All or nothing? The severability of adjudicators’ decisions

Where an adjudicator’s decision simultaneously addresses matters relating to “construction operations” for the purposes of the Construction Act alongside activities which are not “construction operations”, to what extent will the court sever the decision to allow a part of it to be enforced? A recent TCC decision gives guidance and useful pointers on the scope of the doctrine of severability generally.

Facts

The defendant engaged the claimant contractor to carry out works at the Dragon Liquefied Natural Gas terminal at Milford Haven. The parties fell into dispute as to the value of the final account and the claimant referred the matter to adjudication. The defendant challenged the jurisdiction of the adjudicator on the basis that the activities undertaken by the claimant were not “construction operations” for the purposes of the Act, and participated in the adjudication expressly without prejudice to its contention that the adjudicator lacked jurisdiction. The adjudicator awarded the claimant £318K plus VAT, but the defendant refused to honour the decision. The claimant sought enforcement by way of summary judgment. The defendant resisted, arguing:

• the agreement between the parties was not a “construction contract” because certain operations fell within the exception in s.105(2)(c) of the Act; and
• the adjudicator lacked jurisdiction because the works fell partly within the definition of “construction operations” under the Act and partly within the definition of excepted activities.

With regard to the latter argument, the court addressed the important question of whether or not the decision of an adjudicator can be severed to allow it to take effect in relation solely to that part of the dispute which is reached within the adjudicator’s jurisdiction.

The judgment

Ramsey J held that:

• Some of the works undertaken by the claimant were excluded from the operation Act, but most of them were caught by the Act. The court therefore had to go on to consider the scope of the adjudicator’s jurisdiction.
• The claimant had referred a dispute concerning a valuation of all of the works under the contract i.e. one dispute involving both “construction” and non-“construction” operations. The adjudicator had ruled that she had jurisdiction in relation to all of the dispute and her decision was a single decision relating to all of the works. However, an adjudicator does not have jurisdiction to deal with the whole of the dispute referred in circumstances where there is a mixture of “construction” and non-“construction” operations. An adjudicator has jurisdiction only in relation to that part of the dispute relating to “construction operations”.
• Where an adjudicator’s decision is made in relation to a single dispute which relates to works that are partly caught by the Act and partly outside, the decision is generally not severable to allow that part which is within the jurisdiction to be enforced. However, where the “bad” part of the adjudicator’s decision can be identified and chopped off with relative ease, then the “good” part of the decision may be enforced. That was not possible on the facts of this case, as there was a dispute between the parties as to what proportion of the sums awarded by the adjudicator related to works outside of her jurisdiction.

Implications

This case supports the view that the courts will not necessarily adopt an "all or nothing" approach to the enforcement of adjudicators' decisions (see our Law Now article on Cantillon Ltd v Urvasco). Where an adjudicator has made a decision relating to single dispute involving a mix of matters inside and outside their jurisdiction, the courts will contemplate severing the decision where it can be very clearly shown that the “bad” part can be cut away with ease. This may arise, for example, in circumstances where the “bad” part of the decision represented 5 distinguishable items in a 50 item final account.

The issue of severance only arose in this case because there was no adjudication provision written into the contract. If there had been such a provision, the question of whether the works were "construction operations" would not have arisen. This highlights the problems for projects and works on the fringe of the Act, such as those involving, for example, process plant and power stations. It was largely through failing to anticipate the operation of the Construction Act with regards to their particular project that the parties in this case got themselves into a tangle.

Reference: Cleveland Bridge (UK) Limited v Whessoe-Volker Stevin Joint Venture [2010] EWHC 1076 (TCC)