CSC Braehead Leisure Ltd v Laing O'Rourke Scotland Ltd

JurisdictionScotland
CourtCourt of Session (Outer House)
Neutral Citation[2008] CSOH 119,[2008] CSOH 93

OUTER HOUSE, COURT OF SESSION

[2008] CSOH 119

CA23/08

OPINION OF LORD MENZIES

in the cause

(FIRST) CSC BRAEHEAD LEISURE LIMITED and (SECOND) CAPITAL & REGIONAL (BRAEHEAD) LIMITED

Pursuers;

against

LAING O'ROURKE SCOTLAND LIMITED

Defenders:

________________

Pursuers: McNeill, Q.C., M. Hamilton; Maclay Murray & Spens, LLP

Defenders: Ellis, Q.C.; MacRoberts, LLP

19 August 2008

Introduction

[1] The dispute between the parties to this action relates to an adjudication procedure in relation to a construction contract within the meaning of the Housing Grants Construction and Regeneration Act 1996 ("the 1996 Act"). Although narrated in the context of a separate action from the present proceedings, the background circumstances are summarised in the introduction to my Opinion dated 20 June 2008 in CSC Braehead Leisure Ltd v Laing O'Rourke (Scotland) Ltd [2008] CSOH93, 2008 SLT 697, and I refer to that narrative for the sake of brevity.

[2] The contractual framework in the present case was the Scottish Building Contract with Contractors Design Sectional Completion Edition May 1999 in its January 2002 Revision, which contained a Schedule of Amendments incorporated into the Employers' Requirements. The provisions of the contract relating to adjudication of disputes were contained in Article 7 of the SBCC Standard Form read together with Clause 39A thereof, as amended by section 3 of the Employers' Requirements. A dispute arose between the parties as to whether or not the defenders had, by defective work amounting to breach of contract, caused or materially contributed to either or both of a collapse of the ceiling in Auditorium 7 of the Odeon Cinema in the development, and the condition of the ceilings in the other auditoria in that cinema, and, if so, to what damages the pursuers were entitled from the defenders. On 23 January 2008 the pursuers remitted this dispute to adjudication by serving a notice of adjudication on the defenders. On 25 January 2008 Mr John D Campbell, QC was appointed adjudicator by the nominating body, and on 28 January Mr Campbell requested an extension to the 28 day period for the exercise by him of his jurisdiction to 10 March 2008. This was consented to by the pursuers. The defenders lodged a response to the referral, and the pursuers lodged a rebuttal to the response. The defenders were then allowed to make a response to the rebuttal. There was a hearing on 26 and 27 February, and at that time the adjudicator indicated that he wished a hearing on quantum. After sundry further procedure (to which I shall refer below) the period for the adjudicator issuing his decision was extended to 31 March 2008, then to 4pm on 4 April 2008, and then noon on 7 April 2008. By email timed and dated 11.56am on 7 April 2008 the adjudicator issued electronically his decision on the matters referred to him, together with his reasons therefor. A signed and witnessed version of the final document in writing was issued on 10 April 2008.

[3] The defenders have informed the pursuers that they do not intend to comply with the decisions of the adjudicator recorded in said decision letter because the final document is invalid. The pursuers have accordingly raised the present action in which they seek declarator that, save in any litigation which may be launched to determine whether or not the pursuers are entitled to damages from the defenders in relation to losses arising from the collapse of the ceiling of Auditorium 7 and the condition of the other ceilings, and until any such litigation may finally resolve all dispute about that matter, the defenders may not in any proceedings to which the pursuers are party, deny (i) that in the manner in which they carried out the design and construction of the works undertaken by them in connection with said ceilings, the defenders were in breach of the building contract and by that breach materially contributed to the collapse of the ceiling in Auditorium 7, or (ii) that by reason of its breaches of contract it materially contributed to rendering the other ceilings unsafe, thus necessitating their repair before the admission of the public. The pursuers also seek decree for payment to them by the defenders of the sum brought out in the adjudicator's decision. The defenders' position is that the adjudicator's pretended decision was invalid and should be reduced ope exceptionis. They maintain this on several grounds, including that the pretended decision was arrived at by the adjudicator without his exhausting the jurisdiction conferred upon him, that it was pronounced ultra vires compromissi, and also ultra vires, and also in breach of the rules of natural justice. The matter came before me for discussion at debate.

[4] Senior counsel for the defenders advanced several particular submissions directed against the adjudicator's purported decision letter, which are largely fore-shadowed in Answer 7.7 of the Defences and in the Note of Argument for the defenders (No. 11 of process). I propose to summarise parties' submissions with regard to each of these matters, and to discuss them, in turn. Before I do so, however, it may be helpful to record the more general opening submissions for parties, including some of the averments and contractual framework on which they placed particular reliance.

General submissions for the defenders
[5] Senior counsel for the defenders invited me to repel the pursuers' pleas-in-law, to sustain the second and third pleas-in-law for the defenders and to set aside the adjudicator's alleged decision; he maintained that there was sufficient in the averments and the agreed documentation to enable the court to sustain the defenders' second and third pleas-in-law at this stage.
If I was against him on this, he moved me to sustain the defenders' first plea-in-law and to dismiss the action on the ground of relevancy. In the event that I was against him on either of these positions, having regard to the terms of the first conclusion this should be dismissed.

[6] The contractual framework for adjudication was to be found in Article 7 and Clause 39A of the parties' contract dated 23 and 24 September 2004, together with certain bespoke amendments to Clause 39A. Senior counsel drew my attention to Clause 39A.4.1 which provided that the adjudicator may, with the consent of all of the parties to those disputes, adjudicate at the same time on more than one dispute under the same contract, and observed that no such consent had been given in this case. Clause 39A.5.1 referred to "a dispute or difference" in the singular. He also drew attention to the use of the words "sent" and "send" in Clauses 39A.5.2, 39A.6.2 and 39A.6.3. He emphasised that the last of these clauses (which was subject to a bespoke amendment requiring accompanying reasons for the decision) envisaged a single decision from the adjudicator, and required him to "forthwith send that decision in writing to the parties".

[7] Counsel submitted that the bespoke amendment to Clause 39A.6.4, which deleted the existing text and substituted therefor: "The Adjudicator shall determine the matters in dispute in accordance with the law and the terms of the Contract, applying the normal standards of proof applicable to civil disputes", imposed an onerous duty on the adjudicator, requiring him to find evidential proof on the balance of probabilities.

[8] Clause 39A.8.1 provided inter alia that "the decision of the Adjudicator shall be binding on the Parties until the dispute or difference is finally determined by arbitration or by court proceedings or by an agreement in writing...", but this left open the question as to whether what the adjudicator has issued in the present case is "the decision". Clause 39A.8.2 emphasised that there could only be one decision which would be delivered to the parties (although this might contain more than one decision within it).

[9] Turning to what happened in the present case, senior counsel observed that parties agreed to the adjudicator's requests for extension of time on four occasions, the last agreed extension of time expiring at noon on 7 April 2008, the adjudicator stating when seeking this extension that "there will not be another similar request." The adjudicator emailed parties at 11.56 on 7 April 2008 with what is stated to be his decision letter attached. In his email he states that:

"I enclose my Decision Letter, a hard copy of which has been signed before midday today. A copy of the signed letter will follow in the post. Please confirm that you have received this email.

You will see that I envisage some minor further written procedure to take account of a matter touching on overall quantum. Please also confirm that you agree to further extend the Adjudication procedure until 5pm on Friday 11 April for that stated purpose alone."

[10] At paragraphs 62 and 63 of the attached "decision letter" the adjudicator found and declared that the defenders were in breach of the building contract and by their breach materially contributed to the collapse of the ceiling in Auditorium 7 and rendered the ceilings in the other auditoria unsafe thus necessitating their repair before the admission of the public.

[11] The Adjudicator dealt with quantum at paragraphs 64 to 73. Paragraphs 72 and 73 were in the following terms:

"72. I therefore require parties to furnish me by Friday 11 April with a statement indicating their respective approaches to an appropriate sum to be deducted from the figure of £4,856,172. If there is agreement, so much the better, but if there is not, I am happy to work further on any submissions received so as to adjudicate upon the level of any such deduction which may be appropriate, even £Nil. I say nothing more at present about the appropriate level of such a deduction. The Adjudication will therefore, with parties' agreement, have to have its life extended until 5pm on Friday 11 April. Please confirm.

73. Accordingly, I find in favour...

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