Norwest Holst Limited V. Carfin Developments Limited
| Jurisdiction | Scotland |
| Judge | Lord Glennie |
| Neutral Citation | [2008] CSOH 138 |
| Published date | 18 September 2008 |
| Docket Number | CA33/08 |
| Court | Court of Session |
| Year | 2008 |
| Date | 18 September 2008 |
| OUTER HOUSE, COURT OF SESSION [2008] CSOH 138 | |
| CA33/08 | OPINION OF LORD GLENNIE in the cause NORWEST HOLST LIMITED Pursuer; against CARFIN DEVELOPMENTS LIMITED Defender: ________________ |
Pursuers: Miss Hamilton, McClure Naismith
Defenders: Mr Thomson, Brodies LLP
18 September 2008
[1] The pursuers are building contractors. On or about 1 November 2006 they entered into a contract with the defenders for the construction of certain works in connection with the stabilisation of abandoned coal mine workings beneath a site at New Stevenston Road, Carfin. The defenders were the employers in terms of the contract. The engineer appointed under the contract was the Mason Evans Partnership.
[2] The contract incorporated the ICE Conditions of Contract 5th Edition dated June 1973 (January 1979 Revision) subject to various bespoke amendments agreed between the parties. It also incorporated a number of other documents to which I need not refer for present purposes.
[3] Clause 60 of the ICE conditions deals with "Certificates and Payment". It provides in clause 60(1) that:
"The contractor shall submit to the Engineer after the end of each month a statement (in such form if any as may be prescribed in the Specification) showing:-
(a) the estimated contract value of the Permanent Works executed up to the end of that month; ..."
and other matters relevant to its claim for payment. Clause 60(2) provides that:
"Within 28 days of the date of delivery to the Engineer....in accordance with sub-clause (1) of this Clause of the Contractor's monthly statement the Engineer shall certify and the Employer shall pay to the Contractor (after deducting any previous payments on account):-
"(a) the amount which in the opinion of the Engineer on the basis of the monthly statement is due to the Contractor on account of sub-clause (1)(a) and (d) of this Clause less a retention as provided in sub-clause (4) of this Clause..."
Clause 60(6) has been amended by the parties. It provides for interest on overdue payments. Clause 60(8) provides that every certificate issued by the Engineer pursuant to the clause must be sent to the Employer and at the same time a copy must be sent to the Contractor.
[4] The pursuers aver in their summons that they issued a monthly statement in the form of an application for payment dated 31 August 2007. Thereafter the Engineer issued a certificate under clause 60(2) dated 21 September 2007, certifying an amount of £1,136,525. They claim payment of that amount less payments previously made which are agreed to be in the sum of £919,665. The balance concluded for is £216,860. They also claim interest on that sum in terms of clause 60(6). The calculation of interest is a matter of simple arithmetic applied to the Bank of Scotland base rate as it varies from time to time.
[5] The defenders dispute the pursuers' case. In summary, they say that the document dated 21 September 2007 was not a valid certificate issued by the Engineer in terms of clause 60(2). Further, they maintain that even if it is a valid certificate and prima facie triggers the obligation to make payment under clause 60(2), the defenders are entitled to withhold that payment pending resolution of their claims for damages against the pursuers for breach of contract. They allege that the pursuers are in breach by reason of their delay in carrying out the works.
[6] The pursuers respond to that last contention by pointing out, as is admitted to be the case, that the defenders have not served a "withholding notice" in terms of section 111(1) of the Housing Grants Construction and Regeneration Act 1996 and are therefore not entitled to withhold payment of sums which they are due to pay in terms of the contractual mechanism.
[7] Clause 66 of the ICE Conditions is headed "Settlement of Disputes". It provides as follows:-
"66(1) If any dispute or difference of any kind whatsoever shall arise between the Employer and the Contractor in connection with or arising out of the Contract or the carrying out of the Works including any dispute as to any decision, opinion, instruction, direction, certificate or valuation of the Engineer (whether during the progress of the Works or after their completion and whether before of after the determination abandonment or breach of the Contract) it shall be referred to and settled by the Engineer who shall state his decision in writing and give notice of the same to the Employer and the Contractor... Such decisions shall be final and binding upon the Contractor and the Employer unless either of them shall require that the matter be referred to arbitration as hereinafter provided..."
Relying upon this clause, the defenders moved the Court to sist the cause so that the dispute might be referred to the Engineer. The pursuers, for their part, opposed that motion on the ground that there was no arguable dispute or difference between the parties to be referred to the Engineer. They submitted that the points raised by the defenders were untenable. They moved that the matter proceed to debate on their pleas-in-law to the relevancy of the defences; and, as a fall-back, they also moved the court to grant summary decree in case the defences were held relevant because of some averment of fact or non-admission which could be seen to be clearly unfounded.
[8] I heard that debate and the motion for summary decree at the same time as the defenders' motion for a sist.
[9] In making their submissions, both parties relied heavily upon the approach taken by the court in considering whether to sist a cause for arbitration. They did not, as I understood it, argue that the clause was an arbitration clause. By reason of the fact that the pursuers are incorporated in England, and in the absence of averments that their relevant place of business is in Scotland, had this been an arbitration clause it would have been in respect of an international arbitration to which section 66 and Schedule 7 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1990 applied, with the consequence that Article 8 of the UNCITRAL Model Law on International Commercial Arbitration would apply. It was not suggested that I should proceed by analogy with the mandatory sist in that Article ("mandatory" because, in the context of the Model Law, the word "dispute" means what it says, and there is no room for the court to form any view about whether the point is or is not "disputable" - c.f. Halki Shipping Corp. v Sopex Oils Ltd [1998] 1 WLR 726). The approach which parties seemed content to adopt was by analogy with a motion to sist on the basis of a domestic arbitration clause. Unlike the case of international arbitration (governed by the 1990 Act and the Model Law) and, previously, non-domestic arbitration (to which section 4(2) of the Arbitration Act 1950 and later section 1 of the Arbitration Act 1975 applied), the power to sist a cause on the basis of a domestic arbitration agreement derives in Scotland not from statute but from common law. The discussion which follows is, accordingly, limited to dealing with the motion before the court by treating it as analogous to a motion to sist for domestic arbitration at common law.
[10] Although for some time this did not seem likely, by the end of the discussion there was, in fact, no real dispute as to the principles to be applied when considering a motion to sist for arbitration in such circumstances. The arbitration clause does not wholly oust the jurisdiction of the court - it simply deprives the court of jurisdiction to enquire into and decide the merits of the case....
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