Construction Centre Group Ltd v Highland Council [2003] ScotCS 114

This summary was provided by CMS Cameron McKenna LLP.

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

Contractual termination provisions that suspend payment obligations will be construed so that they are consistent with the purpose of the HGCR Act 1996.  Also, a claim that might have been relied upon before an Adjudicator, but was not, cannot subsequently be set off against that Adjudicator's decision.

Extra Division, Inner House, Court of Session

11 April 2003

HC engaged CCG to design, construct and maintain works.  The Contract incorporated conditions based on the ICE Conditions of Contract, 5th ed., 1973 (Jan. 1979 revision), with amendments. 

A dispute was referred to adjudication.  The Adjudicator awarded CCG £245k, to be paid within 7 days.  HC did not pay and CCG sued.  At first instance, HC claimed, unsuccessfully, that it was entitled to set off £420k in liquidated damages ('LDs') against the sum awarded by the Adjudicator (see page 119).  HC appealed. 

Before the appeal came to be heard HC determined CCG's employment under the Contract.  HC relied upon clause 63(4) of the Contract, which on a determination suspended HC's liability to pay CCG 'any money on account'.  HC said that this suspended any obligation to pay the sum awarded by the Adjudicator.

The court said that the contract was a 'construction contract' within the meaning of Part II of the HGCR Act 1996 and that Scots law applied.  The court, in upholding the first instance judgment and enforcing the Adjudicator's decision, held as follows:

  1. Following Mantell LJ's judgment in Levolux A T Ltd v Ferson Contractors Ltd (see page 131), the Contract (and, in particular, clause 63(4)) should be construed so as to give effect to Parliament's intention behind the HGCR Act 1996.  'The purpose of the Act was to secure that every construction contract contained provisions which enable the parties to the contract to obtain from an adjudicator, in respect of any dispute arising under the contract, a speedy decision which was binding and enforceable but at the same time merely provisional pending final determination by litigation, arbitration or agreement'.  To construe clause 63(4) as suspending payment of sums awarded by the Adjudicator would defeat the purpose of the HGCR Act 1996.
  2. It would be inconsistent with HC's contractual obligation to give effect to the Adjudicator's decision, to set-off the LDs given that HC had not relied upon that claim, 'as it might have', before the Adjudicator.

Contractual termination provisions that suspend payment obligations will be construed so that they are consistent with the purpose of the HGCR Act 1996.  Also, a claim that might have been relied upon before an Adjudicator, but was not, cannot subsequently be set off against that Adjudicator's decision.

This summary was provided by CMS Cameron McKenna LLP.

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

Click here to read full-screen | Click here to print the case