adjudicator's Jurisdiction

This pertains to the scope of authority granted to an adjudicator to resolve specific disputes under a contract. Exceeding this jurisdiction, such as by addressing matters not firmly established as disputes, can render parts of an adjudicator's decision unenforceable.

Conclusion

The DICKIE & MOORE LIMITED vs. RONALD JAMES McLEISH AND OTHERS judgment is a landmark decision in Scottish construction law, clarifying the conditions under which parts of an adjudicator's award can be severed and enforced independently. By embracing a policy-driven, flexible approach over strict adherence to precedent, the court reinforced the pragmatic nature of adjudication intended to facilitate swift resolution and enforceability of decisions. This case serves as a crucial reference for future adjudications, ensuring that valid portions of decisions can uphold contractual relationships and promote efficient dispute resolution within the construction industry.