Scottish court makes landmark decision on partial enforcement of adjudication awards

Out-Law News | 07 Jul 2020 | 10:29 am | 2 min. read

Scotland’s court of appeal has issued an important decision which provides guidance on when an adjudication award can be partially enforced in Scotland.

The Inner House of the Scottish Court of Session upheld an earlier decision from the Scottish commercial court, which found that an adjudicator’s decision could be partially enforced, aligning Scottish case law with the approach generally taken by courts in England and Wales.

A dispute arose between a construction company and its employer over the final costs for building a large house, which went to adjudication. The contractor was awarded around £325,000 at the end of the process, but the employer refused to pay and the contractor raised enforcement proceedings in the Court of Session.

The action was defended on four grounds, three of which were rejected by first instance judge Lord Doherty. However he agreed with the employer that there was no crystallised dispute in relation to part of the claim.

The employer argued that this meant the entire decision could not be enforced, while the contractor argued that it was possible to partially enforce the decision.

Lord Doherty noted that case law in Scotland and England had diverged. In England, the direction of travel was towards partial enforcement being possible if there was a safe “core nucleus” of the decision which was untainted by the areas which were not enforceable.

Meanwhile in Scotland, the courts had taken a more orthodox approach and although there were some statements to suggest otherwise, had taken the position that partial enforcement was unsatisfactory where a single dispute had been referred to adjudication.

However, Lord Doherty decided that it would not be desirable for the courts north and south of the border to differ on such an important point, and concluded that it was possible to partially enforce the decision.

The Inner House of the Court of Session rejected the employer’s appeal (28 page / 468KB PDF) against Lord Doherty’s decision, adopting broadly the same reasoning.

Construction dispute resolution expert Alastair Walls of Pinsent Masons, the law firm behind Out-Law, said the decision made the position over partial enforcement in Scotland clearer.

“As Lord Doherty noted in his original decision, it cannot have been the intention of those drafting the adjudication legislation that it would be more difficult to enforce awards in Scotland than elsewhere in the UK,” Walls said.

“The decision is important in England as well as Scotland, because it is the first appeal court decision to address this issue and the analysis is detailed,” Walls said.

“A striking feature of the decision is the court’s openness about policy considerations being critical to its analysis. The appellant had argued that the first instance judge was wrong to rely on policy rather than case law, but the Inner House was very clear that policy was important and that legal reasoning is not based on a slavish adherence to precedent – particularly where case law is inconsistent,” Walls said.

Walls said the decision was in theory limited to where there is no crystallised dispute in relation to part of the claim, but was likely to be applied to other jurisdictional issues. If there was a ‘natural justice’ breach in relation to any part of the claim, this would be likely to taint the whole claim, rendering it unenforceable.