Ritchie Brothers (PWC) Ltd v David Philp (Commercials) Ltd

JurisdictionScotland
CourtCourt of Session (Inner House)
Judgment Date24 March 2005
Neutral Citation[2005] CSIH 32
Docket NumberNo 31

Court of Session Inner House Second Division

Lord Justice-Clerk (Gill), Lord Abernethy, Lord Nimmo Smith

No 31
Ritchie Brothers (PWC) Ltd
and
David Philp (Commercials) Ltd

Contract - Construction contract - Adjudicator - 28-day time-limit - Whether mandatory or directory - Scheme for Construction Contracts (Scotland) Regulations 1998 (SI 1998/687 (S 34)), paras 1(1), 7(1), 19

Paragraphs 1, 7 and 19 of the Scheme for Construction Contracts (Scotland) Regulations 1998 provide, inter alia, as follows: "1(1) Any party to a construction contract ('the referring party') may give written notice ('the notice of adjudication') of his intention to refer any dispute arising under the contract to adjudication … 7(1) Where an adjudicator has been selected … the referring party shall, not later than seven days from the date of the notice of adjudication, refer the dispute in writing ('the referral notice') to the adjudicator … 19(1) The adjudicator shall reach his decision not later than - (a) twenty eight days after the date of the referral notice mentioned in paragraph 7(1); (b) forty two days after the date of the referral notice if the referring party so consents; or (c) such period exceeding twenty eight days after the referral notice as the parties to the dispute may, after the giving of that notice, agree. (2) Where the adjudicator fails, for any reason, to reach his decision in accordance with sub-paragraph (1) - (a) any of the parties to the dispute may serve a fresh notice under paragraph 1 and shall request an adjudicator to act in accordance with paragraphs 2 to 7; and (b) if requested by the new adjudicator and insofar as it is reasonably practicable, the parties shall supply him with copies of all documents which they had made available to the previous adjudicator. (3) As soon as possible after he has reached a decision, the adjudicator shall deliver a copy of that decision to each of the parties to the contract."

The pursuer and the defender were respectively contractor and employer under a construction contract. The parties agreed that the date of the referral notice to the adjudicator was 18 September 2003. The 28-day period within which the adjudicator was to reach his decision expired on 16 October. By letter to the adjudicator dated 21 October the defender asserted that the adjudicator had no power to reach a decision on the dispute after 16 October, and that any decision reached after that date would be invalid. On the same day, the adjudicator faxed and posted a letter in which he requested the pursuer to consent to the postponement of his decision until at least 23 October. By letter faxed and posted that day the pursuer confirmed its consent to the postponement requested. On 23 October the adjudicator intimated to the parties that he had made his decision. On 27 October he sent them his decision dated that day. The pursuer brought an action in the commercial court seeking to enforce the decision of the adjudicator. The Lord Ordinary granted decree de plano. The defender reclaimed and argued that the adjudicator's jurisdiction expired on 16 October because he failed to reach his decision by that date.

Held (diss Lord Abernethy) the true interpretation of para 19 was that the adjudicator's jurisdiction ceased on the expiry of the 28 days' time-limit if it had not already been extended in accordance with para 19(1) (paras 12-19, 21, 22, 46); and reclaiming motion allowed.

Dissenting (per Lord Abernethy) while the aim of the legislation clearly was to reach a decision within a short time, it was not rigidly fixed at 28 days, a certain latitude was available, and starting a fresh adjudication process would seriously undermine the aim of providing a speedy provisional resolution to the dispute and would involve the parties in extra expense (paras 37-45).

St Andrew's Bay Development Ltd v HBG Management Ltd2003 SLT 740 commented upon.

Ritchie Brothers (PWC) Ltd raised an action in the commercial court against David Philp (Commercials) Ltd for enforcement of a decision of an adjudicator to whom a dispute arising out of a construction contract between the parties had been referred. The cause called before the commercial judge (Lord Eassie) for debate on 16 March 2004. On 14 April 2004 the commercial judge granted decree de plano. The defender reclaimed.

Cases referred to:

Ballast plc v Burrell Co (Construction Management) LtdUNK2001 SLT 1039; 2001 SCLR 837

Ballast plc v Burrell Co (Construction Management) LtdSC2003 SC 279; 2003 SLT 137

Barnes and Elliot Ltd v Taylor Woodrow Holdings LtdUNK[2003] EWHC 3100; [2004] BLR 111

Blyth and Blyth's Tr v Kaye 1976 SLT 67

Gillies Ramsay Diamond v PJW Enterprises LtdSC 2004 SC 430; 2004 SLT 545

Macob Civil Engineering Ltd v Morrison Construction LtdUNK [1999] BLR 93; [1999] CLC 739

Simon's Construction Ltd v Aardvark Developments LtdUNK[2003] EWHC 2474; [2004] BLR 117

St Andrew's Bay Development Ltd v HBG Management LtdUNK2003 SLT 740; 2003 SCLR 526

Textbooks etc. referred to:

Davidson, FP, Arbitration (2000, W Green, Edinburgh), pp 239, 240

Hunter, RLC, The Law of Arbitration in Scotland (2nd ed, Butterworths, Edinburgh, 2002), para 8.17

Irons, JC, and Melville, RD, Treatise on the Law of Arbitration in Scotland (1903, W Green, Edinburgh), p 133

The cause called before the Second Division, comprising the Lord Justice-Clerk (Gill), Lord Abernethy and Lord Nimmo Smith, for a hearing on the summar roll, on 22 February 2005.

At advising, on 24 March 2005-

Lord Justice-Clerk (Gill)-

Reclaiming motion

[1] This is a reclaiming motion from a decision of Lord Eassie dated 14 April 2004. The defender and the pursuer are respectively employer and contractor under a construction contract. The pursuer seeks to enforce a decision of an adjudicator to whom a dispute between the parties was referred in terms of the Scheme for Construction Contracts (Scotland) Regulations 1998 ('the Scheme'). The defender pleads that the decision of the adjudicator is ultra vires and should be set aside ope exceptionis. The Lord Ordinary held the defences to be irrelevant and granted decree de plano.

Relevant provisions of the Scheme

[2] Paragraphs 1, 7 and 19 of the Scheme provide,inter alia, as follows:

'1.-(1) Any party to a construction contract ("the referring party") may give written notice ("the notice of adjudication") of his intention to refer any dispute arising under the contract to adjudication. …

  • 7.-(1) Where an adjudicator has been selected … the referring party shall, not later than seven days from the date of the notice of adjudication, refer the dispute in writing ("the referral notice") to the adjudicator. …

    • 19.-(1) The adjudicator shall reach his decision not later than-

      • (a) twenty eight days after the date of the referral notice mentioned in paragraph 7(1);

      • (b) forty two days after the date of the referral notice if the referring party so consents; or

      • (c) such period exceeding twenty eight days after the referral notice as the parties to the dispute may, after the giving of that notice, agree.

  • (2) Where the adjudicator fails, for any reason, to reach his decision in accordance with sub-paragraph (1)-

    • (a) any of the parties to the dispute may serve a fresh notice under paragraph 1 and shall request an adjudicator to act in accordance with paragraphs 2 to 7; and

    • (b) if requested by the new adjudicator and insofar as it is reasonably practicable, the parties shall supply him with copies of all documents which they had made available to the previous adjudicator.

  • (3) As soon as possible after he has reached a decision, the adjudicator shall deliver a copy of that decision to each of the parties to the contract.'

Agreed facts

[3] It is now agreed that the date of the referral notice to the adjudicator was 18 September 2003. The 28-days period within which he was to reach his decision therefore expired on 16 October. By reason of a mishap in the post, the referral notice did not come into the adjudicator's hands until 23 September. By letter to the adjudicator dated 21 October the defender's agent asserted that the adjudicator had no power to reach a decision on the dispute after 16 October and that any decision reached after that date would be invalid. On the same day, the adjudicator faxed and posted a letter in which he requested the pursuer to consent to the postponement of his decision until at least 23 October in the light of that assertion. By letter faxed and posted that day the pursuer confirmed its consent to the postponement requested. On 23 October the adjudicator intimated to the parties that he had made his decision. On 27 October he sent them his decision dated that day.

The Issue

[4] Several issues were debated before the Lord Ordinary, but the only live issue now is whether the adjudicator's jurisdiction expired on 16 October because he failed to reach his decision by that date; or whether it continued and was validly extended by virtue of the pursuer's subsequent consent to the extension.

Decision of the Lord Ordinary

[5] The Lord Ordinary held that the expiry of 28 days from the date of referral did not bring the adjudicator's jurisdiction to an end. These are his reasons (para 23):

'When one turns to the provisions of the Scheme one finds that the Scheme itself envisages the event that an adjudicator may not, for whatever reason, be able to produce his decision within the stipulated...

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