A. V. B.
| Jurisdiction | Scotland |
| Judge | Lord Drummond Young |
| Date | 17 December 2002 |
| Docket Number | CA110/02 |
| Court | Court of Session |
| Published date | 17 December 2002 |
| OUTER HOUSE, COURT OF SESSION | |
| CA110/02
| OPINION OF LORD DRUMMOND YOUNG in the cause A Pursuers; against B Defenders: ________________ |
Pursuer: Glennie, Q.C., Biggart Baillie
Defenders: Howie, Q.C., Tods Murray, W.S.
17 December 2002
[1]The defenders are main contractors who have undertaken to design and construct a building project. The pursuers were engaged as subcontractors to the defenders to carry out the design and installation of proprietary roofing to all buildings and wall cladding to certain buildings. The contract between the parties is contained in a Construction Sub-contract based on the SBCC Scottish Building Contract with Contractor's Design September 1995 Revision as amended by a standard form of sub-contract produced by the defenders.
[2]It is accepted by the parties that during the course of the execution of the contract disputes arose between them. Janey L. Milligan, of jlm Construction Dispute Resolution, accepted appointment as adjudicator under a referral notice served by the pursuers dated 7 February 2002. The adjudicator issued her decision on 14 May 2002. In that decision, she awarded the pursuers an extension of time under their subcontract, and also awarded them reimbursement of loss and expense totalling £639,151.82, inclusive of value added tax. The pursuers have raised the present action in order to enforce the latter part of the adjudicator's award. The defenders deny liability to make payment of the sum awarded by the adjudicator, on two grounds. In the first place, they claim that the contract between the parties prohibits the pursuers from raising any action to enforce an adjudicator's award until either the actual completion date of the last phase of the main contract for construction of the project, or the termination of the present parties' subcontract, subject only to an exception where the written consent of both of the present parties has been obtained to such enforcement. In the second place, the defenders rely on the fact that in her decision the adjudicator rejected a contention by the pursuers that they were entitled to an extension of time of 112 weeks, and awarded them an extension of only 46 weeks. Consequently, the defenders maintain, the adjudicator held implicitly that the pursuers were in delay for a period of 66 weeks; that would attract liquidate and ascertained damages at a rate of £75,000 per week. The pursuers had failed to pay such damages, and were accordingly in material breach of contract. Accordingly, in accordance with the principle of retention, the pursuers were not entitled to enforce the adjudicator's award against the defenders.
[3]By way of background, I should state that in July 2002 the defenders presented a petition to the court in which they sought a suspension of further procedure in the present action; that petition was based on the first of the arguments outlined in the preceding paragraph. When that petition first called in court, without representation of the present pursuers, I granted interim suspension. That interim suspension was subsequently recalled by Mr T.G. Coutts Q.C. sitting as a Temporary Judge. Thereafter defences were lodged in the present action, and the pleadings were adjusted. The matter came before me in the form of a debate in which each party challenged the relevancy of the other's pleadings. The debate was combined with a motion for summary decree on the part of the pursuers.
[4]The parties' arguments were deployed against the background of Part II of the Housing Grants, Construction and Regeneration Act 1996, which introduced the concept of adjudication into the law. Section 108(1) of that Act provides that a party to a construction contract has the right to refer dispute arising under the contract for adjudication under a procedure complying with that section. Section 108(2) requires that such a contract should make provision for adjudication procedure. Section 108(3), which is important for present purposes, is in the following terms:
"The contract shall provide that a decision of the adjudicator is binding until the dispute is finally determined by legal proceedings, by arbitration (if the contract provides for arbitration or the parties otherwise agree to arbitration) or by agreement".
[5]The contract between the parties made detailed provision for adjudication. The relevant provisions are contained in Appendix 8 to the Construction Sub-Contract, which is headed "Sub-contract disputes resolution procedure". Paragraph 2.1 of Appendix 8 provides that if a dispute is referred to adjudication the procedure is to be governed by the ORSA Adjudication Rules-1998 Version 1.2, but subject to a large number of amendments. The ORSA Adjudication Rules are rules promulgated by the Official Referees Solicitors Association, a body of English solicitors who specialise in construction disputes. The Rules are obviously drafted with English law in mind, but the amendments go some way to bring them into line with Scots law. The material provisions of Appendix 8 and the ORSA Rules are as follows.
First, rule 14 of the ORSA rules provides as follows:
"Decisions of the Adjudicator shall be binding until the dispute is finally determined by legal proceedings, by arbitration (if the Contract provides for arbitration or the parties otherwise agree to arbitration) or by agreement".
That provision obviously echoes the wording of section 108(3) of the 1996 Act. Next, rule 28A, which was inserted into the ORSA Rules by Appendix 8, is in the following terms:
"Every decision of the Adjudicator shall be implemented without delay. The parties shall be entitled to such reliefs and remedies as are set out in the decision, and shall be entitled to summary enforcement thereof, regardless of whether such decision is or [is] to be the subject of any challenge or review. No party shall be entitled to raise any right of set-off counterclaim or abatement in connection with any enforcement proceedings. The parties agree and bind themselves to each other to docquet every decision with their consent and to registration of the Adjudicator's decision in the Books of Council and Session for execution".
Rule 33 of the ORSA Rules is as follows:
"No Party shall, save in case of bad faith on the part of the Adjudicator, make any application to the courts whatsoever in relation to the conduct of the Adjudication or the decision of the Adjudicator until such time as the Adjudicator has made his decision, or refused to make a decision, and until the Party making the application has complied with any such decision".
Paragraph 2.1 of Appendix 8 contains the following three provisions:
"f) notwithstanding Rules 14 and 33, no party shall, save in the case of bad faith on the part of the Adjudicator make any application whatsoever to a competent court in relation to the conduct of the Adjudication or the decision of the Adjudicator until the earlier of the Actual Completion Date of the last Phase or termination of this Sub-Contract unless and until the prior written consent of both the Sub-Contractor and the Contractor has been obtained.
"g) notwithstanding Rules 14 and 33, no party shall make any application whatsoever to a competent court in relation to the conduct of the Adjudication or the decision of the Adjudicator after that date being the later of, ninety (90) days from the decision of the Adjudicator or ninety (90) days from the Actual Completion Date of the last Phase;
"h) notwithstanding Rules 14 and 33, no party shall make any application whatsoever to a competent court in relation to the conduct of the Adjudication or the decision of the Adjudicator unless it shall involve the pursuit of a claim or counterclaim of a monetary value in excess of £25,000.00 (index-linked) or in the case of claims or counterclaims of a lesser monetary value arising out of the same facts and circumstances an aggregate monetary value of £25,000.00 (index-linked)".
The restriction on court proceedings connected with the adjudication
[6]The defenders' first argument was that, according to the terms of the parties' contract, the pursuers were not presently entitled to raise proceedings to enforce the adjudicator's decision. That argument was based primarily on paragraph 2.1(f) of Appendix 8. Counsel submitted that the restriction on going to court contained in that paragraph was of an all-embracing nature, and covered every sort of action connected with a decision of the adjudicator. Consequently no such action was competent, in the absence of termination of the parties' sub-contract or consent, until actual completion of the last phase of the main contract had been achieved; it was a matter of concession that that date had not yet arrived. Paragraph 2.1(f) should be read with paragraph 2.1(g), which contained a further restriction on proceedings ninety days after the date of actual completion of the last phase of the main contract or, if later, the decision of the adjudicator. Thus, it was said, in the absence of termination of the subcontract or the consent of the parties, any proceedings of any nature relating to the adjudication could only be brought within a ninety day window following the completion of the last phase of the main contract. Rule 28A was of more limited scope; it provided what was to happen once an action relating to an adjudication came into existence. At that stage, the purpose of rule 28A was to ensure that enforcement was possible immediately, and not held up by either counterclaims or proceedings for judicial review of the adjudicator's decision. Rule 28A did not specify when proceedings might be raised; that was because that matter had been dealt with in paragraph 2.1(f) and (g). In reply, counsel for the pursuers founded on section 108(3) of the 1996 Act and rules 14, 28A and 33. The result of section 108(3) and rule 14 was that an adjudicator's decision was binding when it was pronounced, and it remained binding until...
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