Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2010] CSOH 135
CA87/08	OPINION OF LORD HODGE in the cause ALTON B COPLAND LTD Pursuer; against ORKNEY BUILDERS (CONTRACTORS) LTD Defender: ­­­­­­­­­­­­­­­­­________________

Pursuer: Simpson; Wright Johnston & Mackenzie

Defender: M. Hamilton; Anderson Strathern LLP

1 October 2010

[1] Alton B Copland Limited ("ABC") is a company which is based in Orkney and carries out plumbing and related work. Orkney Builders (Contractors) Limited ("OB") is a building contractor which also is based in Orkney. For about twenty years until 2008 ABC and OB collaborated on projects in Orkney. During most of that period OB treated ABC as its preferred plumbing sub-contractor. The principals of the two businesses, Mr Alton B. Copland and Mr Charles Kemp respectively, were on friendly terms for many years and attended social events together. Unfortunately differences have arisen between the parties and this action concerns disputes in relation to four contracts in which ABC acted as a subcontractor of OB.

[2] Much of the evidence on which the parties relied in this proof was the recollection of the witnesses of events which occurred several years ago. This resulted from the informal ways in which the parties entered into their contracts. OB as a main contractor often entered into formal building contracts with its employer. By contrast it entered into contracts with its subcontractors by obtaining a quotation for the subcontract work and then accepting a quotation in a telephone call or by a handshake. There was very limited documentary evidence of the terms which had been agreed. I formed the view that the witnesses generally did their best to recall the events but there was inevitably a considerable measure of retrospective rationalisation, particularly by both Mr Copland and Mr Kemp, not all of whose evidence was therefore reliable. As a result it has been difficult to reach firm views on precisely what occurred in several of the matters which were in dispute.

St Magnus Manse, Kirkwall

[3] In February 2003 ABC entered into a subcontract with OB to provide plumbing, gas installation and roofing services in works which were to be carried out on St Magnus Manse, Berstand Road, Kirkwall. ABC submitted a tender for £24,005.06 in respect of the plumbing element of the works. Another plumbing subcontractor, Steven R Paterson Limited ("SRP"), offered to carry out the plumbing work for £20,925.63.

[4] Notwithstanding SRP's lower offer, OB appointed ABC as the subcontractor. But in its main contract tender to the employer OB used SRP's subcontract rates and price while listing ABC as the subcontractor. The dispute between the parties relates to OB's assertion, which ABC denies, that in a telephone conversation at the time when Mr Kemp was about to submit the main contract tender, Mr Copland agreed to carry out the subcontract works by matching SRP's price.

[5] ABC carried out the subcontract works. The price was altered as a result of adjustments in the contract works. ABC claimed £23,261.85 for plumbing and leadwork and a further £261.85 for moving a WC in accordance with an architect's instruction. On or around 12 December 2003 ABC submitted its final valuation for £23,261.85 for the plumbing and leadwork, having submitted shortly before a separate claim for moving the WC. OB paid ABC £19,346, which was the sum it calculated to be due under SRP's tender for the plumbing and leadworks as altered by the subsequent changes.

[6] OB made a final payment under the contract on or about 31 March 2005 when, in accordance with its final payment certificate of that date, it released £967.30, which was retention on the sum of £19,346.

[7] ABC claimed that it was due to be paid in accordance with its tender as adjusted and so claimed £4,177.70, being the difference between its claim and what OB paid it (£23,261.85 + £261.85 -£19,346).

[8] OB advanced two defences. First it asserted that any obligation to pay money under the contract had been extinguished by negative prescription. Secondly, it argued that Mr Copland had agreed to match SRP's price in order to obtain the contract, which involved an innovative ground heating system, in which he was interested.

[9] I deal first with the defender's plea of prescription. Ms Hamilton for the defender referred me to section 6 of and paragraph 1(g) of Schedule 1 to the Prescription and Limitation (Scotland) Act 1973 ("the 1973 Act"). She submitted that the obligation to pay under the contract had prescribed as it had became enforceable more than five years before this action was served on OB on 12 January 2009. Mr Simpson for the pursuer submitted that the claim was not enforceable before 12 January 2004 and, in any event, that OB had relevantly acknowledged the subsistence of a debt under the contract by making the final payment on or after 31 March 2005, thus preventing the operation of prescription: sections 6 and 10 of the 1973 Act. He also referred me to paragraph 4 of Schedule 2 to the 1973 Act, Gibson v Carson 1980 SC 356 and Garden v Rigg (1743) Mor 11274.

[10] I reject the plea of prescription. ABC's final valuation was dated 12 December 2003; but it has not been demonstrated that the amount claimed in that valuation was enforceable as soon as ABC submitted the valuation to OB. ABC was the subcontractor of OB and it was its practice to submit an application for payment to OB for inclusion in OB's application to its employer. Thereafter, the employer's professional advisers would confirm what in their opinion was due to be paid and a certified sum would be paid to OB, which in turn would pay ABC. Counsel did not explore in evidence or in submission whether, under this contract, ABC had a right to sue OB for payment at any time before the subcontract works had been certified by the employer's advisers or before the employer had paid OB. I infer that it did not: see paragraph [38] below. But, in any event, OB has not demonstrated that the obligation to pay the sum claimed in ABC's final valuation of 12 December 2003 was enforceable before 12 January 2004. Accordingly the plea of prescription must fail. In the circumstances I do not need to decide whether the later release of retention in March 2005 was a relevant acknowledgement of subsistence of the debt. Had I to do so, I would have wished to hear more detailed submissions.

[11] Turning to the defence on the merits, the issue is whether in a telephone conversation in early November 2002, when Mr Kemp was completing his main contract tender, Mr Copland agreed to carry out the subcontract works, not at the price which he tendered but for a price which matched the lower tender by SRP. Mr Copland's evidence was that there was no such agreement. While in the fifth valuation for the project dated 8 August 2003, when the work was at an advanced stage, ABC used the figure of £19,346 as the measure of the work done to that date, its final valuation dated 12 December 2003 claimed the sum of £23,261.85 for the plumbing and leadwork. OB's position was that ABC was entitled to no more than £19,346. Mr Kemp spoke of the telephone call and Mr Copland's agreement to accept SRP's tender price as ABC's entitlement. He had not told Mr Copland the precise figure that SRP had tendered but had suggested that it was about £4,000 lower than ABC's tender. He suggested in his evidence that Mr Copland was particularly keen to win the subcontract as it involved a geothermal heating system in which he was interested and which was new to Orkney. As a result OB used SRP's prices in its tender but stated that ABC was the subcontractor.

[12] Mr Kemp's account was supported to some extent by his wife, Mrs Catherine Kemp, who was the financial director of OB and its company secretary. She had responsibility for the company's books and financial records and for organising its payroll, taxation and audit. She was a credible witness who did her best to tell the truth but some of her evidence involved her recollection of what she must have learnt from her husband rather than from direct involvement in discussions with Mr Copland. She confirmed that ABC's price was significantly greater than SRP's tender price and that Mr Copland was keen to obtain the subcontract because he wanted to be involved in the innovative method of heating the house. She had completed the contract using SRP's tender prices and named ABC as the subcontractor in the main contract tender on the understanding that Mr Copland had agreed informally to match SRP's prices.

[13] Mr and Mrs Kemp's son, Stephen, also gave evidence. At the relevant time he worked as a contracts manager for OB. His evidence was not wholly consistent with that of his father and certainly did not support an agreement to match SRP's prices. He was not involved in the tender process but knew of Mr Copland's wish to be involved in the project. He thought that ABC had offered a 2.5% discount to reduce the price which it had tendered.

[14] The arrangement of which Mr and Mrs Kemp spoke is an unusual one. Mr Kemp said that he had not disclosed SRP's tender to ABC as that would have been unethical but that he had obtained Mr Copland's acceptance to match SRP's price. It is clear that OB operated the contract on the basis that the subcontractor was (subject to variations) entitled to the sums stated in the SRP tender. ABC on the other hand submitted a final valuation in December 2003 which was based on its tender and was not consistent with its acceptance of an arrangement to match SRP's prices. Each party thus acted consistently with what it now asserts was the agreement. It is puzzling that, after submitting the final valuation in December 2003, Mr Copland did not complain of non-payment until January 2006, when ABC's involvement in the Dounby project had put pressure on its overdraft limit and relations between Mr Copland and Mr Kemp were deteriorating. But this may reflect a lack of rigorous book-keeping within ABC and a failure until that time to chase for payment of sums which Mr Copland thought were due.

[15] While I accept that OB's directors acted at the time in the belief that the SRP prices governed the subcontract, I am not satisfied that OB has proved that Mr Copland accepted the unusual arrangement of which Mr Kemp spoke. It is clear that at that time when Mr Copland and Mr Kemp enjoyed good social and commercial relations, much of their commercial dealings proceeded on the basis of trust and their arrangements were not recorded with any formality. In this context there appears to have been a misunderstanding between Mr Kemp and Mr Copland. It is clear that ABC tendered for the subcontract and was appointed subcontractor. Absent proof of the unusual arrangement, ABC's tender, as adjusted to reflect changes in the contract works, must govern the subcontract. I consider therefore that the defenders are bound to pay the pursuers £4,177.70 under the St Magnus Manse contract.

Dounby Care Home

[16] In around October 2003 ABC submitted a tender to OB to provide plumbing services on a major project which involved the construction of a care home for the elderly at Dounby, Orkney. Its tenders for the installation of plumbing and heating amounted in aggregate to almost £500,000. This was by far the largest contract which ABC had ever undertaken. The project again involved a ground heating system in which Mr Copland was interested. He explained that he had mixed feelings about tendering for the project because of its scale and the need to protect his company's cash flow.

[17] In the course of dealings between ABC and OB it was not uncommon for ABC to offer OB a main contractor's discount of between 1% and 2.5%. It was not disputed that in a telephone discussion with Mr Kemp, shortly before OB submitted the main contractor's tender for the project, Mr Copland, unusually, offered OB a 4% main contractor's discount on ABC's tender. The issue on which the parties are in dispute is whether the discount was conditional upon OB making prompt and monthly payments of the sums due to ABC as its subcontractor.

[18] I am satisfied that 4% was an unusually large discount for ABC to offer, particularly on a high value contract and that, when he agreed to give the discount, Mr Copland said that he expected prompt and regular payments of the sums due to ABC under the subcontract. I accept that he wished to ensure that ABC would be paid promptly because of his concerns over the company's cash flow on such a large contract. It is not clear what were the precise words which Mr Copland used when he stated that he wanted prompt payment. In subsequent correspondence when he complained that OB had failed to make prompt payment he described the alleged agreement in different terms. In a letter dated 17 September 2004, in which ABC complained of OB's failure to make "monthly" payments and "withdrew" its offer of a 4% discount, Mr Copland stated that the offer "was given to you verbally along with the statement that we would need to get regular payments." He invited Mr Kemp to treat the letter with the utmost urgency and to "put things back to one calendar month payments." In a letter dated 4 February 2005 in which ABC threatened to withdraw labour from the Dounby project, Mr Copland demanded payment of £23,221.52, which he described as "the 4% discount we offered for prompt and regular payments which has not been adhered to." In a letter dated 14 February 2005 he referred again to "the 4% discount we offered for prompt and regular payments." In his oral evidence he spoke of "prompt and monthly payments."

[19] Mr Charles Kemp gave evidence that he had not agreed to any condition which tied the 4% discount to an obligation to pay ABC at certain times. He accepted that in March 2004 OB had passed on to ABC a document ("the schedule of valuation dates") showing the expected dates on which Orkney Islands Council ("the Council"), the employers, would conduct site visits and on which OB as main contractor would submit valuations to the Council. But he suggested that that had been to allow ABC to plan the timely submission of its subcontract valuations rather than to set up dates by which the regularity of the main contractor's payments to ABC could be assessed. He explained that it was not commercially feasible for him to agree that the discount would be conditional upon prompt payment as OB had, in accordance with normal practice, included the discount in its tender and did not control the dates on which the Council would pay the sums due under the main contract. He and Mrs Kemp spoke of seeking to accommodate ABC when it faced cash flow difficulties during the contract but both denied that OB had ever agreed to make the discount conditional upon payment of sums on particular dates or within a particular time.

[20] I am persuaded that Mr Copland did state that he wanted prompt payment when he offered the 4% discount. But I am not satisfied that Mr Kemp assented to the request. Mr Copland could not recall the precise words which he used or Mr Kemp's response. His evidence was that he had asked for monthly payments. He said that Mr Kemp must have agreed to the condition as he would have remembered if he had not agreed. He accepted that there was nothing in writing at the time to vouch the arrangement. While I accept that Mr Copland wanted to make the discount conditional upon prompt and regular payments and that he acted in the belief that he had such an agreement, there is insufficient evidence to persuade me that OB agreed to the condition. The casual nature of the discussion may have been typical of the way in which Mr Copland and Mr Kemp did business at that time, but it makes it very difficult for a court, looking at the matter objectively, to conclude that the parties intended that prompt payment was to be a contractual obligation.

[21] I am strengthened in this view by the consideration that there is uncertainty as to the mechanism by which the parties would assess the performance of the supposed contractual obligation. Mr Copland suggested that the schedule of valuation dates told ABC when to submit its valuations and that the speed with which OB paid ABC after the first valuations dictated the obligation to pay monthly thereafter. Thus, he suggested, when ABC received its first cheque under the contract in early June 2004, that defined the obligation on OB so that it had to pay at a similar time in the months which followed. In his submissions on behalf of the pursuer, Mr Simpson argued that the agreement was that the contractual stage payments would be made promptly and monthly. He submitted that "promptly and monthly" was to be interpreted as meaning that one payment would be made by OB to ABC each month and would be made on or around the same day of each month.

[22] There are two problems with this approach. First, there is no evidence to show that Mr Copland and Mr Kemp agreed such a mechanism to give the needed clarity to the uncertain obligation to pay "promptly" or "regularly" or "monthly". The schedule of valuation dates was only the Council's forecast of when its officials would inspect the site and provided for the submission of the main contractor's valuation on the day after the site meeting, namely on the second Wednesday and Thursday of each month. If the site meeting were postponed, so also would the submission of the valuation and the subsequent payment by the Council. The alleged mechanism depends on the circumstance of the date of the first payment or payments and there is no evidence that ABC and OB agreed to measure the obligation by the date of such payments. Secondly, it appears that Mr Copland was incorrect in his recollection that the first payment under the Dounby Care Home project was made in early June 2004. There was a payment of £42,647.80 on 9 June 2004 on a valuation which ABC had submitted on 4 May 2004. But that was the third payment under the contract. ABC had already submitted two valuations on 9 April 2004 and was paid £29,184.19 and £15,035 on about 21 May 2004, six weeks after the date of the submission of ABC's first two valuations. Thus if the first payments were intended to establish a baseline by which the promptness of future monthly payments were to be judged, that baseline would have entailed a regimen for payment towards the end of the month. This did not support ABC's contention that it was entitled to be paid around the start of every month.

[23] There was also produced a document which Mr Copland and Mrs Kemp compiled when ABC and OB attempted to sort out their differences without recourse to litigation and which both parties accepted as generally accurate. It showed among other things that in September, November and December 2004 and in January 2005 there were delays in payment as more than six weeks passed between ABC's submission of its valuation and its receipt of payment from OB. This appears to have caused ABC serious cash flow problems and to have damaged relations between Mr Copland and Mr Kemp. But OB paid sums to ABC every month between May 2004 and February 2005 except in December 2004, where the Christmas break appears to have caused delay. In that month the Council paid OB on 22 December and ABC received OB's payment on 7 January 2005. Thus, even if there were a contractual condition of the nature which Mr Simpson contended, it appears that it was not breached until the end of December 2004.

[24] While this pattern of payment was not what Mr Copland expected or thought that he had agreed, I am not persuaded that OB was under a contractual duty to pay the contract instalments at a particular date each month or that the 4% discount which ABC offered and OB accepted was subject to a contractual condition as to promptness of payment. ABC's claim for £32,353.17, which was based on its withdrawal of the discount, therefore fails.

[25] ABC also claimed £1,040 plus VAT (namely £1,222) on the basis that OB had wrongly applied the 4% discount to an additional heat pump which had been purchased for the Dounby Care Home Project. Ms Hamilton for OB accepted in her submissions that the parties had agreed that the £26,000 to be paid for that heat pump would not be subject to the discount and that ABC was due to be paid £1,222. She pointed out that the issue had not been focussed in the pursuer's pleadings and submitted that interest should not be due thereon.

Dounby Surgery

[26] The parties also entered into a subcontract by which ABC provided plumbing services in a contract for the construction of a surgery adjacent to the Dounby Care Home. The parties were in dispute over the same issue of whether the agreed 4% discount was subject to a condition of prompt payment. For the reasons which I have set out in paragraphs [20] to [24] above, I am not persuaded that the agreed discount was subject to the alleged contractual condition. I am satisfied that ABC was not entitled to withdraw that discount. It follows that ABC's claim for £5,055.63 inclusive of VAT under this head fails.

Wellington Street
[27] On 9 March 2004 ABC submitted a tender to OB for a subcontract for

plumbing services in a proposed development of thirty five houses for Orkney Housing Association Limited at Wellington Street, Kirkwall. Several disputes have arisen in relation to the contract which followed.

[28] The first issue in dispute is whether ABC agreed to give OB a 2.5% main contractor's discount on the subcontract price. Mr Copland's position was that he had not agreed to give a discount and that he would have remembered if he had. But there was clear evidence from Mr Kemp, which was supported by both Mr Stephen Tulloch and Mr Neil Robertson, who were respectively an estimator and a quantity surveyor working for OB, that on the evening of 10 March 2004, when OB was finalising its main contract tender for submission on the following day, Mr Kemp had telephoned Mr Copland from his office to discuss a discount. Mr Kemp gave evidence that Mr Copland had offered a 2.5% discount and both Mr Tulloch and Mr Robertson spoke of Mr Kemp informing them immediately after the telephone call that ABC had agreed to that discount. Mr Kemp requested Mr Tulloch to make a record of ABC's agreement to the discount. While there was a minor disagreement in the evidence of Mr Tulloch and Mr Robertson about whether the latter was in the same room in OB's office as Mr Kemp and Mr Tulloch when the telephone call was made, I attribute that to differing recollections rather than anything more sinister. There was also contemporaneous documentation to support OB's position in the documentary record which Mr Tulloch made at Mr Kemp's request. He wrote the following above his initials on ABC's cover sheet which had accompanied its tender:

"10/3/04. 19.15. ABC agreed with CAK 2.5% MCD"

(MCD refers to the main contractor's discount). This oral evidence and written record clearly support the view that ABC agreed a 2.5% discount. Mr Simpson in his closing submission referred to documentary evidence from 2006 which showed that by then Mr Copland believed that he had not offered a discount. But he did not seriously dispute that, on the balance of probabilities, the evidence, to which I have referred, pointed to an agreement by Mr Copland on the evening of 10 March 2004 to give the discount. I am satisfied that OB was entitled to the 2.5% discount.

[29] The second dispute relates to a price uplift. There was a delay in agreeing the subcontract after March 2004, as the housing association put off the placing of the main contract. In July 2004 Mr Kemp enquired in a telephone conversation with Mr Copland whether ABC would be willing to fix its prices for the leadwork and plumberwork in the tender for two years. The parties disputed the content of this call. Mr Copland stated that he initially refused to fix his prices but eventually agreed that he would, provided that OB allowed ABC a 5% mark-up on the prices quoted in the tender. Mr Kemp's evidence was that he had not agreed to such a mark-up and that he would not have done so unless he also obtained a mark-up from the employer for OB as main contractor, as its tender would have been based on ABC's rates. But his recollection of the circumstances in which the main contract was placed was generally unreliable and not convincing.

[30] Contemporaneous documentation supports Mr Copland's recollection. On 5 July 2004 Mr Steven Miller, a civil engineering student who had a summer job with OB, wrote to ABC by fax, referring to the conversation and recording an agreement that the prices would be fixed for two years from March 2004. He invited a response in writing. There is no evidence of a written response but Mr Copland wrote on the fax, "5% agreed with Charlie", to record his earlier telephone discussion with Mr Kemp.

[31] There was also evidence from Mr Adrian Howard, who was the quantity surveyor employed by Pentarq, the project architects on the Wellington Street development, that there had been a renegotiation of the main contract tender rates between OB and Mr Ian Sloan of Pentarq in later 2004, which had resulted in an uplift on the rates quoted in the original tender. Mr Neil Robertson also recalled that there had been further negotiation of the price after ABC's tender of 9 March 2004 but could not remember the detail of the discussions. This evidence supports the view that both OB as main contractor and ABC as subcontractor received an uplift in their rates because of the delay in placing the contract, which was finally agreed only in November 2004. I therefore conclude that OB did agree to a 5% uplift on the relevant rates quoted in ABC's tender. This uplift did not apply to the plumberwork for the heating system in ABC's tender, which was superseded by a change in the design of the heating system. Accordingly, £3,508.48 is due to ABC.

[32] The third matter in dispute is whether OB was entitled to make a deduction from ABC's claim for alleged double-counting by ABC of the pipework which it had installed following a change in the design of the rainwater management system in the houses. The rainwater management system sought to use gathered rainwater instead of mains water to supply the cisterns in the WCs in the houses. On 1 September 2005 Mr James Middlemas of ABC prepared a quotation of £791 per house as the price of installing this system, which was called the Envireau Water Recycling System. By email dated 8 September 2005 Mr Neil Robertson of OB asked him to review the quoted price to see if it could be reduced as the system was over budget. But there was no evidence of any agreement by ABC to reduce that price. Mr Copland gave evidence, which was not challenged, that it was Mr Middlemas's normal practice to allow for any savings, which would result from a re-design of a proposal, when submitting a quotation for revised works.

[33] On 5 April 2006 Mr Adrian Howard of Pentarq wrote to Mr Copland suggesting that there had been double-counting in the plumbing work associated with the Envireau system and inviting ABC to complete an attached document to indicate a credit sum for the saving in cold water distribution pipework. ABC did not respond to this request. Mr Copland denied receiving the letter at that time and said that he had not found it in ABC's files. In the absence of a response by ABC, Mr Howard carried out a theoretical calculation, based on OB's tender prices, of the savings which might be involved if an allowance were made for double-counting. He estimated the likely saving at about £100 per house. Accordingly, Pentarq deducted £3,500 from OB's final account and OB deducted the same sum from ABC's claim.

[34] I am not persuaded that either Pentarq or OB was entitled to make any deduction for double-counting. First, I am not satisfied that there was such double-counting. As I have said, there was evidence that Mr Middlemas's normal practice was to give an allowance for such savings. While Mr Middlemas did not give evidence as he had no recollection of the calculation, I see no reason to question Mr Copland's unchallenged evidence as to his normal practice. Neither Mr Adrian Howard nor Mr Neil Robertson was able to remember who had told the other that there had been the double-counting, which led to Mr Howard's calculation. Both denied having taken the initiative in the matter. Neither took any further steps to confirm the position with ABC. I am unable to conclude that there was a reliable basis for the assertion that there was such double-counting. ABC is therefore entitled to £3,500. Even if I had been satisfied that there had been some double-counting, I would have held OB's estimate to be excessive. I found Mr Copland's evidence that Mr Howard had materially overstated the extent of such double-counting to be persuasive. He demonstrated that the only likely saving (if Mr Middlemass had overlooked it in his quotation) was in relation to about two metres of cold water piping per house, except for those houses which had two WCs where the saving would be doubled. He estimated that the saving would have amounted to about £20 per WC. Accordingly, if I had found that there had been double-counting I would have confined it to the sum of £960.

[35] The fourth dispute is about whether OB was entitled to deduct £308 from sums due to ABC for the cost of joiner work which OB incurred as a result of an alleged mistake by ABC's employees in the installation of pipes for washing machines in fourteen houses. There was no dispute that OB's joiners had had to cut holes in the plasterboard in the kitchens of the houses to allow the installation of pipes in the correct position. Mr Copland suggested that the problem had arisen as a result of OB's employees having provided the ducts in the wrong position, but Mr Kemp and Mr Neil Robertson gave evidence that ABC's plumbers had installed the pipes in the wrong position. Mr Neil Robertson, who was a credible witness, explained that OB's site agent, Mr Sutherland, had noticed the problem and had recorded on day sheets the time spent by OB's employees in rectifying it. Thereafter, from April 2007, in his payment certificates Mr Robertson deducted from sums due to ABC the sum of £308 as a credit for this joiner work. While the details of the work carried out were not wholly clear, I accept the evidence of Mr Kemp and Mr Robertson, which is supported by the contemporaneous documentation. Thus I find that OB was entitled to deduct £308 from ABC's claim on the Wellington Street project.

Summary of claims
[36] From the above I conclude that ABC is entitled to the following sums:

(i) St Magnus Manse: £4,177.70 (paragraph [15] above)

(ii) Dounby Care Home £1,222.00 (paragraph [25] above)

(iii) Wellington Street (a) £3,508.48 (paragraph [31] above)

(b) £3,500.00 (paragraph [34] above)

£12,408.18

Claim for interest

[37] ABC claims interest on the sums to which it is entitled and also statutory compensation under the Late Payment of Commercial Debts (Interest) Act 1998 as amended ("the 1998 Act") and the Late Payment of Commercial Debts (Rate of Interest) (Scotland) Order 2002 (S.S.I. 2002 No 336) ("the 2002 Order").

[38] Under section 6 of the 1998 Act and article 4 of the 2002 Order interest is due at the rate of 11.75% per year on the sum of £4,177.70 from the day after the relevant date until payment. It is not clear precisely when in January 2004 the sum became due and payable under the contract between the parties. I am not persuaded that ABC proved that there was an implied term that payment would be made within thirty days of the submission of its valuation, but I am satisfied that in any event, OB was obliged to pay once it received money from its employer after the employer's professional advisers had certified the works. I do not consider that the relevant day is to be calculated by reference to the thirty day period under section 4(5) of the 1998 Act as ABC and OB appear to have agreed, at least implicitly, a mechanism for payment. It appears on the evidence of both Mr and Mrs Kemp to have been OB's practice to pay when paid by the employer. Mr Copland did not deny that that occurred. I infer that there was an accepted practice that OB would pay ABC when its employer paid it under the main contract. I therefore award interest on the St Magnus Manse claim above from 1 February 2004, as it is likely that by then OB would have been paid by its employer and would have come under an obligation to pay ABC. In relation to the claim for wrongly charged discount on the Dounby Care Home project, I do not consider it just to award statutory interest as the claim was not identified in the written pleadings but was conceded when Mr Simpson produced suggested findings at the conclusion of the proof. See section 5 of the 1998 Act. Interest on the sum of £1,222 will therefore run from the date of this opinion and interlocutor until payment. On the Wellington Street claims, interest is due on claims (a) and (b) from 1 October 2007 at the rate of 13.5% per year until payment. I have adopted the same approach as in the St Magnus Manse contract in relation to the relevant date: ABC's valuation of 15 August 2007 covered these sums and payment was probably due by 30 September 2007.

[39] Statutory compensation under section 5A of the 1998 Act is due in the following sums:

St Magnus Manse: £70

Dounby Care Home Nil

Wellington Street (a) £70

(b) £70

£210

Interest is due on that sum at the judicial rate of 8% from the date of citation until payment.

Conclusion
[40] I therefore repel defender's third plea in law, which asserted the extinction by prescription of the pursuer's claim in relation to the St Magnus Manse contract. Otherwise, I sustain the pursuer's first, second and third pleas-in-law but only to the extent of awarding the sums referred to in paragraphs [36] and [39] above together with interest thereon at the rates and from the dates specified in paragraphs [38] and [39] above until payment.