OUTER HOUSE, COURT OF SESSION |
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CA229/02
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OPINION OF LORD MACKAY OF DRUMADOON in the cause TRUSTEES OF THE HARBOURS OF PETERHEAD Pursuers; against LILLEY CONSTRUCTION LIMITED Defenders:
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Pursuers: Davidson, Q.C. ; Maclay Murray and Spens
Defenders: Glennie, Q.C., Cowie; Biggart Baillie
1 April 2003
"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.
......"
"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."
"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 due to the Contractor on account of sub-clauses (1)(a) and (1)(d) of this Clause less a retention as provided in sub-clause (5) of this Clause and
(b) such amounts (if any) as the Engineer may consider proper (but in no case exceeding the percentage of the value stated in the Appendix to the Form of Tender) in respect of sub-clauses (1)(b) and (1)(c) of this Clause.
......
66 (1) Except as otherwise provided in these Conditions if a dispute of any kind whatsoever arises between the Employer and the Contractor in connection with or arising out of the Contract or the carrying out of the Works including any dispute as to any decision opinion instruction direction certificate or valuation of the Engineer (whether during the progress of the Works or after their completion and whether before or after the determination abandonment or breach of the Contract) it shall be settled in accordance with the following provisions.
(2) For the purpose of sub-clauses (2) to (6) inclusive of this Clause a dispute shall be deemed to arise when one party serves on the Engineer a notice in writing (hereinafter called the Notice of Dispute) stating the nature of the dispute. Provided that no Notice of Dispute may be served unless the party wishing to do so has first taken any steps or invoked any procedure available elsewhere in the Contract in connection with the subject matter of such dispute and the other party or the Engineer as the case may be has
(a) taken such step as may be required or
(b) been allowed a reasonable time to take any such action.
(3) Every dispute notified under sub-clause (2) of this Clause shall be settled by the Engineer who shall state his decision in writing and give notice of the same to the Employer and the Contractor within the time limits set out in sub-clause (6) of this Clause.
......
(6) (a) Where a Certificate of Substantial Completion of the whole of the Works has not been issued either
(i) the Employer or the Contractor is dissatisfied with any decision of the Engineer given under sub clause (3) of this Clause or
(ii) the Engineer fails to give such decision for a period of one calendar month after the service of the Notice of Dispute or
(iii) the Employer or the Contractor is dissatisfied with any recommendation of a conciliator appointed under sub-clause (5) of this Clause
then either the Employer or the Contractor may within 3 calendar months after receiving notice of such decision or within 3 calendar months after the expiry of the said period of one month or within one calendar month of receipt of the conciliator's recommendation (as the case may be) refer the dispute to the arbitration of a person to be agreed upon by the parties by serving on the other party a written Notice to Refer.
(b) Where a Certificate of Substantial Completion of the whole of the Works has been issued the foregoing provisions shall apply save that the said periods of one calendar month referred to in (a) above shall be read as 3 calendar months."
"The intention of Parliament in the (1996 Act) was plain. It was to introduce a speedy mechanism for settling disputes and construction contracts on a provisional interim basis, and requiring the decision of adjudicators to be enforced pending the final determination of disputes by arbitration, litigation or agreement. ...... Parliament has not abolished arbitration and litigation of construction disputes. It has merely introduced an intervening provisional stage in the dispute resolution process. Crucially, it has made it clear that decisions of adjudicators are binding and are to be complied with until the dispute is finally resolved."
The views as to the relationship between adjudication and arbitration, which have subsequently been expressed by several other judges, including Lady Paton in Watson Building Services Ltd v Harrison 2001 S.L.T. 846, at p.852F, para.[21], and Lord Macfadyen in The Construction Centre Group Ltd v The Highland Council 2002 SLT 1274, at para.[10], are entirely consistent with Dyson J's approach.