Trustees Of The Harbours Of Peterhead V. Lilley Construction Limited
| Jurisdiction | Scotland |
| Judge | Lord Mackay of Drumadoon |
| Date | 01 April 2003 |
| Docket Number | CA229/02 |
| Court | Court of Session |
| Published date | 01 April 2003 |
| OUTER HOUSE, COURT OF SESSION | |
| CA229/02
| OPINION OF LORD MACKAY OF DRUMADOON in the cause TRUSTEES OF THE HARBOURS OF PETERHEAD Pursuers; against LILLEY CONSTRUCTION LIMITED Defenders: ________________ |
Pursuers: Davidson, Q.C. ; Maclay Murray and Spens
Defenders: Glennie, Q.C., Cowie; Biggart Baillie
1 April 2003
[1]This is an action for payment in which the pursuers, the Trustees of the Harbours of Peterhead, conclude for payment of two separate sums by the defenders. Conclusion 1 is for payment of £1,428,847.50 and Conclusion 2 for payment of £122,178.80. The defenders are a limited company, which carries on business as contractors. The action arises out of a contract in terms of which the defenders ("the Contractor") undertook certain construction works for the pursuers ("the Employer"), in connection with the Merchants Quay Development at Peterhead Harbour.
[2]The action is a commercial action. During a Preliminary Hearing, on 14 March 2003, I heard submissions in respect of a motion on behalf of the defenders to sist the action, to enable the dispute between the parties to be resolved in terms of Clause 66 of the contract. In practical terms, what the defenders seek to do is to refer the disputes between the parties to arbitration. The motion was opposed by the pursuers. The submissions I heard raised issues as to the relationship between adjudication, conducted under reference to the provisions of the Housing Grants, Construction and Regeneration Act 1996 ("the 1996 Act") and The Scheme for Construction Contracts (Scotland) Regulations 1998 (SI 1998 No.647) ("the 1998 Regulations"), and arbitration. Accordingly, before I turn to deal with the submissions I heard, it is appropriate that I refer briefly to that statutory background.
[3]Sections 108 and 114 of the 1996 Act provide as follows:
"108(1)A party to a construction contract has the right to refer a dispute
arising under the contract for adjudication under a procedure complying with this section.
For this purpose 'dispute' includes any difference.
(2)The contract shall -
(a)enable a party to give notice at any time of his intention to refer a dispute to adjudication;
(b)provide a timetable with the object of securing the appointment of the adjudicator and referral of the dispute to him within 7 days of such notice;
(c)require the adjudicator to reach a decision within 28 days of referral or such longer period as is agreed by the parties after the dispute has been referred;
(d)allow the adjudicator to extend the period of 28 days by up to 14 days, with the consent of the party by whom the dispute was referred;
(e)impose a duty on the adjudicator to act impartially; and
(f)enable the adjudicator to take the initiative in ascertaining the facts and law.
(3)The contract shall provide that the decision of the adjudicator is binding until the dispute is finally determined by legal proceedings, by arbitration (if the contract provides for arbitration or the parties otherwise agree to arbitration) or by agreement.
The parties may agree to accept the decision of the adjudicator as finally determining the dispute.
(4)The contract shall also provide that the adjudicator is not liable for anything done or omitted in the discharge or purported discharge of his functions as adjudicator unless the act or omission is in bad faith, and that any employee or agent of the adjudicator is similarly protected from liability.
(5)If the contract does not comply with the requirements of subsections (1) to (4), the adjudication provisions of the Scheme for Construction Contracts apply.
(6)......
For Scotland, the Scheme may include provision conferring powers on courts in relation to adjudication and provision relating to the enforcement of the adjudicator's decision.
114(1)The Minister shall by regulations make a scheme ('the Scheme for Construction Contracts') containing provision about the matters referred to in the preceding provisions of this Part.
(2)......
(3)In this section 'the Minister' means -
(a)for England and Wales, the Secretary of State, and
(b)for Scotland, the Lord Advocate.
(4)Where any provisions of the Scheme for Construction Contracts apply by virtue of this Part in default of contractual provisions agreed by the parties, they have effect as implied terms of the contract concerned.
......"
[4]The 1998 Regulations were made by the Lord Advocate on 6 March 1998. They extend only to Scotland. Part 1 of the Schedule to the Regulations contains The Scheme for Construction Contracts (Scotland) ("the Scheme"). The Scheme applies when a construction contract, which is subject to the law of Scotland, does not comply with the requirements of subsection (1) to (4) of the 1996 Act.
[5]The contract between the parties was entered into after 1 May 1998. The law of Scotland applies to the contract. The contract is a construction contract. The contract does not comply with the requirements of sub-sections (1) to (4) of section 108 of the 1996 Act. In these circumstances the provisions of the Scheme apply. Having regard to the terms of section 114(4) of the 1996 Act, the provisions of the Scheme have effect as implied terms of the contract between the parties. All this was a matter of agreement between the parties.
[6]Paragraph (1) of the Scheme provides that 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. Paragraph 7(1) of the Scheme provides for the referring party to refer the dispute in writing to the adjudicator, by means of a "referral notice". The remaining paragraphs of the Scheme lay down the details of the procedures for adjudication and the effect of the adjudicator's decision. In particular, paragraph 23(2) provides:
"The decision of the adjudicator shall be binding on the parties, and they shall comply with it, until the dispute is finally determined by legal proceedings, by arbitration (if the contract provides for arbitration or the parties otherwise agreed to arbitration) or by remit between the parties."
[7]For the purpose of determining the motion to sist this action, it is unnecessary to record in detail how the contract between the parties was constituted or to say much about its terms. The contract is, however, subject to the I.C.E. Conditions of Contract 6th Edition (January 1991) ("the Conditions"), together with the definitions, additions and variations listed in the tender documentation. It is also clear from a reading of the Summons and Defences, that it is a matter of agreement between the parties that the defenders agreed to carry out the contract works on a lump sum basis, subject to certain agreed conditions and modifications. Moreover, there is no dispute that when the contract was concluded the parties agreed that the contract commencement date should be 15 June 1998 and the contract completion date should be 20 June 1999.
[8]Clauses 60 and 66 of the Conditions provide as follows:
"60(1)The Contractor shall submit to the Engineer at monthly intervals a statement (in such form if any as may be prescribed in the Specification) showing
(a)the estimated contract value of the Permanent Works executed up to the end of that month
(b)a list of any goods or materials delivered to the Site for but not yet incorporated in the Permanent Works and their value
(c)a list of any of those goods or materials identified in the Appendix to the Form of Tender which have not yet been delivered to the Site but of which the property has vested in the Employer pursuant to Clause 54 and their value and
(d)the estimated amounts to which the Contractor considers himself entitled in connection with all other matters for which provision is made under the Contract including any Temporary Works or Contractor's Equipment for which separate amounts are included in the Bill of Quantities
unless in the opinion of the Contractor such values and amounts together will not justify the issue of an interim certificate.
......
(2)Within 28 days of the date of delivery to the Engineer or Engineer's Representative in accordance with sub-clause (1) of this Clause of the Contractor's monthly statement the Engineers shall certify and the Employer shall pay to the Contractor (after deducting any previous payments on account)
(a)the amount which in the opinion of the Engineer on the basis of the monthly statement is...
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