The Construction Centre Group Limited V. The Highland Council
| Jurisdiction | Scotland |
| Judge | Lord Hamilton,Lord Carloway,Lord Osborne |
| Date | 11 April 2003 |
| Docket Number | XA123/02 |
| Court | Court of Session |
| Published date | 25 April 2003 |
| EXTRA DIVISION, INNER HOUSE, COURT OF SESSION | |
| Lord Osborne Lord Hamilton Lord Carloway
| XA123/02 OPINION OF THE COURT delivered by LORD HAMILTON in RECLAIMING MOTION in the cause THE CONSTRUCTION CENTRE GROUP LIMITED Pursuer and Respondent; against THE HIGHLAND COUNCIL Defender and Reclaimer; _______ |
Act: Mackenzie, Solicitor Advocate; Masons (Pursuers and Respondents)
Alt: Keen, Q.C.; Dundas & Wilson (Defenders and Reclaimers)
11 April 2003
[1]In December 1999 the pursuer and respondent ("the Contractor") entered into a contract with the defender and reclaimer ("the Employer") for the design, construction and maintenance of the Small Isles and Inverie Ferry Scheme, Phase I. The contract included, among other provisions, conditions based on the ICE Conditions of Contract, Fifth Edition, 1973 (as revised in January 1979) subject to amendments and additions agreed between these parties. The Engineer under the contract was the Employer's Director of Roads & Transport. The contract was a "construction contract" within the meaning of Part II of the Housing Grants, Construction and Regeneration Act 1996 ("the 1996 Act"). The contract contained various provisions designed to give effect to that statute.
[2]In April 2002 the Contractor submitted to the Engineer an Interim Application for Payment (No. 21) in respect of the period ending 3 April 2002. It sought certification of a sum in excess of £5.5 million as due by the Employer to the Contractor. The Engineer responded by letter dated 2 May 2002 in which he stated in effect that in his opinion no sum fell to be certified by him as due under Application No. 21. A dispute then arose between the parties in respect of that matter. The Contractor referred that dispute to adjudication and in due course Mr John Hounslow was appointed as Adjudicator. In terms of a "Notice of Adjudication" given by it on 15 May the Contractor requested the Adjudicator:
"3.1To open up, examine and review Interim Application for Payment No. 21 to period ending 3 April 2002 to find an amount payable to the Referring Party [the Contractor] of £5,505,972.57 or such other amount as the Adjudicator may determine.
3.2To order payment by the Responding Party [the Employer] within seven days of the date of the Adjudicator's decision in the sum of £5,505,972.57 or such other amount as the Adjudicator may determine.
... "
The Employer raised certain matters in response. On 28 June 2002 the Adjudicator issued his decision on the referral. It was, in so far as material, in the following terms:-
"1.I find an amount of £245,469.24 payable by the Highland Council to The Construction Centre Group Limited.
2.The sum in 1. above shall be paid within seven days of the date of this Decision.
... "
The Employer did not within seven days pay to the Contractor the sum which the Adjudicator had decided should be paid. Thereafter the Contractor raised, as a commercial action, the present proceedings in which it concludes for payment to it by the Employer of that sum together with interest thereon from the date of citation. The Employer lodged defences to the action, which included a contention that as at 3 July 2002 the sum of £420,000 was due under the contract by the Contractor to the Employer as liquidated damages for delay in completion of the Works. The Contractor thereafter enrolled a motion for summary decree. At a preliminary hearing the Lord Ordinary continued that motion to a fixed diet of 14 August 2002, appointing parties meantime to lodge Notes of Argument and Lists of Authorities. No order was made for adjustment of the pleadings. Having heard parties in argument at the fixed diet, the Lord Ordinary made avizandum. On 23 August he granted the Contractor's motion for summary decree as sought.
[3]The Employer marked a reclaiming motion against that interlocutor. Grounds of appeal were lodged. Shortly before the hearing of the reclaiming motion the Employer tendered proposed amended grounds of appeal. These reiterated the existing grounds but added to them grounds based on events which had occurred since the pronouncement of the Lord Ordinary's interlocutor. One of these events was that on 27 November 2002 a receiver had been appointed to the Contractor. It is unnecessary to discuss that event in detail since it was accepted before us that its occurrence could not of itself found any basis for interfering with the Lord Ordinary's interlocutor. The other additional proposed ground of appeal was in the following terms:-
"6.In respect that by letters dated 7 and 15 October 2002 the Defender determined the Pursuer's employment in accordance with Clause 63 of the Conditions of Contract, the Reclaiming Motion ought to be granted and the Lord Ordinary's interlocutor dated 23 August 2002 set aside. Clause 63(4) of the Conditions of Contract provides that if the Employer enters and expels the Contractor from Site he shall not be liable to pay to the Contractor any money on account of the Contract until the expiration of the Period of Maintenance and thereafter until the costs of completion damages for delay in completion (if any) and all other expenses incurred by the Employer have been ascertained and the amount thereof certified by the Engineer. The Period of Maintenance has not yet begun and therefore the Defender is not liable to pay any further money on account to the Pursuer pending expiration of the Period of Maintenance and thereafter the ascertainment of the costs of completion and all other expenses".
[4]At the outset of the reclaiming motion Mr Keen for the Employer moved the court to allow the existing grounds of appeal to be amended to include those based on these recent events and to remit the cause to the Lord Ordinary to reconsider the issue of summary decree in the light of them. He also intimated that, so far as concerned the existing grounds of appeal, the Employer would be insisting only on a limited aspect of one of these grounds. Mr MacKenzie for the Contractor did not oppose the motion to amend the grounds of appeal but intimated that he would oppose any remit to the Lord Ordinary since, even if the Contractor's employment had in October 2002 been validly determined by the Employer (which was disputed), summary decree as granted by the Lord Ordinary remained, he contended, the appropriate disposal. The court allowed the grounds of appeal to be amended as proposed and thereafter heard parties on the outstanding issues.
[5]It is convenient at this point to notice the material contractual provisions. The contract is to be interpreted in accordance with Scots Law (Clause 67). Clause 66(1) provides that Disputes are to be resolved in accordance with the provisions of that Clause and Annex 3 to the Conditions of Contract. It also provides certain definitions, in particular:-
"(b)'Dispute' means a difference or dispute of whatever nature between the Employer and the Contractor arising out of or concerning the Contract:
(c)'Disputes Resolution Procedure' means the procedure set out in this
Clause 66 and Annex 3 to Conditions of Contract".
Clause 66(2) provides:-
"Where any Dispute shall arise between the Employer and the Contractor concerning the Contract, either the Employer or the Contractor may give notice in writing at any time to the other to refer the Dispute to the Disputes Resolution Procedure as set out in this Clause 66 and Annex 3 to Conditions of Contract. Either the Employer or the Contractor may then refer such Dispute to the said Disputes Resolution Procedure.
For the purposes of this Clause the Dispute shall be that stated in the Notice of Dispute. For the purposes of all matters arising concerning the Contract the word "dispute" shall be construed accordingly and shall include any difference".
Clause 66(4) provides:-
"The Employer and the Contractor shall give effect forthwith to every decision of:
(i)the Engineer on any matter arising concerning the Contract;
(ii)the Adjudicator on a Dispute given under this Clause 66
unless and until the decision is revised by agreement of the Employer and the Contractor or pursuant to this Clause 66 and Annex 3 to Conditions of Contract".
Clause 66(6) provides:-
"(i)If a Dispute shall arise, whether before or after the commencement of
the Designs and the Works and whether before or after repudiation or other termination of the Contract or of the Contractor's employment under the Contract, the Dispute shall be referred and decided in the first instance by the Adjudicator acting as independent adjudicator but not as arbiter.
(ii)Any decision of the Adjudicator shall be final and binding upon the
Employer and the Contractor unless and until there is an amicable settlement in accordance with paragraph 2 of Annex 3, to Conditions of Contract or unless and until the Dispute has been referred to arbitration as hereinafter and an arbitral award has been made or a settlement reached between the Employer and the Contractor.
...
(iv)Unless the Contract has already been determined or terminated the
Contractor shall in every case continue to proceed with the Designs and the Works with all due diligence regardless of the nature of the Dispute and the Employer and the Contractor shall give effect forthwith to every decision of the Adjudicator except and to the extent that the same shall have been revised by a settlement reached between the Employer and the Contractor or an arbitral award".
[6]Annex 3 (headed "Disputes Resolution Procedure") addresses Adjudication Procedure (paragraph 1), Amicable Settlement (paragraph 2) and Arbitration (paragraph 3). Paragraph 1, in so far as material, provides:-
"1.1Subject to Clause 66 the Employer and the Contractor may give notice to each other in writing to refer a Dispute to adjudication at any time. Such notice shall specify the difference or matter in dispute and shall set out the principal facts and arguments relating to it which shall include inter alia:
(i)a concise summary of...
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