Scottish Court of Session Decisions

"We have been authorised by the client KWF Holmes Ltd whose registered office is at Silverwells House, 114 Cadzow Street, Hamilton, ML3 6HP, to accept the tenders submitted by you on the 2 November 2005 in the amount of £521,791.03 further revised by your letter dated 2 December 2005 in the amount of £513,791.03."

"A. Whether or not the Adjudicator's decision is ultra vires

1. The power to refer the parties' dispute to adjudication is
derived from a clause in the pursuers' revised tender of 2 December 2005. Only if this tender was accepted by the defenders, and a contract concluded between the parties thereby, did the Adjudicator have jurisdiction.

2. The defenders set out additional grounds upon which they seek to have the Adjudicator's decision set aside ope exceptionis. These are: that she failed to take account of the evidence of Mr Thomson, and the affidavit of Mr Imrie; and that she failed to have regard to the argument that there was no contract at all (ie. neither with the defenders nor with KWF Homes Ltd). This raises the issue:

2.1 Whether it is open to the defenders to seek to reduce the Adjudicator's decision on any of these grounds;

2.2 Where it is open to them to do so, whether any of these grounds are well-founded.

B. Retention and set-off

3. The defenders have pleaded retention and set-off on the basis of an (as yet) unspecified claim for damages. Whether or not they may do so depends on whether a valid notice of intention to withhold payment was in accordance with the contract."

The Court also allowed the preliminary proof to consider the question "if no notice of intention to withhold was given, does that preclude the right of retention or set off by the defenders?". Finally, the Court extended the scope of the preliminary proof to include the "breach of natural justice" point as contained in paragraph 3 of the defender's note of argument No 18 of process, which was in the following terms:

"3. The adjudicator's decision should in any event be reduced as being
contrary to the rules of natural justice.

3.1 The principle issue for determination was whether there was a contract between the parties.

3.2 A key witness for the Defenders was the QS Mr Peter Imrie. Mr Imrie provided an affidavit confirming that a building contract had been completed in the name of KWF Homes Ltd, and KWF Homes Ltd was to be the party to the contract. Mr Imrie was on holiday and was not contactable during the adjudication. On his return, he advised that he would be willing to participate in a conference call.

3.3 Whilst Mr Imrie had provided an affidavit, he did so prior to the issues becoming focused by the adjudication, and it was not possible to put the evidence of the Pursuers' witnesses in respect of the written contract to him. The Defenders were grossly prejudiced by the Adjudicator's refusal to hold a conference call with Mr Imrie. Mr Imrie was available for a conference call on 21^st September 2007. The adjudicator's decision was not due until 26^th September 2007. In these circumstances, given the short timescales within which adjudication is meant to operate, it would have been reasonable for the adjudicator to conduct a conference call with Mr Imrie."

Documentary Evidence

• By letter dated 22 December 2004 Gordon Gibb wrote to the defenders with an amended fee proposal, the architect's appointment being administered under the terms conditions and limitations of SCA/2000 published by the RIAS.
• The application for building warrant for the erection of a building at 17 Fairyknowe Gardens, Bothwell which was received by the Local Authority on 1 March 2005 was made by Mr & Mrs Forrest. Building Warrant was granted on 14 July 2005.
• By letters dated 11 August 2005 Peter Imrie invited contractors to submit a tender for a proposed new build house at 17 Fairyknowe Gardens, Bothwell for Mr & Mrs Forrest.
• By letter dated 5 September 2005 the pursuers returned completed tender documents; again the covering letter indicated that the proposed new build house was for Mr & Mrs Forrest.
• On 4 October 2005 Peter Imrie wrote to the pursuers inviting them to submit a fresh tender. Again this was for "proposed new build house at 17 Fairyknowe Gardens, Bothwell for Mr & Mrs Forrest".
• By letter dated 2 November 2005, bearing the same heading, the pursuers submitted a tender. The formal tender document, on the page signed on behalf of the pursuers, bore the following heading:

"Form of Tender

Tender for: New Build House, 17 Fairyknowe Gardens, Bothwell

Client: Mr & Mrs Forrest"

• The bill of quantities defined the employer "client" as Mr & Mrs Jane Forrest. At page 1/7 it is provided that the works shall be completed in accordance with the SBBC form of contract with contractors Designed Portion with Quantities. (It was not disputed that this was a reference to the SBCC Scottish Building Contract Contractors designed portion with quantities, which provides by clause 7 that if any dispute or difference arises under or by reason of breach of this contract either party may refer it to adjudication in accordance with clause 41a.).
• No. 6/17 of process was a minute taken by Ken Rodger of the pursuers of a meeting held at the office of Gibb Architects at 11am on Wednesday 30 November 2005. This minute stated that the meeting followed the revised tender of £521,000,00 for the house, that the architects pointed out that a few areas of the pursuers' tender were higher than others and wondered if the pursuers could look again at their price and get back to them before Friday 2 December. It was recorded that Ken Rodger would look at prices and discuss overall response with other directors. The list of those present included John & Jane Forrest as "clients".
• By letter dated 2 December 2005, the pursuers wrote to John Thomson of Gibb Architects. Again the heading showed the new house "for Mr & Mrs Forrest". The pursuers offered a saving "to your client" of £8,000.00.
• No. 6/19 of Process was a draft letter (apparently not sent) from John Thomson of Gibb Architects to the pursuers, referring to the pursuers' letter of 2 December 2005 and stating "on behalf of our clients, Mr & Mrs Forrest, we accept your tender sum of £513,791.03." The draft is stamped "draft for approval by client".
• On 16 December 2005 John Thomson of Gibb Architects sent an e mail to Peter Imrie in the following terms: "Further to our discussion earlier today, we look forward to receiving a copy of the letter accepting Fleming Buildings' tender on behalf of Jane & William Forrest."
• By letter dated 20 December 2005 Peter Imrie wrote to the pursuers. As noted above, this letter started "we have been authorised by the client KWF Homes Limited whose registered office is at Silverwells House, 114 Cadzow Street, Hamilton, ML3 6HP to accept the tenders submitted by you on the 2 November 2005 in the amount of £521,791.03 further revised by your letter dated 2 December 2005 in the amount of £513,791.03. A formal building contract is being prepared and will be forwarded to you for completion prior to site commencement". The letter went on to specify the conditions of contract which applied to the works.
• By letter dated 20 December 2005, Mr Thomson wrote to Forbes & Whiteford Limited (who were contractors who were competing with the pursuers for this work) stating "we refer to your recent tender submission for the project listed above and subsequent meeting in our office to discuss the details of the project with our clients, Mr & Mrs Forrest. After much deliberation our clients have decided to accept a tender received from Fleming Buildings Limited." This letter was copied to the defenders.
• There was a pre-start meeting on 10 January 2006, attended by, amongst others, the defenders, Mr Mike Burrows and Mr Walter Kerr, both from the pursuers, and John Thomson from Gibb Architects. Minutes of that pre-start meeting were distributed to all those who attended. The defenders were described in the minutes as "client". There was no reference to KWF Homes Limited (hereafter "KWF") in this minute.
• No 7/1 of process was a certified true copy letter dated 9 January 2006 from the Assistant General Manager/Credit of Airdrie Savings Bank addressed to the pursuers, in the following terms:

"Dear Sirs,

KWF Homes Limited

We confirm that bank approval has been granted to provide funding in favour of KWF Homes Limited to contract for the construction of a new build detached property at 17 Fairyknowe Gardens, Bothwell on a fixed price contract basis."

• After the commencement on site there were 25 site meetings, the first of which was on 8 February 2006 and the last of which was on 19 March 2007. Both defenders attended each of these meetings. Minutes were taken by Gibb Architects of each of these meetings, and distributed to all those present. In each of these minutes the defenders are designed as "client". There is no reference to KWF in any of them. Minutes of these meetings were also taken on behalf of the pursuers, but not distributed to others. In many (but not all) of the pursuers' minutes the defenders are designed as "client": there is no reference to KWF in any of the pursuers' minutes.
• By letter dated 10 January 2006 John Thomson of Gibb Architects wrote to the pursuers enclosing for signature a copy of the F10 notification form.
• By letter dated 13 January 2006 the pursuers replied returning a copy of the form and confirming that they had passed the original to the Health & Safety Executive.

• By letter of the same date they sent the form to the Health & Safety Executive. The F10 form is a standard form, partly printed and partly hand written. The hand written sections were completed by John Thomson of Gibb Architects. The defenders were designed as the client. Section 10 of the form, which contained provision for a declaration of a planning supervisor was scored out by Mr Thomson. The form was signed by Mr Mike Burrows on behalf of the pursuers.
• During the course of the works Gibb Architects issued 12 architects instructions, the first being dated 16 February 2006 and the last being dated 19 March 2007. In each of these instructions the defenders were designed as the employer, and the pursuers as the contractor. In none of them is there reference to KWF.
• Gibb Architects issued 9 architects certificates, the first of which was dated 15 March 2006 and the last on 1 December 2006. In each of these certificates the defenders are designed as the employer. In none of them is any reference made to KWF.
• On 13 January 2006 John Thomson sent about 17 letters in identical terms to the occupiers of other properties in Fairyknowe Gardens. Each of these letters was headed "new house - 17 Fairyknowe Gardens, Bothwell" and began "on behalf of our clients, Mr & Mrs Forrest, we would like to notify you that works to their new home will be commencing on site on Monday 23 January 2006." Each of these letters was copied to Mr Mike Burrows of the pursuers.
• Peter Imrie issued several valuation claim forms, on each of which the employer was stated to be the defenders. No reference was made in any of these to KWF.
• By e mail dated 1 December 2006 paving contractors wrote to Gibb Architects stating inter alia "your clients Jane & William Forrester (sic) have requested D J Knight Paving Services to quote for the surfacing of the driveway at 17 Fairyknowe Gardens, Bothwell with natural stone paving cubes and to prepare the foundation and drainage."
• By letter dated 19 December 2006 the defenders wrote to the pursuers intimating that they wished to deduct Liquidate and Ascertained Damages. This letter was on paper headed "Mr & Mrs William & Jane Forrest, 17 Fairyknowe Gardens, Bothwell, G71 8RW" and was signed by each of the defenders, above the words William and Jane Forrest. There was no reference to KWF in this letter.
• By letter dated 20 April 2007 the first defender wrote to Gordon Gibb to advise that his appointment would be terminated with immediate effect from the date of the letter. This letter bore the heading "KWF Homes Limited, Flat 2/4, 169 Hamilton Road, Mount Vernon, Glasgow, G32 9QT".
• By letter dated 27 April 2007 Gordon Gibb of Gibb Architects replied to the first defender (making no reference to KWF) maintaining that under the conditions of his appointment he was entitled to reasonable notice in writing, that no such notice had been given, and that Gibb Architects' appointment would be terminated on 4 May 2007, and that they would remain Architects and Contract Administrator for this project until that time.
• In a different category because they are excluded from the terms of the joint minute are letters on headed note paper from KWF Homes Limited, 11 St John's Boulevard, Uddingston, relating to termination of Gibb Architects' employment as Contract Administrator dated 10, 20, 25 & 30 April 2007. That dated 10 April was addressed to the pursuers and signed by the first defender above the words "Jane Forrest KWF Homes Limited" and stated inter alia...... "I write to confirm my intention to terminate the employment of Gibb Architects." That dated 20 April was in the same form enclosing a copy of the termination letter to Gibb Architects. That dated 25 April was in the same form and intimated that Mr Brian Patterson had been appointed as the new contract administrator. That dated 30 April was in the same form, addressed to Mr Gibb and maintaining the position that his appointment was terminated with immediate effect from the date of the letter of 20 April "due to professional misconduct and abusive behaviour".
• Also excluded from agreement in the joint minute were two letters dated 5 May 2007, each on KWF Homes Limited note paper from the address at 11 St John's Boulevard, Uddingston. Neither had the first defender's name on them. Each was addressed to the pursuers. One of these enclosed a withholding notice in the sum of £246,465.00 in respect of architect's certificates 11 and 12. The other stated that "as Gibb Architects issued these to you after he was dismissed on 20 April 2007, they should be ignored."
• Also excluded from the agreement in the joint minute was a letter from Peter Imrie to the pursuers dated 13 April 2006 in the following terms:

"Dear Sir or Madam

New Build House at 17 Fairyknowe Crescent, for KWF Homes Limited

We herewith enclose the Building Contract as discussed and agreed for your attention. We would request that you complete and sign the document and return it to our offices."

• As part of the same production there was lodged the standard terms of the Scottish Building Contract Contractors Design Portion with Quantities, with the words "draft for typing" written in pencil at the top of the first page. The gaps in the standard form were completed in pencil and identified the employer as KWF Homes Limited, registered office Silverwells House, 114 Cadzow Street Hamilton, ML3 6HP.
• Also excluded from the agreement in the joint minute was a letter from Peter Imrie to the pursuers dated 29 June 2006 addressed to the pursuers. This letter stated:

"Dear Sir or Madam,

New Build House 17 Fairyknowe Crescent, for KWF Homes Limited

We herewith enclose the SBCC Building Contract with Contractors Design Portion duly completed as discussed and agreed for your attention and agreement. Please complete this document in accordance with the guidance note for signing as attached and return to my office in due course. A copy of the completed and signed document will be issued to you."

Witnesses for the Pursuers

"one thing in your favour in any subsequent negotiation with the contractor is that, unless anything is written in the Bill to the contrary, there is no statutory right to go to adjudication under a contract for the erection of an individual dwelling for the sole use of the owner."

The defenders never responded to this email to correct him or to say that this was not a contract for the erection of an individual dwelling for the sole use of the owner.

"Further to our discussion earlier today we look forward to receiving a copy of the letter accepting Fleming Buildings' tender on behalf of Jane and William Forrest."

He explained this by saying that the contractual implications of KWF did not register with him - he always thought of the clients as Jane and William. He recognised the letter dated 20 December 2005, but he could not say if this was issued by Mr Imrie or by Gibb Architects. He thought it was issued however, and remembered Mike Burrows saying in a telephone conversation that they were in the process of signing the paperwork. At the pre-start meeting he remembered vaguely a discussion between Mike Burrows and the first defender after the business on the agenda had been completed. He did not remember any details of the meeting, but he did remember a letter being handed to Mike Burrows at the end. He did not think that Mike Burrows was surprised to receive this letter; it was handed over because the defenders had asked at the initial interview meeting whether the pursuers would have any difficulties with KWF being the contracting parties. Mr Thomson never saw the letter from the bank, but he thought it was from Airdrie Savings Bank. He confirmed that he had prepared the minutes of the pre-start meeting on 10 January 2006; when asked why he described the defenders as the client, he replied that he tended not to focus on the "bit at the top of the minutes" and that this was an error on his part. He made the same error when preparing the minutes of the first site meeting on 8 February 2006. When asked why there was no reference to KWF in those meetings, he replied that he did not know whether there was in fact a signed contract. He understood that KWF were the employers, because the letter accepting the tender went out in their name. Mr Thomson attended no site meetings after the first site meeting.

[51] (iii) Mrs Jane Forrest, the first defender, was aged 34 and was a company director who lived at 998 Great Western Road, Glasgow. She was the owner of the property at 17 Fairyknowe Gardens, Bothwell, which she purchased in May 2001. She originally intended to build an extension to the existing property, but because of defective workmanship by the contractors then carrying out the work, she and her husband decided to demolish the property and develop a new house. She instructed Gordon Gibb as her architect to take over the design of the house from her previous architects. She instructed Peter Imrie as her quantity surveyor; he had worked for a firm who had been employed by her father. In August or September 2005 several contractors were invited to tender to perform the project; Mrs Forrest was expecting the costs to be less than £350,000, and she was surprised when the tenders were in excess of £800,000. She and her husband met with Gordon Gibb and Peter Imrie in order to try to find savings; at that point she realised that she was not in a financial position to continue. Although her original intention had been to develop the house for her residential use, after the initial tender procedure she and her husband knew that they could not afford to keep the house. She therefore contacted her bankers, Airdrie Savings Bank, and they agreed in principle that the house should be developed commercially by KWF. She told her development team of her intention that the project would be carried out on behalf of KWF in about September or October 2005, when work was being done on a revised Bill of Quantities. Her development team included Gordon Gibb and Peter Imrie. She told them this verbally, and then emailed Gibb Architects with the details of KWF, as at that time Gordon Gibb was running another job in Kilmarnock and John Thomson was working with him. When pressed, she had difficulty trying to recall how and where she told Gordon Gibb that KWF was to be the client in the Fairyknowe Gardens Project; she knew that at the savings meeting they would probably consider this a commercial venture as she could not afford to continue at this price. She was sure that there would have been telephone conversations after that meeting and she was trying to think if they had another meeting, but she could not remember the exact time. However, as far as she knew the second invitation to tender ran in the name of herself and her husband, not KWF.

"I decided that I wished to proceed with Fleming Builders. I instructed John Thomson to put matters into motion for Fleming Builders to construct a detached house. I actually wrote to Gibb Architects confirming that my preference was Fleming Builders."

Notwithstanding this evidence, she stated that John Thomson knew that the employers would be KWF as he was present at the November meeting and she was not in a position to contract personally.

Submissions for the parties
[74] Having set out at considerable length the evidence at the preliminary proof, I can deal with parties' submissions more briefly, as written submissions were helpfully lodged on behalf of each of the parties, and the submissions in court followed these written submissions very closely. The written submissions are in the court process, and I refer to these for their whole terms. I summarise briefly these submissions for present purposes.

Discussion
[90] Understandably, both parties laid great importance on the question of credibility and reliability of the various witnesses, and I deal with this matter first.

[101 Despite the evidence of Mr Imrie, I am not satisfied that any completed standard form contract identifying KWF as the employers was ever sent, handed over or delivered to the pursuers. I am not satisfied that the two letters dated 5 May 2007 which from part of No 6/3 of process were ever received by the pursuers, nor am I satisfied that the letters dated 10, 20, 25 and 30 April 2007 which form part of No 6/5 of process were ever received by their addressees.

"in reaching his decision the Adjudicator shall act impartially, set his own procedure and at his absolute discretion may take the initiative in ascertaining the facts and the law as he considers necessary in respect of the referral and his powers shall include the following....requiring from the parties further information than that contained in ..... any written statement provided by the parties; ... giving directions as to the timetable for the Adjudication, any deadlines...".

The defenders do not aver, nor did they submit before me, that the adjudicator acted in breach of these powers or outwith her discretion. They do not even aver that in the circumstances of this case, and the email correspondence set out in productions 6/199 to 6/211 of process, no reasonable adjudicator would have failed to conduct a conference call with Mr Imrie. The highest that the defenders' submissions go is to assert that "given the short timescales within which adjudication is meant to operate, it would have been reasonable for the adjudicator to conduct a conference call with Mr Imrie".

Conclusion