UK: New Scottish Appeal Court Case On Enforcement Of Adjudicator's Awards

Last Updated: 22 July 2014
Article by Shona Frame

The Inner House (Scottish Appeal Court) Decision In Charles Henshaw & Sons Limited V Stewart & Shields Limited [2014] Csih 55 Reaffirms The Principle That It Is Only In Very Limited Cases That The Court Will Refuse To Enforce Adjudicators' Decisions. Grounds For Refusal Are Limited To The Adjudicator Making A Decision On A Matter Outside His Jurisdiction Or A Clear Breach Of Natural Justice.

Facts

Stewart & Shields Was Main Contractor For Work To A Hospital Chapel. Henshaw Was A Sub-Contractor. The Dispute Centred Around Payment For A Number Of Variations. Henshaw Took This Dispute To Adjudication At Which It Was Successful. Stewart & Shields Refused To Pay And An Enforcement Action Followed.

Henshaw Was Successful At First Instance In The Sheriff Court. Stewart & Shields Appealed To The Sheriff Principal But Lost. It Then Appealed Again To The Inner House Of The Court Of Session.

Arguments

Stewart & Shields Claimed That Additional Works Were Not Variations To The Contract Works But Were Actually Separate Contracts. That Would Mean That They Related To A Contract Or Contracts Separate From The One Referred To Adjudication, Meaning The Adjudicator Did Not Have Jurisdiction.

This Argument Relied On The Wording Of A Clause In One Of The "Technical And Scope Of Works Clarifications" Which Stated That "Any Variations Would Be Subject To A Re-Quote". This Reference To A Re-Quote, They Said, Meant That A Separate Contract Would Be Formed.

In Response, Henshaw Argued That This Was Not A Commercially Sensible Approach. It Would Result In There Being Several Separate Contracts, One For Each Variation. To Interpret The Clause In This Way Would Put Obstacles In The Way Of Sensible Commercial Dealing And Would Not Be The Approach Expected By Reasonable Businessmen.

Decision

The Judges Referred To The "Wealth Of Judicial Commentary" On The Nature Of Adjudication And To The Common Theme That It Is Only In Very Limited Cases That The Court Will Refuse Enforcement. They Said That The Adjudication Process "Ought Not To Be Derailed By The Pursuit Of Technical Legal Arguments, Particularly When Those Arguments Are Patently Without Merit". Stewart & Shields' Arguments Were Described As Being "Wholly Lacking In Substance". The Suggestion That Work Had To Stop To Allow A Re-Tendering Process Every Time There Was A Variance Between Bill Quantities And Actual Quantities And That There Would Be A Series Of Separate Contracts Was Said To Be "A Ludicrous Proposition". The Judges Had No Hesitation In Refusing The Appeal And Ordering Enforcement Of The Adjudicator's Award.

Comment

The Decision In This Case Is Unsurprising Given Previous Authorities On Enforcement. It Is Notable Though That This Case, Where The Sum At Issue Was £33k, Went Through 3 Separate Courts, With Stewart & Shields Losing At Each Stage. Stewart & Shields Was Found Liable In The Expenses Of The Action But Regardless Of The Ultimate Outcome, If Its Motive Was To Delay Payment, It Succeeded In That. The Time From The Adjudicator's Award To This Final Appeal Was 9 Months. The Ability Of A Losing Party In An Adjudication To Cause Such A Delay Is Directly Contrary To The Purpose Of Adjudication. This Was Possible Here Because Stewart & Shields Would Not Have Required Leave To Appeal. This Is In Contrast To The Appeal Mechanisms In The Arbitration (Scotland) Act 2010 Where Any Appeal To The Inner House On Questions Of Jurisdiction, Serious Irregularity And Legal Error Requires Leave From The Outer House On Specified, And Restricted, Grounds.

© MacRoberts 2014

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