A decision by Scotland’s Court of Session has preserved the statutory rights of companies to refer disputes arising under contract to adjudication.
The right is a feature of the 1996 Construction Act handed down by Parliament.
The case in question was T Clarke (Scotland), pursuer and reclaimer, versus Mmaxx Underfloor Heating, defender and respondent.
The decision in favour of Mmaxx was delivered by Lord Bracadale on 15 October on the reclaiming motion made by T Clarke on 26 March 2014, seeking to prevent Mmaxx from raising further adjudications.
The Lord Ordinary refused the granting of interim interdict against Mmaxx from referring disputes for adjudication, arising from a contract between the two parties.
A total of nine adjudications had been initiated, eight from Mmaxx and one from T Clarke.
The contract in question related to the redevelopment of West Linton Primary School in 2012, for which T Clarke (Scotland) had been subcontracted to carry out mechanical and electrical works.
The company then engaged Mmaxx to install ground-source heat pumps, bore holes and underfloor heating.
When disputes arose, these were referred to adjudication under the Housing Grants, Construction and Regeneration Act 1996.
Specialist Engineering Contracting Association chief executive officer and practising barrister Rudi Klein told H&V News: “If the decision in this case had gone the wrong way it could have put a massive dent in the statutory right to refer disputes arising under contracts to adjudication.
“To put it mildly the contract was beset by disputes from beginning to end,” he continued.
“The big question for the Court was this: The right to adjudicate disputes arising under a contract was a statutory right conferred by the 1996 Construction Act. Could the Court stop the future exercise of a right handed down by Parliament?” Professor Klein asked.
Counsel for T Clarke had argued that the Court could restrain the exercise of the right of adjudication in circumstances where it was being used oppressively. Mmaxx said Counsel for T Clarke was abusing this right by resorting to serial adjudications to extort sums of money from his client.
Counsel for Mmaxx had responded that adjudication was essentially a contractual right, albeit underpinned by statute. It was, therefore, essentially a private contractual process in which the Court did not have any direct interest.
The major exception to this was the Court’s right to intervene in jurisdictional matters to ensure that adjudicators did not stray from their remit.
“Mr McFarlane, Mmaxx’s proprietor, had been robust – said his Counsel - in exercising his right of adjudication, which right could be exercised ‘at any time’,” Professor Klein said.
“In giving the judgment of the Court, Lord Bracadale’s response to the arguments was short and sweet. What the Court was being asked to do was to prohibit Mmaxx from referring all future disputes to adjudication irrespective of whether they were well-founded or not. If the Court was to do this it would be placing a ‘significant limitation on the right provided by Parliament in the 1996 Act’,” he said.
“We can now all breathe again that the right to adjudicate has remained intact. But, just a word of warning. The Inner House seemed to agree with judicial comments in a couple of cases in England that a Court could intervene to halt an on-going adjudication in the event that the process was being abused.”