Petition Of Bougues E & S Contracting Uk Ltd Against Vital Energi Uitilities Ltd For Judicial Review
| Jurisdiction | Scotland |
| Judge | Lord Malcolm |
| Neutral Citation | [2014] CSOH 115 |
| Court | Court of Session |
| Docket Number | P355/14 |
| Published date | 22 July 2014 |
| Date | 22 July 2014 |
| Year | 2014 |
| OUTER HOUSE, COURT OF SESSION
| |
|
| [2014] CSOH 115
|
| P355/14
| OPINION OF LORD MALCOLM
in the petition of
BOUYGUES E&S CONTRACTING UK LTD
Petitioners;
against
VITAL ENERGI UTILITIES LTD
Respondents:
for judicial review of an adjudicator’s decision
________________
|
Petitioners: Currie QC, Borland; Pinsent Masons LLP
Respondents: RW Dunlop QC, G Walker; Morton Fraser LLP
22 July 2014
[1] In this petition the court is asked to quash an adjudicator’s decision on the basis that it is subject to a number of defects. The background is as follows. In 2006 Fife Council commissioned a combined heat, power and community energy system. The contractors were Vital Energi Utilities Ltd. They entered into a subcontract with Bouygues E&S Contracting UK Ltd for the design, supply and installation of the mechanical and electrical parts of the scheme. There were various allegations of poor workmanship, delays, etc. Ultimately Vital ended the subcontract. The matter was referred to adjudication. In May 2013 it was decided that the termination was justified.
[2] A second adjudication (which is the one under challenge) began in January 2014 before a different adjudicator, this time an experienced QC. He was asked to order Bouygues to make payment to Vital of a sum in excess of £4.482 million. The claim was in two parts: (1) monies due in terms of condition 57 of the subcontract in respect of the cost of completion of the subcontract works; (2) a damages claim for delays – which was dismissed by the adjudicator. In respect of the other claim, the adjudicator ordered Bouygues to make payment of just over £1.614 million. In this petition they seek declarator that the decision is a nullity, and the court is invited to set it aside.
The first ground of challenge
Submissions for Bouygues
[3] Bouygues contend that before any payment order could be made, the adjudicator required to decide whether and to what extent the works they carried out were defective. However, he failed to do so. At paragraph 19(a) of his determination the adjudicator said:
“On a proper construction of condition 57 there is no requirement to determine a breach and no issue of causation. What is required in relation to this element of the dispute between the parties is a determination of the cost to the employer for completion of the works. I do not need to find that any expenditure was ‘caused’ by conduct on the part of the responding party. I need only be satisfied that it was incurred in carrying out the subcontract works.”
For Bouygues Mr Currie QC submitted that the adjudicator made a fundamental error in respect of his approach to condition 57. By not addressing the question of whether any of the work was defective, and having set aside issues of causation, he adopted such a restrictive view of his task that he failed to exhaust the jurisdiction conferred upon him, and acted contrary to the rules of natural justice. He did not entertain a relevant line of defence. The mistake cannot be described as an intra vires error of law. It prevented him from addressing an important part of the defence, namely that Vital had not proved that there was any defective workmanship.
[4] The error caused the adjudicator to decide that the sums awarded relate to works which were required to complete the subcontract, and this notwithstanding that he failed to distinguish between defective and incomplete works. Mr Currie referred to Construction Centre Group Ltd v Highland Council 2002 SC 1274 (OH) at paragraph 19; Connaught Partnerships Ltd v Perth and Kinross Council [2013] CSOH 149 at paragraph 19; Pilon Ltd v Breyer Group Plc [2010] EWHC 837 (TCC) at paragraph 17(4); and RBG Ltd v SGL Carbon Fibers Ltd [2010] CSOH 77 at paragraph 26.
Submissions for Vital
[5] For Vital Mr Dunlop QC submitted that there was no error in the adjudicator’s approach. Even if there was an error, it did not invalidate the decision. The proper approach to challenges of this kind is set out in Diamond v PJW Enterprises Ltd 2004 SC 430 (IH); Carrilion Construction Ltd v Devonport Royal Dockyard Ltd [2005] EWCA Civ 1358; Pilon Ltd (cited earlier); and Bouygues UK Ltd v Dahl-Jensen UK Ltd (CA) [2000] CLC 927 (and the same case at first instance). The adjudicator understood the question asked of him and answered it in a manner which was fair to both parties. He entertained the defence, but rejected it for the reasons given. The adjudicator was asked to quantify the costs of completion of the subcontract, all as per the parties’ agreement in condition 57. That is what he did. It was immaterial whether the costs related to defective or incomplete work. He decided that all of the awarded costs fell into one or other of those categories, and were supported by invoices. They are therefore recoverable under condition 57. Paragraphs 24 – 35 of the determination demonstrate a careful and discriminating approach, with regard being had to all the evidence, including the competing expert reports from Mr Burns and Mr Baldwin, and to the advice of the technical assessors.
Decision on the first ground of challenge
[6] I am satisfied that, in essence, Mr Currie is asking the court to conclude that the adjudicator reached the wrong decision on this line of defence. It is well established that the court will not review the merits of an adjudicator’s decision. In Scotland that is most clearly demonstrated by the decision in Diamond. At paragraph 31, the then Lord Justice Clerk, Lord Gill, explained that an adjudicator’s reasoning must (a) demonstrate that he has dealt with the issues remitted to him; (b) reveal his conclusion on each issue; and (c) be understandable to a reasonable reader. The adjudicator’s decision meets those tests. On numerous occasions judges have emphasised that any other approach would undermine the purpose of the adjudication regime, namely to provide a swift and binding, albeit provisional, resolution to a dispute in the course of a construction contract.
[7] The court has intervened when an adjudicator has completely ignored a relevant line of defence – see for example Whyte and Mackay Ltd v Blyth & Blyth [2013] CSOH 54 at paragraphs 30 - 36. But this is not such a case. The adjudicator correctly identified the issue before him and the position adopted by the parties in respect of it. He reached a considered decision, which was stated in clear and comprehensible terms. Whether it proves to be a correct decision will no doubt be resolved in the on-going court action. In the meantime I reject this ground of challenge.
[8] I have not overlooked the complaint that the adjudicator did not make his views on condition 57 clear until he issued his final determination. That is not a basis for a successful challenge. I should also record that in averment, though hardly in oral argument, there was a complaint that the adjudicator’s reasons are unintelligible. There is no merit in that proposition.
The second ground of challenge
[9] The next ground of challenge relates to an episode when the adjudicator sought and received advice from one of the assessors, all as related at paragraph 35 of the determination. The adjudicator is a layman in engineering terms. He asked for an assessment from...
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Vital Energi Utilities Limited Against Bouygues E & S Contracting Uk Limited
...has been the subject of an unsuccessful application by the present defender for judicial review (see Lord Malcolm’s Opinion published at [2014] CSOH 115). [3] In the present action, the pursuer pleads that the defender was in breach of contract and, separately, that the defender was in defa......