Gillies Ramsay Diamond V. P.j.w. Enterprises Limited
| Jurisdiction | Scotland |
| Judge | Lady Paton |
| Date | 27 June 2002 |
| Court | Court of Session |
| Published date | 10 February 2004 |
| OUTER HOUSE, COURT OF SESSION | |
|
| OPINION OF LADY PATON in the cause GILLIES RAMSAY DIAMOND Petitioners; against PJW ENTERPRISES LIMITED First Respondents: for Judicial Review of a decision dated 4 May 2001 of David H. Wilson, F.R.I.C.S., A.C.I.Arb., Adjudicator, in terms of the Housing Grants, Construction and Regeneration Act 1966 ________________ |
Petitioners: R. A. Smith, Q.C., Clive; Simpson & Marwick, W.S.
First Respondents: Howie, Q.C.; MacRoberts
27 June 2002
Building contract containing an adjudication clause
[1]PJW Enterprises Limited, Glasgow ("the employers") entered into a building contract dated 22 April 1991 with R & R Construction (Scotland) Limited, Glasgow ("the contractors") to carry out an extension to and refurbishment of premises at 40 Stanley Street, Kinning Park, Glasgow. The contract was an SBCC Scottish Minor Works Contract (April 1998 revision), number 6/7 of process. By Clause 10A, the contracting parties undertook to refer any dispute or difference arising under or by reason of breach of the contract to adjudication. Clause 10A.6.5.10 gave the adjudicator the power to award damages and interest thereon.
[2]In the course of the works, the employers and contractors resorted to adjudication on five occasions. The employers were ordered to make certain payments, which they did.
Letter appointing a contract administrator, without an adjudication clause
[3]The employers had also instructed a firm of surveyors, Gillies Ramsay Diamond ("Diamond") to act as contract administrator during the works. The terms and conditions of appointment were contained in Diamond's letter dated 9 July 1998, number 7/1 of process. That letter did not contain an adjudication clause. Nevertheless, if the contract was a construction contract within sections 104 and 108 of the Housing Grants, Construction, and Regeneration Act 1996, the statutory adjudication scheme applicable in Scotland would automatically apply (section 108(5) of the 1996 Act), and one contracting party could oblige the other contracting party to submit to adjudication in relation to any "dispute arising under the contract".
Disputes between employers and contract administrator
[4]In the course of the works, disputes arose between the employers and Diamond, resulting in the termination of Diamond's appointment on 28 January 2000. The employers considered that their contract with Diamond was a construction contract within sections 104 and 108 of the 1996 Act. Accordingly, despite the lack of adjudication clause in the contract, they intimated their intention to refer the dispute to adjudication by a notice of adjudication dated 13 March 2001 number 7/2 of process. In that notice, the employers maintained inter alia that:
"It was an implied term of the parties' contract that [Diamond] would exercise the degree of skill and care to be expected of an ordinarily competent surveyor ...
The building contract contained a provision, namely, Clause 5.3, whereby [Diamond] as contract administrator, could issue written instructions. Said provision provides that where instructions are given orally they shall, within two days, be confirmed in writing by the contract administrator.
[Diamond] failed to issue written confirmations (hereinafter referred to as "written instructions") confirming oral instructions issued by them as contract administrator under the building contract.
[Diamond] recognised that re-measurement to reflect the actual quantities involved in the contract works, as opposed to those stated in the specification, would result in substantial savings to [the employers]. [Diamond] ought to have issued written instructions in relation to items they remeasured. They failed to do so as hereinafter narrated ...[There follows detailed specification of losses said to have been sustained by the employers as a result of the lack of written instructions.]
[Diamond] certified 10 September 1999 as the date when in their opinion the works had reached practical completion ... Practical completion of the works was achieved eight weeks after the completion date [16 July 1999].
In terms of Clause 3.3 of the building contract, [the contractors] are obliged to pay or allow to the employers liquidate damages at the rate of £5,000 per week between the completion date and the date of practical completion.
No application for an extension of time was made prior to practical completion being reached. Prior to practical completion being reached, [the contractors] did not notify the then contract administrator in writing that the works would not be completed by the date for completion. After practical completion, on or about 7 January 2000, [the contractors] made application for an extension of the completion date. By letter addressed to [the contractors] dated 11 January 2000, [Diamond] purportedly granted an extension of the completion date of 41 days. They did so without reference to [the employers] or their legal advisers.
Gavin Ramsay of [Diamond] had been present at a meeting on 23 November 1999 at which [the employers'] solicitor expressed the view that it was questionable as to whether, under the building contract, an application for an extension of time could competently be made after practical completion had been certified ...
In the course of an adjudication between [the employers] and [the contractors], the adjudicator held that he was bound by the extension of time purportedly granted by [Diamond]. [There follows detailed specification of losses said to have been sustained by the employers as a result of the purported grant of extension of time, for example, loss arising from delayed payment of liquidate damages]..."
[5]The employers' notice of adjudication ends with a narration of the termination of Diamond's appointment as contract administrator on 28 January 2000, and the need to engage another firm to complete the administration of the building contract, giving rise to liability for additional professional fees "occasioned as a direct and foreseeable result of [Diamond's] breaches of the parties' contract. They were occasioned by [Diamond's] repeated failures to exercise the degree of skill and care to be expected of an ordinarily competent surveyor". The redress sought by the employers included an order from the adjudicator that they were entitled to payment from Diamond of £46,187, or such other sum as the adjudicator thought proper.
[6]By referral notice dated 16 March 2001, number 6/4 of process, the employers referred the dispute to the adjudication of David H. Wilson of Wilson Associates, Glasgow. The referral notice repeated the issues summarised in the notice of adjudication number 7/2 of process.
[7]Various procedural steps then followed. In particular, Diamond, by fax dated 27 March 2001, advised Mr Wilson that in their opinion the dispute was "not a dispute under the contract but was an action for professional negligence in delict". Diamond invited Mr Wilson to resign. By fax dated 27 March 2001, Mr Wilson advised Diamond that he considered that the dispute was a dispute under the contract, and that he had the necessary jurisdiction to proceed. Diamond responded by a fax dated 30 March 2001, reiterating their position that the dispute was not a dispute under the contract, but rather an allegation of negligence. They further stated that, even if the dispute were truly a contractual dispute, it was the same or substantially the same dispute as one which had already been the subject of four previous adjudications. In either event, Mr Wilson should resign. By letter dated 13 April 2001, Mr Wilson repelled both arguments.
[8]An oral hearing before Mr Wilson took place on 19 April 2001. Evidence was led from two witnesses, Jack McKinney (for the employers) and Gavin Ramsay (for Diamond). Submissions were made by legal representatives for both the employers and Diamond. In broad terms, Diamond submitted that the adjudicator was being asked to decide disputes which were the same or substantially the same as disputes dealt with in previous adjudications; that the employers had not yet suffered loss; that the role of a contract administrator could not be described as work under a "construction contract" (and therefore the matter did not fall within the 1996 Act and could not be the subject of adjudication); that the adjudicator did not have the power to award damages; that Diamond had not failed to issue written instructions; and that Diamond had acted correctly in granting the extension of time.
Adjudicator's decision and reasons
[9]On 4 May 2001, the adjudicator issued a decision number 6/1 of process. Said decision stated inter alia:
"7.01 From the information I have received and ascertained on the matters in dispute within the timescale imposed, it is my decision that the referring party [the employers] have suffered loss as a result of breach of an implied term of the contract between the parties. It is my decision that the respondents [Diamond] have in some circumstances not exercised the degree of skill and care to be expected of an ordinarily competent surveyor. As a result the referring party are entitled to damages in respect of some, though not all, of the items claimed. A breakdown of the referring party's entitlement is included in the reasons for the decision.
Accordingly I decide that:-
The referring party is entitled to payment by the respondents of the sum of twenty nine thousand one hundred and nineteen pounds, eighty pence (£29,119.80), excluding VAT, with the due date for payment as the date of this decision and the final date for payment seven days from the date of this decision.
Interest is not payable on the above amount ..."
[10]The reasons for the decision were contained in a separate document number 6/2 of process, and provided inter alia:
"1. ...The current adjudication is not concerned with a dispute which is the same as previous adjudications ...
2. As matters stand ... there is no doubt that...
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