Whyte and Mackay Ltd v. Blyth & Blyth Consulting Engineers Ltd, 9 April 2013 – adjudication contrary to human rights

Outer House case in which Whyte and Mackay sought to enforce an adjudicator’s decision requiring Blyth & Blyth to pay them almost £3m in damages.

Blyth & Blyth had designed the structure of a new bottling plant at Whyte and Mackay’s Grangemouth premises. Whyte and Mackay claimed that the foundations were defective and would result in settlement and damage to the building. They referred the resulting dispute to an adjudicator (as they were entitled to do in terms of the contract between the parties)[1].

When Whyte and Mackay sought to enforce the adjudicator’s decision in the Court of Session, Blyth & Blyth argued that the adjudicator had failed to give adequate reasons for his determination and that to enforce the decision was incompatible with Blyth & Blyth’s rights under the European Convention on Human Rights.

Reasons for the decision
Lord Malcolm found that the adjudicator had failed to give adequate reasons for his determination as he had failed to deal with Blyth & Blyth’s contention that, even if the additional piling deemed necessary to make the foundations adequate had been specified in their design, Whyte and Mackay would not have been prepared to pay the additional time and financial costs required to carry out the extra work. This was potentially a complete answer to the claim and a very significant omission from the adjudicator’s decision. As such, it was sufficient to justify reduction of the award.

Human Rights
Arguably of more importance, however, was Lord Malcolm’s finding that to enforce the adjudicator’s award would be a disproportionate interference with Blyth and Blyth’s right to their possessions under article 1 of the first protocol to the Convention on Human Rights.  Lord Malcolm observed that adjudication is a “rough and ready” process which is “designed to provide a speedy and relatively cheap provisional award pending a final determination by litigation, arbitration or agreement”; the “rough and ready” aspect being particularly true in large and relatively complicated cases such as this one. He also noted judicial concerns as to whether difficult questions of law should be referred to adjudication. Whilst a court, in the face of a Convention challenge, will usually be able to justify enforcement of an adjudicator’s award on the basis of the general interest benefits arising from adjudication (e.g. speed, cost, efficiency and cash-flow requirements), this was a case where such benefits were largely, if not entirely absent. No general or public interest had been served by Whyte and Mackay taking the dispute to adjudication (it would be many years until the cost savings gained by the absence of piling would be outweighed by the projected losses and the bulk of the claimed losses would not occur until 2035/6).

In coming to this conclusion, Lord Malcolm also dismissed Whyte and Mackay’s argument that a decision not to enforce the adjudicator’s award on the basis of article 1 of the first protocol would undermine the whole adjudication scheme, finding such a contention to be “exaggerated and unconvincing”.

A further challenge to the award under article 6 of the Convention (the right to a fair hearing) was rejected on the basis that article 6 is only engaged when a civil right or obligation is being determined and an adjudication cannot be regarded as a final determination of the right or obligation at stake.

The full judgement is available from Scottish Courts here.

All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.

[1] If the contract had not so provided, they would, in any event have been entitled to do so under and in terms of the Housing Grants, Construction and Regeneration Act 1996.

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