Atholl Developments (slackbuie) Limited For Judicial Review, Suspension And Interim Suspenion Of An Adjudicators Decision Dated 14 May 2010

CourtCourt of Session
JudgeLord Glennie
Neutral Citation[2010] CSOH 94
Date14 July 2010
Docket NumberP575/10
Publication Date15 July 2010

OUTER HOUSE, COURT OF SESSION

[2010] CSOH 94

P575/10

OPINION OF LORD GLENNIE

in the cause

ATHOLL DEVELOPMENTS (SLACKBUIE) LIMITED

Petitioners:

for

Judicial Review, Suspension and Interim Suspension of an Adjudicator's Decision dated 14 May 2010

________________

Petitioners: R. Smith Q.C., Logan; Fyfe Ireland LLP

Respondents: Howie Q.C., Walker; Halliday Campbell WS

14 July 2010

[1] In December 2006 the petitioners, Atholl Developments (Slackbuie) Limited, entered into a construction contract with UBC Group Limited, in terms of which UBC Group Limited, as contractors, undertook the construction of 51 houses and the provision of associated services on a piece of ground formerly known as Lower Slackbuie and Upper Slackbuie Farm, Inverness. Because of the confusion likely to be caused by their different roles in the disputes with which these proceedings are concerned, Atholl as petitioners herein and as referring party in one Adjudication and respondent in another, and UBC as respondents to this petition and in one Adjudication but referring party in another, I shall refer to them respectively as "Atholl" and "UBC". The contract was on the standard form SBCC Scottish Building Contract with Approximate Quantities May 99 Edition (January 2004 revision), with additional incorporations and other terms agreed by the parties. Clause 41A of the standard terms contained provisions for Adjudication.

[2] There are a number of disputes between the parties arising out of the contract which are the subject of an action in the commercial court. Of more direct relevance for present purposes is the fact that certain matters have been referred to Adjudication. There have been two Adjudications. In the first ("the First Adjudication"), Atholl were the referring party. That Adjudication arose against the background that UBC had issued a draft Final Account, to which Atholl had intimated a Response. Atholl asked the Adjudicator to "find and declare" that their Response to the draft Final Account "represents a proper valuation of the Final Account for the Contract" and "in the alternative, to find and declare the proper valuation of the Final Account for the Contract in such sum as the Adjudicator considers appropriate." In the First Adjudication, the Adjudicator, at para 8.2, found and declared that the proper valuation of the Final Account for the Contract was the sum of £6,231,353.30.

[3] That figure was greater than the figure for which Atholl had contended, but less than that put forward by UBC. On the basis of that finding, UBC commenced a second Adjudication ("the Second Adjudication"), before the same Adjudicator, seeking an order that the total amount due from Atholl under the Final Account was the sum of £6,231,353.30 (i.e. the amount determined to be due in the First Adjudication) and that, in consequence, and having regard to the sums which UBC had already received under the contract, Atholl should pay UBC the balance of £348,033.00 or such other sum as the Adjudicator might decide. The decision of the Adjudicator in the Second Adjudication was that UBC were due payment from Atholl of the gross amount to which I have referred, and that Atholl should make payment to UBC of the net amount of £348,033.00.

[4] In the Commercial Court Action, UBC, as pursuers, have amended the Summons to add a conclusion for payment of the sum of £348,033.00 awarded by the Adjudicator. They seek summary decree for that amount, leaving the remainder of their claims to go to proof. I deal with that claim for summary decree in a separate Opinion. That amendment prompted Atholl to apply, by petition for Judicial Review, to reduce the decision of the Adjudicator in the Second Adjudication. Subsequently, by amendment, they have added a prayer for reduction of his decision in the First Adjudication. It is, in fact, the First Adjudication which is the focus of their detailed criticism. They make no independent criticism of his decision in the Second Adjudication. Their point about the Second Adjudication is parasitic, namely that, since, in the Second Adjudication, the Adjudicator followed and applied his decision in the First Adjudication, and since, as they contend, the First Adjudication falls to be reduced for reasons set out in the petition, then the decision of the Adjudicator in the Second Adjudication is tainted, and must fall along with his decision in the First Adjudication.

[5] The First Adjudication was, as I have said, concerned with an assessment of the proper evaluation of the Final Account under the Contract. A large number of disputed items on the Final Account were put before the Adjudicator for his determination. As it is not uncommon, he sought and obtained an extension of 14 days on top of the original time limit of 28 days. He sought a further extension on top of that, but was only granted two more days. His decision is articulate and, on the face of it, coherent, and shows no signs of having suffered as a result of having been written under undue pressure. But it is clear that he had a lot of work to do, a lot of papers to go through, and a lot of points to consider, all within a relatively short period of just over six weeks. This is by no means uncommon in Adjudication generally; and it is in part responsible for the reputation, which Adjudication has acquired, of being a form of "rough justice". But the problem is at its most acute when the issue for consideration is not a discrete legal or factual dispute but the evaluation of a Final Account which, inevitably, contains within it a myriad of sub‑issues.

[6] In the First Adjudication, Atholl submitted that the Final Account should be valued in the sum of £5,472,125.18. Had they been successful, this would have resulted in payment to them from UBC of about £350,000. UBC produced its own Final Account, which bore the date 28 January 2010 but, as I understand it, first emerged during the Adjudication process, valuing the work at approximately £7,900,000. The difference between the two valuations of the Final Account defined the ambit of the dispute between the parties which the Adjudicator in the First Adjudication was required to decide. In the event he found the value of the Final Account to be £6,231,353.30, rather nearer Atholl's position than that of UBC, but nonetheless sufficiently above the Atholl's evaluation to result in a payment being due to UBC. He gave a reasoned decision, as requested. His decision was dated 24 March 2010.

[7] In terms of the contract, the Adjudicator's decision is binding unless and until the dispute between the parties is finally determined by the court or in arbitration or in some other manner: see Clause 48A.1. This is in line with the statutory scheme: see Section 108(3) of the Housing Grants, Construction and Regeneration Act 1996 and Clauses 21 and 23 of the 1998 Scottish Scheme.

[8] The Second Adjudication was at the instance of UBC. As I have said, they sought payment of the sum of £348,033.00. The Adjudicator published his decision in their favour on 14 May 2010. At no time prior to the publication of his decision did Atholl take any steps to challenge the decision in the First Adjudication. Nor did they indicate to the Adjudicator that they were minded to challenge it. Their contention before him was that they wished to put before him material which he had not taken into account in reaching his decision in the First Adjudication. This is material which now forms a basis of their application to reduce the decision in the First Adjudication. Whether they were, on that basis, entitled to attempt in the Second Adjudication to reargue points that were before the Adjudicator in the First Adjudication is, perhaps, a moot point, but that is what they did and I do not need to resolve it for present purposes. The Adjudicator dealt with those points on their merits by saying, in effect, on each of them, that he had taken the material into account in reaching his decision in the First Adjudication. He therefore produced a decision in the Second Adjudication wholly in line with that which he had produced in the First Adjudication.

[9] Mr Smith Q.C., who appeared for Atholl, took me carefully through a selection of the papers to demonstrate not only that, in coming to his decision in the First Adjudication, the Adjudicator had made a number of clear errors, but also to infer from this that the Adjudicator had not paid any attention to certain documents and submissions put in by Atholl. These matters fall under four different headings; and I will deal with them separately in the next four paragraphs of this Opinion.

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