Practical Law

A few weeks ago, I looked at Lord Doherty’s judgment in Dickie & Moore Ltd v McLeish, where I focused on the mentoring – pupil adjudicator points, and left the crystallisation of the dispute points to others.

This week, I’m looking again at Lord Doherty’s judgment in Dickie & Moore Ltd v McLeish, only this time it is his second opinion that I am interested in, which focused on severing the adjudicator’s decision.

And if you are wondering why I’m quoting from Alexander Dumas’ Three Musketeers, then read on…

Dickie & Moore Ltd v McLeish (number two)

Round one was an adjudication enforcement application before Lord Doherty in the Scottish courts. The contractor (Dickie & Moore) had succeeded in an adjudication and, when the adjudicator’s decision went unpaid, issued court proceedings to get its money.

The employer (the Lauren McLeish Trust) raised a number of issues to challenge enforcement. Three of those challenges failed but the crystallisation argument (that part of the dispute had not crystallised at the time of the adjudication notice) succeeded, meaning that the adjudicator lacked jurisdiction to hear all of the dispute and his decision was not enforced.

Round two was all about whether the court could (and should) sever the adjudicator’s decision, removing the non-crystallised part and then enforcing the balance.

Severing the non-crystallised part

After a detailed analysis of case law involving some 16 judgments from both England and Scotland, the judge decided he could and should sever, although it wasn’t quite that straightforward since he also decided that he could not make an equivalent division of the amount for the adjudicator’s fees and expenses, which resulted in that part of the adjudicator’s decision not being enforced.

I like the phrase “severance is competent provided that a core nucleus of the decision can safely be enforced”, which Lord Doherty used a number of times, getting his inspiration from Pepperall J in Willow Corp Sarl v MTD Contractors Ltd.

It seems to sum up his approach to severance in this case. It all came down to whether there were any parts of the adjudicator’s decision that were untainted by the findings on those parts of the dispute that hadn’t crystallised. As the adjudicator had dealt with the issues “separately and independently” and his calculations “were not in any way dependent upon or influenced by [them]”, it was clear the decision could be severed and partly enforced.

Adjudicator’s fees and expenses

It was a term of the adjudicator’s appointment that the parties would be jointly and severally liable for his fees and expenses and that, during the process, the fees would be split equally and then apportioned in the decision.

Here, as part of his decision, the adjudicator had apportioned liability for his fees and expenses between the parties on a 50:50 basis, which the contractor had paid in full. It was seeking to be reimbursed for the employer’s share (just under £20,000) as part of the enforcement proceedings.

However, the judge concluded that the sums that made up the “core nucleus of the award” did not include the adjudicator’s fees and expenses. This was because, while the adjudicator had exercised his discretion to apportion his fees and expenses between the parties, it was not:

“… clear or obvious that his apportionment would have been the same. It would not be right to second guess what he would have done.”

This was the case even though the judge thought it was unlikely that the adjudicator would have exercised his power differently even if he had only been dealing with the “core nucleus of the award”.

In reaching this conclusion, Lord Doherty had Akenhead J’s judgment in Bovis Lend Lease Limited v The Trustees of the London Clinic in mind, where he had referred to the “insuperable difficulty” of dealing with the adjudicator’s fees where they had not been apportioned between the two parts of the claim. Akenhead J had concluded that he simply would not have enforced that part of the adjudicator’s decision.

Lord Doherty also referred to Akenhead J’s judgment in Beck Interiors Ltd v UK Flooring Contractors, where he had also noted the difficulty in determining what alternative apportionment there ought to be for the adjudicator’s fees and expenses. Again he said he would have declined to enforce that part of the decision because:

“… although one could arithmetically apportion [the adjudicator’s fee] in relation to sums recovered and others not jurisdictionally recoverable, one cannot second guess what the adjudicator would have done. For instance, he might have said that each party should pay half or that Beck should pay the costs of his time relating to the jurisdictional issue and some different proportion of his costs for the balance.”

I had a look back to see what I said at the time of these judgments (the advantage of blogging for so long is that there is almost always a comment from the past!). It seems I didn’t blog about Bovis but I did write about Beck, where I said:

“Decisions that can be severed are more likely to be enforced. While I have previously suggested that adjudicators should write decisions that are issues based, that advice is even more pertinent given Akenhead J’s decision to sever in both Working Environments and Beck. It’s probably wise for the adjudicator to consider splitting his fee between issues too, especially if there is a jurisdictional challenge. After all, it’s a good idea to have an eye on the future and plan accordingly.”

I probably couldn’t put it any better now than I did back then.

However, that wasn’t the end of the fees story in Dickie & Moore because the parties had agreed (in a joint minute for the court) that they were jointly and severally liable to pay the adjudicator’s fees and expenses and, if the decision was enforceable, the employer would reimburse the contractor “in respect of half the adjudicator’s fees and expenses”. This meant the employer was “bound to grant that relief”, given the court’s findings to enforce part of the decision.

MTD Contractors Ltd v Willow Corp Sarl  and Willow v MTD

In Willow v MTD, one of my decisions was severed. At the time, I left others to discuss the severance point (although I did look at the use of Part 8 applications to “appeal” an adjudicator’s decision). In my view, that case demonstrates the difference between a Part 7 type procedure and a Part 8 declaratory relief application.

In the Part 7 application (MTD Contractors Ltd v Willow Corp Sarl) my decision was enforced. Although Pepperall J severed part of my decision by virtue of the Part 8 hearing, my decision on fees stood on the basis that (but for the Part 8 final determination) my decision was enforceable (and the question of my fees was not before the court, only whether I had correctly interpreted the agreement related to practical completion).

The distinction in Dickie & Moore is that the court found that part of the adjudicator’s decision was unenforceable due to the non crystallisation point. Therefore, in theory at least, some of the adjudicator’s fees were associated with the unenforceable parts of the decision.

All for one and one for all

And back to the reason for my Three Musketeers quote.

At paragraph 46 of his judgment, Lord Doherty referred to the fact that the Construction Act 1996 applies equally in Scotland, England and Wales. He made the same point about the Schemes for Construction Contracts 1998, acknowledging they are all in substantially the same terms. He concluded that despite the differences in approach to severance taken in some of the judgments he had considered (not only between the judges, but also between the jurisdictions) there should only be one approach across the three jurisdictions, that it should not be harder to sever adjudicators’ awards in Scotland in appropriate cases than it is in England and Wales. This was why he declined to follow a number of the cases he had reviewed, including in Highlands and Islands Authority Ltd v Shetland Islands Council. He said a blanket ban on severance in single dispute cases would encourage unsuccessful parties to scrabble around for grounds to resist enforcement, as success on any ground would invalidate the adjudicator’s decision.

I’m not sure I’ve seen a judge in either jurisdiction suggest “all for one and one for all” when it comes to how the the courts deal with the myriad of issues that adjudication throws up, but it makes sense to me. It will be interesting to see if others agree.