Sw Global Resourcing Limited V. Morris & Spottiswood Limited
| Jurisdiction | Scotland |
| Judge | Lord Hodge |
| Neutral Citation | [2012] CSOH 200 |
| Court | Court of Session |
| Date | 28 December 2012 |
| Published date | 28 December 2012 |
| Docket Number | CA77/12 |
| OUTER HOUSE, COURT OF SESSION [2012] CSOH 200 | |
| CA77/12 | OPINION OF LORD HODGE in the cause SW GLOBAL RESOURCING LIMITED Pursuer; against MORRIS & SPOTTISWOOD LIMITED Defender: ________________ |
Pursuer: Walker; Brodies LLP
Defender: Howie QC; MacRoberts LLP
28 December 2012
[1] Morris & Spottiswood Ltd ("M&S") was the main contractor in a contract with Historic Scotland to carry out building works at Stirling Castle. SW Global Resourcing Ltd ("SW") was a sub-contractor. The sub-contract was formed by correspondence and a purchase order. The parties agreed that it was a construction contract within the meaning of Part II of the Housing Grants, Construction and Regeneration Act 1996.
[2] On 21 November 2011 SW referred to adjudication a dispute about its claim for disruption costs and loss and expense incurred in the proper execution of the works. In its notice of referral SW sought an order that M&S pay it £272,677.77. On 23 November 2011 Mr John N. Bell was appointed as the adjudicator.
[3] M&S challenged Mr Bell's jurisdiction on the ground that the issue which had been referred to him had already been decided by Ms Janey Milligan in an earlier adjudication. Mr Bell rejected that challenge in a decision dated 2 December 2011 in which he held that the dispute which Mrs Milligan determined related to an interim application in respect of loss and expense.
[4] In a decision dated 10 January 2012 Mr Bell awarded SW £73,303.16 in relation to its claim for loss and expense together with interest on that sum from 18 July 2011 at 2% above the Bank of England base rate until payment.
[5] In this action SW seeks payment of the sums which Mr Bell found due. M&S in its defences seeks to have Mr Bell's decision reduced by way of exception and alleges that the decision was a nullity based on five inter-related grounds of challenge. In a debate Mr Howie QC for M&S sought a decree setting aside Mr Bell's decision and Mr Walker for SW sought decree de plano.
M&S's grounds of challenge
[6] Mr Howie advanced several grounds of challenge which overlapped. He addressed me on passages in Mr Bell's decision and mounted his inter-related challenges on each passage. That was helpful in presenting the relevant documents to me. But in what follows I try to separate out the strands of his argument so that I can state my reasons on each ground in an orderly manner.
(i) Breach of natural justice and apparent bias
[7] SW and M&S were not in agreement on whether they had incorporated the terms and conditions of the main contract (GC/Works/1) into the sub-contract and made submissions on that issue. SW contended that the main contract terms were not incorporated while M&S contended that they were. This dispute focused on a provision in the sub-contract order (para 4) which stated that "so far as applicable to the sub-contract works" SW would comply with the provisions of the main contract as though they had been incorporated into the sub-contract.
[8] Mr Bell referred to this dispute in section 7 of his decision and held that clauses 46.1 and 46.2 of the main contract, which gave a contractual right to claim prolongation and disruption costs, were available to SW in the sub-contract as the legal basis of its claim for loss and expense. He held however (in para 7.8) that clause 46.3 of the main contract, which obliged the contractor to give immediate notice of circumstances that were likely to disrupt the regular progress of the works, was not incorporated into the sub-contract "because there is no benchmark (contract period) to measure against and serve notice."
[9] Mr Howie submitted that this amounted to a breach of natural justice as neither party had advanced a proposition of the partial incorporation of clause 46. SW's position had been that the provision did not apply while M&S had submitted that clause 46 applied and that SW had not given the notices which clause 46.3 stipulated as a pre-condition of the claim for prolongation costs. There was no basis for the suggestion that Mr Bell was dealing with a case of partial incorporation.
[10] Mr Howie also attacked as a breach of natural justice and an instance of apparent bias Mr Bell's statement in para 8.3 of his decision:
"I consider that the Referring Party has entitlement to costs which arise out of their claim of loss and expense and irrespective of the extent (or otherwise) of the records provided in this adjudication. I cannot find the value to be nil and must use my knowledge and experience as a Quantity Surveyor (41 years) to evaluate the loss and expense claim on a fair and reasonable basis using the records provided."
This, Mr Howie submitted, amounted to an admission by Mr Bell that even if SW had not produced sufficient documentary evidence to discharge the burden on it to establish its claim for loss and expense, he was determined to find in its favour. That amounted to apparent bias. If the passage was not so construed, it involved the adjudicator using his own knowledge and experience to fill in the holes in SW's case without first giving M&S an opportunity to comment.
[11] In my view Mr Bell did not breach natural justice in deciding that clauses 46.1 and 46.2 of the main contract were incorporated into the sub-contract but that clause 46.3 was not. As Lord Hamilton stated in Babcock Rosyth Defence Ltd v Grootcon (UK) Ltd 1998 SLT 1143 at 1149C,
"When parties make reference to a set of conditions designed primarily for use in another contract but do not expressly adapt those conditions to meet the circumstances of their own relationship, it is often difficult to determine with confidence the contractual effect."
In this case, Mr Bell was faced with M&S's assertion that the main contract conditions applied and SW's argument that they did not. The circumstances are very different from those which arose in Strathclyde Regional Council v City of Glasgow District Council 1992 SLT 51 in which the judge was criticised for deciding the case on a basis that the parties had not placed before him: judex non reddit plus quam quod petens ipse requirit". Rather in this case Mr Bell used his own knowledge and experience in assessing the parties' contentions and reached a conclusion some way between their respective positions. I agree with Mr Walker's submission that his so doing without inviting further comments from the parties is not obviously unfair: see Costain Ltd v Strathclyde Regional Council 2004 SLT 102, Lord Drummond Young's sixth proposition in para 20 of his opinion, Paton, Petitioners [2011] CSOH 40, Lord Bannatyne's fifth proposition in para 72, and Carillion Construction Ltd v Devonport Royal Dockyard [2006] BLR 15 (CA), Chadwick LJ at para 85.
[12] Further, SW's answers to M&S's response to the notice of referral (pro 6/39) while asserting that there had been no incorporation of the main contract terms, referred to case law on the partial incorporation of contractual terms. M&S's further submissions (Pro 6/40) referred to that case law and the email from SW's solicitors to Mr Bell (6/42) addressed specifically the incorporation of clause 46. In my view Mr Bell was entitled to deal with the issue of the partial incorporation of clause 46 of the main contract without inviting further comment.
[13] I do not infer any unfairness or apparent bias from what Mr Bell stated in para 8.3 of his decision. It is important to observe that SW had sought a sum substantially larger than that which he awarded and that he excluded several claims, including a claim for disruption, on the basis of a lack of adequate records. I agree with Mr Walker that in para 8.3 Mr Bell was stating that he was prepared to use the records which SW provided in assessing its claim, notwithstanding his concerns about the quality of some of the documents, and that he would bring to bear his knowledge and experience in making that assessment. In...
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