Insight
The most recent adjudication enforcement dispute to hit the Scottish courts, UK Grid Solutions Limited and Amey Power Services Limited Pursuers v Scottish Hydro Electric Transmission plc, continues the trend of light-touch judicial interference with the adjudication process, enforcing an adjudicator’s decision based on what could be reasonably construed when reading it as a whole.
What went wrong?
A joint venture construction consortium called GE Amey JV undertook to build a new substation at Fort Augustus, together with the installation and commissioning of the related infrastructure. Scottish Hydro Electric Transmission plc (SHET) retained responsibility for delivery and installation of two transformers.
Delivery of the transformers was delayed, which gave rise to a compensation event under the NEC3 Engineering and Construction Contract. GE Amey JV valued the impact of the delay as being £1.8m, whilst SHET valued it at nil.
GE Amey JV referred the dispute to adjudication and was successful, but SHET refused to pay.
Did the adjudicator exhaust his jurisdiction?
In the enforcement action, SHET’s defence was that the adjudicator’s decision was unenforceable because he had failed to exhaust his jurisdiction by failing to address certain relevant and material defences advanced by the defender relating to delay damages and deductions or set-off. Further, if the adjudicator had addressed and rejected SHET’s argument, he had failed to give reasons for doing so.
SHET submitted that GE Amey JV’s claim for the impact of the transformer delay should be reduced to zero because the project was already in critical and culpable delay caused by GE Amey JV’s lack of progress, poor co-ordination, and defects in their works. The liquidated damages due as result of this delay should be set-off against GE Amey JV’s claim. SHET submitted that the adjudicator failed to address this line of argument and had therefore failed to exhaust his jurisdiction.
Outer House decision
Where an adjudicator fails to address and determine a material line of defence, this will result in unfairness and a breach of natural justice. On the face of it, SHET’s argument was convincing. If the adjudicator had failed to address the set-off submissions, which were material because they had the potential to cancel out any payment due to GE Amey JV, then the decision would be unenforceable.
However, the court found that the adjudicator had exhausted his jurisdiction notwithstanding that he had not directly addressed the argument of set-off. The judge reached this conclusion on the basis that it was possible to discern from the adjudicator’s decision, reasonably construed against the background of the submissions made to him, both what he decided and the reasons for that decision. The adjudicator’s decision was upheld and SHET is liable to pay GE Amey JV the full sum determined by the adjudicator.
This case is yet another good example of just how difficult it is to try and avoid the enforcement of an adjudicator’s decision.