Severability of an Adjudicator's decision

Challenging an adjudicator’s decision is not easy, as there are limited grounds for challenge. The concept of severance, where the court can enforce part of a decision only, was, until Cantillon Ltd v Urvasco Ltd (2008) EWHC, impossible. Since then the courts have taken different approaches to severability. However a recent Scottish Inner House decision has brought some much needed clarity.

Grounds for challenge

Typically adjudicator’s decisions can only be challenged on the grounds that:

• the adjudicator lacked jurisdiction; or
• there has been a serious breach of the rules of natural justice.

But what happens if the adjudicator either lacks jurisdiction or breaches the rules of natural justice in relation to only part of the decision? Will the whole decision then fall down or can that part be "severed" from the rest of the decision?

In Cantillon Ltd v Urvasco (2008) Akenhead J made obiter comments that if the decision properly addresses more than one dispute or difference, a successful jurisdictional challenge on one part of the decision will not undermine the validity of the rest of the decision. Prior to that, the approach had been that if one part of the decision was flawed then the whole decision fell with it.

Since Cantillon Ltd v Urvasco there have been a number of seemingly inconsistent decisions on the severability point. However a recent Inner House (Scotland’s Appeal Court) decision Dickie & Moore Limited v McLeish and others (2020) CSIH 38, provides some much needed clarity on this point, and is likely to be applied not just in Scotland but also in England and Wales.

The facts

In 2016 the parties entered into a building contract for the construction of a large house. The contract provided that the Scheme for Construction Contracts (Scotland)(as amended) applied, subject to amendments.

Following construction in 2018 Dickie & Moore Ltd, the contractor, challenged the final account and later referred a dispute to adjudication. The defenders challenged the adjudicator’s jurisdiction, but the adjudicator rejected the challenge and decided that:

• Dickie & Moore Ltd were entitled to payment of GBP324,492,60 plus interest;
• Dickie & Moore Ltd were entitled to an additional extension of time of eleven weeks and associated loss and expense; and
• The Final Account should be increased by GBP181,607,17.

When the defender failed to pay the award, Dickie & Moore Ltd raised enforcement proceedings. The defenders challenged enforcement on a number of grounds, including that the adjudicator had breached the rules of natural justice, and that the adjudicator lacked jurisdiction because of lack of crystallisation of the dispute.

The commercial judge, Lord Doherty, found against the defenders on several parts of the decision including the points on natural justice, but held that a material part of the dispute had not crystallised before the notice was served.

Dickie & Moore Ltd asked that the other parts of the decision be enforced, but the defender submitted that the decision of the adjudicator was a unity and as a result the whole decision should not be enforced. The judge held that the parts of the claim in which the adjudicator lacked jurisdiction could be severed from those where he did have jurisdiction. The defenders disagreed.

The judgment

The judgment provides some much needed clarity on severability of an adjudicator’s decision.

Both decisions evaluate previous Scottish and English decisions on the severability point, many of which had been decided inconsistently. Lord Drummond Young in the Inner House acknowledged these inconsistencies and said they can be resolved by having regard to both the underlying purpose and policy of the Scheme.

Natural Justice

The defenders’ natural justice argument had centred on the adjudicator engaging a "pupil" who was a quantity surveyor and claims consultant. Neither party objected to the pupil’s involvement, until the fee note was issued where it was recorded that he had provided other assistance by populating the Scott Schedule, taking meeting notes and producing action points and proof reading the decision prior to it being issued to the parties.

The defender argued that the adjudicator had obtained quantity surveying assistance and assistance from the pupil on significant issues, without the parties’ consent, which was a breach of natural justice.

Lord Doherty found that while he thought that the adjudicator should have told the parties what his pupil was doing, he did not consider his failure to do that was a breach of natural justice.

The natural justice point was not brought back to the Inner House by the defenders. However Lord Drummond Young thought it less likely that a decision would be severed if the adjudicator had acted in breach of the principles of natural justice, as it would inevitably cast doubt over the whole of the adjudicator’s reasoning.

Single or multiple dispute?

The case at hand involved a single dispute. The defender submitted that the approach in Cantillon v Urvasco, which rejected the possibility of severing the decision where it related to a single dispute, had generally been adopted in Scotland. If this approach was accepted then the whole decision would be null and void.

Lord Doherty in the Outer House ruled out this approach, saying it “is likely to be productive of disproportionate and unjust results in a not insignificant number of cases”. The Inner House agreed, acknowledging that in previous decisions there did appear to be a distinction between single and multiple dispute cases. However in later decisions “a more nuanced and flexible approach is taken”.

In Bovis Lend Lease Ltd v Trustees of the London Clinic (2009) (TCC) Akenhead J considered the case of disputes A and B where B had not yet crystallised. “Even if, mistakenly, the adjudicator adjudicates on A and B, that part of his decision which addresses dispute A will be enforced unless it is simply not possible verbally or mathematically to identify what his decision on A alone is”.

Lord Drummond Young said this pointed to a strong practical test and recognised a number of cases which had followed this approach both in Scotland and England: “In our opinion that is clearly correct; indeed the distinction between a single dispute and more than one dispute frequently turns on how claims are classified rather than anything going to their underlying substance”.

A new test?

Having rejected a rigid single/multiple dispute test, Lord Drummond Young then put forward a new test for severability. He noted that in a previous judgment, Akenhead J had pointed out that there were several different grounds for challenging jurisdiction, and different considerations might apply to each.

He considered the approach suggested by Pepperall J in Willow Corp Sarl v MTD Contractors Ltd (2019) (TCC). The court should ask “whether it is clear that there is anything left that can be safely enforced”. While Lord Drummond Young did not think that a test relating to “safety” would gain support in Scotland, he suggested a test along these, related, lines:

“The court should make the assumption that the parts of the decision that are invalid, for example because the dispute had not crystallised, did not exist. On that basis it should then consider whether the remainder of the decision can be enforced without its being tainted by the invalid part of the decision”.

Lord Drummond Young affirmed the words of Lord Doherty that the court would consider whether there remained a “core nucleus” of the original adjudicator’s decision that the court could enforce.

Finally, he suggested that it would be unlikely for a decision to be severed if the adjudicator has acted in breach of the principles of natural justice, as this “inevitably casts an element of doubt over the whole of the adjudicator’s reasoning,” whereas “acting outwith jurisdiction in respect of one aspect of the dispute does not necessarily taint the remainder”.

Conclusion

This decision provides practitioners with clear authority on severability, which we would expect to see followed in both Scotland and England.

The courts are likely to adopt the "core nucleus" test going forward to decide whether part of a decision can be severed. Whilst the judgment concerns a single dispute, it is likely that the decision will apply to multiple disputes as well.

However, decisions which are made in circumstances where there has been a breach of natural justice probably still cannot be severed, as an element of doubt is created over the whole decision, not just the part that was wrongly decided.