Sgl Carbon Fibres Limited V. Rbg Limited

JurisdictionScotland
CourtCourt of Session
JudgeLord Glennie
Neutral Citation[2011] CSOH 62
Docket NumberCA144/10
Date31 March 2011
Publication Date31 March 2011

OUTER HOUSE, COURT OF SESSION

[2011] CSOH 62

CA144/10

OPINION OF LORD GLENNIE

in the cause

SGL CARBON FIBRES LIMITED

Pursuers;

against

RBG LIMITED

Defenders:

________________

Pursuer: Howie, Q.C.; MacRoberts

Defender: Lake, Q.C.; Maclay Murray & Spens

31 March 2011

Introduction

[1] The pursuers, SGL Carbon Fibres Limited, seek to enforce the decision of an adjudicator, Mr George Ross, in terms of which he found the defenders, RBG Limited, liable to pay them the sum of £1,074,609.99 plus VAT, together with interest of £45,266.11 on the principal sum awarded. The pursuers quantify the VAT as being at least £161,191.50 (on the basis that the rate of VAT having been at least 15% at all material times). Mr Ross' decision was made on 8 October 2010 and was corrected in respect of certain clerical mistakes by letter dated 22 October 2010. I shall refer to the decision as corrected simply as "the decision". Because the parties adopted opposite roles in a previous adjudication and, as pursuer and defender in a previous action relating thereto, I shall, to avoid confusion, refer to them in this Opinion by the abbreviations "SGL" and "RBG". Similarly, because there have been two adjudications before different adjudicators, I shall refer to Mr Ross by name rather than, as is more usual, simply calling him the adjudicator.

[2] RBG resist enforcement on two grounds. The first is that the decision, or part of it, was made in breach of the principles of natural justice in that, in reaching his decision on certain issues, Mr Ross made use of his own knowledge and experience (a) to make factual determinations for which there was no evidence and (b) without giving them a reasonable opportunity of commenting thereon. The second is that he failed to exhaust his jurisdiction or, alternatively, acted in excess of it, the two criticisms in this case being simply opposite sides of the same coin. In their defences, RBG seek to have the decision set aside ope exceptionis (by way of exception).

[3] The matter came before the court for debate, it being agreed that the relevant facts appeared sufficiently from the documents before the court. At the beginning of the hearing, Mr Lake, QC, for RBG, indicated that he would also be seeking reduction of the decision. To this end, without objection from Mr Howie QC, who appeared for SGL, RBG lodged a petition in which they, as petitioners, sought reduction of the decision on those same grounds. The petition was in short form, incorporating by reference the contentions of the parties in the Summons and Defences in the main action. This came on for hearing at the same time as the debate, it being agreed that the disposal of the petition would follow from the decisions reached at debate in the main action.

The contract

[4] The contract between the parties was entered into on 10 June and 30 July 2008. In terms of that contract, RBG agreed to construct an additional production line at SGL's factory premises. The work included the installation of pipework, plant and ducting, the construction of an extension to part of the existing factory premises and the execution of associated infrastructure works. The contract was substantially on the terms of the NEC 3 form of contract with amendments and additions as agreed by the parties. It provided two alternative methods of dispute resolution, the applicable method depending upon whether or not the contract works were subject to the Housing Grants, Construction and Regeneration Act 1996. The works here were subject to the 1996 Act, and the method of dispute resolution in clause W2 applied. That provided for disputes arising under or in connection with the contract to be referred to and decided by an adjudicator. It contained provisions regulating the conduct of the adjudication. These included, at clause W2.3(4), a provision that the adjudicator was entitled to "take the initiative in ascertaining the facts and the law related to the dispute". It provided also, in clause W2.3(11) that the adjudicator's decision was binding unless and until revised by the tribunal - the chosen tribunal in this case being arbitration - and, further, it made a decision by the adjudicator a condition precedent to any reference to arbitration.

The first adjudication

[5] The adjudication with which this action is concerned is the second to have taken place between the parties under this contract. The first adjudication was commenced by RBG by notice dated 19 November 2009. The adjudicator was Robert Fleming. The reference was in respect of the following disputes:

(i) whether the Completion Date should be changed to 16 January 2009;

(ii) whether SGL were due to pay RBG the sum of £250,049.93 plus VAT, or some greater or lesser sum, in respect of invoice SINV/0036570;

(iii) whether SGL were due to pay RBG the sum of £45,703.47 plus VAT, or a greater or lesser sum, in respect of invoice SINV/0036578;

(iv) whether SGL were due to pay RBG the sum of £508,629.36 plus VAT, or some greater or lesser sum, in respect of invoice SINV/0036591;

(v) whether SGL were due to pay RBG the sum of £139,482.61 plus VAT, or some greater or lesser sum, in respect of invoice SINV/0039421;

(vi) whether SGL were due to pay RBG the sum of £972,192.01 plus VAT, or some greater or lesser sum, in respect of invoice SINV/0039657; and

(vii) whether the above payments should be made with interest.

The five invoices referred to were all issued in 2009, and those identified in paragraphs (iv) to (vi) above were issued in respect of work carried out after 31 December 2008.

[6] On 18 January 2010 Mr Fleming issued his decision in the first adjudication. On 29 January 2010 he corrected various clerical errors. No sums were found due to the defenders in respect of the matters referred to at paragraphs (ii) and (iii) above. Payment of £183,212.46 with VAT at 15% was found due in terms of paragraph (iv). Payment of £139,482.61 with VAT at 15% was found due in terms of paragraph (v). Payment of £612,020.58 with VAT at 15% was found due in terms of paragraph (vi). The total sum due to the defenders was £934,715.65 plus VAT.

[7] RBG raised proceedings to enforce that decision. Those proceedings were defended by the SGL. After hearing parties on RBG's motion for summary decree and at debate, Lord Menzies refused the motion for summary decree and dismissed the action. His decision is reported as RBG Ltd. v SGL Carbon Fibres Ltd. [2010] BLR 631. He held that Mr Fleming had failed to exhaust his jurisdiction as a result of misconstruing his remit. The question he had had to answer concerned RBG's entitlement to be paid in respect of five invoices under deduction of certain credits. The contract provided that the amount payable at each date for payment was the accumulating value of the Price for Work Done to Date ("PWDD"). Mr Fleming had correctly rejected the argument that the accumulating value of the PWDD was fixed and could not be revisited. It was necessary for him, therefore, in considering RBG's entitlement to payment in respect of the five invoices before him, to revisit the PWDD and consider whether it contained any element of overpayment by SGL, SGL's contention being that no further payment was due to RBG in respect of the 2009 invoices because of earlier overpayments. Mr Fleming had declined to have regard to evidence concerning those earlier overpayments and to this extent had failed to exhaust his jurisdiction.

[8] In addition to refusing the motion for summary decree and dismissing the action, Lord Menzies also sustained SGL's fifth plea-in-law and set aside the decision ope exceptionis. There was no separate petition by SGL for reduction. The effect of that appears to be that the decision stands but it cannot be relied upon by the parties to it and cannot be revisited by the adjudicator: see Vaughan Engineering Limited v Hinkins & Frewin Limited 2003 SLT 428 at para.[35].

The current adjudication

[9] Notice of Adjudication in the adjudication with which this action is concerned was served by SGL on 7 April 2010. On 9 April 2010 Mr Ross was appointed to act as adjudicator and wrote to the parties informing them of his selection. The dispute was identified in the Notice of Adjudication in the following terms:

"3.1 The dispute between the parties is in relation to the cumulative amount due to date to RBG, and payment to SGL for the change in the amount due."

The "Redress Sought" was set out in para.4 of the Notice of Adjudication. SGL sought a determination that RBG was in breach of contract and that the cumulative amount of £11,710,534 claimed by RBG was not justified. They contended as their primary case that the amount due to RBG was only £5,310,520.85. RBG had already been paid the sum of £9,540,989.18. On the basis that the amount due was only £5,310,520.85, they sought an order for repayment by RBG to them of £4,230,468.30 (or such other sum as might be found due), plus VAT and interest as appropriate.

[10] Mr Ross produced his decision on 8 October 2010, various extensions of time having been agreed between the parties to enable him to do so. His decision runs to some 217 pages. He corrected his decision on 22 October 2010, the corrections consisting of revisions to the Summary in the last four pages. As I have said, he found RBG liable to pay SGL the sum of £1,074,609.99, plus £45,266.11 by way of interest on that sum, together with VAT where applicable. He approached the matter by considering the issues under 20 broad headings. Issues 1-4 were of a general nature, relating to the form of contract operated by the parties, early warning notices, and an analysis of SGL's primary and secondary positions. Issues 5-20 related specifically to the matters in dispute. Thus, Issue 5 was described as:

"Section 1 - Site Set Up and Management

(Relative to PWDD up to 31 December 2008)"

The descriptions of other issues took a similar form, each being qualified by the words,...

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