In
Fleming Builders Limited v Mrs Forrest [2008] CSOH 103 the main issue
was whether the adjudicator had jurisdiction which depended on whether there was
a contract and if so whether the contract for work on the residential property
was made with the occupier Mrs Forrest or with a company KWF Holmes Ltd.
Lord Menzies was also required to decide whether the adjudicator had acted in
breach of natural justice. Although the judgment deals at length with the
evidence, the judgment is simply the application of well established
adjudication principles to the facts.
The Issue of the Contract
In the adjudication between Fleming and Mrs Forrest, the adjudicator decided
that there was a contract and that it was between the parties to the
adjudication and that she had jurisdiction. She then proceeded to order Mrs
Forrest to make payment of £112,598.75 plus interest to Fleming.
Lord Menzies held that there was no contract between Fleming and KWF and
distinguished
John Stirling v Westminster Properties Scotland Ltd [2007] BLR 537. He
recognised that there might be cases in which loosely worded correspondence sent
after the formation of a contract, for example in the name of a company rather
than in the name of the individual who was the true contracting party, may be
construed liberally so that the company was acting as an ad hoc agent for the
individual contracting party. Lord Menzies found that was not the situation in
the instant case. There is no evidence pointing to the formation of a contract
between Fleming and KWF. He decided that the fact that payments for works
performed under the contract were made from an account in KWF's name was neither
here nor there.
Lord Menzies decided that there was indeed a contract between Fleming and Mrs
Forrest and placed emphasis on the conduct of the professional team and the
various documents produced consistent with there being a contract and the
experience of Mrs Forrest in other developments.
Lord Menzies held that the adjudicator had jurisdiction.
Natural Justice
Mrs Forrest argued that that the adjudicator failed to address its argument
that there was no contract between the parties, but Lord Menzies rejected this
on its facts referring to
Diamond v PJW Enterprises Ltd [2004] SC 430.
The interesting point is that Lord Menzies appears to have treated the
adjudicator's determination of this issue as within her jurisdiction. the
judgment shows that there were substantive submissions to the adjudicator on her
jurisdiction, but there is no statement that Mrs Forrest continuously objected
to jurisdiction.
It appears to have been accepted that the adjudicator's decision was within
her jurisdiction as it was argued that a statutory adjudication (ie one which
fell within the provisions of the Housing Grants Construction and Regeneration
Act 1996) was to be distinguished from a purely contractual adjudication. It was
argued that the adjudication fell into the latter category, and that purely
contractual adjudications must be regarded as a species of arbitration so that
the well-established principles on which the Court may interfere with an
arbiter's decision applied equally to the instant case.
Lord Menzies rejected that approach as an artificial and misconceived
distinction.
Lord Menzies considered there was no justification for a distinction between
the way in which the Court would approach the decision of an adjudicator who had
dealt with a dispute under the Act and the Scheme, and the way in which the
Court would deal with an adjudicator who had dealt with a dispute under the
contract. He considered that the observations of the Lord Justice Clerk in
Diamond at paragraph [20] were general and not confined to adjudications
within the context of the Act and the Scheme, although in that case the
adjudication was under the Act and the Scheme for Construction Contracts
(Scotland) Regulations 1998..
Lord Menzies held that the adjudication in the instant case was a form of
provisional resolution only and it did not oust the jurisdiction of the courts
or of an arbiter. Its primary purpose was to regulate the dispute, pending a
definitive resolution of it by litigation, arbitration or agreement.
Particularly when read with Lord Macfadyen's Opinion in Diamond, it was
clear that the position of an adjudicator was quite distinct from that of an
arbiter. There was no reason, in principle or in practice, why the Court faced
with the decision of an adjudicator appointed under the relevant clauses of the
instant standard form of contract should treat it as an arbitration rather than
an adjudication, nor why it should treat the decision any differently from one
made in the context of section 104 of the 1996 Act and the 1998 Scheme.
Retention and Set-Off
The adjudicator found that a letter was not a valid Withholding Notice in
terms of clause 30.1.1.4 of the contract, because it was in the name of KWF and
accordingly not from the employer Mrs Forrest. Lord Menzies agreed with the
analysis, but held in any event that even if the adjudicator was wrong on this point,
any error was intra vires and accordingly not subject to challenge in the
instant proceedings.
It was argued that unless the contract specifically excludes the right at
common law of retention and set-off then Mrs Forrest was entitled to retain and
set-off sums due to them against any decision of the adjudicator. It was argued
that their right to retain and set-off at common law was not excluded by the
contract.
Lord Menzies disagreed and referred to Clauses 30.1.1 to 30.1.15 which he
decided provided a scheme whereby the contract excluded the right to common law
retention or set-off. The only means by which an employer could properly refrain
from making payment of a sum due under an architect's certificate was by the
contractual mechanism contained in that scheme. He held that it would defeat the
whole purpose of the contractual scheme if common law retention or set-off was
available in any event. It would also defeat the purpose of adjudication to
provide a swift but provisional regulation of a dispute ad interim if it were
open to a party to seek to retain or set-off sums against a decision of an
adjudicator. He observed that his reasoning was consistent with that in
Rupert Morgan Building Services (LLC) v David Jervis [2004] BLR 18.
Exclusion of Evidence
It was submitted that it would have been reasonable for the adjudicator to
conduct a conference call with a key witness on his return from holiday. It was
aid that he had expressed willingness to participate in a conference call. It
was argued that a failure to do so was a breach of natural justice.
Lord Menzies found that there was no evidence from the witness when he was on
holiday, that he was asked and whether he was willing to attend a conference
call. It was held that in light of the lack of evidence from the witness and in
the absence of any argument that the adjudicator acted outwith the wide powers
and discretion conferred on her in terms of the contract, there was no force in
the attack on the adjudicator based on a possibility of a breach of natural
justice. The adjudicator had the affidavit of the key witness, the benefit of
having heard evidence from witnesses for both sides and full legal submissions
together with a substantial body of documentary evidence and in the short
timetable the adjudicator could not be criticised for proceeding to reach her
decision without such a conference call.
Conclusion
Lord Menzies held that the adjudicator had jurisdiction, there was nothing to
suggest that her decision was contrary to the rules of natural justice and there
were no grounds on which Mrs Forrest could seek to retain or set-off sums
against the adjudicator's decision. | 