Adjudication: Gillies Ramsay Diamond v PJW Enterprises Ltd

Different approaches to adjudication North and South of the Scottish border should be avoided. Adjudicator's decisions, provided they are not made ultra vires, should not be open to judicial review as this would undermine the adjudication system. Professional negligence in relation to construction contracts is within the ambit of an adjudicator's jurisdiction, despite the complexity of the test to be applied.

Lady Paton

27 June 2002, Outer House, Court of Session

P employed G, a firm of surveyors, to act as contract administrator in relation to works under a separate building contract. The terms and conditions of G's appointment, contained in a letter (the "Contract"), did not include an adjudication clause.

Disputes arose between P and G resulting in termination of G's employment. Practical completion under the building contract was achieved 8 weeks after the date of completion. P were entitled to £5000 per week liquidated damages from the contractors. G purportedly granted an extension of time ("EOT") after practical completion, without consulting P. An adjudicator awarded P damages for losses incurred as a result of G's professional negligence in granting the EOT. G sought judicial review of the adjudicator's decision.

It was held that:

(i) P had the right to refer the disputes to an adjudicator under the statutory scheme as the Contract was, whether viewed as a whole, or severed (taking into account only the obligation of "arranging for the carrying out of construction operations by others, whether under sub-contract…or otherwise"), a construction contract within s.104(1)(b) of the Act. G's contract administration services also qualified as surveying work within s.104(2). (ii) The adjudicator had power to award damages, despite the fact that an arbiter in Scotland does not have this power unless expressly empowered to do so. Arbiters in England are allowed to do so (Heyman v Darwins Ltd [1942] A.C. 356). The court should not import a Scottish common law rule that relates to a quite separate system of arbitration into a UK statutory scheme, (particularly as it has been criticised). Adjudicators in England can award damages (Bouygues (UK) Ltd V Dahl Jensen (UK) Ltd., CA [2000] B.L.R. 522). The fact that the scheme provides only for the referral of disputes "under" the Contract did not limit this. (iii) P had suffered loss in having to make payments to the building contractor in respect of adjudicators' awards in the contractor's favour, despite the fact that those adjudicators' awards were merely provisional. An adjudicator is entitled to consider the losses as they stand at the time. The rule that damages should be assessed once and for all (Stevenson v Pontifex and Wood (1887) 15R. 125) did not affect this. (iv) The adjudicator was entitled to make the decisions (in relation to the EOT and G's professional negligence) that he did. They were intra vires, whether or not his conclusions were partly wrong/wrong. The case did not fall within the categories of those susceptible to review by way of judicial review.

Different approaches to adjudication North and South of the Scottish border should be avoided. Adjudicator's decisions, provided they are not made ultra vires, should not be open to judicial review as this would undermine the adjudication system. Professional negligence in relation to construction contracts is within the ambit of an adjudicator's jurisdiction, despite the complexity of the test to be applied.