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Back to school for lessons on Scottish assignation law (or assignment to you)

I had a feeling of deja vu when I looked at Lord Bannatyne’s judgment in Edinburgh Schools Partnership Ltd v Galliford Try Construction (UK) Ltdnot only because Galliford Try were involved, but because the main focus of the judgment was on assignation, the Scottish equivalent of assignment.

I looked at these issues earlier this year when I considered O’Farrell J’s judgment in Mailbox (Birmingham) Ltd v Galliford Try Construction Ltd. At the time I said that the judgment was “enough to make your head hurt”. I’m not sure it has got any easier, second time around!

Edinburgh Schools Partnership Ltd v Galliford Try Construction (UK) Ltd

The facts are similar to Mailbox, in that in 2004, Galliford Try entered into a design and build contract with Edinburgh Schools Partnership (ESP) to design and build a number of schools in Edinburgh. (ESP also entered into a FM contract with Amey Community Ltd.) At some point after that, ESP entered into an assignation (is that the phrase?) with the Governor and Company of the Bank of Scotland, whereby ESP’s rights under the design and build contract were assigned to the bank as security trustee.

Fast forward to 2016. During a winter storm one of the schools suffered damage when a gable wall partially collapsed. Investigations showed there were problems at six other schools and Galliford Try carried out extensive repair works on the express understanding that there was no admission of legal liability. This led to a dispute between ESP and Galliford Try. There was also a dispute between ESP and Amey, which Amey referred to adjudication on 8 February 2017 (referred to as the related adjudication in the judgment).

As the parties’ design and build contract allowed adjudications related to substantially the same issues to be heard by the same adjudicator, even if they arose under a different contract, on 13 February 2017, ESP gave notice of its intention to refer the dispute with Galliford Try to the adjudicator. On 14 February it provided the adjudicator with particulars about the dispute and, on 15 February, both adjudications were conjoined.

Galliford Try subsequently raised a number of challenges to the adjudicator’s appointment, which, in turn, the adjudicator rejected. The adjudicator’s decision was issued on 28 March 2017.

Galliford Try’s challenges

Galliford Try raised three challenges, which can be summarised as:

  • Did ESP have the right to refer its dispute with Galliford Try to adjudication or did the assignation mean that the proceedings should have been brought in the name of the bank, as security trustee?
  • Had ESP complied with the contract’s adjudication provisions or had it failed to serve a preliminary statement?
  • Was the adjudicator’s involvement in a related, earlier (2016) adjudication between ESP and Amey sufficient to give rise to an allegation that the adjudicator was biased (or there was apparent bias)?

The judgment does not set out the adjudicator’s reasoning but, I think it is clear from the way that the court dealt with the assignation point that this was a difficult issue for the adjudicator to address. I suspect the adjudicator found the procedural and bias points somewhat easier to cope with. I know I would have.

Assignation (or the title dispute)

Although the judgment deals extensively with the parties submissions on whether ESP retained the right (or title) to refer the dispute with Galliford Try to adjudication, Lord Bannatyne summarises his findings in a clear and helpful way over just six pages. Essentially, he agreed with ESP that there had only been an assignation in security, which meant that ESP retained a financial interest in the design and build contract and still had the right to sue or start an adjudication (in other words, it was a partial assignment). This meant the adjudicator had jurisdiction to deal with the matter.

These are complex issues for an adjudicator to deal with, especially in the time frame allowed in adjudication. We don’t know the extent of the parties’ submissions but, assuming they were similar to the ones before the court, it isn’t a surprise that it took the adjudicator until 13 March to make his decision on the issue (presumably a non-binding decision). We also don’t know whether this particular adjudicator was legally qualified or not, but one would hope so to tackle such issues appropriately.

What I said when I looked at the Mailbox judgment still holds true:

“… I think the assignment point is a good example of how complex identity issues can be in adjudication and how important it is for adjudicators to understand the law and relevant legal principles. Some might argue that this is reason enough why certain disputes should be referred to a lawyer-adjudicator, rather than a construction professional-adjudicator. All I would say in response to that is those of us who are dual-qualified are well placed to deal with these issues.”

The procedural dispute

I thought this was one of the more interesting aspects of the judgment and Galliford Try’s argument went something like this.

ESP did not comply with the relevant contract provisions when it referred the dispute to the related adjudicator because its letter of 14 February 2017 failed to provide the particulars, as required by paragraphs 11.2 and 11.3 of schedule 2 of the design and build contract. Those included a preliminary statement (paragraph 113(c)) setting out:

“(i) the basis and grounds for consolidation of the Dispute and the Related Dispute;

(ii) the cases of the parties to the Dispute (Insofar as the cases of both parties to the Dispute can at the relevant time be described);

(iii) any relief sought by the parties to the Dispute…”

Lord Bannatyne disagreed with Galliford Try’s argument. He said that the contract did not require the preliminary statement to be in a particular form and he did not think that it was necessary for all the relevant information to be in one place. Further, there was no reason why the information could not be supplied by reference to another document. On the facts, the adjudication notice contained all the necessary information and Galliford Try was able to respond to it (which it had done).

This issue may have turned on its facts, but one consequence is that it could expose parties to further wrangling over compliance (or not) with contractual provisions similar to this one. Lord Bannatyne might have suggested parties should approach this in a practical way, but this is adjudication, and we all know how responding parties like to argue about such things!

Allegations of bias

The allegation of bias or apparent bias was said by Galliford Try to give rise to a material breach of the rules of natural justice.

It is an interesting one for me, as someone who is often appointed by parties in circumstances similar to this. Adjudicators are usually appointed in related adjudications precisely because of the perceived advantages of the same individual looking at related disputes. This can be between the same parties or, like here, where there is a common party (here it was ESP). Clearly the parties recognised this as a factor because they included paragraph 11 in their contract.

Again Lord Ballantyne dealt with the point in a few paragraphs. I liked his starting point, namely that:

“… when an adjudicator has made a decision in a case it does not necessarily disqualify him from hearing a related case raising the same issue.”

He referred to the test for bias and also Dyson J’s judgment in Amec v Whitefriars, and asked himself whether a fair minded and informed observer would conclude there was “a real possibility for bias” in the present circumstances. He held that the facts came “nowhere near satisfying the test”. In the earlier 2016 adjudication, the adjudicator had been asked to interpret certain contractual provisions related to limitation. Those issues did not arise in the 2017 adjudication.

Again, not an unsurprising result.

This is the second time this year that Galliford Try has been on the wrong end of a court judgment dealing with assignment. Personally, is isn’t an issue that I have seen that often in practice, but at least now I understand a whole lot more about the topic!

 

 

 

MCMS Ltd Matt Molloy

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