British
and Irish Legal Information Institute
Freely Available British and Irish Public Legal Information
[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]
Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> D McLAUGHLIN & SONS LTD AGAINST EAST AYRSHIRE COUNCIL [2020] ScotCS CSOH_109 (30 December 2020)
URL: http://www.bailii.org/scot/cases/ScotCS/2020/2020_CSOH_109.html
Cite as: [2020] ScotCS CSOH_109, [2020] CSOH 109, 2021 SLT 1427, 2021 GWD 2-20
[New search] [Printable PDF version] [Help]
Page 1 ⇓
OUTER HOUSE, COURT OF SESSION
[2020] CSOH 109
CA45/20
OPINION OF LORD CLARK
In the cause
D McLAUGHLIN & SONS LIMITED
against
EAST AYRSHIRE COUNCIL
Pursuer
Defender
Pursuer: Howie QC; DAC Beachcroft Scotland LLP
Defender: Thomson QC; Shepherdand Wedderburn LLP
30 December 2020
Introduction
[1] Under a building contract the pursuer was the contractor, employed by the defender.
The works involved the construction of a new single storey extension at Hurlford Primary
School, East Ayrshire. A dispute was referred to adjudication. The pursuer seeks to enforce
the award of the adjudicator. The defender challenges the adjudicator’s decision.
Background
[2] The terms of the contract included the Standard Building Contract with Quantities
for use in Scotland (SBC/Q/Scot) 2011 edition, as amended by the Preliminaries (“the
Page 2 ⇓
2
Standard Conditions”). The works commenced in 2016. A dispute arose between the
parties regarding sums claimed by the pursuer to be due from the defender under the
construction contract. The pursuer raised an action in the sheriff court on 12 September 2019
seeking payment of the balance said to be due. On about 17 March 2020, the pursuer issued
a Notice of Adjudication. The adjudicator found in favour of the pursuer. The defender
refused to make payment and the pursuer raised the present action for enforcement of the
adjudicator’s decision. In its defences, the defender challenges the adjudicator’s decision,
not on any grounds regarding jurisdiction or breach of natural justice, but concerning
alleged errors by the adjudicator. The defender also enrolled a motion to lodge a
counterclaim in this action. The motion was unopposed by the pursuer. The counterclaim
seeks declarators which would have the effect that the award by the adjudicator is not
enforced and also seeks payment by the pursuer of the adjudicator’s fees paid by the
defender. In August 2020, the action which had been raised in the sheriff court was remitted
to the Court of Session. In order to distinguish those proceedings from the current
enforcement action I shall continue to refer to them as the sheriff court action. At a
preliminary hearing, it was agreed that this case and the remitted sheriff court action should
call for debate, with 1 day allocated for each case. At the debate hearing I was informed that
the parties had agreed that the remitted sheriff court action should not be the subject of
debate and should be sisted. I shall shortly explain, in brief terms, the dispute, the
adjudication process and the points raised in the court actions, but it is important to note at
the outset that this case involves not only an action for enforcement of an adjudicator’s
decision but also a counterclaim by the defender, and that there is a previously raised sheriff
court action by the pursuer seeking what could be described as final determination of the
parties’ dispute by the court.
Page 3 ⇓
3
The sheriff court action
[3] The defender’s Final Certificate valued the works in the sum of £3,343,223.82. In the
sheriff court action, the pursuer seeks declarator that the true value of the Final Certificate
contract sum should have been £3,711,242.80 and seeks decree for the balance said to be due,
that is, £441,622.78. The pursuer avers inter alia that the Final Certificate failed to
acknowledge the pursuer’s full and proper entitlement in respect of the valuation of
variations and the measured works. The figures relied upon by the pursuer are based upon
worksheets submitted by it to the defender on 21 May 2019. The differences in the parties’
respective valuations of the adjusted contract sum, relating to the valuation of the variations
and measured works, were stated in the worksheets. The pursuer accepts that all sums
certified by the contract administrator have been paid by the defender, but the pursuer
denies that the Final Certificate incorporated all 27 interim certificates issued under the
contract by the contract administrator. The pursuer’s clamed gross value of the contract
sum that should have been stated in the Final Certificate is n ot advanced on the basis of the
Interim Payment Certificate relied upon in the adjudication, discussed below. However, the
sheriff court action concerns the overarching issue of the amount claimed to be due to the
pursuer as the adjusted contract sum.
The dispute referred to adjudication
[4] One of the due dates for an interim payment under the contract was 27 July 2017.
The defender’s architect did not issue an Interim Certificate stating the sums he considered
to be, or have been, due within 5 days after 27 July 2017 in accordance with clause 4.10.1 of
the Standard Conditions. On 10 August 2017, the pursuer issued an Interim Payment Notice
Page 4 ⇓
4
to the defender’s quantity surveyor in terms of clause 4.11.2.2 of the Standard Conditions in
the contract. The Interim Payment Notice stated that the pursuer considered the sum
of £949,556.50 was due to it as at 27 July 2017. Following service of the Interim Payment
Notice, the defender’s architect did not issue a Pay Less Notice in terms of clause 4.12.5
and 4.13 of the Standard Conditions. Accordingly, in terms of clause 4.12.3 of the Standard
Conditions, the pursuer contended that the defender was obliged to make payment of the
whole sum in the Interim Payment Notice. The defender refused to do so. Between
August 2017 and July 2019 interim certificates were issued and the defender made various
payments to the pursuer under the contract. Between November 2019 and January 2020, the
parties corresponded about the pursuer’s entitlement to be paid the balance said to be due.
The defender refused to make payment of the sums claimed by the pursuer.
The adjudication
[5] As noted, on or around 17 March 2020, the pursuer issued a Notice of Adjudication
in terms of clause 9.2 of the Standard Conditions and Rule 1 of Part 1 of the Schedule to the
Scheme for Construction Contracts (Scotland) Regulations 1998 (SI 1998/657) (as amended)
(“the Scheme”) in respect of this dispute. On 20 March 2020, Mr Donny MacKinnon,
Chartered Surveyor, was appointed as the adjudicator. On 23 March 2020, the pursuer
served a Notice of Referral, to which, on 1 April 2020, the defender produced a Response.
On 6 April 2020, the pursuer served a Reply and on 10 April 2020 the defender produced a
Rejoinder. On 14 April 2020, the pursuer served a Surrejoinder and on 17 April 2020, the
defender produced a Response to the Surrejoinder.
[6] In the adjudication, the pursuer valued its entitlement to payment based on a gross
valuation of £3,802,614.87, some £91,372.07 more than the sum of £3,711,242.80 relied upon
Page 5 ⇓
5
in the sheriff court action. In summary, the defender sought to resist payment on the basis
that: (a) the Interim Payment Notice was invalid because: (i) the sum due had been
calculated to the wrong due date (27 July 2018 as opposed to 28 July 2018); (ii) it had failed
to stipulate the relevant clause in the contract under which the notice was being issued,
leading to ambiguity; and (iii) it had been defectively served because it was not copied to
the architect/contract administrator and the defender; (b) in any event, the Final Certificate
issued by the defender on 17 July 2019 was conclusive evidence of sums due to the pursuer
under the contract and, on that basis, the adjudicator was obliged to make a nil award; and
(c) in any event, there had been an oral settlement agreement reached in respect of the
Interim Payment Notice between the defender’s quantity surveyor and the pursuer’s
Mr Hill. In summary, the pursuer’s position on these issues was: (a) the Interim Payment
Notice was valid because: (i) it had been calculated to the correct due date of 27 July 2017;
(ii) there was no requirement to stipulate the relevant clause under which the Interim
Payment Notice was being issued and its terms were sufficient to meet the reasonable
recipient test for such notices; (iii) it had been correctly served as clause 4.11.2.2 only
required notice to be given to the quantity surveyor and the agreed method of service of
electronic communication had been used; (b) on a proper construction of the contract, the
Final Certificate did not preclude enforcement of the pursuer’s pre-existing right to payment
in respect of the Interim Payment Application; and (c) there had been no oral settlement
agreement reached.
The adjudicator’s decision
[7] On 6 May 2020, the adjudicator issued his decision and then on 11 May 2020 issued a
corrected version. In summary, the adjudicator decided that: (a) the Interim Payment
Page 6 ⇓
6
Notice was valid because: (i) the relevant due date was 27 July 2017; (ii) it gave reasonable
notice to the defender’s quantity surveyor of what it was; and (iii) it was served in
compliance with the contract; (b) the Final Certificate did not did not affect the dispute as
regards the Interim Payment Application and he was not obliged to issue a nil award; and
(c) the defender had not satisfied the burden of proof in respect of any settlement agreement;
any agreement reached was only in respect of delaying commencement of adjudication.
[8] In consequence, the adjudicator found the defender was liable to make payment to
the pursuer of £427,578.75, plus VAT, giving a total sum of £513,094.50. The adjudicator also
found the defender was liable to make payment of interest in the amount of £78,361.18 up to
the date of his decision, increasing in the daily amount of £61.46 until payment is made. The
adjudicator also found that the defender, as the unsuccessful party, was liable for his fees in
the amount of £14,373.60 inclusive of VAT.
The present action
[9] In this action, the pursuer seeks enforcement of the adjudicator’s decision. In its
defences and counterclaim the defender identifies two grounds for contesting enforcement.
The first relates to the Final Certificate being conclusive evidence in the adjudication and the
adjudicator having erred in not treating it as such. The second relates to the validity of the
Interim Payment Notice dated 10 August 2017. At the hearing, senior counsel for the
defender accepted that the second issue would require some evidence to be led and that it
could not be dealt with at this stage. On the Final Certificate matter, the key points made by
the defender in its pleadings are:
“The Final Certificate was conclusive evidence in the Adjudication, as provided in
Standard Condition 1.9, because the Adjudication was not commenced wit hin
60 days of the Final Certificate. Reference is made to Answer 13. The defender has
Page 7 ⇓
7
paid all sums due to the pursuer in terms of the Final Certificate. As a result no sum
is due to the pursuer in respect of the 10 August 2017 Notice (described by the
pursuer as an Interim Payment Notice and which was essentially provisional in
nature), which formed the sole basis of the pursuer’s claim to payment in the
Adjudication. The adjudicator should have awarded a nil amount. This issue of the
conclusive evidential nature of the Final Certificate, and its consequences, is a short
and self-contained point. It was raised in the Adjudication. Reference is made in
particular to Paragraphs 1.iii, 61 to 68, 70 and 74 of the Response. The point requires
no oral evidence or other elaboration beyond that which is capable of being provided
during a relatively short hearing, devoid of oral evidence, taking place no later than
any hearing to be held in respect of the pursuer’s pleas-in-law and conclusions.
Without prejudice to that generality, the point does not engage any consideration or
determination of the issue of when the works commenced. In the circumstances it
would be unconscionable for the Court to ignore the point, and the defender is
entitled to have the point decided by way of the decrees of declarator first and third
concluded for in the defender’s Counterclaim, arising as the point does in connection
with the enforcement of the decision of the Adjudicator in terms of Article 8 of the
Standard Conditions…”
These points are reflected in the counterclaim. The pursuer’s position in response is pled as
follows:
“…Explained and averred that the final certificate was not accorded the status of
conclusive evidence in the adjudication by virtue of clause 1.9 of t he Standard form
of building contract. The final certificate had been challenged by the pursuer
timeously (i.e., within sixty days from the date of issue thereof) in the said action in
Kilmarnock sheriff court. Accordingly, in respect of any matter which came to be
challenged in that action - such as the sums truly payable to the pursuer by the
defender under certificates issued pursuant to the Contract - the final certificate
never achieved the status of conclusive evidence, whether in the proceedings in
Kilmarnock or anywhere else. Irrespective of the procedure required to decide the
point about the status of the final certificate in the adjudication, it is not
unconscionable for the Court to decline so to do. That status is a matter of law
arising in the adjudication upon which the adjudicator has arrived at a decision.
Whether his decision on the point of law be right or wrong, it is not a basis in law for
refusing to comply with the contractual obligation to give effect to the decision of the
adjudicator or for the court to refuse an order - such as is here concluded for - to
enforce the prompt implement by the defender of its said contractual obligation. To
do otherwise would be to undermine the policy of the adjudication system…”
In the counterclaim, the defender also seeks recovery of the adjudicator’s fees paid by the
defender.
Page 8 ⇓
8
The issues
[10] It is well-established in the authorities (discussed shortly) that in an action for
enforcement of an adjudicator’s decision the grounds upon which enforcemen t can be
challenged are limited, in effect to matters of jurisdiction and natural justice, and that errors
of law or fact by the adjudicator do not permit a challenge to enforcement. However, as is
explained below, senior counsel for the defender sought t o argue that there was authority in
England to the effect that there was an exception to these general principles, allowing in
certain limited circumstances an error by the adjudicator to be founded upon in the
challenge to enforcement. He argued that this exception should be recognised and followed
by the courts in Scotland and that the defender’s position fell within that exception. The
pursuer resisted that argument. That is the major issue in this case.
[11] The subsidiary issue, which arises only if the defender succeeds, is whether the
defender can recover the fees paid to the adjudicator.
Submissions
Submissions for the pursuer
[12] The defences were unusual in an action for enforcement of an adjudicator’s decision.
There was no question of any jurisdictional error or natural justice or any other matter
falling within the grounds of challenge in an enforcement action. The adjudicator’s decision
was being attacked because it is wrong. That did not warrant a defence to enforcement of
the adjudicator’s decision. It was simply a complaint about an error of fact or law within his
jurisdiction. The Final Certificate point argued by the defender was in fact also about
evidence and the weight the adjudicator thought should be given to the evidence and was
therefore even less available for complaint. It was plainly within the bounds of what the
Page 9 ⇓
9
adjudicator was entitled to do. Reference was made to Carillion Construction Ltd v Devonport
Royal Dockyard Ltd [2006] BLR 15 (at para [84]). If the adjudicator put the wrong level of
weight to particular evidence, that was the misfortune of the losing party. So, whether or
not senior counsel for the defender was correct about the conclusive evidence point it did
not get the defender anywhere. Reference was also made to Amey Wye Valley Ltd v County of
Herefordshire District Council [2016] BLR 698 (at para [30]) and Gillies Ramsay Diamond v PJW
Enterprises Limited 2004 SC 430 (at paras [35] and [36]), and [40]-[43]). In the latter case,
Lord Gill had been fairly forthright about the nature of the errors of law made by the
adjudicator. The view taken by the court was that it was not appropriate to seek to overturn
the decision because it was disfigured by errors of fact or law. Judicial review of the
adjudicator’s decision was not available for intra vires errors of law. That case made it clear
that there is no possible defence based on the decision being wrong.
[13] When an adjudicator’s decision is issued that ipso facto creates liability. There is a
way of recovery: the losing party pays and can then raise an action under section 108 of the
Housing Grants, Construction and Regeneration Act 1996, which might be called an
unwinding action. That is the sole method of dealing with an error of law. The reference to
recovery in Gillies Ramsay Diamond (at para [43]) must mean that the loser has to pay in the
meantime. As the sole method of sorting an adjudicator’s decision that is erroneous is to sue
to get your money back there is a duty to pay and the person found liable can not create a
defence by saying the decision is erroneous. Whatever may be the position in England, one
could not square that with the decision in Gillies Ramsay Diamond, which disallows a defence
based on actual legal error. The defence was one that is not open because it is
fundamentally inconsistent with the statute, the Scheme and the policy of parliament. That
was all to the effect that the adjudicator’s decision shall be binding until subsequent
Page 10 ⇓
10
litigation declares otherwise. The reason why there are adjudicator’s decisions which cannot
be enforced because of such things as jurisdictional or natural justice errors is that in these
cases there is no proper decision and there is an ultra vires nullity.
the case heavily relied upon by the defender, it refers to a claim for declaration, which is
about the need to sue separately for money to be repaid. It is not a defence to an
adjudication enforcement case to say the adjudicator has made even a farcically obvious
error, such as the very blatant error as in Gillies Ramsay Diamond. If what had been issued in
the present case was not an Interim Payment Notice but was a copy of a Shakespeare sonnet,
that would not have been challengeable. The legal ground under section 108 is the implied
an example of how errors are resolved. An unwinding litigation could not be raised until
the losing party complied with the obligation to pay out. Doing it as a counterclaim
involves erecting a defence by another name. The defender could not create a defence in
practice by the kind of procedural arrangement being sought to be followed here.
[15] In Hutton Construction Ltd, it was not all clear where the exceptions identified by
Coulson J came from. In the present case, there was no common ground that the defender’s
position should be dealt with at this hearing. However, in Hutton Construction Ltd (from
para [14]) Coulson J deals with circumstances in which the court will hear the points even
where there is no agreement. Anything said there that is inconsistent with the decision in
Gillies Ramsay Diamond should be rejected. It was unclear from Hutton Construction Ltd
whether or not payment under the adjudicator’s award had been made. Reference was
para [48]). The idea of sorting cash flow problems by quick decisions would be subverted if
Page 11 ⇓
11
Hutton Construction Ltd were to be followed by this court. The approach in Hutton
Construction Ltd failed badly as an attempt to protect the statutory scheme. If speedy
enforcement can be stopped by means of a counterclaim then we would be heading back to
the old days of various assorted manoeuvres to avoid payment. The reference in Hutton
Construction Ltd to unconscionability was inadequate. For these reasons the points raised by
the defender should not be entertained.
[16] If that was wrong then turning to the Final Certificate point, a provision about
conclusive evidence falls to be construed strictly as in Autoridad del Canal de Panama v Sacyr
SA [2017] 1 AER (Comm) 916 (at para [81], sub-paragraph 6). Clause 1.9.1 refers to
conclusive evidence about the contract sum. The claim here was not about that; rather, it
was about work on account. It was not about a matter on which the Final Certificate is given
any standing by clause 1.9.1. The claim was about how much the pursuer should get paid
for each particular month. So on that short basis the whole argument for conclusive
evidence fell down. The Final Certificate had nothing to do with interim payment.
[17] If that was incorrect, one needed to pay attention to the exceptions stated in
clause 1.9.3. The sheriff court action canvassed the issue of how much the pursuer was to be
paid. On a proper construction of the provisions, that would knock out the things on which
the Final Certificate would be conclusive. The removal of the conclusive evidence rule
operated for all purposes, not just for the sheriff court action but also to the adjudication
proceedings. The barrier having been broken by the court, the subsequent adjudication was
not affected by the conclusive effect of the certificate just because no adjudication was raised
within 60 days. Trustees of the Marc Gilbard 2009 Settlement Trust v OD Developments and
matter of interpretation of the clause. The commentary about that case disagreed with the
Page 12 ⇓
12
decision. The judge had not given appropriate weight to the fact that these clauses have to
be construed strictly. But in any event the case was distinguishable on its facts. The literal
language of the provision says it is not conclusive regarding the matters raised in the
litigation. If Coulson J was correct in Trustees of the Marc Gilbard 2009 Settlement Trust, then
how could one sensibly choose to raise proceedings and later go to adjudication? Similarly,
on Coulson J’s approach, if adjudication happened within 60 days then in subsequent
proceedings about the same issue it must be the case that the Final Certificate would be
conclusive. The adjudication would be bound to be self-defeating, which is absurd. That
result was avoided if the conclusive evidence rule remains broken for subsequent
proceedings. It has to be the case that after 60 days the certificate is no more conclusive than
it was within the 60 days.
[18] As to the defender’s final point raised in the counterclaim, seeking repayment of the
adjudicator’s fees, it was not open to the court in an action on the merits of the dispute to
order payment to the ultimately successful losing party in the adjudication. Authority for
that could be found in Castle Inns (Stirling) Ltd v Clark Contracts Ltd, referred to in Halsbury
Homes Ltd v Adam Architecture Ltd [2016] BLR 419 (at paras [50]-[59] and [63]-[64]).
Lord Drummond Young made clear that the allocation of the adjudicator’s fees is incidental
and not something one is entitled to get back at all.
Submissions for the defender
[19] In summary, notwithstanding the basic nature of the adjudication enforcement
policy captured by the concept of “pay now and argue later” there was an ex ception to those
principles. That exception was founded upon the two authorities of Caledonian Modular
Page 13 ⇓
13
Wilson Properties (London) Ltd and there was no authority to say these were wrongly decided.
Both cases readily acknowledged the “pay now argue later” proposition and case law such
as Carillion Construction Ltd v Devonport Royal Dockyard Ltd (and by implication
Gillies Ramsay Diamond v PJW Enterprises Limited), but indicate that there is an exception.
The submission in the note of argument for the pursuer that in fact one still had to make
payment of the sum awarded by the adjudicator to come within the exception was obviously
wrong. There could not be an exception any more if one has paid. It was not correct that in
either of the two cases quoted payment was required. Hutton Construction Ltd was an
enforcement case. Reference was made to Fenice Investments Ltd v Jerram Falkus Construction
Ltd (at paras [48] and [49]). The present case fell within the exception.
[20] On the question of the conclusive nature of the Final Certificate the adjudicator was
manifestly wrong. This was supported by Trustees of the Marc Gilbard 2009 Settlement Trust v
OD Developments and Projects Ltd. The sum finally certified here had been paid by the
defender what the pursuer was seeking to do was go back to years before and say the
balance due at that stage was not paid and the pursuer is entitled to it. The suggestion of a
disconnect between interim and final payments was unsound and ignored the contractual
relationship. Each interim certificate superseded the previous one: Scottish Equitable Plc v
Miller Construction Ltd 2002 SCLR 10 (at 20B). One then comes to the Final Certificate which
states the amount the contractor is to be paid. While in Hutton Construction Ltd the judge
had explained the scope of the second exception, that related to the factual circumstances of
the previous case, Caledonian Modular Ltd v Mar City Developments Ltd, and when one read
the rest of his judgement the exception was not limited to those issues. The judge referred to
a matter of construction being beyond rational justification. The test was whether there is a
short and self-contained issue which can be dealt with in a short hearing and it would be
Page 14 ⇓
14
unconscionable (that is, unreasonable) to ignore it. It would be enough if the adjudicator’s
decision is demonstrably wrong and manifestly wrong. The principles put forward in these
cases should be accommodated within the strictures of cases such as Carillion Construction
Ltd and Gillies Ramsay Diamond v PJW Enterprises Limited. The law had moved on and
exceptions to the general principles have been identified. If one proceeds on the basis of the
exception as explained in Hutton Construction Ltd none of that cuts across the essential “pay
now and argue later” principles of adjudication. Indeed, to the contrary, the policy one
would expect would be support the existence of such a narrow or limited exception, not
least to avoid unnecessary proliferation of litigation. Accordingly, in light of that exception,
the court could entertain the point.
[21] The proper interpretation of clause 1.9 of the contract was as decided by Coulson J in
Trustees of the Marc Gilbard 2009 Settlement Trust v OD Developments and Projects Ltd. The
reasoning in that case was manifestly correct. It recognised and gave effect to the purpose of
the conclusivity clause. The judge correctly decided that the extent to which the conclusive
status is lost is in the action timeously raised. This adjudication was a “smash and grab one”
saying that because no Pay Less notice was issued the interim certificate requires payment.
That was not a matter raised in the sheriff court action and therefore the conclusive evidence
point raised there was different in substance. When the adjudication raised something not
raised before, it was caught by the conclusive evidence point. Accordingly, Coulson J was
manifestly correct (at para [22]) regarding the poin t that the proper interpretation of the
clause does not allow proceedings to be issued later, relying on the Final Certificate not
being conclusive evidence. So, the position was that the issue before the adjudicator was
one on which he reached the manifestly wrong decision which can be demonstrated wholly
in accord with the conditions identified in Hutton Construction Ltd (para [17]), which
Page 15 ⇓
15
represents an exception that the court should recognise and give effect to. One would need
a brief evidential hearing on the Interim Payment Notice argument but that still fell within
the exception, which allows oral evidence if necessary.
[22] The defender was also entitled to recover the fees it had paid to the adjudicator. The
defender avers, by reference to email correspondence involving its solicitors, that payment
was made by the defender and that the adjudicator has confirmed full payment having been
made by the defender. It was a necessary legal consequence of adjudication provisions,
which are consistent with the provisions of the 1996 Act, that parties must have a directly
enforceable right to recover any overpayment to which an adjudicator’s decision can be
shown to have led. The right arises by way of an implied term to that effect in the
[2015] UKSC 38 (para [23]). Such a right arises out of restitutionary considerations
(para [24]). On the same underlying principles and analysis the same right arises in respect
of any payment of adjudicator’s fees which would not have been due or paid had it not been
for an error by the adjudicator which is capable of being addressed by way of a defence to,
and a counterclaim in response to, an enforcement action. The defender ought t o have a
directly enforceable right to recover the fees which were essen tially overpaid on that
premise.
Reply for the pursuer
[23] Aspect Contracts Ltd v Higgins Construction plc concerned payment made under the
dispute and did not address incidental questions regarding fees and interest as in Castle Inns
(Stirling) Ltd v Clark Contracts Ltd and Halsbury Homes Ltd v Adam Architecture Ltd. These
first instance cases were more in point. In relation to Trustees of the Marc Gilbard 2009
Page 16 ⇓
16
Settlement Trust v OD Developments and Projects Ltd the criticisms made by the commentators,
narrated at the beginning of the case report, were adopted, although the pursuer had its own
criticisms. Clause 1.9.3 states that the conclusive effect is lost save in respect of the matt ers
to which those proceedings relate. It was the subject matter that was important. So, as the
sheriff court action discussed what was to be paid in the contract sum, if that was a question
at issue and included the Interim Payment Notice from 2017 and the adjudication, then the
conclusive evidence rule had been removed by the sheriff court litigation for the
adjudication as well. The Scottish Equitable Plc case, referred to by senior counsel for the
pursuer, was beside the point. The issue here was what should have been paid in 2017. The
decision in Hutton Construction Ltd v Wilson Properties (London) Ltd had not been the subject
of any subsequent English authority. The exceptions it referred to were an invention and
not justified by appellate decisions or what the statutory regime states. To that extent, it was
contrary to appellate authority, particularly in Gillies Ramsay Diamond v PJW Enterprises
Limited. The decision in S & T (UK) Ltd v Grove Developments Ltd [2019] BLR 1 was in some
respects inconsistent with Hutton Construction Ltd v Wilson Properties (London) Ltd. The court
held that it was a precondition of raising a true value adjudication that the sum in the
“smash and grab” adjudication was paid in advance. In England the courts have been
troubled by a number of cases despite it being said that the exception only applies in very
rare circumstances. Many parties have tried to fit their cases into that category. This served
to reflect that the purpose of the statute was that such exceptions do not exist. Even if they
do exist, the guidelines in Hutton Construction Ltd v Wilson Properties (London) Ltd did not
include scope for an argument such as that of the defender in this case about the conclusive
evidence clause. The class of case covered by the exception would, for example, be one
which is self-evidently time-barred.
Page 17 ⇓
17
Decision and reasons
Relevant legal principles
[24] Paragraph 23(2) of the schedule to the Scheme for Construction Contracts (Scotland)
Regulations 1998 (as amended), which reflects the terms of section 108(3) of the Housing
Grants, Construction and Regeneration Act 1996, and applies here, states:
“(2) 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 agree to
arbitration) or by agreement between the parties.”
There are two decisions of the Supreme Court which contain, for present purposes, helpful
observations about these terms, although the issues involved do not relate directly to those
[2015] UKSC 38, Lord Mance (with whom Lord Wilson, Lord Sumption, Lord Reed and
Lord Toulson agreed) said:
“14. By providing that the decision of an adjudicator is binding and that the parties
shall ‘comply with it’, paragraph 23(2) of the Scheme makes the decision enforceable
for the time being. It is enforceable by action founded on the contractual obligation
to comply with the decision combined, in a normal case, with an application for
summary judgment. The limitation period for enforcement will be six years from the
adjudicator’s decision. But the decision is only binding and the obligation to comply
with it only lasts ‘until the dispute is finally determined’ in one of the ways
identified. By use of the word ‘until’, paragraph 23(2) appears to contemplate that
there will necessarily be such a determination. The short time limits provided by
paragraph 19(1) also indicate that adjudication was envisaged as a speedy
provisional measure, pending such a determination. But there is nothing to prevent
adjudication being requested long after a dispute has arisen and without the
commencement of any proceedings. Further, it seems improbable that the Scheme
imposes on either party any sort of obligation to start court or arbitration
proceedings in order to confirm its entitlement. Either or both of the parties might
understandably be content to let matters rest.
…
Page 18 ⇓
18
17. Without the ability to recover such a payment, the Scheme makes no sense.
Adjudication is conceived as a provisional measure. At a cash flow level, Higgins
remains entitled to the payment unless and until the outcome of legal proceedings,
arbitration or negotiations, leads to a contrary conclusion. But at the deeper level of
the substantive dispute between the parties, the parties have rights and liabilities,
which may differ from those identified by the adjudication decision, and on which
the party making a payment under an adjudication decision must be entitled to rely
in legal proceedings, arbitration or negotiations, in order to make good a claim to
repayment on some basis…
…
19. I have no difficulty in accepting that Aspect could at any time, from at least the
development in early 2005 of the original dispute, have asked the court to declare
that it had not committed any breach of contract or incurred any tortious liability to
Higgins, and that the court would have regarded proceedings of this nature for a
declaration as entirely admissible and appropriate
…
29. …What the Scheme contemplates is the final determination of the dispute
referred to the adjudicator, because it is that which determines whet her or not the
adjudicator was justified in his or her assessment of what was due under the
contract.
…
32. …In finally determining the dispute between Aspect and Higgins…the court
must be able to look at the whole dispute. Higgins will not be confined to the points
which the adjudicator in his or her reasons decided in its favour. It will be able to
rely on all aspects of its claim for £822,482 plus interest. That follows from the fact
that the adjudicator’s actual reasoning has no legal or evidential weight. All that
matters is that a payment was ordered and made, the justification for which can and
must now be determined finally by the court.”
[25] In Bresco Electrical Services Ltd (in liquidation) v Michael J Lonsdale (Electrical) Ltd
[2020] UKSC 25, Lord Briggs (with whom Lord Reed, Lord Kitchin, Lord Hamblen and Lord Leggatt
agreed) said:
“12. A very important underlying objective, both of adjudication and of other
recommendations which were eventually implemented in the 1996 Act, was the
improvement of cash flow to fund ongoing works on construction projects. A
particular concern was that a dispute between (say) a sub-contractor and a
sub-sub-contractor which could only be resolved by litigation or arbitration could
Page 19 ⇓
19
in the meantime disrupt the entire project while a refusal of interim payment led to
the cessation of significant works. The motto which has come to summarise the
recommended approach is ‘pay now, argue later’. Adjudication was one of five
reforms introduced by Part II of the 1996 Act designed to facilitate the realisation of
the cash flow aspiration behind that motto… It is achieved by rigorous time limits
for the conduct of the adjudication, the provisionally binding nature of the
adjudicator’s decision and the readiness of the courts (and in particular the TCC) to
grant speedy summary judgment by way of enforcement, leaving any continuing
disagreement about the merits of the underlying dispute to be resolved at a later
date, by arbitration, litigation or settlement agreement.
13. But solving the cash flow problem should not be regarded as the sole objective of
adjudication. It was designed to be, and more importantly has proved to be, a
mainstream dispute resolution mechanism in its own right, producing de facto final
resolution of most of the disputes which are referred to an adjudicator. Furthermore
the availability of adjudication as of right has meant that many disputes are speedily
settled between the parties without even the need to invoke the adjudication process.
This is in part because Parliament chose to confer the right to adjudicate ‘at any
time’, so that it can be and is used to resolve disputes eg about final accounts
between the parties after practical completion, rather than merely at the interim
stage: see Connex South Eastern Ltd v MJ Building Services Group plc [2005] EWCA
Civ 193; [2005] 1 WLR 3323, paras 34-38 per Dyson LJ, who concluded that in
section 108: ‘The phrase ‘at any time’ means exactly what it says.’
14. There is a chorus of observations, from experienced TCC judges and textbook
writers to the effect that adjudication does, in most cases, achieve a resolution of the
underlying dispute which becomes final because it is not thereafter challenged.
15….the overall picture of most adjudication decisions achieving de facto final
resolution of the underlying dispute appears clear.
…
26. Finally, when compared with arbitration and litigation, speed and economy come
at an inevitable price in terms of reliability. There is no formal avenue of appeal
against an adjudicator’s decision, and the court will in general summarily enforce it,
regardless whether it is correct on the merits, provided that the adjudicator acted
independently and within their jurisdiction. But a dissatisfied party can insist on
having the dispute redetermined de novo in court or by arbitration (if available) even
though the adjudicator’s decision will continue to bind in the meantime.”
[26] For present purposes, I can draw certain clear points from these observations.
Firstly, the common practice will be for the dispute to be referred to adjudication. The
parties do not normally bring litigation to seek final determination of the dispute. Rather,
Page 20 ⇓
20
much more often they simply adhere to the adjudicator’s decision or perhaps use that as a
factor in reaching agreement to settle their dispute. However, final determination by the
court (or by arbitration, if agreed) remains built-in as an available option. Secondly, if the
losing party refuses to comply with the adjudicator’s decision, the other party will seek
enforcement. This speedy mechanism will commonly make it difficult for litigation (or
arbitration) for final determination of the dispute to have reached a stage where it can be
dealt with at or around the time of the enforcement proceedings. But, thirdly, while it is
very commonly the case that no litigation (or arbitration) is raised in respect of the dispute
prior to the adjudication or the enforcement proceedings, that is obviously not ruled out,
and parties have their ordinary rights to bring the dispute to the court at any time, whether
before, during or after the adjudication. This is consistent with the parties’ ability also to
refer a dispute to adjudication “at any time”. Thus, there may, albeit very rarely, be a route
towards final determination of the dispute currently in place at the time of the adjudication
or by the time enforcement proceedings come to be dealt with. As a consequence, in such
rare circumstances, if the court is able to finally determine the dispute prior to making an
enforcement order then there will be no requirement to comply with the adjudicator’s
decision. Fourthly, in seeking final determination, as Lord Mance made clear, the parties
may rely upon rights and obligations not ventilated in the adjudication but nonetheless
relevant to the dispute.
Coulson J’s “exception”
[27] The decision of Coulson J (as he then was) in Hutton Construction Ltd v Wilson
Properties (London) Ltd is of central significance to the arguments in the present case and it is
therefore necessary to set out the key passages in some detail. Coulson J stated:
Page 21 ⇓
21
“3. The starting point, of course, is that, if the adjudicator has decided the issue that
was referred to him, and he has broadly acted in accordance with the rules of
natural justice, his decision will be enforced: see Macob Civil Engineering Ltd v
Morrison Construction Ltd [1999] CLC 739; [1999] BLR 93. Adjudication decisions
have been upheld on that basis, even where the adjudicator has been shown to
have made an error: see Bouygues (UK) Limited v Dahl-Jensen (UK) Ltd
[2001] CLC 927; [2000] BLR 522. Chadwick LJ summarised the principal reason for this
‘the need to have the 'right' answer has been subordinated to the need to have an
answer quickly.’
4. There are two narrow exceptions to this rule. The first, exemplified by Geoffrey
case the calculation error was raised by the defendant in a separate Part 8 claim.
Because the error was admitted by everyone, including the adjudicator, and
because there was no arbitration clause, which meant that the court had the
jurisdiction to make a final decision on the point, there were no reasons why, in
that case, the error could not be corrected…
5. The second exception concerns the proper timing, categorisation or description
of the relevant application for payment, payment notice or payless notice, and
could be said to date from Caledonian Modular Ltd v Mar City Developments Ltd…
In that case, the defendant had raised one simple issue, in a detailed defence and
counterclaim served at the outset, to the effect that a small group of documents
could not have constituted a claim for or notice of a sum due for payment. If that
argument was right, it was agreed that the claimant was not entitled to summary
judgment. At paragraph 11 of my judgment in that case, I reiterated the general
principle that it was not open to a defendant to seek to avoid payment of a sum
found due by an adjudicator by raising the very issue on which the adjudicator
ruled against the defendant in the adjudication. I went on:
‘12. That is, of course, the general rule and it will apply in 99 cases out of 100.
But there is an exception. If the issue is a short and self-contained point, which
requires no oral evidence or any other elaboration than that which is capable of
being provided during a relatively short interlocutory hearing, then the
defendant may be entitled to have the point decided by way of a claim for a
declaration. That is what happened, for example, in Geoffrey Osborne v Atkins
Rail Ltd [2010] BLR 363. It is envisaged at paragraph 9.4.3 of the TCC Guide
that separate Part 8 proceedings will not always be required in order for such
an issue to be decided at the enforcement hearing.
13. It needs to be emphasized that this procedure will rarely be used …..’”
Coulson J then focused upon the second exception referred to in para [5] of his judgment
and said:
Page 22 ⇓
22
“8. The authorities since Caledonian Modular demonstrate that, very often, the point
taken by the defendant is a straightforward argument to the effect that the
adjudicator was wrong and that, either with regard to its timing, or its content, the
relevant payment notice was invalid and/or that the pay less notice was valid and
prevented payment. In those circumstances, the defendant has issued Part 8
proceedings seeking a declaration to that effect. The claimant may issue its own
enforcement claim or, as the cases show, the parties may agree that, if the
defendant loses its Part 8 claim, it will pay the sums awarded by the adjudicator in
any event.”
He then referred to decisions in five cases after Caledonian Modular and went on to say:
“10. These cases all involved a significant degree of agreement between the parties.
In particular, they all involved CPR Part 8 claims issued by the defendant
challenging the decision of the adjudicator, and seeking a final determination by
way of court declarations. They all involved a tacit understanding that the parties'
rights and liabilities turned on the decision as to whether or not the particular
notice had been served in time and/or was a valid application for payment or
payment/pay less notice.
11. Furthermore, the issue of a separate Part 8 claim in those circumstances was not
simply a matter of form. It was important in two respects. First, it provided a
vehicle whereby the defendant could set out in detail its challenge to the
adjudicator's decision. This meant that the claimant could see and understand the
precise basis of the challenge and the consequential declarations sought.
12. Secondly, the existence of a separate Part 8 claim meant that the TCC knew
from the outset what was going to be involved at any subsequent hearing…
13. In my view, the practice which has grown up around challenges of this sort has
worked relatively well, but only where there has been a large measure of consent
between the parties from the outset. The problems in the present case, and in
many other recent cases, have arisen because there has been no such consent.
14. Many defendants consider that the adjudicator got it wrong. As I said in
Caledonian Modular, in 99 cases out of 100, that will be irrelevant to any enforcement
application. If the decision was within the adjudicator's jurisdiction, and the
adjudicator broadly acted in accordance with the rules of natural justice, such
defendants must pay now and argue later. If the degree of consent noted in the
authorities set out in Section 3 above is not forthcoming, then the following
approach must be adopted.
15. The first requirement is that the defendant must issue a CPR Part 8 claim setting
out the declarations it seeks or, at the very least, indicate in a detailed defence and
counterclaim to the enforcement claim what it seeks by way of final declarations.
For the reasons already explained, I believe a prompt Part 8 claim is the best
option.
Page 23 ⇓
23
…
17. On this hypothesis, there is a dispute between th e parties as to whether or not
the defendant is entitled to resist summary judgment on the basis of its Part 8
claim. In those circumstances, the defendant must be able to demonstrate that:
(a) there is a short and self-contained issue which arose in the adjudication and
which the defendant continues to contest;
(b) that issue requires no oral evidence, or any other elaboration beyond that which
is capable of being provided during the interlocutory hearing set aside for the
enforcement;
(c) the issue is one which, on a summary judgment application, it would be
unconscionable for the court to ignore.
18. What that means in practice is, for example, that the adjudicator's construction
of a contract clause is beyond any rational justification, or that the adjudicator's
calculation of the relevant time periods is obviously wrong, or that the
adjudicator's categorisation of a document as, say, a payment notice when, on any
view, it was not capable of being described as such a document. In a disputed case,
anything less would be contrary to the principles in Macob, Bouygues and Carillion.
19. It is axiomatic that such an issue could still only be considered by the court
on enforcement if the consequences of the issue raised by the defendant were
clear-cut. In Caledonian Modular, it was agreed that, if the document was not a
payment notice - and it plainly was not - then the claimant's case failed. If the
effect of the issue that the defendant wishes to raise is disputed, it will be most
unlikely for the court to take it into account on enforcement. Any arguable
inter-leafing of issues would almost certainly be fatal to a suggestion by the
defendant that their challenge falls within this limited exception.
20. The dispute between the parties as to whether or not the issue should be dealt
with on enforcement would have to be dealt with shortly at the enforcement
hearing itself. The inevitable time constraints of such a hearing will mean that it
will be rare for the court to decide that, although the issue and its effect is disputed,
it can be raised as a defence to the enforcement application.
21. In my view, many of the applications which are currently being made on this
basis by disgruntled defendants (and which are not the subject of the consensual
process noted above) are an abuse of the court process. The TCC works hard to
ensure that there is an enforcement hearing within about 28 days of
commencement of proceedings. The court does not have the resources to allow
defendants to re-run large parts of an adjudication at a disputed enforcement
hearing particularly in circumstances where the adjudication may have taken
28 days or 42 days, whilst the judge might have available no more than two hours
pre-reading and a two-hour hearing in which to dispose of the dispute.”
Page 24 ⇓
24
[28] In considering the approach taken in England, I do so with some diffidence because I
am not sufficiently au fait with the procedure, but on my basic understanding the
development of the court’s approach can be traced as follows. In Fenice Investments Inc v
Jerram Falkus Construction Ltd Coulson J said (at para [48]):
“I am in no doubt that an adjudicator's decision is binding on the parties and, save in
exceptional circumstances, it must be complied with, no matter how quick or slow
the Pt 8 procedure to challenge that decision. A losing party who makes a challenge
to the decision by using the CPR Pt 8 procedure can do so, but in the ordinary case
he must, in the meantime, pay the sum found to be due.”
Thereafter, in Caledonian Modular Limited v Mar City Developments Limited Coulson J
indicated the exceptional circumstances which might allow a challenge in respect of an
error, not involving jurisdiction or natural justice. That appears to have led to a number of
situations in which parties in English proceedings have sought to challenge the enforcement
of an adjudicator’s decision on the basis of an error. As quoted above, in Hutton Construction
Ltd v Wilson Properties (London) Ltd Coulson J referred to many such applications by
disgruntled defendants being an abuse of the court process. Accordingly, Coulson J then
sought to take a more restrictive approach, identifying the limited circumstances in which
an application challenging enforcement on the grounds of an error could be entertained. By
way of example, that approach was subsequently applied in ISG Construction Ltd v Platform
Interior Solutions Ltd [2020] EWHC 1120 (TCC) in which a few days after having granted
summary judgment in favour the defendant in enforcement proceedings, the judge then
heard the claimant’s case, brought under Part 8 seeking declarations including that the
decision of the adjudicator was wrong and beyond rational justification. The judge
concluded that the test in Hutton Construction Ltd v Wilson Properties (London) Ltd was not
met, firstly because the point raised by the plaintiff was not raised in the adjudication and
Page 25 ⇓
25
secondly because the issue raised went beyond a short point of construction and required
valuation evidence.
[29] In understanding the exception which Coulson J identifies, it is of crucial
importance to note that he is referring to situations in which an application for final
determination has been made and is capable of being dealt with at or around the same
time as the enforcement action (see eg paras [10] and [15] of his judgment). This was
encapsulated by Mr Jonathan Davies QC in his judgment in Bouygues (UK) Limited v Febrey
Construction Ltd) who noted that there were two sets of proceedings listed for hearing
before the court. The first was the defendant’s application for summary judgment in
respect of the enforcement of an adjudicator’s decision and the second was the claimant’s
proceedings under Part 8 as to the interpretation of the parties’ contract. The judge stated
(para [2]) that:
“This case is an illustration of the practice of parties seeking to upset an
Adjudicator's Decision by way of the swift final determination of the dispute.”
[Emphasis added]
He then made reference to Caledonian Modular Limited v Mar City Developments Limited.
[30] While the approach is described as an exception, I do not view it as an exception in
the ordinary sense to the general principles of law as to how enforcement can be challenged.
Rather, it is an exception in the sense that an application for final determination is ready to
be heard and is sufficiently short and focused to be dealt with at or around the time of the
enforcement application. However, it might equally be said that this is not an exception at
all, but instead is simply an application of the basic principles of section 108(3) and
paragraph 23(2) of the Scheme as to final determination. So, in the vast majority of
situations a final determination issue will not be capable of being considered at the same
Page 26 ⇓
26
time as an enforcement application, but the exception allows that to occur in very limited
circumstances where final determination can swiftly be dealt with. Put slightly differently,
final determination by the court involves consideration of the dispute rather than merely a
challenge to the adjudicator’s decision, but commonly it will incidentally involve a challenge
to the adjudicator’s decision in the sense that the contention is that, in reaching the final
determination, what the court should decide differs from the adjudicator’s decision because
the adjudicator erred.
[31] In this jurisdiction, there is of course no Part 8 procedure. However, as I have noted,
either party may raise proceedings for final determination of the dispute at any time. One
possibility (used in the present case) is to seek to lodge a counterclaim in the commercial
action in which enforcement is sought. A counterclaim can of course relate to a matter
forming part of, or arising out of the grounds of, the action by the pursuer or it can seek a
decision which is necessary for the determination of the question in controversy between the
parties. In an ordinary action, a counterclaim can simply be lodged. In a commercial action,
a motion to lodge a counterclaim is required and the authority of the commercial judge is
required to permit it (Rule of Court 47.7(1)). The approach taken by that rule acknowledges
that a counterclaim can delay the resolution of the primary action.
[32] The preliminary question that arises in this case is whether the court should follow
the principle behind Hutton Construction Ltd v Wilson Properties (London) Ltd which, as I have
said, I interpret as allowing an application for final determination, if that is suitable for swift
disposal, to be dealt with at or around the time of the enforcement hearing. I see no real
difficulty with that principle. The law is clear that the decision of the adjudicator is binding
(subject to the limited areas of challenge) until final determination and as I have noted there
may, at least potentially, be circumstances in which, in the interests of justice, final
Page 27 ⇓
27
determination can properly be made at or around the time of the enforcement proceedings.
For practical reasons, however, those cases are likely to be very few and far between.
Commonly, no proceedings will have been raised prior to the referral to the adjudicator.
Enforcement proceedings will normally be raised shortly after the adjudicator’s decision, if
payment is not received. There is therefore in most situations a limited time for the losing
party to raise final determination proceedings (whether in a separate action or a
counterclaim) which can be ready for determination at the enforcement hearing. Any such
proceedings will require pleadings, sufficient time for adjustment, and discussion of the
appropriate procedural way forward. Whether in any particular case there is a means of
achieving final determination at or around the time of the enforcement hearing, and it is
appropriate to have that heard, will be a matter for the commercial judge dealing with the
case to determine having regard to the relevant circumstances.
[33] That leads on to the question of whether the details of the approach of Coulson J in
Hutton Construction Ltd v Wilson Properties (London) Ltd should be used as identifying when
it will be appropriate to allow the final determination matter to be heard in the context of
there also being an enforcement action. I broadly accept the approach he takes, but the
precise scope of what he describes as the exception may not be entirely clear. As quoted
above, at para [5] he describes the second exception as concerning the proper timing,
categorisation or description of the relevant application for payment, payment notice or
payless notice. However, having described the conditions for allowing the application to be
heard he refers, in para [18], again quoted above, to examples including whether that the
adjudicator's construction of a contract clause is beyond any rational justification, or that the
adjudicator's calculation of the relevant time periods is obviously wrong, or that the
adjudicator's categorisation of a document is of that nature. It may be the case that the
Page 28 ⇓
28
descriptions in these two paragraphs are indeed linked and that the reference to
construction of a contract clause is in the context of, for example, the categorisation of the
relevant document. But in understanding the boundaries of what is described as an
exception of this important nature, it would be preferable if a bright line could be drawn.
[34] Nonetheless, in my view, Coulson J’s approach should be treated with respect and as
a broadly helpful indication of the circumstances in which final determination can be
reached in the context of there also being en forcement proceedings. However, I go no
further than repeating that in this jurisdiction it will be a matter for the judge dealing with
the case to decide if that can occur. It will often be very unusual for the final determination
matter to be, as it were, “oven ready” at the time of the enforcement hearing and the use of a
counterclaim or action to try to stymie enforcement without the justification that it can
suitably be dealt with at the hearing is to be strongly discouraged.
[35] In the present action, however, the procedural circumstances are indeed rather
unusual. As I have noted, the sheriff court action was raised by the pursuer in 2019. If, as
seems clear, it is to be viewed as seeking resolution of the final sums to be paid to the
pursuer by the defender, it is an action for final determination of their dispute. The
adjudicator’s final decision was issued on 11 May 2020 and proceedings to enforce it were
raised on 8 June 2020. A motion was enrolled on 14 July 2020 by the defender to lodge a
counterclaim. The motion was not opposed and was granted. The pursuer was given time
to respond to the counterclaim. The pleadings in the summons, defence, counterclaim and
answers were then adjusted, with adjustments completed on 18 August 2020. A substantive
hearing, in the form of a 2 day diet of debate, on both the remitted sheriff court action and
the enforcement proceedings was then fixed for 19 and 20 November 2020. The pursuer did
not in the ordinary sense, and as described by Coulson J in Hutton Construction Ltd in his
Page 29 ⇓
29
reference to a number of other English cases, consent to the issues being dealt with at the
same hearing. But, as I have said, the pursuer did not oppose the motion to lodge the
counterclaim and in this case adequate time has been available to the parties to refine their
pleaded positions on the counterclaim issues.
[36] If I were to apply the approach taken in Hutton Construction Ltd, I would conclude
that the counterclaim does not fall within the criteria set out therein. Firstly, the issue raised
is not (as I understood senior counsel for the defender to accept) about the proper timing,
categorisation or description of the relevant application for payment, payment notice or
payless notice. Secondly, (taking for the moment para [18] in Hutton Construction Ltd as
expressing a wider test) it is not possible to conclude that the adjudicator’s decision is
“beyond rationally justifiable”. The relevant contractual provisions state:
“1.9.1 Except as provided in clauses … 1.9.3 … the Final Certificate shall have effect
in any proceedings under or arising out of or in connection with this Contract
(whether by adjudication, arbitration or legal proceedings) as: …
.2 conclusive evidence that any necessary effect has been given to all the terms of
the Contract which require that an amount be added to or deducted from the
Contract Sum or that an adjustment be made to the Contract Sum… ;
.3 conclusive evidence that all and only such extensions of time, if any, as are due
under clause 2.28 have been given; and
.4 conclusive evidence that the reimbursement of direct loss and/or expense, if
any, to the Contractor [i.e. the pursuer] pursuant to clause 4.23 is in final
settlement of all and any claims which the Contractor has or may have arising
out of the occurrence of any of the Relevant Matters, whether such claim be for
breach of contract, duty of care, statutory duty or otherwise.
… [1.9].3 If adjudication, arbitration or other proceedings are commenced by either
party within 60 days after the Final Certificate has been issued, the Final Certificate
shall have effect as conclusive evidence as provided in clause 1.9.1 save only in
respect of the matters to which those proceedings relate.”
In Trustees of the Marc Gilbard 2009 Settlement Trust v OD Developments and Projects Ltd
Coulson J held that the Final Certificate did not have effect as conclusive evidence in the
Page 30 ⇓
30
proceedings actually raised within the specified period but it constituted conclusive
evidence in any proceedings not raised within that period. Senior counsel for the pursuer
submitted that an alternative interpretation made more commercial sense: as long as at least
one set of proceedings was raised timeously, the Final Certificate would not, in terms of
clause 1.9.3, as strictly construed, have conclusive effect in any later claims in respect of the
matters to which the first set of proceedings relate. The arguments presented by senior
counsel for the pursuer in relation to the issue of construction of clause 1.9, read along with
the points made by the commentators in the case report, demonstrate that there are
legitimate and properly arguable reasons why the interpretation reached in Trustees of the
Marc Gilbard 2009 Settlement Trust v OD Developments and Projects Ltd may not be correct.
That plainly suffices to indicate that the test of the adjudicator’s interpretation being
“beyond any rational justification” is not met. All of that said, in this case the pursuer did
not oppose the lodgement of the counterclaim and did not seek immediate enforcement of
the adjudicator’s decision. As the issue in the present case called for a debate after a
reasonable period of adjustment of the pleadings, and by implication the pursuer permitted
the defender, no doubt for pragmatic reasons, to develop its challenge in full, it might be
open to argument that it is not necessary for this court to take the same restricted approach
as in Hutton Construction Ltd.
[37] However, there is a much more central point in this case: does the counterclaim seek
final determination of the dispute between the parties? In my opinion, it clearly does not.
As I have noted, the question of validity of the Interim Payment Notice raised in the
counterclaim was reserved for later determination. The Final Certificate point in the
counterclaim is presented as a challenge to the adjudicator’s decision. It is something that
arises from the adjudication and proceeds upon the basis that the adjudication occurred
Page 31 ⇓
31
outwith the 60 day period. If successful, it will show the adjudicator’s decision to be
incorrect. But it does not give rise to the final determination of the full dispute between the
parties. That will be highly likely to involve the earlier payment notices, interim certificates
and the Final Certificate. There are extant proceedings raised originally in the sheriff court
and now before this court about the overarching issue of the sums said to be due to the
pursuer based upon at least some of that documentation. It was not suggested that these
extant proceedings can somehow be ignored for the purposes of final determination of the
parties’ dispute or that the contention in the counterclaim about conclusive evidence would
itself allow final determination of the dispute. On the contrary, the extant proceedings
plainly cannot be disregarded as they deal with the dispute about what sum, if any, remains
due. If I were to decide at this juncture on the conclusive evidence point in the adjudication
that decision would not deal with the extant proceedings. Importantly, it is not clear
whether, in those proceedings, the conclusive evidence point will require to be considered
and decided upon. The defender may, for example, wish to use it to seek to demonstrate
that the adjudicator’s decision was incorrect and to seek to argue (as was raised here) that as
the issues before the adjudicator differed from those in the sheriff court action the conclusive
evidence rule applied. Given that the conclusive evidence issue could potentially be a
matter raised in that action, it would not be appropriate for me to reach a decision upon it.
In short, the matter of final determination is not before the court at this point.
Conclusion
[38] I conclude that while there may be unusual and very limited circumstances in which
a judge might allow final determination to be dealt with at or around the time of the
enforcement proceedings, this case does not fall into that category because the issue of final
Page 32 ⇓
32
determination remains at large and is not addressed in the counterclaim. The challenge to
enforcement, based as it is on an alleged error by the adjudicator, must therefore fail: see
eg Carillion Construction Ltd v Devonport Royal Dockyard Ltd; Gillies Ramsay Diamond v PJW
Enterprises Limited. In these circumstances, the point made by the defender about recovery
of the adjudicator’s fees does not arise.
Disposal
[39] I shall sustain the pleas-in-law for the pursuer in the principal action, repel the
pleas-in-law for the defender in that action, and grant decree as concluded for by the
pursuer. In relation to the counterclaim I require to hear from parties as to whether, in light
of the decision I have reached, it, or any part of it, should remain in play. In the meantime, I
reserve all questions of expenses.