Trustees of the Harbours of Peterhead v Lilley Construction Limited
Case reference:
[2004] ScotCS 91
Tuesday, 1 April 2003
Key terms: Adjudicator's decision - ICE 6th Edition - clause 66 - Reference to Arbitration
The Defenders, Lilley Construction Limited, carried out construction works for the pursuers, The Trustees, at Merchants Quay Development at Peterhead Harbour. The contract included the ICE Conditions 6th Edition (January 1991) although it did not comply with the requirements of sub Sections (1) to (4) of Section 108 of the 1996 Act. Therefore the provisions of the Scheme applied.
In accordance with clause 60 Lilley applied for an interim payment. The engineer, on 9 November 2001, wrote to Lilley stating that the interim application had been assessed and that no further monies were due to Lilley. On 13 December 2001 Lilley served a notice of adjudication on the Trustees. The notice of referral identified 14 individual claims for payment. Six of those claims were upheld by the adjudicator in a decision dated 12 April 2002 amounting to a total of £1,217,753.34. The Trustees paid Lilley the total sum together with interest.
In this action the Trustees were seeking to recover from Lilley a large proportion of that payment together with a sum in respect of liquidated damages. The main issues related to the relationship between adjudication under the Act and the Scheme, and arbitration pursuant to clause 66 of the contract.
The Trustees argued that where a dispute had been referred to adjudication and that adjudication had resulted in a decision, the terms of clause 66 did not provide for the possibility of subsequent arbitration in respect of the dispute which had been referred to adjudication. They argued that as Lilley had triggered adjudication they had "stepped outside" of the provisions of clause 66. As a result the contractual route to arbitration was no longer available to Lilley.
Lord Mackay considered that this argument proceeded on the basis of a misunderstanding of the relationship between the terms of the contract and the implied terms pursuant to the Act. He referred to the frequently quoted words of Dyson J in Macob Civil Engineering Limited v Morrison Construction Limited [1999] BLR 93 stating that the purpose of the Act was to introduce a speedy mechanism for settling disputes on an interim basis. He considered that the Scheme envisaged that the decision of an adjudicator would be binding until the dispute was finally determined by litigation, arbitration or agreement. In conclusion, the dispute about matters referred to adjudication could competently be dealt with in accordance with the provisions of clause 66. Therefore, Lord Mackay granted to motion to sist the action in order to enable Lilley to refer the matter to arbitration in accordance with clause 66 (6) of the ICE Conditions.
In accordance with clause 60 Lilley applied for an interim payment. The engineer, on 9 November 2001, wrote to Lilley stating that the interim application had been assessed and that no further monies were due to Lilley. On 13 December 2001 Lilley served a notice of adjudication on the Trustees. The notice of referral identified 14 individual claims for payment. Six of those claims were upheld by the adjudicator in a decision dated 12 April 2002 amounting to a total of £1,217,753.34. The Trustees paid Lilley the total sum together with interest.
In this action the Trustees were seeking to recover from Lilley a large proportion of that payment together with a sum in respect of liquidated damages. The main issues related to the relationship between adjudication under the Act and the Scheme, and arbitration pursuant to clause 66 of the contract.
The Trustees argued that where a dispute had been referred to adjudication and that adjudication had resulted in a decision, the terms of clause 66 did not provide for the possibility of subsequent arbitration in respect of the dispute which had been referred to adjudication. They argued that as Lilley had triggered adjudication they had "stepped outside" of the provisions of clause 66. As a result the contractual route to arbitration was no longer available to Lilley.
Lord Mackay considered that this argument proceeded on the basis of a misunderstanding of the relationship between the terms of the contract and the implied terms pursuant to the Act. He referred to the frequently quoted words of Dyson J in Macob Civil Engineering Limited v Morrison Construction Limited [1999] BLR 93 stating that the purpose of the Act was to introduce a speedy mechanism for settling disputes on an interim basis. He considered that the Scheme envisaged that the decision of an adjudicator would be binding until the dispute was finally determined by litigation, arbitration or agreement. In conclusion, the dispute about matters referred to adjudication could competently be dealt with in accordance with the provisions of clause 66. Therefore, Lord Mackay granted to motion to sist the action in order to enable Lilley to refer the matter to arbitration in accordance with clause 66 (6) of the ICE Conditions.