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Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> BARHALE LTD AGAINST SP TRANSMISSION PLC [2021] ScotCS CSOH_2 (12 January 2021)
URL: http://www.bailii.org/scot/cases/ScotCS/2021/2021_CSOH_2.html
Cite as: 2021 SLT 52, 2021 SLT 852, [2021] CSOH 2, [2021] ScotCS CSOH_2, 2021 GWD 4-50
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OUTER HOUSE, COURT OF SESSION
[2021] CSOH 2
CA64/20
OPINION OF LORD TYRE
In the cause
BARHALE LIMITED
against
SP TRANSMISSION PLC
Pursuer
Defender
Pursuer: McKinlay; Burness Paull LLP
Defender: Howie QC; Shepherd& Wedderburn LLP
12 January 2021
Introduction
[1] This is an action for enforcement of an adjudicator’s decision. The defence is that the
decision should be set aside ope exceptionis on the ground that the adjudicator failed to
exhaust his jurisdiction or, alternatively, failed to give adequate reasons for his decision.
The material facts are not in dispute.
The parties’ contract
[2] In about February 2018, the pursuer and defender entered into a contract whereby
the pursuer agreed to carry out works described as “the carrying out and construction of
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Currie Switchgear Modernisation & Group Reinforcement - Civil Works” at an electricity
sub-station at Currie, Edinburgh. The terms of the contract included (i) the conditions in the
NEC3 Engineering and Construction Contract, Main Option B, Third edition, April 2013,
and (ii) the Contract Data part one in Appendix 1 to the contract. The Contract Data part
one provided inter alia that the method of measurement to be used was the Civil Engineering
Standard Method of Measurement, 3rd edition (“CESMM3”).
[3] The works undertaken by the pursuer included the construction of a number of
foundations in an area of existing made ground. In order to construct the foundations, the
pursuer required to carry out excavations and remove the made ground down to competent
strata at a minimum excavation level indicated on drawings in the Works Information. The
pursuer then required to bring levels back up in imported fill, constructing the foundations
as it brought up the levels.
[4] The pursuer executed the works by carrying out a bulk excavation of an area greater
than the area of the foundations to be constructed, down to a level where adequate bearing
capacity was found. In most places the surface achieved acceptable bearing at the formation
level for the foundations. In a limited number of areas, where the bearing was inadequate,
the pursuer continued further excavations in stages, testing until good bearing was achieved
and then up-filling to the underside of foundations. It then proceeded with backfilling and
construction of the foundations from that level.
The dispute referred for adjudication
[5] A dispute arose between the parties as to the amount due to the pursuer for the
excavation and filling work that it had carried out. The pursuer sought payment for the
remeasured quantities based upon the actual bulk excavation, disposal and filling carried
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out, applying the relevant rates from the bill of quantities. The defender refused to make
payment on this basis, contending that the pursuer was entitled to be paid only o n the basis
of the net volume of excavation for the foundations constructed, including excavation and
fill directly beneath or above those foundations, but excluding the remaining area excavated
and backfilled as a consequence of the bulk excavation.
[6] In refusing to make payment for the actual bulk excavation, the defender founded
upon the following measurement rules in Class E (Earthworks) in section 8 of CESMM3:
“M1: In accordance with paragraph 5.18 the quantities of earthworks shall be
computed net using dimensions from the Drawings with no allowance for bulking,
shrinkage or waste…
…
M6: The volume measured for the excavation of a structure or foundation shall be
the volume which is to be either occupied by or vertically above any part of the
structure or foundation.
…
M16: Filling of excavations around completed structures shall be measured only to
the extent that the volume filled is also measured as excavation in accordance with
rule M6.”
[7] On 29 May 2020, the pursuer served a notice of intention to refer the dispute to
adjudication and applied to the Institution of Civil Engineers for nomination of an
adjudicator. On 8 June 2020 the pursuer referred the dispute to the nominated adjudicator.
[8] In its referral to the adjudicator, the pursuer submitted that it was apparent that the
drafter of the bill of quantities had had in mind that (in line with the Works Information) the
made ground would be removed and replaced in bulk, thus forming the “platform” for
construction of the foundations. Reference was made to clause 11.2 (28) of NEC3, Option B,
which stated: “The Price for Work Done to Date is the total of the quantity of the work
which the Contractor has completed for each item in the Bill of Quantities multiplied by the
rate…”. The pursuer asserted that in any payment assessment prepared by the project
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manager, he was required to include the measured quantity of work actually completed by
the contractor, ie the whole volume of the bulk excavation and fill, and to apply the
appropriate rates from th e bill of quantities to that volume. Appended to the pursuer’s
referral was its measure submission to the defender which had inter alia explained why the
pursuer considered that measurement rules M6 and M16 were not relevant to the
circumstances of this case.
[9] The defender submitted its response to the pursuer’s referral. The response included
five “significant points”, three of which may be noted here. Point 1 reiterated the argument
based on rule M6 of CESMM3. Point 3 took issue with the pursuer’s interpretation of the bill
of quantities; the defender argued that the bill did not provide for a bulk excavation, and
that accordingly bulk excavation had been nothing more than the pursuer’s chosen
methodology. Point 5 reiterated the argument based on rule M16 of CESMM3.
[10] The pursuer submitted a reply to the defender’s response. The reply addressed each
of the defender’s five points in turn. In relation to point 1, the pursuer maintained its
position that rule M6 was irrelevant to the claim because the works consisted of construction
of a platform and not separate foundations.
[11] The defender submitted a rejoinder to the pursuer’s reply. The rejoinder began by
noting that on the day after the pursuer had submitted its reply, the adjudicator had sent an
email advising that he considered that his decision was basically upon the question: “Does
the Works Information instruct Barhale to undertake bulk earthworks, or not?”. The
defender stated that it considered that a second question had to be answered, so that
together, the questions were: (i) what works was the pursuer required by the Works
Information to undertake, and (ii) what does the contract provide for the pursuer to be paid
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for its works? The second of those questions is the CESMM3 argument. Points made by the
pursuer in its reply in relation to that argument were responded to.
[12] The pursuer submitted a surrejoinder to the defender’s rejoinder. The arguments in
the surrejoinder focused primarily on whether the Works Information required the pursuer
to undertake bulk earthworks, and on the status of the bill of quantities.
[13] No further formal arguments were submitted by either party. However, on 15 July
2020, the adjudicator sent an email to the parties’ representatives stating:
“The principle [sic] decision that I’m to make is ‘Does the Works Information require
the bulk excavation and filling work that was undertaken by Barhale, or not?’ Both
parties have advanced their best case in respect of their contentions, but neither party
has advanced a contention that should I decide for the opposing party in principle
then the quantities stated in Barhale’s Application for Payment dated 17th April
2020, or the Project Manager’s Assessment of 1st May 2020, are incorrect.
Therefore, unless a party challenges the quantities contended for by the opposing
party, then I shall accept them at face value…”
The defender’s agents replied the following day (16 July 2020), stating inter alia:
“Please note that SPT considers the primary dispute in this matter concerns the
applicable contractual method of measurement. Whilst it is relevant to determine
whether or not bulk excavation was required, the true question is what is BH entitled
to be paid for those works, whether required or not, and this is to be determined by
applying the method of measurement stated in the contract…”
The adjudicator immediately responded:
“It is clear that SP has failed to understand the question I asked in my email dated
15 July 2020, timed at 15:59, and decided to re-run its contentions. So I will spell it
out.
If in principle I decide that the Works Information has instructed Barhale to
undertake the bulk excavation, disposal and filling work, does SP disagree the
quantities advanced by Barhale?”
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The adjudicator’s decision
[14] The adjudicator issued his decision on 27 July 2020. At paragraphs 21 and 22 of his
decision, the adjudicator summarised the dispute between the parties as follows:
“21. The dispute between the parties was that Barhale contended that the Works
Information instructed it to undertake the bulk excavation, disposal and filling work,
whereas SP contended that whilst Barhale undertook constructing its contracted
work this way, it was Barhale’s methodology of undertaking the work, not that it
was instructed to be undertaken by the Works Information this way and, therefore,
all Barhale was entitled to be paid was for the net excavation, disposal and backfill
required to construct each of the foundation bases in accordance with the Civil
Engineering Standard Method of Measurement 3rd edition (‘CESMM3’), which was
incorporated into the contract.
22. The primary decision that I have to decide is whether the Works Information
instructed the bulk excavation, disposal and filling work undertaken by Barhale, or
not.”
[15] The adjudicator’s decision includes a section headed “The Issues”, containing a
narrative of the parties’ contentions. This section has three sub-headings, namely “Does the
Works Information instruct Barhale to undertake the bulk dig, disposal and filling work, or
not?” (paragraphs 26-40); “The Parties’ Quantities” (paragraphs 41-48); and “SP’s
Counterclaim” (paragraphs 49-51). At paragraphs 36-40, the adjudicator summarised the
defender’s contentions in the following terms:
“36. SP’s contention was that the work undertaken by Barhale was subject to
re-measurement in accordance with CESMM3 and that in accordance with the terms
and conditions of the Contract the Project Manager had duly assessed the value of
Barhale’s work in accordance with this and supported this with voluminous
technical quantity surveying detail, including a copy of CESMM3, in support of its
contentions in this regard.
37. SP also contended that Barhale’s reliance upon the quantities stated in the Bills
of Quantities could not be relied upon because the quantities are not Works
Information, notwithstanding that the descriptions were due to the amended
Z clause. SP went to considerable length in advancing this contention,
notwithstanding that at no time did Barhale contend that the quantities in the Bill
of Quantities were a part of the Works Information.
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38. The whole of SP’s contentions were that the only excavation, disposal and filling
that it was contracted to pay Barhale for, were the net quantities under and around
each of the 440 No. isolated foundations, nothing more and whilst Barhale undertook
the bulk excavation, disposal and filling operation, this was solely its methodology
adopted of its own volition. It was not required by the Works Information
incorporated into the Contract.
39. SP agreed that the documents relied upon [by] Barhale… were Works
Information but contended that Barhale’s claims that Drawing 2208 shows
construction by bulk excavating was misconceived as there is no such reference
stated on the drawing.
40. Other than this [sic] denial at paragraph 3.7 of SP’s Response to the Referral, SP
did not provide any other interpretations to the above mentioned Works
Information, other than to state that it did not instruct Barhale to undertake the bulk
excavation, disposal and filling work for which Barhale is seeking payment. SP
agreed that Barhale undertook this work, but its contention was that Barhale had
chosen to do this as its methodology of undertaking the construction of the
foundations, not that the Works Information obligated Barhale to undertake this
work.”
[16] The decision itself, which begins at paragraph 53, follows the same structure. The
adjudicator’s conclusion in relation to the first issue is set out at paragraph s 71 and 72:
“71. Because of all of the above, especially the impracticability of Barhale being able
to construct the work as measured by the Project Manager in compliance with the
Specification, especially that of the compaction and proof rolling of the upfill, I
decide that the Works Information does instruct Barhale to undertake the bulk
excavation, disposal and filling operation to construct the platform and also that this
was the design intent of SP’s designer of the Contract Works.
72. Therefore, I also decide that the works should be measured and valued in
accordance with Barhale’s Method of Working as stated at paragraphs 1.9, 1.11, 1.12
and 1.13 of Barhale’s Referral.”
The adjudicator then turned to the issue of the quantities that the pursuer was to have
valued and paid and, in essence, accepted the pursuer’s figures. He rejected the defender’s
counterclaim. No argument is advanced in the present proceedings in relation to either of
those parts of the adjudicator’s decision.
[17] In the light of his decision on the three issues identified above, th e adjudicator found
the pursuer entitled to an additional payment of £196,606.33 for the bulk excavation,
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disposal and filling work to construct the platform. He made further orders in relation to
interest, VAT and payment of his fee.
Arguments for the parties
Argument for the defender
[18] On behalf of the defender it was accepted that in the vast majority of cases, an
adjudicator’s decision would be enforced by the court. Nevertheless it was submitted that
the present case fell within one of the limited but well recognised categories in which
enforcement should be refused. The adjudicator had failed to exhaust his jurisdiction or, if
not, had failed to give proper and adequate reasons for his decision.
[19] The adjudicator’s decision failed to consider the defen der’s argument as to the
proper contractual basis for assessment and payment for the excavation and associated
disposal and filling works, and in particular failed to consider its argument as to the
operation and effect of rules M6 and M16 in CESMM3. This had been a significant point in
dispute during the adjudication and had been highlighted as such in the defender’s written
submissions. The adjudicator had simply determined that a bulk excavation was required
by the contract, and then awarded the pursuer’s full claim and dismissed the counterclaim.
In so doing the adjudicator had failed to address points 1 and 5 in the defender’s response to
the pursuer’s referral.
[20] It could not be maintained that the measurement argument had been considered and
impliedly rejected. The two issues were discrete: the first was a question of contractual
interpretation; the second concerned the measurement of the sum due to the pursuer on the
assumption that its argument on interpretation was preferred (as it was). The adjudicator
may have misunderstood his jurisdiction; it appeared from the email correspondence that
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he had applied his mind to the extent of his jurisdiction and concluded that it was restricted
to the interpretation point. It was unlikely that he had simply missed the point altogether,
because it had been expressly drawn to his attention. In the circumstances, the presumption
of regularity could not be relied upon by the defender.
[21] There was English case law to the effect that a failure by an adjudicator to address a
question referred to him might render his decision unenforceable, but only if the failure was
deliberate. However, that case law should be approached with caution in Scotland. It
appeared to consist of cases in which the ground of challenge was breach of natural justice,
as opposed to failure to exhaust jurisdiction. The Scottish courts had not gone down the line
of distinguishing between deliberate and inadvertent failure, perhaps because the usual
ground of challenge was failure to exhaust jurisdiction. There was no good reason to draw a
distinction between deliberate and inadvertent failure. If, however, it was considered
appropriate to make such a distinction, the present case was properly to be regarded as a
deliberate failure.
[22] Alternatively, if it were to be held that the adjudicator had not failed to exhaust his
jurisdiction, then he had failed to give adequate, or indeed any, reasons for rejecting the
defender’s CESMM3 argument.
Argument for the pursuer
[23] On behalf of the pursuer it was submitted that the defence was irrelevant and that
the adjudicator’s decision should be enforced by the granting of decree de plano. It was
obvious that the adjudicator had addressed the defender’s CESMM3 argument. The
adjudicator’s analysis of the dispute was that the scope of the pursuer’s instruction was the
primary issue. His use of the words “Therefore, I also decide” in paragraph 72 showed that
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he regarded the pursuer’s entitlement to payment as a separate issue from the scope of
instruction. His approach of treating the issues of “scope of instruction” and “entitlement to
payment” as inextricably linked was readily capable of being understood. The defender had
accepted that the scope of instruction was relevant in assessing the pursuer’s entitlement to
payment. Whether the adjudicator was correct, as a matter of law, to regard it as the most
important factor was irrelevant. Any error of law in taking that approach would be
intra vires and would not provide a basis for resisting enforcement. Rejection of the
defender’s argument was also implicit in the adjudicator’s decision on the central issue
referred to him, which was to accept that the works should be measured and valued in
accordance with the basis proposed in the pursuer’s referral.
[24] If the court was in any doubt as to whether the CESMM3 argument had been
considered and rejected, regard should be had (i) to the presumption of regularity; (ii) to it
being inherently unlikely that the adjudicator would fail to consider an argument which
featured prominently in the defender’s submissions and in email correspondence, and
which the adjudicator had summarised at paragraphs 36 and 38; and (iii) to the nature of
adjudication, which could be a “rough and ready” process that did not demand the same
level of reasoning as a judicial decision. The issues referred to the adjudicator had been
addressed at the correct level of generality.
[25] In any event, even if the adjudicator had not considered a relevant defence
argument, this was not a case of deliberate exclusion or refusal to address. On that basis,
and in light of the line of English authority on inadvertent failure to exhaust jurisdiction, the
decision should be enforced.
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Legal principles
[26] The legal principles applicable to enforcement of an adjudicator’s decision were
largely a matter of agreement between the parties. They include the following:
● The intention of Parliament in enacting the Housing Grants, Construction and
Regeneration Act 1996 was to introduce a speedy mechanism for settling disputes
in construction contracts on a provisional interim basis, and requiring the
decisions of adjudicators to be enforced pending the final determination of
disputes by litigation, arbitration or agreement: Macob Civil Engineering Ltd v
Morrison Construction Ltd [1999] BLR 93, Dyson J at page 97;
● The objective which underlies the 1996 Act and the statutory Scheme requires the
courts to respect and enforce the adjudicator’s decision unless it is plain that the
question which he has decided was not the question referred to him, or the
manner in which he has gone about his task is obviously unfair. It should only
be in rare circumstances that the courts will interfere by refusing to enforce an
adjudicator’s decision. In the overwhelming majority of cases, the proper course
for the party who is unsuccessful in an adjudication must be to pay the amount
that he has been ordered to pay by the adjudicator: Carillion Construction Ltd v
Devonport Dockyard Ltd [2006] BLR 15, Chadwick LJ at paragraphs 85-87;
● If an adjudicator’s decision on an issue referred to him is wrong, whether because
he erred on the facts or the law, or because in reaching his decision he made a
procedural error, it is still an enforceable decision on the issue referred: Macob
(above), Dyson J at page 98. This applies even where the error in the
adjudicator’s decision is plain from the reasons given: Bouygues UK Ltd v
Dahl-Jensen UK Ltd [2000] BLR 522, Buxton LJ at paragraphs 11-15; Chadwick LJ
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at paragraphs 27-28; Amec Group Ltd v Thames Water Utilities Ltd
[2010] EWHC 419 (TCC), Coulson J at paragraph 78;
● The scope of an adjudication is defined by the notice of adjudication, together
with any ground founded upon by the responding party to justify its position in
defence of the claim made: Construction Centre Group Ltd v Highland Council 2002
SLT 174, Lord Macfadyen at paragraph 19. If a responding party in adjudication
proceedings raises a line of defence to a claim made against it, the adjudicator
requires to deal with it: Connaught Partnerships Ltd (in administration) v Perth &
Kinross Council 2014 SLT 608, Lord Malcolm at paragraph 19.
● There is however no requirement for an adjudicator expressly to address every
point taken by the parties in their submissions. The court should not put a fine
tooth comb through the adjudicator’s decision, seeking to ensure that every
single point has been addressed. It is necessary to take a more broad-based
approach, looking at the dispute that was referred and the result. It is not a
breach of natural justice if one particular sub-issue is not referred to in the
decision: Coulson, Construction Adjudication (4th ed, 2018), paragraphs 13-53
to 13-55.
[27] Parties were not, however, in agreement as to the circumstances in which the court
may refuse to enforce an adjudicator’s decision on the ground of failure to exhaust
jurisdiction. On behalf of the pursuer it was accepted that failure to exhaust jurisdiction
might render a decision unenforceable, but it was contended that that could be so only
where the failure was deliberate and not inadvertent. In support of that proposition,
reference was made to the judgment of Coulson J in Pilon Ltd v Breyer Group plc
[2010] BLR 452 at paragraph 22:
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“…22.1 The adjudicator must attempt to answer the question referred to him. The
question may consist of a number of separate sub-issues. If the adjudicator has
endeavoured generally to address those issues in order to answer the question then,
whether right or wrong, his decision is enforceable: see Carillion v Devonport.
22.2 If the adjudicator fails to address the question referred to him because he has
taken an erroneously restrictive view of his jurisdiction (and has, for example, failed
even to consider the defence to the claim or some fundamental element of it), th en
that may make his decision unenforceable, either on grounds of jurisdiction or
natural justice: see [Ballast plc v The Burrell Company (Construction Management)
22.3 However, for that result to obtain, the adjudicator's failure must be deliberate.
If there has simply been an inadvertent failure to consider one of a number of issues
embraced by the single dispute that the adjudicator has to decide, then such a failure
will not ordinarily render the decision unenforceable: see Bouygues and Amec v
TWUL…”
[28] A distinction between deliberate and inadvertent failure to consider an issue was not
expressly drawn in either Bouygues UK Ltd v Dahl-Jensen UK Ltd or Amec Group Ltd v Thames
Water Utilities Ltd. Bouygues was concerned with a patent arithmetical error by the
adjudicator, which was held not to render his decision unenforceable. Amec v TWUL,
another decision of Coulson J, contained the following analysis at paragraphs 86-88:
“86 Thus there are two strands of authority. If the adjudicator makes an error of
calculation his decision will still be enforced (see, for example, Bouygues). But if he
fails to address the critical element of the dispute, his decision will not be enforced
(see, for example, Ballast and [Quartzelec Ltd v Honeywell Control Systems Ltd
[2009] BLR 328 ). There was at least a suggestion in this case that these authorities may be
difficult to reconcile.
87 In my judgment there is no inconsistency between these two lines of authority. If
an adjudicator wrongly fails to have regard to the responding party's defence to the
claim, because he erroneously thought that he could not do so (as for example
happened in Broadwell), then he was not addressing the question that had been asked
of him. He manifestly could not engage with the dispute that had been referred if he
was failing to consider the responding party's defence to the claiming party's claim.
Of course, such a conclusion can only be reached by the court ‘in the plainest cases’
(Chadwick LJ in Devonport).
88 On the other hand, if the adjudicator sought to answer the right question and
engage with the dispute that had arisen between the parties, even if in so doing he
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made a mistake and forgot something or gave undue significance to something else,
then that decision was still enforceable and no jurisdictional issue or breach of
natural justice could arise (see Bouygues). There is a significant difference in law
between, on the one hand, not answering the right question at all and, on the other,
answering the right question but in the wrong way.”
[29] The distinction between deliberate and inadvertent failure to address an issue
(including a critical defence) was further discussed by Jefford J in RGB P&C Limited v Victory
House General Partner Limited [2019] EWHC 1188 (TCC) at paragraph 53:
“The analysis in Pilon v Breyer left open the possibility that an inadvertent failure to
consider one of a number of issues might render a decision in breach of natural
justice, but it would not ordinarily do so, and it is difficult to identify any case in
which a decision has not been enforced for such a reason. The only example
identified in Construction Adjudication is the decision of the Outer House in Whyte and
cases seems to me to be for two reasons. Firstly, an inadvertent failure to address a
particular issue is in the nature of an error within the adjudicator's jurisdiction rather
than a breach of the rules of natural justice. Secondly, and if that is wrong, it would
be an unusual case where the court would both draw the inference that an issue had
not been addressed and conclude that the failure to address the issue was so
significant that it meant that the adjudicator had not decided the dispute referred to
him and/or that the conduct of the adjudication was so unfair that the decision
should not enforced. The more significant the issue, the less likely it is to be
inadvertently overlooked; the less significant it is, the more likely it is that it has
been taken account of in the round.”
For my part, and with respect to Jefford J, I find this analysis somewhat difficult to reconcile
with the clear distinction drawn in Bouygues (by Chadwick LJ at paragraph 27) and in
AMEC v TWUL (by Coulson J at paragraph 88, above) between not answering the right
question at all and answering the right question but in the wrong w ay. Whilst I respectfully
share Jefford J’s difficulty in envisaging situations in which an inadvertent failure to
consider an issue could constitute a breach of natural justice, it does not appear to me to be
necessary to characterise every failure by an adjudicator to answer a question that he was
bound to address as a breach of natural justice.
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[30] More recently, the test for unenforceability based on an inadvertent failure was
at paragraph 49:
“It will be noted that an inadvertent failure to consider one of a number of issues will
‘ordinarily’ not render the decision unenforceable. This qualification admits the
possibility that an inadvertent failure may in an extraordinary case bring the
principle into play. No clear guidance is available about when an inadvertent failure
will render the decision unenforceable. Since the essence of the adjudication process
is that the real dispute between the parties should be resolved, it seems to me that
the touchstone should be whether the inadvertent failure means that the adjudicator
has not effectively addressed the major issues raised on either side…”
[31] A distinction between deliberate and inadvertent failure to address the critical issues
does not, in my view, emerge clearly from the Scottish case law. The approach in Scotland
was reviewed by Lord Clark in Field Systems Designs Ltd v MW High Tech Projects UK
[2020] CSOH 102, a decision issued since the hearing in the present case). Lord Clark’s conclusion
was that the test adopted by Lord Doherty in DC Community Partnerships Ltd v Renfrewshire
Stuart Smith J in KNN Coburn LLP v GD Holdings Ltd above, ie that the adjudicator has not
effectively addressed the major issues raised on either side. I respectfully agree, and I note
that the application of such a test is entirely consistent with earlier decisions of this court in
Ballast plc v The Burrell Company (Construction Management) Ltd (above) (Lord Reed at
paragraphs 39-42); RBG Ltd v SGL Carbon Fibers Ltd 2010 SLT 631 (Lord Menzies at
paragraph 46); and Whyte and Mackay Ltd v Blyth & Blyth Consulting Engineers Ltd (above)
(Lord Malcolm at paragraph 35).
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Application of principles to the present case
[32] The dispute before the adjudicator raised four issues for determination, namely
(i) whether the Works Information required the pursuer to carry out a bulk excavation,
disposal and fill; (ii) if so, how that work was to be measured in terms of CESMM3; (iii) the
quantities that the pursuer had to be valued and paid; and (iv) the defender’s counterclaim.
There is no doubt that the adjudicator addressed issues (i), (iii) and (iv). However, in my
opinion, he did not effectively address issue (ii), or indeed address it at all. It is clear that
this was a critical issue raised by the defender in its response to the referral, which had to be
addressed by the adjudicator when reaching his decision. In its response, again in its
rejoinder, and again in the email sent to the adjudicator on 16 July 2020, the defender
emphasised that its primary contention was that even if the pursuer was correct that the
Works Information required a bulk excavation, disposal and filling, CESMM3 was
applicable and restricted the volume measured for both the excavation and the filling to the
volume occupied by (including beneath) or vertically above any part of the foundation. The
adjudicator simply did not address that argument, and in failing to do so, in my opinion, he
failed to exhaust his jurisdiction, and his decision cannot be enforced.
[33] I reject the pursuer’s argument that the adjudicator was entitled to treat the two
issues as inextricably linked; they were obviously quite separate. His view on the first was
in no way determinative of his view on the second. I also reject the argument that the words
“Therefore, I also decide” in paragraph 72 afford an indication that he considered and
decided the second issue, albeit without giving specific reasons. On the contrary, it appears
to me that those words confirm that the adjudicator regarded his decision on the proper
interpretation of the Works Information as determinative of the merits of the dispute,
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leaving only the parties’ quantities and the counterclaim to be addressed thereafter.
Reading the decision as a whole it is obvious that the adjudicator did not engage with the
CESMM3 argument at all, and there is no basis for applying the presumption of regularity.
[34] For the reasons that I have already given, I am not persuaded that it is necessary to
characterise the adjudicator’s failure to exhaust jurisdiction as deliberate before it can be
held to be unenforceable. If, however, I were wrong about that, I would hold that the fa ilure
in the present case is fairly characterised as deliberate. On two separate occasions the
adjudicator put it to the parties that he considered that the decision he had to make was
whether the Works Information instructed the pursuer to undertake bulk earthworks, or not.
On both occasions the defender replied, insisting that the adjudicator also had to decide the
issue of the applicable contractual method of measurement. On the second of those
occasions, this elicited a terse response from the adjudicator that the defender had failed to
understand the question that he had asked. In these circumstances, if it were necessary to
decide that the failure to exhaust jurisdiction was deliberate, then I would be minded to do
so.
[35] In the light of my decision on failure to exhaust jurisdiction, it is unnecessary for me
to consider the defender’s alternative argument based on inadequacy of reasons. As senior
counsel for the defender acknowledged, if (as I have found) the adjudicator failed to address
the critical issue, no question of adequacy or inadequacy of reasoning can logically arise.
Given the admittedly rough and ready nature of adjudication, and the fact that an
adjudicator’s decision is enforceable even if the question referred has been wrongly
answered, it will be rare for a reasons challenge to succeed if an argument based on failure
to exhaust jurisdiction has been rejected. In the circumstances of the present case it seems to
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me that the question of adequacy of reasoning is entirely hypothetical, and I need say no
more about it.
[36] Finally, I should note that the pursuer presented a “severability” argument in the
eventuality that I held that either of the defender’s arguments was well-founded in relation
to backfill (Point 5 of the defender’s response to the referral) but not in relation to excavation
(Point 1 of the response). It was submitted, in that eventuality, that the adjudicator’s
decision in relation to backfill was severable, on the basis of the test applied by the court in
ie whether, approaching the matter in a flexible and practical manner, there was a core
nucleus of the decision that was untainted by the unenforceable part and which might
therefore be safely enforced. On behalf of the defender it was accepted, under reference to
the value of the respective works, that the adjudicator’s decision in relation to backfill was
severable. I would not therefore have had to decide this point, had it arisen.
Disposal
[37] For these reasons, I hold that the adjudicator’s decision must be set aside
ope exceptionis. I shall repel the pursuer’s pleas in law, sustain the defender’s fourth plea,
and grant decree of absolvitor. Questions of expenses are reserved.