SL Timber Systems Ltd v Carillon Construction Ltd [2001] ScotCS 167

This summary was provided by CMS Cameron McKenna LLP.

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Even if one party has failed to give a timeous notice of its intention to withhold payment, the other party is still obliged to show that he is entitled to the sums claimed under the  contract. In Scotland challenges to the enforcement of adjudicators' decisions on grounds of the receiving party's inability to repay the amount awarded in later proceedings are unlikely to be upheld.

Lord Macfadyen, Outer House, Court of Session

27 June 2001

S sought to enforce an adjudicator's award for three sums under three contracts for the supply and erection by S for C of structural timber kits. (The form of contract used is not clear from the judgment, but it is clear that the adjudication provisions did not comply with HGCRA 1996 and therefore the Scottish adjudication Scheme applied.) C refused to pay the sums sought by S so the disputes were referred to adjudication and the same adjudicator was appointed for all three contracts.

C sought to resist enforcement of the adjudicator's awards on the ground that he misinterpreted the effect of Ss 110 and 111 of HGCRA 1996 and therefore mistook the scope of his jurisdiction. The adjudicator had held that in the absence of a timeous notice of withholding it was not for him to address whether the sums claimed were in fact due under the contract which would therefore be awarded by him as claimed. C submitted that the adjudicator had fallen into error in refusing to examine whether the sum claimed was due under the contract.

The judge found that the adjudicator fell into error by combining his consideration of Ss 110 and 111 of the 1996 Act. Failure to give a S110(2) notice did not in any way preclude dispute about the sum claimed. As the adjudicator put together C's failure to give a S110(2) notice with its failure to give a timeous S111 notice, and therefore declined to address whether sums claimed by S were due under the contract, he fell into error. The absence of a timeous notice of intention to withhold payment did not relieve the party making the claim of the ordinary burden of showing that the sum claimed was contractually due. The judge referred to the comments on this point in VHE Construction v RBSTB Trust Co, Northern Developments v J&J Nichol, KNS v Sindall, Woods Hardwick v Chiltern and Whiteways v Impresa Castelli and noted that these were not entirely consistent but said that any cases which decided that without a S111 notice there could be no dispute as to the amount of payment due went too far.

However the judge held that the adjudicator's error did not take him outside the proper scope of his jurisdiction as he did address the correct question but answered it wrongly. As a result enforcement of his decision could not be challenged on the basis of his errors in relation to Ss 110 and 111.

C also sought to resist enforcement of the adjudicator's decision on the ground that S was insolvent and would be unable to meet any decree for repayment that may be granted in later proceedings. The judge referred to Bouygues v Dahl-Jensen, Rainford v Cadogan and Absolute Rentals v Gencor but found they did not contain any clear guidance on the point. The reasoning (in Bouygues and Rainford in particular) depended on specialities of English procedure relating to summary judgments and stays of execution. He held there was nothing in the 1996 Act to qualify the expressed intention that the adjudicator's provisional award should be enforced pending final resolution of the dispute, to the effect of making an exception in the case where the claimant, although not in liquidation, could be shown to be insolvent. He therefore found that enforcement of the adjudicator's decision could not be challenged on this ground either.

Even if one party has failed to give a timeous notice of its intention to withhold payment, the other party is still obliged to show that he is entitled to the sums claimed under the contract. In Scotland challenges to the enforcement of adjudicators' decisions on grounds of the receiving party's inability to repay the amount awarded in later proceedings are unlikely to be upheld.

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-cmck.com/Construction/Construction-Disputes

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