Construction Centre Group Limited v Highland Council
Case reference:
[2004] ScotCS 114
Friday, 11 April 2003
Key terms: Plea of retention - Plea of compensation - liquid and illiquid debt - ICE Contract - Receiver
The Contractor entered into a contract with the Employer, the Highland Council, for the design, construction and maintenance of the Small Isles and Inverrary Ferry scheme, phase 1. The contract was the ICE 5th Edition 1973 (Revised January 1979} subject to amendments and additions. A dispute had been referred to adjudication, and the Adjudicator issued his decision on 28th June 2003. He found that the Highland Council was to pay the contractor £245,469.24 within 7 days of the decision.
A receiver was appointed to the Contractor on 27th November 2002. Clause 53 of the Contract states that if the Employer expels the Contractor from the site, then the Employer is not liable to pay anything further to the Contractor until the end of the period of maintenance. These comprised two new grounds of appeal. The original ground of appeal was that the Lord Ordinary had not properly distinguished a plea of retention from a plea of compensation. Essentially, the Employer was seeking to argue that a defence could be maintained even though they had not raised the issue of a deduction in respect of liquidated damages during the adjudication.
Lord Hamilton, delivering the opinion, said the Courts must interpret construction contracts consistently with the objective of the Act and "lend their assistance to the prompt enforcement of decisions made by Adjudicators within the scope of their jurisdiction". It is against this background that the contract should be construed. He gained support from the case of Ferson Contractors Limited v Levolux. He went on to decide that it was not necessary to find whether the liquidated damages for delay could be an illiquid or a liquid matter, because the defence had not been relied upon during the adjudication. It was inconsistent with the contractual obligations between the parties to give effect to it now in order to defeat the Adjudicator's decision. He distinguished the case of Parsons Plastics (Research & Development) Limited v Purac [2002] EWCA C iv 495 on the grounds that that case turned upon contractual provisions which were not subject to the Act, and further the English concept of set-off was distinct from similar concepts in Scott's law. The motion was therefore refused.
A receiver was appointed to the Contractor on 27th November 2002. Clause 53 of the Contract states that if the Employer expels the Contractor from the site, then the Employer is not liable to pay anything further to the Contractor until the end of the period of maintenance. These comprised two new grounds of appeal. The original ground of appeal was that the Lord Ordinary had not properly distinguished a plea of retention from a plea of compensation. Essentially, the Employer was seeking to argue that a defence could be maintained even though they had not raised the issue of a deduction in respect of liquidated damages during the adjudication.
Lord Hamilton, delivering the opinion, said the Courts must interpret construction contracts consistently with the objective of the Act and "lend their assistance to the prompt enforcement of decisions made by Adjudicators within the scope of their jurisdiction". It is against this background that the contract should be construed. He gained support from the case of Ferson Contractors Limited v Levolux. He went on to decide that it was not necessary to find whether the liquidated damages for delay could be an illiquid or a liquid matter, because the defence had not been relied upon during the adjudication. It was inconsistent with the contractual obligations between the parties to give effect to it now in order to defeat the Adjudicator's decision. He distinguished the case of Parsons Plastics (Research & Development) Limited v Purac [2002] EWCA C iv 495 on the grounds that that case turned upon contractual provisions which were not subject to the Act, and further the English concept of set-off was distinct from similar concepts in Scott's law. The motion was therefore refused.