Thu 25 Feb 2021

Enforcing Adjudicator's Decisions in Scotland - The Differences

The position on enforcement of an adjudicator's decision in Scotland is not identical to England and Wales.  There are key differences that parties to an adjudication should be aware of.   

In Scotland, there are two ways in which an adjudicator's decision may be enforced.  The most practical option available to a party is to raise a court action.  The most suitable forum for raising an action of this kind is in the Commercial Court which seeks to determine the enforcement of adjudications as quickly as possible so that the parties get the most benefit from the adjudicator's decision.  A party may lodge a motion for summary decree in order to seek an expedient result.

The second option available to a party wishing to enforce is to register the adjudicator's decision in the Books of Council and Session.  The parties will need to submit the decision to the Registers of Scotland along with the appropriate fee. They can then request an extract of the decision be registered in the Books of Council and Session.  The extract has the same effect as a court order would.  The difficulty with this method of enforcement lies in its practical application.  In order for the decision to be registered both parties must give their consent. It is very unlikely, of course, that a party would consent to the decision being registered when it is against their interests.  It is therefore more effective for a party who wishes to enforce to raise a court action.

The party who wishes to enforce the adjudicator's decision may not always be successful.  As applies across the UK, there are two ways by which a party may seek to challenge the enforcement of an adjudicator's decision:

Firstly, a party may argue that the adjudicator lacks jurisdiction.  There are numerous grounds on which a party may argue this.  These include: that there is no contract in the dispute; that the contract in dispute was not in fact a construction contract as referred to under the Construction Act; that the adjudicator's appointment did not comply with the relevant rules; that the dispute had not crystallised; that the dispute that the adjudicator ruled on was in effect the same as a dispute that had already been determined by an adjudicator; and that the adjudicator did not comply with the required timeframe and failed to give a decision within the time allowed.  If a party wishes to rely on a defence of lack of jurisdiction they must have already brought the issue to the attention of the adjudicator.

Alternatively, a party wishing to challenge the enforcement of an adjudicator's decision can argue that the decision has breached the rules of natural justice.  For example, a party could argue that the adjudicator did not take the party's submissions into account or did not give them enough time to prepare for the adjudication and submit evidence in their support.

A further defence available to parties in Scotland is the principle of "balancing accounts" in insolvency. This is an equitable principle which extends the compensation of debts during insolvency and allows a creditor to set off both liquid or illiquid debts against an insolvent company's claim.  The Scottish courts have made clear that for this defence to apply there has to be more than balance sheet insolvency.  There must be either a formal insolvency event or "clear or uncontested evidence" of insolvency.  If the party is not actually insolvent then the court will consider whether it is in the interests of justice to enforce the adjudicator's decision.

If this defence is successful, the courts will refuse to enforce an adjudicator's decision.  This is unlike the position in England where a stay of execution of the enforcement of the decision may be granted.  When enforcing an adjudicator's decision in Scotland it is therefore important to remember that the Scottish courts will either enforce the decision or they will not. 

An interesting footnote to conclude this discussion is a recent development in the Scottish courts.  The Inner House of the Court of Session upheld an earlier decision of the Scottish Commercial Court and found that an adjudicator's decision can be partially enforced.  The case was Dickie & Moore Ltd v Trustees of the Lauren McLeish Discretionary Trust and the Inner House determined that although some parts of the adjudicator's decision were invalid, this did not invalidate the whole decision.  The parts of the adjudicator's decision that were valid could still be enforced.  Before the judgment in this case the possibility of partial enforcement was an area of difference between Scotland and England. This has now changed with the Court considering that it would be more beneficial to the parties in an adjudication if there was coherence between Scotland and England.

This article formed part of our Litigation in Scotland Report 2021 - to view the complete report click here.

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