Edinburg Royal Joint Venture (Petition of) [2002] No: HT-02-121 Outer Ct of Session

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The paying party's attempt to delay enforcement of the adjudicator's decision could not succeed when the terms of the contract were read as a whole. The receiving party's failure to pay liquidated damages due to the paying party did not prevent them relying on the contract to obtain enforcement.

TG Coutts QC, Outer House, Court of Session (Scotland)

2 August 2002

An adjudication had taken place between E and Broderick Structures, E's sub-contractor. The adjudicator had awarded B an extension of time of 46 weeks (not the full period it had sought) and loss and expense of £556,000. E tried to prevent that decision being enforced by B.

The Contract incorporated an adaptation of the ORSA (Official Referees Solicitors Association) Adjudication Rules 1998. The amendments to this were intended to make the rules applicable to a Scottish contract, but the Court described them as "virtually incomprehensible." The adjudication procedure provided that every decision of the adjudicator should be implemented without delay and should be capable of summary enforcement without set off or counterclaim. However, there were also provisions that no party could make any application to a Court until completion of the project or termination of the sub-contract without prior written consent of contractor and sub-contractor.

E relied on the provisions delaying application to the Court to prevent B enforcing the decision of the adjudicator. This failed to take account of other provisions which entitled B to be paid the money awarded. The Court noted that the provisions relied upon by E were not stand alone provisions and could not prevent the enforcement of the decision.

E also wished to retain or counterclaim sums which they claimed were due as liquidated damages (on the basis that B had not obtained all of its claimed extension of time). The Court noted that set off and counterclaim were excluded from consideration in relation to enforcement of the adjudicator's decision.

E also argued that the meaning of the provisions relating to delay in enforcement meant that all disputes were postponed until the conclusion of the contract so they could all be raised at once. E also said B had failed to consider both sides obligations, and since they had failed to comply with the contract by paying liquidated damages, they could not rely upon its provisions to seek payment of the decision.

The Court rejected this argument. It was an inevitable consequence of adjudication that monies might be paid which were ultimately held not to be due. There might be sums due to E but these had not been quantified and no award had been made by the adjudicator for them. Therefore, B were entitled to enforce the adjudicator's decision and should receive payment.

The paying party's attempt to delay enforcement of the adjudicator's decision could not succeed when the terms of the contract were read as a whole. The receiving party's failure to pay liquidated damages due to the paying party did not prevent them relying on the contract to obtain enforcement.

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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