Profile Projects Limited V. Elmwood (glasgow) Limited
| Jurisdiction | Scotland |
| Judge | Lord Menzies |
| Neutral Citation | [2011] CSOH 64 |
| Court | Court of Session |
| Published date | 08 April 2011 |
| Date | 08 April 2011 |
| Docket Number | CA141/10 |
| OUTER HOUSE, COURT OF SESSION [2011] CSOH 64 | |
| CA141/10 | OPINION OF LORD MENZIES in the cause PROFILE PROJECTS LIMITED Pursuers; against ELMWOOD (GLASGOW) LIMITED Defenders: ________________ |
Pursuer: Richardson; ADLP Limited, Solicitors
Defender: Sandison Q.C.; Russell & Aitken, WS
8 April 2011
Introduction
[1] The parties entered into a contract whereby the pursuers were engaged as sub-contractors to the defenders for carrying out the design and installation of partitions and other works for NHS Lothian. A dispute arose as to the pursuers' entitlement to payment in terms of their interim application 3. The contract was a construction contract within the meaning of the Housing Grants, Construction and Regeneration Act 1996 ("the Act"). The Act makes it obligatory for such contracts to contain provision for disputes to be resolved by adjudication. The pursuers referred the dispute to adjudication in terms of a Notice of Adjudication dated 3 September 2010, and a referral notice dated 9 September 2010. The parties were not agreed as to who should act as adjudicator. On the application of the pursuers, the Scottish Building Federation appointed Mr John Nicolson as adjudicator. The defenders immediately challenged the jurisdiction of Mr Nicolson, for reasons set out in a document entitled "Notice of Challenge by Respondent to Jurisdiction of Adjudicator" dated 9 September 2010. The defenders maintained their objection to Mr Nicolson's assumption of jurisdiction throughout the purported adjudication, but the adjudicator rejected this objection. He issued his determination of the parties' dispute on 6 October 2010, and amended it to correct an error in calculation on the following day. He found that payment was due by the defenders to the pursuers. He also found the defenders liable in the costs of his fees.
[2] The defenders have refused to make payment of these sums to the pursuers. The pursuers have accordingly raised this action for payment. In their defences the defenders have reiterated their objection to the jurisdiction of the adjudicator, and argue that as his determination was pronounced without jurisdiction, it was null and void and should be reduced ope exceptionis. The matter came before me for debate on the defenders' first plea-in-law, being a general plea to the relevancy. At the same time, the pursuers' motion for summary decree in terms of the first two conclusions of the summons was heard, and in the alternative counsel for the pursuers sought decree de plano. Both parties helpfully lodged detailed notes of argument (nos. 11 and 12 of process); I do not seek to repeat these verbatim here, but I have taken their whole contents into account, together with the submissions made at the bar, and the written replies for the parties (nos. 17 and 18 of process) which were lodged after the debate.
The relevant provision of the contract
[3] Clause 27(ii) of the sub-contract between the parties provided as follows:-
"In the event of any dispute or difference arising between the Main Contractor and the Sub-contractor under or in connection with the Sub-contract which cannot be settled by informal means then either party may give notice at any time of its intention to refer said dispute or difference to adjudication. The provisions of the Scheme for Construction Contracts in Scotland then in force will apply to the adjudication, save where inconsistent with any of the provisions of this Clause. The Adjudicator shall be agreed between the parties, and failing which nominated by the Chairman or Vice Chairman for the time being of the Scottish Branch of the Royal Institution of Chartered Surveyors (RICS). Upon the agreement on or, as the case may be, the nomination of an Adjudicator able and willing to act, the parties shall thereupon execute with the Adjudicator adjudication agreement in the form then current adopted by the Scottish Building Contract Committee as amended or deemed to have been amended to the effect (one) that the referring party shall bear the whole costs of the adjudication including, but not limited to the Adjudicators fees and costs in their entirety and both parties' legal expenses (on a solicitor and client basis and upon the scale of charges applicable to Court of Session business) in and incidental to the adjudication and (two) that the Adjudication Agreement and any award of the Adjudicator thereunder may be registered in the Books and Council for preservation only and not for execution. Financing charges associated with matters being pursued under the adjudication process shall not be subject to award. Unless and until the Adjudicator's decision is issued, the Main Contractor and the Sub-contractor shall proceed as if the subject matter of the dispute or difference is not in issue and the decision of the Adjudicator shall be final and binding as a matter of contractual obligation between the parties, unless and until it has either been set aside by a competent tribunal or the matter has been determined by a Court or arbitrator."
The statutory framework
[4] Section 108 of the Housing Grants, Construction and Regeneration Act 1996 provides inter alia as follows:
"(1) A party to a construction contract has the right to refer a dispute arising under the contract for adjudication under a procedure complying with this section.
For this purpose 'dispute' includes any difference.
(2) The contract shall-
(a) enable a party to give notice at any time of his intention to refer a dispute to adjudication;
(b) provide a timetable with the object of securing the appointment of the adjudicator and referral of the dispute to him within 7 days of such notice;
(c) require the adjudicator to reach a decision within 28 days of referral or such longer period as is agreed by the parties after the dispute has been referred;
(d) allow the adjudicator to extend the period of 28 days by up to 14 days, with the consent of the party by whom the dispute was referred;
(e) impose a duty on the adjudicator to act impartially; and
(f) enable the adjudicator to take the initiative in ascertaining the facts and the law.
(3) The contract shall provide that the decision of the adjudicator is binding until the dispute is finally determined by legal proceedings, by arbitration (if the contract provides for arbitration or the parties otherwise agree to arbitration) or by agreement.
The parties may agree to accept the decision of the adjudicator as finally determining the dispute.
(4) The contract shall also provide that the adjudicator is not liable for anything done or omitted in the discharge or purported discharge of his functions as adjudicator unless the act or omission is in bad faith, and that any employee or agent of the adjudicator is similarly protected from liability.
(5) If the contract does not comply with the requirements of subsections (1) to (4), the adjudication provisions of the Scheme for Construction Contracts apply....".
[5] The Local Democracy, Economic Development and Construction Act 2009 made provision for insertion of a new section 108A (not yet in force), as follows:-
"108A Adjudication costs: effectiveness of provision
(1) This section applies in relation to any contractual provision made between the parties to a construction contract which concerns the allocation as between those parties of costs relating to the adjudication of a dispute arising under the construction contract.
(2) The contractual provision referred to in subsection (1) is ineffective unless-
(a) it is made in writing, is contained in the construction contract and confers power on the adjudicator to allocate his fees and expenses as between the parties, or
(b) it is made in writing after the giving of notice of intention to refer the dispute to adjudication."
The Scheme for Construction Contracts (Scotland) Regulations 1998 provide, in paragraph 2 of part I of the Schedule as follows:-
"2.- (1) Following the giving of a notice of adjudication and subject to any agreement between the parties to the dispute as to who shall act as adjudicator -
(a) the referring party shall request the person (if any) specified in the contract to act as adjudicator;
(b) if no person is named in the contract or the person named has already indicated that he is unwilling or unable to act, and the contract provides for a specified nominating body to select a person, the referring party shall request the nominating body named in the contract to select a person to act as adjudicator; or
(c) where neither head (a) nor (b) above applies, or where the person referred to in (a) has already indicated that he is unwilling or unable to act and (b) does not apply, the referring party shall request an adjudicator nominating body to select a person to act as adjudicator.
(2) A person requested to act as adjudicator in accordance with the provisions of sub-paragraph (1) shall indicate whether or not he is willing to act within two days of receiving the request.
(3) In this paragraph, and in paragraphs 5 and 6 below, "an adjudicator nominating body" shall mean a body (not being a natural person and not being a party to the dispute) which holds itself out publicly as a body which will select an adjudicator when requested to do so by a referring party."
Submissions for the defenders
[6] Senior counsel for the defenders invited me to sustain the first plea-in-law for the defenders, repel the pleas-in-law for the pursuers and grant decree of dismissal. He submitted that there were three questions for determination in this case; only if the first and second questions were answered in the affirmative and the third question was answered in the negative could the action survive dismissal.
[7] The first question is whether the adjudication provisions in the contract are - because they require the party referring a dispute to adjudication to bear the costs relating to the adjudication - incompatible with the relevant requirements of ...
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