Construction Group Centre v The Highland Centre
| Jurisdiction | Scotland |
| Judgment Date | 23 January 2004 |
| Date | 23 January 2004 |
| Docket Number | No 35,No 38 |
| Court | Court of Session (Inner House - Extra Division) |
EXTRA DIVISION
Lord Macfadyen
Contract - Construction contract - Decision by adjudicator - Whether sums awarded by adjudicator to be paid immediately without deduction - Housing Grants, Construction and Regeneration Act 1996 (cap 53), sec 1081
Process - Matters arising after reclaiming motion marked - Whether appropriate to remit to Lord Ordinary
A contractor and employer entered into a construction contract for the design, construction and maintenance of a ferry scheme. The contract included conditions based on the ICE Conditions of Contract, Fifth Edition, 1973 (as revised in January 1979) subject to amendments. The contract was a 'construction contract' within the meaning of Pt II of the Housing Grants, Construction and Regeneration Act 1996. A dispute between the parties as to an interim application was referred to adjudication. On 28 June 2002, the adjudicator found a sum due by the employer and ordered it to be paid within seven days. The employer failed to pay the sum, and the contractor raised a commercial action in the Court of Session for payment. The employer lodged defences, which included a contention that as at 3 July 2002 a larger sum was due by the contractor to the employer as liquidated damages for delay in completion of the works. The commercial judge granted the contractors motion for summary decree. The employer reclaimed. The employer argued that: (1) the grounds of appeal should be amended and the cause remitted to the Lord Ordinary to reconsider the issue of summary decree in the light of them and (2) the Lord Ordinary had not properly distinguished between a plea of retention and a plea of compensation. The contractor argued that: (1) the new matters in the amendment did not constitute a defence to the action and (2) the argument on retention had not been advanced before the Lord Ordinary and in any event was unfounded.
Held that: (1) there were circumstances in which, in the light of events which had occurred while a reclaiming motion was in dependence, the Inner House might remit to the Lord Ordinary to consider the consequences of such events; where the new matter raised factual issues, the ordinary course would be for a minute of amendment to be tendered, but in the present case the matter was sufficiently clear from the grounds of appeal; before making a remit the Inner House would require to be satisfied that there was a real prospect that it would result in a different practical outcome (pp 471H-472B); (2) the purpose of the 1996 Act was to secure that every construction contract contained provisions for a speedy decision from an adjudicator which was binding and enforceable but provisional pending final determination by litigation, arbitration or agreement, and courts of law must lend their assistance to the prompt enforcement of adjudicators' decisions (p 472C-D); and (3) the contra-debt for liquidated damages for delay not having been relied on before the adjudicator, the employer could not now plead compensation in this action (p 474B), and motion to remit to Lord Ordinary and appeal bothrefused.
Parsons Plastics (Research and Development) Ltd v Purac Ltd [2002] ECWA Civ 459 distinguished.
THE CONSTRUCTION CENTRE GROUP LIMITED raised a commercial action for payment against The Highland Council. The cause came before the commercial judge (Lord Macfadyen) on 14 August 2002 on the pursuer's motion for summary decree. On 23 August 2002 the commercial judge granted the motion. The defender reclaimed.
Cases referred to:
A v B 2003 SLT 242
Ferson Contractors Ltd v Levelux A T Ltd [2003] ECWA Civ 11
K N S Industrial Services (Birmingham) Ltd v Sindall Ltd [2001] Const LJ 170
McEwan v Middleton (1866) 5M 159
Parsons Plastics (Research and Development) Ltd v Purac LtdUNK [2002] EWCA Civ 459
Rainford House Ltd v CadoganUNK [2001] BLR 416
Redpath Dorman Long Ltd v Cummings Engine CoSC 1981 SC 370
S I Timber Systems Ltd v Carillion Construction Ltd 2002 SLT 997
Textbooks referred to:
Erskine, Institutes (Nicholson ed) p 1169, note (c)
The cause called before an Extra Division, comprising Lord Osborne, Lord Hamilton and Lord Carloway for a hearing on the summar roll.
At advising, on 11 April 2003, the opinion of the Court was delivered by Lord Hamilton -
OPINION OF THE COURT - [1] In December 1999 the pursuer and respondent ('the Contractor') entered into a contract with the defender and reclaimer ('the Employer') for the design, construction and maintenance of the Small Isles and Inverie Ferry Scheme, Phase I. The contract included, among other provisions, conditions based on the ICE Conditions of Contract, Fifth Edition, 1973 (as revised in January 1979) subject to amendments and additions agreed between these parties. The Engineer under the contract was the Employer's Director of Roads & Transport. The contract was a 'construction contract' within the meaning of Pt II of the Housing Grants, Construction and Regeneration Act 1996 ('the 1996 Act'). The contract contained various provisions designed to give effect to that statute.
[2] In April 2002 the Contractor submitted to the Engineer an Interim Application for Payment (No. 21) in respect of the period ending 3 April 2002. It sought certification of a sum in excess of 5.5 million as due by the Employer to the Contractor. The Engineer responded by letter dated 2 May 2002 in which he stated in effect that in his opinion no sum fell to be certified by him as due under Application No. 21. A dispute then arose between the parties in respect of that matter. The Contractor referred that dispute to adjudication and in due course Mr John Hounslow was appointed as Adjudicator. In terms of a 'Notice of Adjudication' given by it on 15 May the Contractor requested the Adjudicator:
'3.1 To open up, examine and review Interim Application for Payment No. 21 to period ending 3 April 2002 to find an amount payable to the Referring Party [the Contractor] of 5,505,972.57 or such other amount as the Adjudicator may determine.
3.2 To order payment by the Responding Party [the Employer] within seven days of the date of the Adjudicator's decision in the sum of 5,505,972.57 or such other amount as the Adjudicator may determine. '
The Employer raised certain matters in response. On 28 June 2002 the Adjudicator issued his decision on the referral. It was, in so far as material, in the following terms:
'1. I find an amount of 245,469.24 payable by the Highland Council to The Construction Centre Group Limited.
2. The sum in 1. above shall be paid within seven days of the date of this Decision. '
The Employer did not within seven days pay to the Contractor the sum which the Adjudicator had decided should be paid. Thereafter the Contractor raised, as a commercial action, the present proceedings in which it concludes for payment to it by the Employer of that sum together with interest thereon from the date of citation. The Employer lodged defences to the action, which included a contention that as at 3 July 2002 the sum of 420,000 was due under the contract by the Contractor to the Employer as liquidated damages for delay in completion of the Works. The Contractor thereafter enrolled a motion for summary decree. At a preliminary hearing the Lord Ordinary continued that motion to a fixed diet of 14August2002, appointing parties meantime to lodge Notes of Argument and Lists of Authorities. No order was made for adjustment of the pleadings. Having heard parties in argument at the fixed diet, the Lord Ordinary made avizandum. On 23 August he granted the Contractor's motion for summary decree as sought.
[3] The Employer marked a reclaiming motion against that interlocutor. Grounds of appeal were lodged. Shortly before the hearing of the reclaiming motion the Employer tendered proposed amended grounds of appeal. These reiterated the existing grounds but added to them grounds based on events which had occurred since the pronouncement of the Lord Ordinary's interlocutor. One of these events was that on 27 November 2002 a receiver had been appointed to the Contractor. It is unnecessary to discuss that event in detail since it was accepted before us that its occurrence could not of itself found any basis for interfering with the Lord Ordinary's interlocutor. The other additional proposed ground of appeal was in the following terms:
'6. In respect that by letters dated 7 and 15 October 2002 the Defender determined the Pursuer's employment in accordance with Clause 63 of the Conditions of Contract, the Reclaiming Motion ought to be granted and the Lord Ordinary's interlocutor dated 23 August 2002 set aside. Clause 63(4) of the Conditions of Contract provides that if the Employer enters and expels the Contractor from Site he shall not be liable to pay to the Contractor any money on account of the Contract until the expiration of the Period of Maintenance and thereafter until the costs of completion damages for delay in completion (if any) and all other expenses incurred by the Employer have been ascertained and the amount thereof certified by the Engineer. The Period of Maintenance has not yet begun and therefore the Defender is not liable to pay any further money on account to the Pursuer pending expiration of the Period of Maintenance and thereafter the ascertainment of the costs of completion and all other expenses'.
[4] At the outset of the reclaiming motion counsel for the reclaimer moved the court to allow the existing grounds of appeal to be amended to include those based on these recent events and to remit the cause to the Lord Ordinary to reconsider the issue of summary decree in the light of them. He also intimated that, so far as concerned the existing grounds of appeal, the Employer would be insisting only on a limited aspect of one of these grounds. Counsel for the reclaimer did not oppose the motion to amend the grounds of appeal but intimated that he would oppose any remit to...
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