T Clarke (scotland) Limited Against Mmaxx Underfloor Heating Limited
| Jurisdiction | Scotland |
| Judge | Lord Drummond Young,Lord Eassie,Lord Bracadale |
| Judgment Date | 15 October 2014 |
| Neutral Citation | [2014] CSIH 83 |
| Court | Court of Session |
| Date | 15 October 2014 |
| Published date | 15 October 2014 |
| Docket Number | CA76/14 |
EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
[2014] CSIH 83
CA76/14
Lord Eassie
Lord Bracadale
Lord Drummond Young
OPINION OF THE COURT
delivered by LORD BRACADALE
in
the reclaiming motion
by
T CLARKE (SCOTLAND) LIMITED
Pursuer and Reclaimer;
against
MMAXX UNDERFLOOR HEATING LIMITED
Defender and Respondent:
Act: MacColl; Brodies LLP
Alt: Weir QC, A McKenzie; MacRoberts
15 October 2014
Introduction
[1] This is a reclaiming motion by the pursuer against an interlocutor dated 26 March 2014 by which the Lord Ordinary refused to grant interim interdict against the respondent and defender from referring for adjudication any disputes arising from a contract between the pursuer and the defender.
Background
[2] The pursuer is a building services company. In 2012 it had a subcontract to carry out mechanical and electrical works in the redevelopment of West Linton Primary School. These works included the design, supply and installation of heat pumps and underfloor heating systems. After a period of negotiation the defender became the sub‑subcontractor in respect of the installation of ground source heat pumps, bore holes and underfloor heating systems. In November 2012 the contract between the pursuer and the defender was set out in a written document which included a clause providing that the subcontract was a “construction contract” for the purposes of the Housing Grants, Construction and Regeneration Act 1996, as amended by the Local Democracy, Economic Development and Construction Act 2009 (the 1996 Act). This allowed for settlement of disputes arising from the contract to be achieved by way of adjudication.
The adjudications
[3] Between June 2013 and March 2014 there were nine adjudications in relation to the contract. Of these, eight were initiated by the defender and one by the pursuer. The Lord Ordinary summarised the adjudications under reference to the date of commencement of each proceeding:
“(a) Adjudication 1 (21 June 2013)
The defender sought payment of £184,740. The adjudicator declined jurisdiction and resigned on 4 July 2013, on the basis that the defender had failed to refer the dispute to adjudication in the contractually stipulated manner.
(b) Adjudication 2 (19 July 2013)
The defender again sought payment of £184,740. The adjudicator again declined the jurisdiction and resigned on 30 July 2013, on the basis that the defender had failed to refer the dispute to adjudication in the contractually stipulated manner.
(c) Adjudication 3 (31 July 2013)
The defender again sought payment of £184,740. The adjudicator determined that the sum sought was significantly exaggerated. The defender was awarded £17,028. The parties were each found liable for 50 per cent of the adjudicator's fees.
(d) Adjudication 4 (8 August 2013)
The adjudicator declined jurisdiction and resigned on 19 August 2013, on the basis that the defender had failed to refer the dispute to adjudication in the contractually stipulated manner.
(e) Adjudication 5 (20 November 2013)
The defender sought to maintain that the contractual payment mechanism did not comply with statutory requirements and that in consequence, it was entitled to further payments from the pursuer. The adjudicator rejected the claim and ordered the defender to pay her fees.
(f) Adjudication 6 (20 December 2013)
This pursuer commenced this adjudication, in which it unsuccessfully sought to recover monies relating to the defender's delays. The parties were each ordered to pay 50 per cent of the adjudicator's costs. The adjudicator levelled various criticisms at the conduct of the defender.
(g) Adjudication 7 (19 February 2014)
The defender contended that it was entitled to further payments, because the pursuer had failed to serve certain notices. The defender dropped this adjudication on 25 February after the adjudicator asked it to demonstrate that it was in a position to meet his fees.
(h) Adjudication 8 (27 February 2014)
The defender sought the same determination as in adjudication 7. The pursuer challenged the jurisdiction of the adjudicator on the ground that she had not been appointed in accordance with the contract and she subsequently resigned.
(i) Adjudication 9 (11 March 2014)
The adjudicator resigned on 20 March 2014 after queries had been raised about the validity of her appointment.”
The pleadings
[4] In the light of this history of references for adjudication the pursuer raised this action for interdict in which it concluded for interdict and interim interdict against the defender “commencing or insisting upon any adjudications… in relation to matters arising or purporting to arise under or in relation to a contract...”
[5] It was averred that the working relationship between the pursuer and the defender had quickly deteriorated. Mr Neil McFarlane, who was a director of the defender and said to be the controlling mind of the company, was the principal point of contact with the pursuer. His behaviour in relation to the works under the contract, including the references for adjudication, was the subject of criticism by the pursuer. The pursuer’s averments were supported by affidavits. The Lord Ordinary continued the case for one week in order to give the defender an opportunity to set out its position in writing, either by way of defences or an affidavit from Mr McFarlane. At the continued hearing, no such documents having been lodged, counsel for the defender explained that there had been insufficient time to do so and he accepted that the Lord Ordinary should proceed on the basis that the averments contained in the summons were true.
[6] The Lord Ordinary summarised some of the averments by the pursuer as to the behaviour of Mr McFarlane as follows:
“(a) Mr McFarlane refused to address a health and safety issue that arose when a hose on the defender’s drilling rig failed. Instead he claimed that the subsequent delay had been caused by the pursuer.
(b) He made unjustified threats to suspend the works.
(c) He lodged various notices claiming delay without a proper foundation.
(d) He sent a large volume of inaccurate correspondence to the pursuer’s contract administrator.
(e) He claimed that the defender had negotiated different payment terms from those agreed.
(f) He required specific instructions for works that the defender was obliged to undertake.
(g) He made erratic applications for payment sometimes seeking different sums for the same work. When queried about this, he responded by stating that he was doing so ‘because I can’. The pursuer concluded that this was an attempt to create as much confusion as possible.
(h) By mid May 2013 the installation of the heat pumps in the plant room by the defender was critical. Until that work was completed the whole project would be delayed. At that stage the defender made further unjustified demands for payment.
(i) Throughout May the defender threatened to suspend the works. The pursuer sought a meeting to try and resolve matters. Mr McFarlane replied by email in which he stated (i) ‘what MMAXX wants is CASH, not meetings to talk about it’; and (ii) ‘for the record, we can both avoid a “protracted legal dispute”, if you pay us a fair and reasonable payment.’
(j) On 7 June, he sent a further erroneous notice of suspension.”
In addition, the pursuer made averments as to what was said by Mr McFarlane in a number of telephone calls to Mr Boyle who was the pursuer’s commercial director. During the course of a call in May 2013 Mr McFarlane said that he was the defender’s only shareholder and had only invested £1 in the company, implying that it had little to lose. He threatened to commence an adjudication and added that he had prior experience of obtaining money in such proceedings and “would never give up”. He also stated that the pursuer would incur expense in resisting the defender’s claims. During the course of another telephone call in early June Mr McFarlane stated: "I'm a maverick, I don't play by the rules". He also stated that he would do whatever he needed to do, including suspending the works. The pursuer would face significant legal costs. In relation to the first adjudication, in the course of a telephone conversation on 25 June 2013, Mr McFarlane said, “The cost of defending adjudications will be massive to T Clarke. I know what it will cost for Brodies to review and respond to my referral, it is currently sitting at over 2,000 pages.” During the course of the second adjudication, on 29 July 2013, in a further telephone call to Mr Boyle, Mr McFarlane stated that he would do whatever was required to obtain monies by way of adjudication, including making use of misinformation and misdirection. He added that he did not care whether his claims were valid or not, and would simply use the adjudication process as often as required on an item by item basis to force a settlement.
[7] The pursuer averred that in relation to the third adjudication the defender misrepresented a number of key facts both in the adjudication process and in earlier correspondence. Examples were cited, including averments that the defender had falsified quotes from the defender’s sub-contractor, Phoenix Drilling, and that prior to the adjudication the defender had claimed that it was entitled to a payment in respect that the pursuer had instructed the defender to stop drilling, which, as the defender admitted at the adjudication, was untrue.
[8] The pursuer averred that the circumstances set out in the summons demonstrated that the conduct of the defender was malicious and in bad faith. It was a nimious and oppressive use of the adjudication process. No true dispute was being pursued.
The decision of the Lord Ordinary
[9] The Lord Ordinary noted that the pursuer’s averments disclosed a “troubling picture”. Given the various statements made by Mr McFarlane and the “slew of adjudications” it was understandable that the pursuer should query the defender’s...
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