Lord Bannatyne in the Outer House of the Court of Session reviewed the principles of assignation under Scottish law which is equivalent to assignment under English law.

A Project Agreement was entered into between Edinburgh Schools Partnership (“ESP”) and the City of Edinburgh Council to provide various services including the design, construction and refurbishment of a number of schools in Edinburgh as well as the facilities management of those schools. ESP entered into a Design and Build Contract with Galliford Try Construction (“Galliford”). ESP entered into a facilities management agreement in respect of the schools with a facilities contractor. A dispute arose between ESP and the facilities contractor which was referred to an expert for adjudication. If any dispute between ESP and Galliford raised substantially the same issue as the dispute with the facilities contractor, s.11 of the Design and Build Contract enabled ESP to refer the dispute to be determined by an expert. The adjudications were conjoined and the adjudicator issued decisions in both adjudications. The Pursuer, ESP, sought to enforce an adjudicator’s decision against the Defender, Galliford, who sought to resist enforcement on three grounds:

1. ESP had no locus to refer the dispute to adjudication as it had assigned its rights under the Design and Build Contract with Galliford to a third party as Security Trustee;
2. The adjudicator did not have jurisdiction to decide the referred dispute as ESP had failed to follow the procedural requirements outlined in the Design and Build contract; and
3. The adjudicator had committed a number of material breaches of the principles of natural justice.

Lord Bannatyne held that ESP had not assigned all of its rights under the Design and Build Contract to the security trustee. Instead, there had been an "assignation in security" where ESP still had the "title" to sue and to start an adjudication. It was noted by the court that there was a conceptual difference between an absolute assignment and assignment in security. Where there is an assignment in security, a party retained an interest in the contract. In this case, such interest was a financial interest. Therefore, such jurisdictional challenge to the enforcement of the adjudicator’s decision by Galliford had failed.

Lord Bannatyne rejected Galliford’s submission regarding the procedural requirements outlined in the Design and Build Contract as it was not established that the ESP had failed to follow these requirements. The court also rejected Galliford’s natural justice arguments regarding the procedure adopted in the adjudication and argument that the adjudicator was biased due to his involvement in a previous adjudication between the ESP and the facilities management contractor. Lord Bannatyne emphasised the fact that an adjudicator that had made a decision in a case did not necessarily disqualify him from hearing a related case raising the same issue. With that having been said, the issues in the two adjudications were held to be "entirely different". Although the second adjudication made a passing reference to his finding in the first adjudication on what amounted to a defect, such reference would not have caused “a fair minded and informed observer” to conclude that there was a real possibility of bias. Thus, Galliford’s challenges to the enforcement of the adjudicator’s decision were rejected.

English practitioners will find similarities to Mailbox (Birmingham) Ltd v Galliford Try Construction Ltd [2017] EWHC 67 (TCC). Contrary to Scotland, there are several ways to protect funders’ interests in England and Wales. Such ways include collateral warranties or third party rights, with a charge over the employer's rights under the construction documents.