John Stirling V. Westminster Properties Scotland Limited

CourtCourt of Session
JudgeLord Drummond Young
Neutral Citation[2007] CSOH 117
Docket NumberCA100/05
Date09 July 2007
Published date09 July 2007

OUTER HOUSE, COURT OF SESSION

[2007] CSOH 117

CA100/05

OPINION OF LORD DRUMMOND YOUNG

in the cause

JOHN STIRLING trading as M & S CONTRACTS

Pursuer;

against

WESTMINSTER PROPERTIES SCOTLAND LIMITED

Defenders:

________________

Pursuer: S Smith; MacRoberts

Defenders: Richardson; Morton Fraser

9 July 2007

[1] In October 2004 the parties entered into a contract for certain internal and external refurbishment works to be carried out by the pursuer at premises at 7 Orchard Road, St Annes, belonging to the defenders. The terms of the contract were contained in a letter of appointment dated 13 October 2004 issued to the pursuer by project managers acting on behalf of the defenders, which incorporated the defenders' specification, description of works, contract drawings and the JCT standard form of Agreement for Minor Works MW 98 (including Amendments 1-5). The parties were in agreement that the contract was contained in those documents. It is significant for the purposes of the present opinion that the contractor was identified as the pursuer; the letter of appointment, which identified the contractor, was addressed to "John Stirling, M&S Contracts". The contract was a construction contract within the meaning of Part II of the Housing Grants, Construction and Regeneration Act 1996; consequently, in terms of clause 8.1 of the contract either party was entitled at any time to refer any "dispute or difference" arising under the contract to adjudication.

[2] A company known as M&S Contracts Limited was incorporated on 5 November 2004. The pursuer was at all material times the sole director of the company. As will appear, a substantial number of the documents issued for the purposes of the parties' contract either proceeded in the name of that company or were issued to that company. The significance of the company's involvement is a matter of some importance, and I will return to it subsequently. The company was incorporated after the contract between the parties was concluded.

[3] Works were duly carried out under the contract; invoices were issued and payments were made in respect of those invoices. On 11 July 2005 Kerr Baxter Associates, the contract administrators, issued Certificate for Payment No 6, which certified that the sum of £48,667.50 plus VAT was due for payment to the contractor within 14 days of the date of issue of the certificate. In that certificate the contractor was referred to as "M&S Contracts". On 14 July 2005 an invoice for that sum was issued to the defenders by M&S Contracts Limited. Thereafter, Kerr Baxter Associates received a letter dated 19 August 2005 bearing to have been written by G. Stirling on writing paper headed "M&S Contracts Limited"; the letter stated

"As you are aware, we are excessively overdue on Certificate for Payment No 6. This has a valuation date of 4th July 2005 and an issue date of 11th July 2005. The certificate is overdue and has not been paid, which is a breach of the employers contract".

The writer of the letter went on to state that interest at 5% would be charged, and that under clause 4.8 of the JCT conditions the contractor was entitled to suspend the works in view of the non-payment. By letter dated 2 September 2005 Longworth Consulting Worldwide Limited, a firm of claims consultants who were acting on behalf of the pursuer, gave notice to the defenders of the pursuer's intention to refer to adjudication the defenders' failure to make the payment due in terms of Certificate No 6. That letter bore the heading "M&S Contracts Limited v Westminster Properties Scotland Ltd". Thereafter M&S Contracts Limited served a notice of adjudication dated 9 September 2005 on the defenders stating its intention to refer to adjudication the dispute arising from the defenders' non-payment of the sums certified as due in Certificate No 6.

[4] By letter dated 22 September 2005 to the adjudicator, copied to M&S Contracts Limited, the defenders advised that in view of the date of M&S Contracts Limited's incorporation it could not have been a party to the contract concluded on 13 October 2004. Thereafter M&S Contracts Limited abandoned its adjudication; the decision was intimated by letter dated 24 September 2005 from the company to the adjudicator, which was copied to the defenders. By letter dated 24 September 2005 addressed to the company and the defenders the adjudicator resigned office. The pursuer then served a notice of adjudication dated 26 September 2005 on the defenders stating his intention to refer to adjudication the dispute arising from the defenders' non-payment of sums certified as due in Certificate No 6. Apart from the identity of the referring party, that notice of adjudication is in materially the same terms as the notice of 2 September 2005. By letter dated 27 September 2005 the adjudicator advised the parties that he accepted appointment in respect of the adjudication. The pursuer then served a referral notice dated 27 September 2005 on the defenders, referring to adjudication the dispute arising from the non-payment of the sums certified as due in Certificate No 6. The defenders disputed the jurisdiction of the adjudicator to act in relation to the matters set out in the notice of adjudication of 26 September 2005. Among the grounds on which jurisdiction was disputed was the contention that no dispute had crystallized between the pursuer and the defenders. The adjudicator issued a decision to the parties on 25 October 2005; in that decision he rejected the contention that there was no dispute between the parties in respect of Certificate No 6. In his decision the adjudicator further determined that the defenders should pay the pursuer the sum of £48,667.50 plus VAT of £8,516.81, totalling £57,184.31, pursuant to Certificate for Payment No 6, those amounts to be paid within 14 days of the date of the decision. He further ordered the defenders to pay interest amounting to £1,152.97 on the foregoing sum, continuing interest at a daily rate of £12.67 from 26 October 2005 until payment, and his own fees amounting to £4,773.44, inclusive of VAT.

[5] The pursuer has raised the present action against the defenders for enforcement of the adjudicator's decision. In their defences the defenders contend that no dispute existed between the present parties prior to the notice of adjudication served by the pursuer on 26 September 2005; consequently the adjudicator lacked jurisdiction, and his decision is a nullity. In the course of the incidental procedure in the action a number of other issues arose between the parties, but all of these have now been resolved by agreement. It has been agreed in particular that the parties to the action were the parties to the contract for the refurbishment works at 7 Orchard Road. The only issue that remains for decision is whether a dispute or difference existed between the present parties prior to service of the notice of adjudication.

[6] The material facts were agreed between the parties in a joint minute, and counsel on both sides made it clear that they were anxious that the action should be resolved at debate. For the pursuer, counsel contended that I should grant decree de plano in terms of the conclusions of the summons. For the defenders, it was contended that I should pronounce decree of absolvitor in view of the extent of the agreed facts; failing absolvitor I should dismiss the action.

[7] Counsel for the pursuer submitted that a dispute between the parties in relation to the sums certified in Certificate for Payment No 6 arose prior to the start of the adjudication. It might have arisen as soon as the 14-day period referred to in the certificate expired, or possibly shortly thereafter. If that were not so, the dispute arose at a reasonable period following the expiry of the 14-day period; that would certainly have occurred before the notice of adjudication was served on 26 September 2005. At the latest the dispute between the present parties can be said to have arisen on 24 September 2005, when the company, M&S Contracts Scotland Limited, abandoned its adjudication. That was also before the notice of adjudication in the pursuer's name was served. On any of these approaches, however, it is clear that the critical question is whether a "dispute or difference" between the present parties can be said to have crystallized before the notice of adjudication was served on 26 September 2005.

[8] The meaning of the expression "dispute or difference" was considered in Amec Civil Engineering Ltd v Secretary of State for Transport, [2005] 1 WLR 2339. In that case, which concerned provisions in the ICE Conditions of Contract rather than adjudication provisions in the JCT forms, the judge at first instance, Jackson J., reviewed the authorities on the matter and set out the law in a series of numbered propositions; these were accepted as accurate when the matter reached the Court of Appeal, and the judges of the latter court made it clear that they accepted those propositions, subject only to certain additional observations. The propositions are found stated in the opinion of May LJ at paragraph [29], and so far as material are as follows

"1. The word 'dispute'... should be given its normal meaning. It does not have some special or unusual meaning conferred upon it by lawyers.

2. Despite the simple meaning of the word 'dispute', there has been much litigation over the years as to whether or not disputes existed in particular situations. This litigation has not generated any hard-edged legal rules as to what is or is not a dispute. However, the accumulating judicial decisions have produced helpful guidance.

3. The mere fact that one party... notifies the other party... of a claim does not automatically and immediately give rise to a dispute. It is clear, both as a matter of language and from judicial decisions, that a dispute does not arise unless and until it emerges that the claim is not admitted.

4. The...

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