Adjudication
Watson Building Services Ltd (2001)

© Daniel Atkinson 2001      24 July 2001

The decision in the scots case of Watson Building Services Ltd (2001) is of interest because it usefully provides a summary of the most important decisions on adjudication. The issue was familiar - the validity of the appointment of an adjudicator, and whether he had jurisdiction to decide his own jurisdiction. Part of the decision appears to be made firmly on the basis of Scots law. Whilst it is suggested that the same decision would be reached in English Law the case is of limited authority under English law.

Watson entered into a sub-contract with Miller (Preservation) Ltd for rot eradication as part of the main building works at Holycross Church, Glasgow. Disputes arose and Miller applied to the Academy of Construction Adjudicators for appointment of an adjudicator. The issue of the jurisdiction of the appointed adjudicator was raised. Watson argued that the adjudication provisions of the main contract were incorporated in the sub-contract and the Academy of Construction Adjudicators was not one of the nominating bodies, so the adjudicator had not been validly appointed. Miller argued that there was no incorporation, there were no express adjudication provisions and therefore the Scheme for Construction Contracts applied. The Scheme allowed any nominating body to appoint the adjudicator and therefore he had been properly appointed. The adjudicator decided he did not have jurisdiction and withdrew.

At this stage one would have expected Miller to approach one of the other nominating bodies to prevent a repetition of the jurisdiction issue. Instead it went back to the Academy of Construction Adjudicators who appointed another adjudicator. The same issue arose, but this time the adjudicator decided he had jurisdiction and continued and made an order for Watson to pay Miller the sum of £7,917.35. Watson did not pay and Miller raised an action for payment in Greenock Sheriff Court. The parties agreed that all proceedings would await the outcome of the outcome of a judicial review before Lady Paton in the Court of Session, Outer House.

There was no dispute that the sub-contract was a construction contract within the meaning of section 104 of the Act. the parties also agreed that the answer to the dispute about jurisdiction or lawful authority of the adjudicator lay in the proper construction of the terms of the construction contract. Lady Paton reviewed the authorities and concluded that depending upon the circumstances a dispute as to jurisdiction may or may not qualify as a dispute under a construction contract. She concluded that in the present circumatances the adjudicator can and should consider the contract terms, form a view about their meaning, and make decisions and rulings accordingly. A dispute about “what the contract was” could properly be determined by an adjudicator.

Lady Paton held that the adjudicator in the present case had the power to determine the meaning and import of the sub-contract terms, even where such an exercise resulted in his determining a dispute about the validity of his appointment and in effect his jurisdiction. Not only did he have the power and authority to carry out such an exercise, but a question relating to the proper construction of the sub- contract terms, and thus the validity of his appointment, was expressly put to him by the parties. Accordingly he was not answering a question which had not been put. The adjudicator had jurisdiction, and having acted within his jurisdiction, the petition was refused.

Lady Paton referred to the decision by His Honour Judge Thornton QC in Fastrack Contractors Ltd v Morrison Construction Ltd in which he listed the four options available when there was a challenge to jurisdiction. She decided that Watson had clearly confirmed in its response that, even if the adjudicator's decision on jurisdiction was contrary to their submission and in their view wrong, the adjudicator could and should proceed to determine the merits of the parties' disputes. In view of Watson’s actions and the terms of their Response, it was not open to them, having received a decision unfavourable to them, to seek at a later stage to resist the adjudicator's order for payment by invoking the supervisory jurisdiction of the Court of Session to challenge the adjudicator's decision on his jurisdiction.

Lady Paton’s decision was sufficient to deal with the matter, but she decided it was appropriate to to express a view about the incorporation of the main contract terms of adjudication. The relevant part of the sub-contract was Clause 3 of the Counter-Offer dated 24th April1999 which required Miller in carrying out the sub-contract works to observe, perform and comply with all the provisions of the Main Contract. Clause 4 provided that the sub-contract was “by and large to the same terms and conditions as the Main Contract” and further comprised a standard form the Scottish Building Contract Contractor’s Design Portion without Quantities. Clause 17 provided that in the event of a dispute reference was to be made to arbitration.

Watson argued that the standard form provided at Clause 8 that references to adjudication were to be in accordance with Clause 41A which provided a list of nominating bodies which did not include the Academy of Construction Adjudicators.

Miller argued that the standard form was designed for the “employer” and “contractor”. The main contractor was responsible for design, the sub-contractor was not. The obligations placed on the sub-contractor were completely different from those imposed on the main contractor. It made no sense to try to read the standard terms applicable to the main contract into the sub- contract. There were uncompleted blanks in the standard. In any event, scarcely one clause seemed to fit the sub-contractor's circumstances. The reference to the standard form simply made clear to the sub-contractor that he had to comply with the broad scope of the main contract. Relying on Scots law it was argued that arbitration clauses could not be incorporated by a general reference. There was no distinction in this context between arbitration clauses and adjudication provisions. The standard form adjudication provisions had not been incorporated. The result was a sub-contract which made provision for arbitration (by Clause 17 of the letter dated 24 April 1999) but no provision for adjudication. It had been correct to revert to the Scheme.

Lady Paton concluded that incorporation of the whole of the standard form terms, unedited and unaltered, was not successfully achieved by the reference in the sub-contract, for the reasons given by Miller. Whatever other clauses might or might not have been incorporated into the sub-contract, the adjudication provisions in Clause 41A of the standard form had not been incorporated into the sub-contract. The sub-contract did not therefore contain provisions which satisfied Section 108 of the Act and the Scheme applied. The adjudicator had been validly appointed.