Scots court keeps bar to adjudication enforcement held high

Anyone familiar with UK construction adjudication will be well aware that the courts are (to say the least) reluctant to set aside - and refuse to enforce - an adjudicator's Decision. It's a policy which is well established north and south of the border, but also one that continues to be tested.

The Opinion of the Outer House in the latest action to come before the Scottish courts, ensures that the bar that a party seeking to resist enforcement needs to overcome, remains a high one.

A consortium comprising UK Grid Solutions Limited and Amey Power Services Limited ("GE Amey JV") were contracted by Scottish Hydro Electric Transmission PLC ("SHETL") to undertake works at Fort Augustus substation. In order for GE Amey JV to complete their works, SHETL required to deliver and install two transformers.

Delivery and installation of the transformers was delayed, giving rise to a Compensation Event ("CE"). That CE was assessed by the project manager at zero and GE Amey JV subsequently raised a claim seeking extensions of time, relief from liquidated damages and an increase to the Defined Costs. SHETL rejected that claim and in March 2023 GE Amey JV referred its claim to Adjudication.

On the 3 May 2023 the Adjudicator issued his Decision awarding GE Amey JV £1,834,573.43 plus associated extensions to the dates for completion. SHETL refused to comply with the Decision and GE Amey JV raised enforcement proceedings in the Scottish Court of Session. SHETL's defence was that:

• the adjudicator had failed to exhaust his jurisdiction as he had failed to address certain relevant and material defences advanced by the defender relating to delay damages and deductions or set-off;
• if, contrary to the first argument, the adjudicator did, in fact, address and reject the defender’s argument, he gave no reasons for doing so; and
• the adjudicator’s purported financial award was meaningless and unenforceable.

With respect to the third ground, the Adjudicator had ordered “…..payment of £1,834,573.43, or such other sum as the Adjudicator may decide, within 7 days of the Adjudicator’s.” [sic].

SHETL had argued that did not order it to make payment of a specified sum and did not specify the time period within which any such payment was to be made. SHETL went on to point out that the typos could have been corrected under the 'slip rule' but that having not been done it was not for the court to subsequently correct it. Those arguments were given short shrift by the court. Read as a whole any reasonably informed reader of the Decision would have had no doubt payment of the sum was to be made, together with interest, within 7 days.

The first and second grounds were closely related and considered together by the court. Both were rejected.

In short, SHETL's argument was that the Adjudicator had failed to consider its set off defence in relation to outstanding liquidated damages it claimed it was due. This defence, SHETL argued, was material and thus required to be dealt with expressly by the Adjudicator in his Decision.

During the course of the adjudication, significant debate was had on whether the delay events should be assessed prospectively or retrospectively (a debate that many practitioners of NEC will be all too familiar with).

GE Amey JV had argued that the contract required a prospective approach be adopted despite the intervening passage of time. The impact of the delays to the transformers required to be assessed from the date the Project Manager ought to have instructed quotations from GE Amey JV. SHETL had argued that a retrospective approach, which took account of what had actually transpired as a result of the transformer delays, ought to be adopted.

The court agreed that the set off defence (though only mentioned in a single sentence of SHETL's rejoinder) was material, but nonetheless considered that the Adjudicator had addressed and rejected it as part of his reasoning for the 'route' to his Decision.

The Adjudicator had agreed the events should be assessed prospectively and the court held that this line of reasoning explained the Adjudicator's rejection of SHETL's set off defence. This was because it followed (on the Adjudicator's reasoning) that had the project manager assessed GE Amey JV's entitlement prospectively at the time the CE arose, SHETL's payment defence would not have existed. That reasoning was sufficient to establish the 'route' to the Adjudicator's Decision and explain the rejection of SHETL's material defence.

The case - though not raising any novel points of law - serves as a useful reminder that attempts to resist enforcement on a 'technicality' will not be viewed favourably by the courts.