In a 2024 decision in the Court of Session, ATG Services (Scotland) Ltd v Ogilvie Construction Ltd [2024] CSOH 94, Lord Sandison rejected Ogilvie Construction Limited’s (“Ogilvie”) submission that the adjudicator committed a material breach of the rules of natural justice by relying upon and applying an English Court’s decision, despite the contract and adjudication being subject to Scots law. 

Background

ATG Services (Scotland) Limited (“ATG”) was subcontracted by Ogilvie to carry out groundworks for the construction of a housing and care facility in Dalkeith, near Edinburgh. A dispute arose from an interim payment application made by ATG for the sum of c. £1.1m to which Ogilvie had failed to respond, such that the sum claimed by Ogilvie became the ‘notified sum’. ATG commenced an adjudication to recover payment of the notified sum from Ogilvie.

Adjudication

At adjudication, Ogilvie argued that ATG had failed to serve a valid interim payment application. The basis for this argument was that, under the sub-contract, ATG was required to serve all interim payment applications by either first-class post to a specified address or by fax. It was further agreed during a pre-contract meeting that interim payment applications could also be validly issued to two specified email addresses. Ogilvie contended that the interim payment application was invalid as ATG had issued the interim payment application to a different email address from those pre-agreed and had therefore failed to comply with the agreed process.

In response, ATG argued that, in administering the sub-contract, the parties had adopted a course of dealings that treated interim payment applications served not in accordance with the sub-contract as valid. More specifically, ATG had served interim payment applications to the same email address for 2.5 years prior to the dispute between them. ATG also referred to observations made by the judge in the English case of Jawaby Property Investment Ltd v Interiors Group Ltd [2016] EWHC 557 (TCC) in support of this argument. The adjudicator agreed with ATG’s arguments and decided that the interim payment application was valid and payment of the ‘notified sum’ should be made by Ogilvie. 

Enforcement

Ogilvie failed to make payment following the adjudicator’s decision and, in response, ATG commenced enforcement proceedings in the Court of Session. 

Ogilvie defended enforcement on the basis that the adjudicator had gone off on a “frolic” and breached the rules of natural justice by applying an English case, decided by an English court under English law to a Scots law dispute. In failing to notify the parties that English law would be applied, Ogilvie argued, the adjudicator had breached the rules of natural justice by depriving Ogilvie of the opportunity to address this point.  In response, ATG argued that Ogilvie’s position was merely that the adjudicator’s decision was wrong due to the reliance on English case law rather than due to the adjudicator having breached the rules of natural justice, and should therefore be dismissed.

The court dismissed Ogilvie’s arguments out of hand; Lord Sandison stating in his opening remark that “the defence to this action is entirely without merit”. 

Lord Sandison clarified that in order for a breach of natural justice to have occurred in the manner argued by Ogilvie, it is required that an adjudicator’s decision depends to some material extent on a ground that was not suggested to him by either party and on which he gave them no sufficient opportunity to comment. It is the lack of opportunity to state one’s case that creates a breach of natural justice. In this case, both parties were aware and accepted that a key question in the adjudication was whether Ogilvie’s previous behaviour in accepting earlier interim payment applications which had not been compliant with the sub-contract terms waived its right to insist upon these requirements in this instance, and both parties made submissions on this point. Therefore, no such breach of natural justice had occurred.

Further, the view of the court was not that the adjudicator had simply applied English law to a Scot’s law case, but that he had viewed the case of Jawaby as an example of a comparable situation in support of the legal principle argued for by ATG. However, it was stated that even if the adjudicator had wrongly felt he was bound by the decision in Jawaby this was a decision he was entitled to make and would “represent no more than an intra vires error of law” which Ogilvie could not contest as a breach of the rules of natural justice.

Key Takeaways 

  • In challenging the adjudicator’s decision, Ogilvie’s focus on the distinction between Scots law and English law was “an immaterial distraction”. It was within the adjudicator’s powers to consider the relevance and applicability of English case law to a Scots law dispute, and whether erroneous or not, this did represent a breach of the rules of natural justice. 
  • For there to have been a breach of the rules of natural justice of the type Ogilvie claimed, the adjudicator’s decision would have had to depend, to some material extent, on a point not raised by either party and upon which the parties have not been provided a sufficient opportunity to comment.
  • Perhaps this decision is not surprising as the courts (in both England and Scotland) continue to take a robust approach to the enforcement of adjudicator’s decisions. This decision confirms the judiciary’s clear position that, in adjudication, the court should not be viewed as a “general appeal tribunal” for “bad” decisions. 

Written by Henry Dalton and Andy Sheppard