A -v- B (company names were not given)
Case reference:
[2002] ScotCS 325
Tuesday, 17 December 2002
Key terms: Enforcement - SBCC sub-contract - ORSA Rules 1998 v 1.2 - amendments - contractual fetter to enforcement - section 108(3)A
The Puruser, was a sub-contractor engaged to carry out the design and installation of a Kalzip standing seem roof and wall cladding for a building in Edinburgh. The Defenders were an unincorporated joint venture set up to design and construct the building. The contract was the SBCC Scottish Building Contract with Contractors Design, September 1995 revision as amended by the Standard Form of Sub-contract produced by the Defender. A dispute arose in respect of extensions of time and loss and expense. The dispute was referred to adjudication by a notice dated 7th February 2002. A decision was given on 14th May 2002 awarding the sub-contractor £639,151.82 inclusive of VAT. The Defenders refused to pay, and so the sub-contractor sort enforcement.
The Defenders denied liability on the basis of 2 grounds. First, that the contract, as amended, between the parties prohibited the sub-contractor from raising any action to enforce the adjudicator’s award until after (1) actual completion of the last phase of the main contract (2) or termination of the parties sub-contract, subject to one exception which was the written consent of both parties to allow enforcement. Second, the Defenders argued that the decision implied that the Pursuers owed the Defenders 66 weeks of liquidated and ascertained damages. The Pursuers had claimed 112 weeks, and the adjudicator had awarded 46. Therefore, the Defenders argued that 66 weeks worth of liquidated damages should have been paid by Pursuers to the Defenders, and that the Pursuers failure to pay was a breach of contract. The Defenders then argued that the Pursuers were not entitled to be paid any sum in respect of the adjudicator’s decision on the basis of the Scottish principal of “retention”.
The adjudication rules contained within the contract were the ORSA Rules 1998 version 1.2, with several amendments. Appendix 8, clause 2.1(f) states that no party shall “make any application whatsoever to a competent court in relation to the conduct of the adjudication or the decision… until the actual completion date of the last phase… or prior written consent” of the parties. Paragraph 2.1(g) is in similar terms, but states that an application shall not be made until the later of 90 days from the decision of the adjudicator or 90 days from the actual completion date of the last phase.
Lord Drummond Young held that the Pursuers were not obliged to wait until actual completion. He considered that the amended clauses needed to be read in the light of section 108(3) of the Act. Further, he drew a distinction between the two types of action which could be taken in respect of an adjudicator’s decision. First a review of the decision, and second, enforcement. A decision was binding until superseded by arbitrational or litigation, and so must be capable of immediate enforcement. In respect of retention, he noted that the principal was limited to Scot’s Law only. It was available as a defence, with very limited application. It had not been raised in the adjudication, and further it had no application once a decree or an award was issued, and he held that an adjudicator’s decision should be treated in the same way. He therefore declared that the pursuers were entitled to the full amount of the adjudicator’s decision.
The Defenders denied liability on the basis of 2 grounds. First, that the contract, as amended, between the parties prohibited the sub-contractor from raising any action to enforce the adjudicator’s award until after (1) actual completion of the last phase of the main contract (2) or termination of the parties sub-contract, subject to one exception which was the written consent of both parties to allow enforcement. Second, the Defenders argued that the decision implied that the Pursuers owed the Defenders 66 weeks of liquidated and ascertained damages. The Pursuers had claimed 112 weeks, and the adjudicator had awarded 46. Therefore, the Defenders argued that 66 weeks worth of liquidated damages should have been paid by Pursuers to the Defenders, and that the Pursuers failure to pay was a breach of contract. The Defenders then argued that the Pursuers were not entitled to be paid any sum in respect of the adjudicator’s decision on the basis of the Scottish principal of “retention”.
The adjudication rules contained within the contract were the ORSA Rules 1998 version 1.2, with several amendments. Appendix 8, clause 2.1(f) states that no party shall “make any application whatsoever to a competent court in relation to the conduct of the adjudication or the decision… until the actual completion date of the last phase… or prior written consent” of the parties. Paragraph 2.1(g) is in similar terms, but states that an application shall not be made until the later of 90 days from the decision of the adjudicator or 90 days from the actual completion date of the last phase.
Lord Drummond Young held that the Pursuers were not obliged to wait until actual completion. He considered that the amended clauses needed to be read in the light of section 108(3) of the Act. Further, he drew a distinction between the two types of action which could be taken in respect of an adjudicator’s decision. First a review of the decision, and second, enforcement. A decision was binding until superseded by arbitrational or litigation, and so must be capable of immediate enforcement. In respect of retention, he noted that the principal was limited to Scot’s Law only. It was available as a defence, with very limited application. It had not been raised in the adjudication, and further it had no application once a decree or an award was issued, and he held that an adjudicator’s decision should be treated in the same way. He therefore declared that the pursuers were entitled to the full amount of the adjudicator’s decision.