REUTERS | Yuriko Nakao

London and Edinburgh disagree on the application of Article 1 of ECHR to adjudication

My title may not be a very catchy one, but with Westminster and Holyrood currently disagreeing about everything (or so it seems), it certainly is a relevant one. I have talked before about English and Scottish judges taking different approaches to issues and the Court of Appeal’s judgment in Lindum Group v Fernie is another example.

Lindum Group v Fernie

Mr and Mrs Fernie engaged Lindum Group Ltd (the contractor) to carry out the fit-out of a new restaurant. The parties agreed that the contractor would be paid a certain sum of money but, because of alleged defects, it wasn’t. The contractor referred that dispute to adjudication and the adjudicator made an award in its favour.

The Fernies still did not pay the contractor, so it sought summary judgment, which was granted by HHJ Grant in the Birmingham TCC . The Fernies appealed that judgment, which the Court of Appeal dismissed. Then, in a move that we do not see reported often, the contractor took steps to enforce the court judgment, obtaining a final charging order in July 2011. That too was appealed by the Fernies and that appeal was also dismissed. However, it seems that the judge gave Mr Fernie a piece of advice, namely to stop resisting enforcement of the adjudicator’s decision and start his own defects claim. As Lewison LJ said:

“That, if I may say so, was sound advice which one might have expected Mr Fernie’s lawyers to have given him a year earlier.”

Although no defects claim was ever issued, the parties did follow a pre-action protocol. The contractor’s attempts to enforce the charging order came back before the court in September 2012. For reasons that Lewison LJ described as obscure, the district judge allowed the Fernies to bring the defects claim into the enforcement proceedings and ordered evidence of the defects to be filed.

This meant more delays and another 15 months passed before the matter was next before the court, at which point it was accepted by the Fernies’ counsel that the defects claim could not proceed at that stage. The court gave the Fernies a period of time to find the money to satisfy the debt owed to the contractor, otherwise their house would have to be sold. Yet another appeal followed, which is what Lewinson LJ dealt with.

Article 1 of the First Protocol of the ECHR

As part of the appeal, the Fernies relied on Article 1 of the First Protocol of the European Convention on Human Rights (ECHR) and the Scottish case of Whyte and Mackay Ltd v Blyth & Blyth Consulting Engineers Ltd (which I discussed last year).

Article 1 is concerned with the protection of property:

“Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest…”

In Whyte and Mackay, Lord Malcolm declined to enforce an adjudicator’s decision. He held (among other things), that it would be disproportionate and wrong to enforce the decision, relying on Article 1.

As I said at the time, I thought the English courts were unlikely to follow that decision and it looks like I’ve been proved right, although in fairness I have to admit not for the reasons I relied on at the time. Rather Lewison LJ distinguished Whyte and Mackay on the basis of its rather extreme facts. Also, here the contractor had an interest in the property as a result of the charging order, which meant the Fernies’ possessions in part belonged to it.

Interestingly, Lewison LJ also referred to Article 8 of the ECHR (which is concerned with right to respect for private and family life), but said that this could not trump the contractor’s right to enforce the judgment.

It’s all about cash flow

There is one point where I would respectfully disagree with Lewison LJ. In paragraph 3 he said that:

“The whole purpose of the scheme, as I have said, was that a builder’s cash flow would not be impeded by disputes about the quality of the work. It is for that reason that the courts have consistently said that provided an adjudicator complies with the rules of natural justice in coming to his decision the courts will enforce that decision and leave it to the disgruntled employer or building owner to issue his own claim against the builder if he thinks fit. As I have said, the point is that cash is actually paid over to the builder.”

That is not entirely correct because it is accepted law that, subject to the issue of a withholding notice or payless notice, a responding party can defend itself against a claim for money due by any legitimate defence, including defects (see Pilon v Breyer).

And finally…

Although I think the human rights points are the really interesting part of this case, it is also worth mentioning that Matt recently looked at the cost of litigating small disputes. This case is an example of one where the sum in issue cannot have been great (although the judgment doesn’t say) and yet it took the contractor considerable time and effort to get its money. It probably isn’t a good advert for the county courts either!

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