Quality Street Properties Ltd v Elmwood [2002] 258/2002 S

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Reaching a compromise agreement in relation to a dispute, which might otherwise be referred to adjudication, could oust the jurisdiction of an adjudicator, as there would no longer be a dispute.

Sheriff Principal Edward Bowen QC

8 February 2002

This was an appeal from a first instance decision of the Sheriff denying Q an injunction to stop E from appointing an Adjudicator pursuant to a Scottish Minor Works Contract.

The Contract Works involved alterations to properties in Glasgow, which were completed in November 1999. Following completion of the works E started an action in Court against Q for sums it believed were owed to it under the Final Account. Q lodged detailed defences the substance of which were that the Contract Price had been the subject of an agreed settlement and all but £7,000 held by way of retention had been paid. Q also instigated a counterclaim.

Following commencement of the Court action E sought to refer two disputes to adjudication under Clause 10A of the Contract which adopted the provisions of s108 of the HGCRA. The disputes were firstly, an ascertainment of the amount properly due to E in terms of its Final Account (including loss and expense) and secondly payment of loss and expense sustained by E due to the regular progress of work being affected.

Q brought the application for an injunction to prevent the appointment of an adjudicator and from proceeding with the adjudication on the ground that E was referring to adjudication issues which were already before the Court. The disputes should not therefore be dealt with in adjudication. The Sheriff dismissed the application and Q appealed.

On appeal Q contended that adjudication proceedings could be displaced (or at least superseded) if the parties had entered into a compromise agreement in relation to their dispute. On this issue the evidence before the Principal Sheriff clearly indicated that negotiations had taken place between the parties in 1999 the result of which sums were paid to E in September 2000.

The Sheriff Principal noted that the solicitor for E accepted that reaching a compromise agreement in relation to a dispute, which might otherwise be referred to him, could oust the jurisdiction of an Adjudicator. The Sheriff Principal believed this to be consistent with Sheppard Construction Limited v Mecright Limited which supported the view that a dispute which has been compromised is no longer susceptible of a reference to adjudication, notwithstanding the provision in s108 of the HGCRA. On the facts of this case the Sheriff Principal believed Q to have shown a prima facie case that a compromise agreement was concluded. Accordingly the adjudication proceedings would be displaced.

Reaching a compromise agreement in relation to a dispute, which might otherwise be referred to adjudication, could oust the jurisdiction of an adjudicator, as there would no longer be a dispute.

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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