Thu 04 Feb 2021

Enforcing adjudicators’ decisions in Scotland

It is well known that the Construction Act 1996 does not provide for a method for the enforcement of a disputed adjudicator’s decision. Those of you practicing south of the border may be familiar with what happens there, but less familiar with how enforcement is dealt with in the Scottish courts.

This post looks at that procedure, and then goes on to discuss the impact of Lord Clark’s judgment in D McLaughlin & Sons Ltd v East Ayrshire Council and whether his discussion about the judgment in Hutton Construction Ltd v Wilson Properties (London) Ltd changes anything in Scotland.

Enforcement proceedings

In England, the Technology and Construction Court (TCC) has a specific system for the enforcement of adjudicator awards under Part 7 or Part 8 of the Civil Procedure Rules (CPR), with claims under Part 8 generally being disposed of on written evidence and oral submission and normally containing no substantial dispute of fact. As such, enforcement proceedings are dealt with promptly.

In Scotland, there is no equivalent to the Part 8 procedure and a full court action requires to be raised. In Scotland, claims under £100,000 require to be raised in the Sheriff Court and claims over £100,000 can be raised in the Court of Session, which is a higher court.

There are two types of procedure: ordinary actions and commercial actions. In an effort to speed up the process, the enforcement of an adjudicator’s decision would normally be raised as a commercial action as a commercial action is supposed to be a quicker court process than an ordinary action. However, not every Sheriff Court has a commercial court so this can sometimes determine the procedure to be used.

The majority of adjudication enforcement actions in Scotland are dealt with as commercial actions in the Court of Session so this is the procedure we shall focus on in this blog.

Enforcement procedure in Scotland

The court action is commenced with a summons. The summons sets out the conclusions (the orders being sought) the pursuer (the claimant in England) is asking the court to grant. It then sets out the basis of claim in a series of numbered paragraphs known as articles of condescendence. The summons concludes with pleas in law, which are the legal propositions in support of the court granting the conclusions sought.

The summons in a commercial action is accompanied by a schedule of documents, which lists the documents the pursuer intends to rely on in the court action and would obviously include the adjudicator’s decision. The summons, schedule of documents and the appropriate form for a commercial action are all sent to the court to allow the summons to be signetted (this is the court’s warrant to serve the summons on the defender (defendant in England)).

The summons and schedule of documents can then be served on the defender. If the defender’s solicitor is known they can be asked to accept service otherwise we would suggest that the summons and schedule of documents are served by way of Sheriff Officer (process server).

From the date that the summons is served on the defender there is a period of 21 days, which is a notice period during which no steps in the court action are taken. An application can be made to the court at the time the summons is lodged for signetting to shorten the 21 day period. This would not be an unusual application to make for the enforcement of an adjudicator’s decision and leave is often sought to reduce this period to seven days.

At the end of the notice period, the summons is returned to the court and lodged for calling. This is the formal commencement of the court action. Within three days of the summons being lodged for calling the defender is required to enter appearance. This is essentially a note advising the matter will be defended and confirming who will be representing the defender. If a defender does not enter appearance, the pursuer can immediately ask the court to grant a decree in absence for the full sum claimed at this stage.

If the defender enters appearance, they will have seven days from the date the summons is called to lodge defences. At this stage, a party can either enrol a motion for summary decree on the basis that, as this is an adjudication enforcement action, there is no defence and the court should grant decree as craved or can wait until the next step of the commercial action process which is for a preliminary hearing to be assigned. This normally occurs within 14 days of the defences being lodged and, at this stage, the court can be asked to grant a debate (which is a hearing on legal arguments, no factual evidence is led at a debate).

When the debate will be assigned very much depends on both the court and parties’ availability. However, there is guidance from the Court of Session that states that it will look favourably on reasonable proposals for the early determination of the dispute, including shortening the period of notice before the court timetable commences and fixing early hearings with a view to early disposal. The court guidance also provides that, if appropriate, a decision will be issued immediately after the hearing intended to dispose of the action or otherwise issue a decision within 28 days. However, it is not unheard of for an enforcement action to take six months from commencement to a decision being issued, which is considerably longer than the procedure in England.

Normally, an enforcement action is a separate court action from a court action that would finally determine the dispute.

D McLaughlin & Sons Ltd v East Ayrshire Council

This case concerned a dispute between an employer and a contractor regarding payment for work on the construction of an extension to a primary school. The contractor initially raised an action in the Sheriff Court seeking to recover payment due under an interim payment notice. After raising the Sheriff Court action, the contractor referred the dispute for adjudication. The adjudicator found in the contractor’s favour and the contractor sought to enforce the adjudicator’s decision in the Court of Session. As part of the defence to the enforcement proceedings, the employer raised a counterclaim.

The employer sought to resist enforcement of the adjudicator’s decision on two grounds:

  • The validity of the interim notice was questionable.
  • The final certificate was conclusive evidence of the final account and the adjudicator had erred in not treating it as such. The employer argued that, as the contractor had not commenced the adjudication within 60 days of the issue of the final certificate and they had paid all sums due to the contractor under the final certificate, the adjudicator should have awarded a nil amount.

It was accepted that the first ground could not be dealt with in the enforcement proceedings but, in response to the second ground of challenge, the contractor argued that they had challenged the final certificate in a timeous manner (as required by the contract) as they had commenced the initial Sheriff Court action within 60 days of the final certificate being issued. Therefore, in respect of any matter challenged in that action, including the sums payable to the contractor, the final certificate could not be afforded the status of conclusive evidence.

The contractor also argued that the decision of the adjudicator could not be challenged as there was no jurisdictional error or question of a breach of the rules of natural justice. The contractor stated that the employer could not challenge the adjudicator’s decision simply because they believed it was wrong. Regardless of whether or not the adjudicator was correct as to the evidential status of the final certificate, there was no defence to the enforcement of the decision.

The employer referred to the exception identified by Coulson J in Hutton Construction Ltd v Wilson Properties (London) Ltd. This confirmed that a party in enforcement proceedings could seek a declaration on part of an adjudicator’s decision that it believed was incorrectly decided, and set out the limited circumstances in which that would be allowed by the court, namely:

  • The issue must be short and self-contained and have arisen in the adjudication.
  • The issue requires no oral evidence or any other elaboration beyond that which is possible during the time allowed for the enforcement hearing.
  • The issue is one that it would be unconscionable for the court to ignore.

Lord Clark’s judgment in D McLaughlin

In the D McLaughlin case, Lord Clark interpreted the Hutton exception as:

“… allowing an application for final determination, if that is suitable for swift disposal, to be dealt with at or around the time of the enforcement hearing…”

He confirmed that in Scotland there was no issue with the Hutton principle. However, it was also made clear that in Scotland, it would be up to the individual judge dealing with the case to decide if that final determination could occur.

Lord Clark applied the approach taken in Hutton to the employer’s counterclaim but found that it did not meet the criteria for three reasons:

  • The employer’s counterclaim was not in regard to the proper timing, categorisation or description of the relevant application for payment, payment notice or payless notice.
  • It was not possible to conclude that the adjudicator’s decision was “beyond rationally justifiable”.
  • The counterclaim did not seek a final determination of the dispute.

Lord Clark found that there may be very rare cases where a judge may allow a final determination to be dealt with at or around the time of the enforcement proceedings with reference to the Hutton exception. However , this case was not one of them as:

“… the issue of final determination remains at large and is not addressed in the counterclaim. The challenge to enforcement, based as it is on an alleged error by the adjudicator, must therefore fail.”

What now for enforcement of adjudicator’s decisions in Scotland?

The D McLaughlin case reaffirms the limited grounds for challenging enforcement of adjudicators’ decisions in Scotland.

While it also confirms that the Hutton exception applies in Scotland, this will be limited to the individual judge agreeing that the limited circumstances set out in Hutton apply and will only apply to those cases that seek to finally determine the dispute by way of a counterclaim to the enforcement proceedings.

In these circumstances, while interesting, the judgment in D McLaughlin is unlikely to change the procedure for enforcement of adjudication decisions in Scotland.

First published in Thomson Reuters

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