HM Insights

Construction dispute: the exceptional case of an adjudicator who failed to exhaust his jurisdiction

A recent adjudication enforcement case fell within the limited category of decisions where enforcement was refused. The adjudicator failed to exhaust his jurisdiction by not engaging with the defender's principal argument about how the Civil Engineering Standard Method of Measurement, 3rd edition (CESMM3) applied to the works carried out, rendering his decision unenforceable.

This is a relatively rare outcome for an adjudication enforcement case. The courts will ordinarily do everything they can to uphold an award but there are limited exceptions to this.

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Background to the case

The pursuer was a civils contractor who undertook to form the foundations for an electricity sub-station in Edinburgh. The contractor carried out bulk excavation of an area greater than the area of the foundations to be constructed before constructing the foundations and backfilling the area.

A dispute arose as to the amount due to the pursuer for the excavation and filling work carried out.

The contractor sought payment based upon the actual bulk excavation, disposal and filling quantities, applying the relevant rates from the bill of quantities. The defender contended that CESMM3 applied, meaning that payment should be based on the net volume of excavation for the foundations constructed, including excavation and fill directly beneath or above those foundations, but not the remaining area excavated and backfilled as part of the bulk excavation. The defender argued that bulk excavation was simply the pursuer’s chosen methodology for constructing the foundations.

The adjudication

The dispute went to adjudication to determine (1) what works the pursuer had been required to undertake and (2) what the pursuer was entitled to be paid for its works, applying the contract.

The adjudicator focused on the first question only. In a communication to both parties he noted that he was to decide "Does the Works Information require the bulk excavation and filling work that was undertaken by [the contractor] or not?"

He asked the parties to confirm if there was any dispute about the contractor's measurement of the quantities excavated and filled. The defender raised concerns that the adjudicator seemed to show a lack of understanding of the defender's argument. Namely, that even if bulk excavation was required by the contract, payment was to be made in terms of CESMM3.

The defender explained to the adjudicator that it considered the true question to be how CESMM3 applied to the works, not simply whether the bulk excavation was required pursuant to the Works Information. The adjudicator's terse response was that the defender had misunderstood his question.

In fact, it seems that the adjudicator was the one who misunderstood; conflating the separate issues of whether the bulk excavation was required by the contract with the question of how payment of the bulk excavation should be measured and assessed.

The adjudicator held that the Works Information did instruct the contractor to undertake the bulk excavation, disposal and filling operation to construct the foundations. He accepted the contractor's volume measurements and found that the Employer should pay an additional £196,600. The adjudicator did not address the application of CESMM3.

The defender refused to pay the award and the contractor raised an action for enforcement of the adjudicator’s decision.

Decision

Reading the adjudicator's decision as a whole, the judge held that it was obvious that the Adjudicator had not engaged with the CESMM3 argument. The court found that adjudicator's failure to address the CESMM3 argument was a failure to exhaust his jurisdiction and the decision could not be enforced.

Commentary

This is a relatively rare outcome for an adjudication enforcement case. The courts will ordinarily do everything they can to uphold an award but there are limited exceptions to this. Most of the legal principles which underpin such decisions were agreed between the parties and these are set out in a useful summary on page 11 of the judgment.

The parties did not however agree as to the circumstances in which the court may refuse to enforce an adjudicator’s decision on the ground of failure to exhaust jurisdiction. The judgment includes discussion of the English proposition that there is a distinction between deliberate and inadvertent failure to address the critical issues in an adjudication and that only deliberate failure will result in an unenforceable decision. Lord Tyre did not agree that such a distinction emerges clearly from the Scottish case law but, in any event, would have determined the failure here to be deliberate given the prominence of the defender's submissions on this point.

Get in touch - we're here to help

Please contact a member of our construction team for advice or assistance in relation to the adjudication process or any other issues arising under construction contracts.

Miranda Cannibal - [email protected] - 0141 227 9436

Laura McCorquodale - [email protected] - 0131 247 2535

Useful links 

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