Highlands And Islands Authority Ltd V. Shetland Islands Council
| Jurisdiction | Scotland |
| Judge | Lord Menzies |
| Neutral Citation | [2012] CSOH 12 |
| Court | Court of Session |
| Date | 20 January 2012 |
| Published date | 20 January 2012 |
| Docket Number | CA101/11 |
| OUTER HOUSE, COURT OF SESSION [2012] CSOH 12 | |
| CA101/11 | OPINION OF LORD MENZIES in the cause HIGHLANDS AND ISLANDS AIRPORTS LIMITED Pursuer; against SHETLAND ISLANDS COUNCIL Defender: ________________ |
Pursuer: Howie, Q.C.; Burness LLP
Defender: MacColl; Brodies LLP
20 January 2012
Introduction
[1] In 2005 the defender contracted with the pursuer to provide the pursuer with design, consultancy, planning services, project management and construction supervision for the construction of an extension to runways at Sumburgh Airport on the southern tip of Shetland. The contract was a construction contract within the meaning of section 104 of the Housing Grants, Construction and Regeneration Act 1996. The pursuer had the right to refer any dispute with the defender under the contract to adjudication; the Scheme for Construction Contracts (Scotland) Regulations 1998 applied in relation to such adjudication.
[2] The runway extension was built, and thereafter a dispute arose between the parties as to whether or not the defender had caused the pursuer losses by way of a defective runway as a result of its breach of contract. By notice dated 14 April 2011 the pursuer intimated its intention to refer that dispute to adjudication. The pursuer sought the nomination of an adjudicator from the Institute of Civil Engineers, which nominated Mr George Ross as Adjudicator. On about 20 April 2011 the pursuer served an Adjudication Referral with supporting documents. On 24 June 2011 Mr Ross issued a decision letter determining the dispute which had been referred to him. After this decision was issued, the defender's solicitors discovered by chance that before reaching his decision Mr Ross had taken advice from senior counsel in relation to the proper construction of Clause 41.3 of the NEC Professional Services Contract, which formed part of the contract between the parties. Mr Ross did not tell either of the parties that he had taken advice from counsel on this matter. He did not tell either of the parties what were the terms of this advice, nor did he give either of the parties any opportunity to address him on the proper construction of Clause 41.3.
[3] In terms of the decision dated 24 June 2011 Mr Ross determined and ordered that the defender made payment to the pursuer of a sum in excess of £2 million in respect of the defender's breaches of contract and the resultant requirement for remedial measures and additional costs, such payment to be made within fourteen days of the decision, and finding the defender liable for the Adjudicator's whole fees and expenses. By letter dated 7 July 2011 the defender's solicitors wrote to the pursuer's solicitors. This letter contained the following:
"In accordance with the Contract, SIC hereby gives HIAL notice that SIC is dissatisfied with the decision of the Adjudicator dated 24 June 2011. SIC hereby notifies you of its intention to refer the subject matter of the dispute to arbitration.
In light of the above, SIC does not intend to make any further payment to HIAL, or to the Adjudicator, in respect of the Adjudicator's decision."
On the following day a letter in substantially the same terms was sent by the defender to the pursuer.
[4] In the present action the pursuer seeks payment of the principal sum awarded by Mr Ross in favour of the pursuer, and the fees which the pursuer had paid to Mr Ross. In answer, the defender claims that the decision was reached in breach of natural justice, and should be set aside ope exceptionis and the defender assoilzied. The pursuer denies that the decision was tainted by a material breach of natural justice, but in the event that there was such a breach, it affected only the quantification of the Future Remedial Works Cost, which was severable from the remainder of the decision, so only that part of the decision should be set aside ope exceptionis. Furthermore, the pursuer avers that the defender has, by the terms of the letters of 7 and 8 July 2011, approbated and homologated the decision and is not entitled to reprobate it now.
[5] For completeness, it should be noted that the defender in the present action raised a petition for judicial review of the Adjudicator's decision dated 24 June 2011, seeking reduction and interim suspension of that decision. The issues raised in the petition and answers were the same as those raised in the present action. Both forms of process were initiated within days of each other, in July 2011.
[6] I heard evidence from Mr George Ross, who was called as a witness for the defender. In addition, an affidavit of Mr Manus Quigg, a partner with Brodies LLP, was lodged, and an affidavit and supplementary affidavit of Mr Ross McGinness, a senior solicitor with Brodies LLP, were lodged. These affidavits formed numbers 19, 20 and 26 of process; it was agreed in terms of the Joint Minutes (numbers 28 and 29 of process) that they were to be taken as the evidence of Mr Quigg and Mr McGinness respectively. It was further agreed, in the second of these joint minutes, that during the course of the adjudication neither the pursuer nor the defender was aware of the particular issues in relation to Clause 41.3 of the NEC Professional Services Contract upon which Mr Ross sought advice from counsel or the particular terms of any advice received by him in response. It was agreed that Mr Ross did not tell the parties that he had taken legal advice in relation to Clause 41.3, and during the course of the adjudication Mr Ross did not disclose the terms of the advice that he received in relation to Clause 41.3 to either party.
The evidence
[7] Mr George Ross confirmed that he accepted appointment to act as Adjudicator in the dispute between the parties; number 6/4 of process was the Notice of Adjudication, and number 6/6 of process was his decision letter issued on 24 June 2011. Part 20 of the decision letter summarised his conclusions, the sum shown at paragraph 20.5 being the sum to be paid by the defender to the pursuer in respect of Future Remedial Works Costs, which sum was included in the total figure which Mr Ross ordered the defender to make payment to the pursuer in paragraph 20.7. His more detained reasoning and assessment of the quantum of Future Remedial Works Costs was contained in paragraphs 17.4 to 17.12 of the decision letter. He applied Clause 41.3 of the NEC Professional Services Contract because this was the only clause which dealt with this issue. He quoted this clause directly at paragraph 17.4, as follows:
"If, after completion, the Consultant does not correct a Defect within the time required by this contract, the Employer assesses the cost of having the Defect corrected by other people and the Consultant pays this amount."
Mr Ross confirmed that he received an e-mail from Ross McGinness of Brodies on 28 June 2011, in the following terms:
"Mr Ross,
We have been in touch with the Faculty of Advocates and understand that you have taken counsel's opinion in this adjudication. Please clarify what questions were asked of counsel and what advice was given.
We are not suggesting that you have acted inappropriately but now that this information has come to our attention you will understand that we must ask the question."
Mr Ross replied to this by e-mail and post dated 29 June 2011, addressed to the solicitors for both parties, in the following terms:
"I acknowledge receipt of Brodies e-mail dated 28 June 2011 in connection with some purported counsel's opinion and believe that there has been a misunderstanding.
I have not drafted any instructions to counsel to obtain counsel's opinion.
I have not received any written counsel's opinion and consequently I have not used such in this adjudication."
Mr Ross received a further e-mail from Brodies LLP, also dated 29 June 2011, in the following terms:
"Mr Ross,
The information that we received was not in relation to a written opinion but an oral opinion. This came to light when we sought to instruct counsel for an opinion and were advised of a conflict. We look forward to hearing from you in this regard. Again no disrespect is intended but we must ask the question."
Mr Ross replied by letter and e-mail of the same date as follows:
"It is my stated belief that I did not seek or was given a formal oral opinion by counsel but was merely seeking confirmation of a view I held on a particular matter.
The telephone call to counsel was based on my understanding, formed in my own mind, of the meaning of Clause 41.3 of NEC Professional Services Contract.
I would repeat that I already had my own view before telephoning counsel. This view was confirmed by counsel and noting extra or additional was discussed during my short telephone conversation."
[8] Mr Ross stated that he had had formed his own view on the meaning of Clause 41.3, and what he was seeking from counsel was confirmation of the view which he already held. Initially he telephoned Mr Howie, Q.C.; as soon as he mentioned that the subject matter of his question was an adjudication between the pursuer and the defender, Mr Howie told him to say nothing more, because Mr Howie had a conflict of interest. Mr Ross then telephoned Mr Currie, Q.C.; his purpose again was to confirm the view which he had formed as to the meaning of Clause 41.3. Mr Ross had never come across this clause before. The provision that the employer should assess the cost of having the defect corrected by other people was in his view different from the concept of actual costs incurred, and he was seeking confirmation of this. He knew how to operate this clause. When he telephoned Mr Currie, Q.C. he read out the whole clause to Mr Currie and said, "My view is that that means 'assess the costs', not the actual costs". Mr Currie responded that the words say what they say. The telephone call lasted no more than two to three minutes and nothing else was discussed. Mr Ross emphasised to Mr Currie that he was not seeking a...
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