W.H MALCOLM JUDICIAL REVIEW
3rd February 2011

“To be a decision or not to be a decision – that is the question”

It is a well established and oft relied upon principle in adjudication proceedings that an adjudicator cannot decide an issue that has been decided in a previous adjudication between the parties.  Indeed Article 9 (2) of the Scheme for Construction Contracts provides that “An adjudicator must resign where the dispute is the same or substantially the same as one which has previously been referred to adjudication, and a decision has been taken in that adjudication”. In the event that the adjudicator chooses not to resign, or the Referring party requests that he proceed to a decision regardless, then it will fall to the court to decide whether the dispute is ‘the same or substantially the same’.

But what is a ‘decision’? That was one of the questions that fell to be considered by Lady Smith before the Outer House of the Court of Session in Scotland in W H Malcolm (Petitioners) [2010] SCOH.

W H Malcolm Ltd entered into a sub-contract agreement with Amec Group Ltd relating to the construction of a school in East Kilbride. A dispute crystallised between the parties over 14 separate items and W H Malcolm referred the dispute to adjudication, crucially it did not make reference to the applicability or not of SMM7 to the sub-contract agreement either in its Notice or its Referral. Amec raised the issue of SMM7 in its Response, arguing that it did not apply as the method of measurement under the sub-contract agreement.  The adjudicator, Janey Milligan, awarded W H Malcolm approximately £140,000 and as part of her reasoning stated that “SMM7 does not apply to the parties’ contract...”.

As is often the case, the differences between the parties did not end there and W H Malcolm issued adjudication proceedings in relation to 3 further items, claiming approximately £500,000 from Amec. In its Response Amec again stated that SMM7 did not apply to the sub-contract agreement and as a result W H Malcolm was not entitled to payment of those sums to which the dispute centred.  Unsurprisingly W H Malcolm asserted that the second adjudicator was not entitled to decide the SMM7 issue as this had already been decided by the first adjudicator. The sub-contract incorporated the TeCSA Rules which state, similarly to the Scheme, that “the adjudicator shall immediately resign on written notice to the parties if he becomes aware that the dispute referred to him is substantially the same as the dispute which has previously been referred to and decided by adjudication under the contract” (TeCSA Rules para 21 xiii).

The second adjudicator considered the parties submissions on the matter and decided that he was “not bound by Janey Milligan’s comments in respect of SMM7”.  W H Malcolm sought judicial review of the issue, seeking an interim interdict in the first instance that the second adjudicator was not to consider any submissions relating to the SMM7 issue and to prevent him from making any decision contrary to the first adjudicator’s decision that SMM7 was not the method of measurement to be utilised under the sub-contract agreement.

It must be noted that the decision in W H Malcolm is not binding upon the English courts, it being a Scottish case; however it provides a useful commentary in the judiciary’s interpretation of the adjudication rules:

The matters falling to be decided by Lady Smith included the question as to whether or not W H Malcolm was contractually entitled to bring judicial review proceedings until after a decision had been issued. In fact Lady Smith decided that it was not so entitled and the petition was refused.

She then considered the question surrounding SMM7 and stated that whilst the applicability of SMM7 was included within the first adjudicator’s reasoning, that in itself did not make it part of the decision. She concluded that “the dispute referred to Janey Milligan was not the issue of whether or not the sub-contract provided for SMM7 measurement. Nor was it what she decided. Her view of that matter is part of the reasoning employed in reaching her decision as to the sum due. But that of itself does not seem to me to be capable of being relied on as making it part of her decision. It was manifestly not an issue which was referred to her, although it could have been. Nor was it part of her decision”.

The salient point arising from Lady Smith’s decision is that the power of determining what is to be included in an adjudicator’s decision as opposed to its reasoning, is in the hands of the Referring Party.  That is to say that the Notice of Adjudication defines the parameters of the dispute and can be as wide or as narrow as the Referring Party so chooses.  The Referral then expands on the Notice, explaining and illuminating its contentions as best it can. The Responding party may raise issues which are not contained within the Notice or the Referral in order to contest the Referring Parties’ assertions (as Amec did in this case with the SMM7 issue) but this does not mean such issues then become part of the dispute or the decision. On the contrary such considerations may at best merely become the reasoning of the adjudicator in getting to its decision, such reasoning can then fall to be decided in a subsequent adjudication between the parties.