 |
[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback] [DONATE] | |
Scottish Court of Session Decisions |
||
|
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Fleming Builders Ltd v. Forrest Or Hives & Anor [2008] ScotCS CSOH_103 (15 July 2008) URL: https://www.bailii.org/scot/cases/ScotCS/2008/CSOH_103.html Cite as: [2008] ScotCS CSOH_103, [2008] CSOH 103 |
||
[New search] [Help]
|
OUTER HOUSE, COURT OF SESSION [2008] CSOH 103 |
|
|
CA106/07 |
OPINION OF LORD MENZIES in the cause FLEMING BUILDINGS LIMITED Pursuers; against MRS JANE FORREST OR HIVES First Defender: and MR WILLIAM FORREST Second Defender ________________ |
Pursuers: S. Smith, MacRoberts
Defenders: Malone, Solicitor Advocate, Bell & Scott
Introduction
"We have been
authorised by the client KWF Holmes Ltd whose registered office is at
Silverwells House,
[2] There
was a pre-start meeting on
[3] The
defenders have made no payment to the pursuers in respect of these sums, so the
present commercial action for payment was raised in late
October 2007. The matter came
before me by way of a preliminary proof, which lasted for eight days in March
and May 2008. The issues to be canvassed
in this preliminary proof were set out by the Court in interlocutors dated
6 February and
"A. Whether or not the Adjudicator's decision is ultra vires
1. The power to refer the
parties' dispute to adjudication is
derived from a clause in the pursuers' revised tender of
2. The defenders set out additional grounds upon which they seek to have the Adjudicator's decision set aside ope exceptionis. These are: that she failed to take account of the evidence of Mr Thomson, and the affidavit of Mr Imrie; and that she failed to have regard to the argument that there was no contract at all (ie. neither with the defenders nor with KWF Homes Ltd). This raises the issue:
2.1 Whether it is open to the defenders to seek to reduce the Adjudicator's decision on any of these grounds;
2.2 Where it is open to them to do so, whether any of these grounds are well-founded.
B. Retention and set-off
3. The defenders have pleaded retention and set-off on the basis of an (as yet) unspecified claim for damages. Whether or not they may do so depends on whether a valid notice of intention to withhold payment was in accordance with the contract."
The Court also allowed the preliminary proof to consider the question "if no notice of intention to withhold was given, does that preclude the right of retention or set off by the defenders?". Finally, the Court extended the scope of the preliminary proof to include the "breach of natural justice" point as contained in paragraph 3 of the defender's note of argument No 18 of process, which was in the following terms:
"3. The adjudicator's
decision should in any event be reduced as being
contrary to the rules of natural justice.
3.1 The principle issue for determination was whether there was a contract between the parties.
3.2 A key witness for the Defenders was the QS Mr Peter Imrie. Mr Imrie provided an affidavit confirming that a building contract had been completed in the name of KWF Homes Ltd, and KWF Homes Ltd was to be the party to the contract. Mr Imrie was on holiday and was not contactable during the adjudication. On his return, he advised that he would be willing to participate in a conference call.
3.3 Whilst Mr Imrie had
provided an affidavit, he did so prior to the issues becoming focused by the
adjudication, and it was not possible to put the evidence of the Pursuers'
witnesses in respect of the written contract to him. The Defenders were grossly prejudiced by the
Adjudicator's refusal to hold a conference call with Mr Imrie. Mr Imrie was available for a conference
call on
[4] There was a considerable body of documentary evidence referred to at the preliminary proof. In addition, I heard evidence from four witnesses on behalf of the pursuers and four witnesses on behalf of the defenders. In their closing submissions parties laid considerable emphasis on the question of the credibility and reliability of these witnesses. In these circumstances it is appropriate that I should attempt to summarise the most important of the productions relied on (although I make it clear that I have taken account of all of the productions and also the terms of the Joint Minute for the Parties, No 20 of process), and thereafter set out the evidence of the witnesses rather more fully than is my normal practice.
Documentary Evidence
"Form of Tender
Tender for: New Build House, 17
Client: Mr & Mrs Forrest"
"Dear Sirs,
KWF Homes Limited
We confirm that bank
approval has been granted to provide funding in favour of KWF Homes
Limited to contract for the construction of a new build detached property at 17
"Dear Sir or Madam
New Build House at
We herewith enclose the
Building Contract as discussed and agreed for your attention. We would request that you complete and sign
the document and return it to our offices."
"Dear Sir or
Madam,
New Build House
We herewith enclose the SBCC
Building Contract with Contractors Design Portion duly completed as discussed
and agreed for your attention and agreement.
Please complete this document in accordance with the guidance note for
signing as attached and return to my office in due course. A copy of the completed and signed document
will be issued to you."
[5] This
production appeared to be a principal rather than a copy. Written across the top in handwriting were
the words "file copy", and attached to it was a post it sticker with the words
"Ann do not post this as I will hand deliver thanks Peter" written on it.
[6] The
foregoing list of productions is not intended to be exhaustive, but is rather a
list of those documents which featured most frequently in the evidence and
which were relied upon most heavily in submissions. There were other documents, including mail
sheets, extracts from diaries, file notes and internal or personal memos which
featured in the evidence but which I have not felt it necessary to list here.
Witnesses for
the Pursuers
[7] (i) Mr Gordon Gibb had practised as
an architect for 22 years before the preliminary proof, his practice involving
a mixture of commercial and domestic buildings.
He first became involved with the site at 17
[8] That
the defenders were personally involved as the employers in these works was
clear from the documentation, said Mr Gibb. They were named in the building warrant, and
in both sets of tender documents.
Mr Gibb was present at the meeting on
[9] Mr Gibb
did not attend the main part of the pre-start meeting on
[10] When shown No 7/5 of process, which bore to be a note extracted from Peter Imrie's diary headed "Pre-start meeting 17 Fairyknowe Gardens" (the date of which was missing from the production) Mr Gibb observed that Peter Imrie was not at the pre-start meeting (as is clear from the Minutes of that meeting which were circulated). With regard to the entry in this excerpt "Client re KWF Homes Ltd contractor confirmed acceptable that even if KWF Homes requested bank details + ref" this was not discussed at the pre-start meeting in his presence, and had not been discussed at the meeting on 30 November. He expressed the view that a contractor would never accept a development company as employer without first having received bank details and a reference in relation to that company, because development companies are here today and gone tomorrow.
[11] With regard to the Form F10 Notice, this had not been issued by the pre-start meeting (despite the indication to the contrary in the excerpt from Mr Imrie's diary). The F10 was sent to the pursuers for signature on 10 January and completed and sent out on 13 January. It was important to note two things from this form: first, that the client was specified as Mr and Mrs Forrest, and second, that the passage relating to a planning supervisor was scored out. This was because a planning supervisor is not required for a domestic development. It would have been appropriate to delete this passage only if the clients were domestic clients having the works carried out for their only use. If the clients had been KWF, it would not have been appropriate to make this deletion.
[12] Throughout the whole progress of the works Mr Gibb stated that he considered that his clients were the defenders and that they were the employers of the pursuers. In none of the site meetings which Mr Gibb attended was there any suggestion that KWF had any involvement in the matter. This is why Mr Gibb designed the defenders as the employers in all his architect's instructions and certificates, which were discussed in detail with the defenders. He described the suggestion that the defenders' names appeared on the architect's instructions not as individuals but as directors of KWF as absurd - although Gibb Architects had worked with KWF on other development sites, in Kilmarnock and elsewhere, the project at 17 Fairyknowe Gardens was for the defenders themselves and he was very clear that they were his clients and the employers in the contract. He could not imagine that they were involved not in a personal capacity but as directors of KWF. Although towards the end of the works the defenders questioned the amounts certified as payments to the pursuers, they never questioned the designation on the architect's certificates of themselves as employers. Contractual terms are of the highest importance to an architect, and Mr Gibb was pretty sure that he checked the architect's instructions and certificates before they were sent out.
[13] Mr Gibb stated that Mrs Forrest asked his advice in
March 2006 just as everyone was dispersing from a site meeting at 17
"one thing in your favour in any subsequent negotiation with the contractor is that, unless anything is written in the Bill to the contrary, there is no statutory right to go to adjudication under a contract for the erection of an individual dwelling for the sole use of the owner."
The defenders never responded to this email to correct him or to say that this was not a contract for the erection of an individual dwelling for the sole use of the owner.
[14] Mr Gibb stated that he had two meetings to discuss
liquidate and ascertained damages with the defenders, these being on 19 and
21 December 2006. The first of
these meetings was attended by the defenders, and the second by the defenders
and Mr Hives, who was the first defender's father. At the first meeting Mr Gibb drafted the
letter dated
[15] Increasingly Mrs Forrest's father Mr Hives became
involved in the project. He told
Mr Gibb that the first defender was ill and could not cope with running
the project anymore so he was taking over.
He first became involved in a relatively minor way in about April 2006
when the plumbing work commenced, and by about November 2006 he was very
involved. Mr Gibb had reservations
about Mr Hives' involvement, because he was not the client and nobody had
agreed to him becoming the client instead of Mr and Mrs Forrest. Mr Gibb said that Mr Hives was very
offensive and threatening to him and to others including Peter Imrie. He remembered one meeting in particular,
quite late in the project works, when he was in the house with Mr Hives
and Mr Imrie, and Mr Hives was attempting to have the pursuers
demolish all internal walls;
Mr Imrie observed that the pursuers were merely doing what
they were supposed to do under the contract.
Mr Hives lost his temper with Mr Imrie and was very offensive
him and told him to "shut up".
Mr Gibb observed that Mr Imrie was a mild man, but eventually
he stood up and said "I'm not taking that from you John, you're not even the
client, William and Jane are the client" and left the
meeting. In about December 2006
Mr Hives told Mr Gibb that the pursuers would not get another penny
for this project, and over the next few months Mr Gibb realised that this
was the defenders' intention. He formed
the view that Mr Hives was trying to get him to instruct as much
additional work as possible, in the knowledge that nobody would be paying for
this. In Mr Gibb's opinion,
although the pursuers did make some errors (the hardwood floor was poorly
fitted and there were some areas of poor workmanship) Mr Hives' position
became so extreme that it became almost ludicrous. When Mr Gibb suggested ways in which
costs could be saved, and discussed these with Mr and Mrs Forrest, Mr Hives
would have none of it. Mr Hives'
conduct became increasingly oppressive and threatening towards Mr Gibb,
until Mr Gibb's appointment as architect and contract manager was
eventually terminated. When
Mr Gibb's secretary telephoned him to tell him that the letter from the
first defender dated
[16] In cross-examination Mr Gibb agreed that he would expect
his minutes of meetings to reflect accurately the capacity in which Mr and Mrs
Forrest attended site meetings. He
accepted that the Minutes of Site Meeting No 23 held on
[17] Mr Gibb was asked if he ever saw Mr Imrie handing
contract documents to the pursuers, and he replied that he saw Mr Imrie
handing what he thought was just a blank form to Mr Ronnie Burrows. He observed that Mr Imrie never got down
to doing things when he was supposed to do them. At the first site meeting on
[18] With regard to the termination of his contract, Mr Gibb observed that Mrs Forrest expressed her desire, erroneously through her company, that she did not want him to continue as architect, and in these circumstances it was appropriate to bring the relationship to an end. Mr Gibb expressed the view that it would have been a breach of contract to terminate immediately. Seven days was the period referred to in the building contract, and this was the time that he required to put things in place in order that his contract could be concluded properly. He then issued the certificate of extension of time and asked Mr Imrie to provide a valuation of works outstanding, so that he could deduct the appropriate amount from the certificate. He granted an extension of time to the pursuers of 37 weeks, for the reasons carefully stated in his extension of time letter.
[19] (ii) Mr Ronald
James Burrows was aged 40 and had been a director of the pursuers for about
ten years, this being the family firm.
He was responsible for sales and contracts (as senior contract
manager). He was not involved in the
tender process relating to 17
[20] Mr Burrows did not recall seeing the letter dated
[21] In cross-examination Mr Burrows stated that he did not
attend the meeting of
[22] (iii) Mr
Kennedy Matthew Rodger was aged 60 and was an estimating director with the
pursuers. He had worked with the
pursuers for almost 37 years. He was involved
in the tendering process for the works at 17
[23] Thereafter in the Spring of 2007
Mr Rodger remembered receiving a letter intimating that Mr Gibb's
appointment as architect would be terminated.
This was handed over at a meeting which Mr Mike Burrows and Mr
Rodger attended with the defenders on
[24] In cross-examination Mr Rodger reiterated that he was at
the meeting of
[25] (iv) Mr
Michael Burrows was aged 41 and had been managing director of the pursuers
for about ten years. After the pursuers'
revised tender was sent out, he attended the tender interview meeting on
[26] The pre-start meeting was attended by Mr Mike Burrows together with Walter Kerr, the defenders, John Thomson, and Hector Munro. Peter Imrie was not present. Mr Burrows remembered that during informal discussions after the meeting the first defender asked him if the pursuers would be happy if KWF were the clients. At the same time she gave him the letter from Airdie Savings Bank. He explained that the pursuers were always concerned with unknown companies in case they did not get paid, particularly with regard to retention monies held for a period of twelve months. Generally the pursuers dealt with "blue chip" clients such as Health Boards. His response to the first defender was that the directors of the pursuers would have to consider the point, and that he did not have the power to agree to it there and then. It was clear at that time that the defenders wished to proceed with the contract, and the pursuers presumed that the request about changing the contracting parties was just for funding purposes. The pursuers remained concerned, as the contract price was not guaranteed. At a directors' meeting after the pre-start meeting, concerns remained. Mr Mike Burrows went to Companies House to investigate KWF and found that the defenders were the sole directors of the company, that it had been recently formed, that no trading accounts had been published and that it owned one property which was subject to a bank guarantee. This did not fill him with confidence.
[27] No record of the discussion between the first defender and Mike
Burrows appeared in the minutes of the pre-start meeting, which Mr Burrows
received about two or three days later.
Mr Thomson, who prepared those minutes, was not party to the
conversation between the first defender and Mr Mike Burrows regarding KWF
although he was probably in the same room.
Mr Burrows referred to his handwritten notes of matters to discuss
at the pre-start meeting, item 3 of which was "contract with Mr and Mrs
Forrest". He believed that if it had
been agreed at the meeting that the client was to be KWF, he would have noted
this (in the same way that he noted that the revised sum agreed was
£513,000). He was asked about Peter
Imrie's handwritten notes (No 7/5 of process), and he denied that he had stated
either at the meeting of 30 November 2005 or the pre-start meeting of
10 January 2006 that KWF would be acceptable as the clients. There was no discussion about bank details or
a reference in relation to KWF at the meeting on
[28] Mr Burrows confirmed that the F10 form was an important document which had to be completed and sent to the Health and Safety Executive before work commenced. The pursuers received the F10 form on the day after the pre-start meeting. They took it from the terms of this form that the defenders were prepared to continue with the contract as individuals rather than seeking a change so that the employers were KWF - not only were they named as the clients, but if the works had been for a development company such as KWF, there would have been a requirement for the appointment of a planning supervisor. The pursuers were happy to proceed on this basis because this was clearly a domestic contract for individuals who intended to occupy the house themselves On this basis they signed the form and sent it to the Health and Safety Executive.
[29] Mr Mike Burrows had no role directing the administration
of the contract on site, and attended no site meetings. He anticipated that the pursuers would be
presented with a form of contract for signing, but this was never done. They never signed a completed contract form
nor were they ever provided with a completed correct contract document for
their signature. He was aware that an
uncompleted contract form was left in the pursuers' reception area, and after
some time it disappeared and the receptionist told him that it had been
uplifted by someone, but nothing was left in its place. Until a week before the preliminary proof in
March 2008 he had never seen the letter dated
[30] In cross-examination it was put to Mr Burrows that
Mr Rodger had said that Mr Burrows had discussed the purported
acceptance of
[31] Mr Burrows was asked if the pursuers had a contract with
the defenders as at the pre-start meeting, and he replied that the pursuers
thought that it was the defenders' intention to proceed with the project and
they were awaiting the necessary documentation to be drawn up. Although they had not accepted the revised
tender in writing, they were at the pre-start meeting and told the pursuers to
proceed. Although the first defender
asked Mr Burrows after the pre-start meeting had concluded whether the
pursuers would be prepared to contract with KWF, Mr Burrows was not
prepared to undertake to do so. He said
that taking the defenders' presence at the pre-start meeting, their instructions
at that meeting, and the receipt of the F10 thereafter specifying the defenders
as clients and deleting the requirement for a planning supervisor satisfied the
pursuers that they were contracting with the defenders. It was then that the pursuers sent out
acceptances of tenders by subcontractors.
Although he was shown the letter from Airdrie Savings Bank dated
[32] Although Mr Burrows remembered receiving a contract
document form, he could not remember if it was a blank form or if any name was
filled in for the client;
in any event, it was the wrong form of contract, and the pursuers
would not have been prepared to sign even if it had been the correct form of
contract if the employer was stated to be KWF.
He did not recall ever seeing a contract which was ready for signature; a contract form
came in, but he did not open it or look at it because he was told that it was
the wrong contract. The pursuers
received a telephone call as soon as Mr Ronnie Burrows got back with the
contract saying that it was to be changed.
He was quite sure that the pursuers did not receive the letter from
Peter Imrie dated
Witnesses for the Defenders
[33] (i) Mr John Thomson was aged 49 and worked with Gibb
Architects between May 2005 and February 2006.
He had worked as an architect with another firm for about one year
previous to this. He began to work on
the
[34] Mr Thomson was at the meeting at about the end of November
2005, which was also attended by Peter Imrie, Gordon Gibb, the defenders, Mike
Burrows and Ken Rodgers. The issue of
whether KWF Homes might be the employers was raised, and Mike Burrows said that
he didn't think that this would be a problem but that he would require a letter
of assurance from the company's bankers.
The meeting was set up for the client to get a feel for who she (sic) wanted
to go forward with. After the meeting,
Mr Thomson drafted a letter of acceptance of tender, after the pursuers
had offered to reduce their tender price by £8,000. He showed this letter to Mr Gibb who
pointed out two errors to him - first that the clients should be KWF and not
the defenders, and second that the letter should make reference to the original
tender sum and to the revised tender sum.
Mr Thomson said that he did not know this, and he remembered this
clearly as he learnt something that day.
Thereafter he remembered emailing the letter to Mr Imrie. On
"Further to our discussion earlier today we look forward to receiving a copy of the letter accepting Fleming Buildings' tender on behalf of Jane and William Forrest."
He explained this by saying that
the contractual implications of KWF did not register with him - he always
thought of the clients as Jane and William.
He recognised the letter dated
[35] On the Friday that he left Gibb Architects, he went through
with Mr Gibb each of the jobs on which he had been involved. He did not mention to Mr Gibb that he
understood the clients to be KWF Homes, because he took this as read - it was
common knowledge. Gibb Architects were
involved on behalf of KWF in relation to another development in
[36] In cross-examination Mr Thomson stated that the defenders
told him that in terms of future developments they would like to set up all
future contracts through KWF. This was
mentioned in about October 2005 in the course of preparations for the
[37] Mr Thomson conceded that Mr Gibb was better at
matters of contract than he was himself, and that Mr Gibb was punctilious
about such matters. However, he was
adamant that Mr Gibb knew about the change of client from the defenders to
KWF; he was
sure that this was raised at the tender interview in November, but he had not
looked for any handwritten notes of that meeting. He remembered preparing the draft letter
dated
[38] Mr Thomson maintained that he drafted the letter dated
[39] Mr Thomson prepared the minutes of the pre-start meeting
of
[40] Mr Thomson was sure that his handwritten notes, which
formed No 7/35 of process and were described in the defenders' inventory
as "copy of John Thomson's handwritten meeting notes of meeting dated
[41] (ii) Mr
Peter Forrest Imrie was a quantity surveyor and project manager, aged
53. He prepared the Bill of Quantities
for the project at 17
[42] Mr Imrie was unable to attend the pre-start meeting; his handwritten
notes headed "Pre-Start Meeting - 17
[43] Mr Imrie was at the first site meeting, and thereafter he hand-delivered the formal building contract to the pursuers, although he could not remember if he did this on 9 February. This contract designed KWF as the clients. He was not at the second site meeting, but it was correct that by 21 February he had still not delivered the contract document. At the site meeting on 9 March the pursuers expressed themselves happy with the contract, and took it away to complete. Mr Imrie was not present at the site meeting of 23 March, but despite the terms of the minutes he was positive that the pursuers had received the completed form of building contract for their signature. Mr Imrie said that he was present at the meeting of 11 April; he was asked to explain the minute which stated that "contract will be handed over to contractor tomorrow for signing", and he explained that he had to get another form of contract, and he thought that the pursuers' insurers would not let them sign the other one.
[44] When faced with the minute of the meeting of
[45] He was aware that an adjudication process was proceeding, but he did not give evidence in that. He could not explain why that was, and he did not know when the adjudication happened.
[46] In cross-examination Mr Imrie stated that the defenders
asked him to do this for them, but he was not formally appointed. He had never been appointed by them or by
Mr Hives on any previous occasion, although the firm that he worked for
was project manager for a site at
[47] Probably before the meeting of
[48] Mr Imrie stated that the pursuers should have received his
letter dated
[49] Mr Imrie remembered an occasion on which the first defender's father John Hives was present on site. Mr Imrie had strong reservations about the role played by Mr Hives. He remembered on one occasion pointing out that Mr Hives was in error, and Mr Hives shouted at him. Mr Imrie left at that point, and said to Mr Hives "You are not even the client, Jane and William are the clients".
[50] Mr Imrie was shown a valuation claim form in respect of
Valuation 8 dated
[51] (iii) Mrs Jane Forrest, the first defender, was aged 34 and
was a company director who lived at
[52] There were two interview meetings in November 2005, both of
which she attended. She visited a house
being built by Whiteford and Forbes, a firm of contractors based in
"I decided that I wished to proceed with Fleming Builders. I instructed John Thomson to put matters into motion for Fleming Builders to construct a detached house. I actually wrote to Gibb Architects confirming that my preference was Fleming Builders."
Notwithstanding this evidence, she stated that John Thomson knew that the employers would be KWF as he was present at the November meeting and she was not in a position to contract personally.
[53] She attended the pre-start meeting in January 2006, and at that
meeting she handed the letter from the bank to Mike Burrows. She told him that this was the bank reference
that he had requested concerning KWF and he thanked her and told her that he
preferred it to be a limited company. He
expressed no concerns about KWF or the letter.
After that meeting neither Mike Burrows nor anyone else from the
pursuers expressed the view that they were not prepared to contract with
KWF. She probably did see the
architect's instruction No 1 dated
[54] Mrs Forrest confirmed that her signature appeared at the foot of the letter dated 19 December 2006 intimating that she wished to deduct liquidate and ascertained damages. She accepted that this letter was headed "Mr and Mrs William and Jane Forrest" and that the words "William and Jane Forrest" appeared below the two signatures, but she did not prepare the letter - it was prepared by Mr Gibb. She went to Mr Gibb's office and she was given this document to read through. She got very upset and said to Mr Gibb's secretary that this was wrong, but the secretary would not phone Mr Gibb. She was in a panic and very distressed, and so she signed the letter. Mrs Forrest then stated that the secretary did in fact call Mr Gibb as she was so upset, but he would not speak to her on the phone, and the secretary told her that Mr Gibb had said that she should sign the document, it would all be okay. She eventually signed it.
[55] She had instructed Peter Imrie to deliver a building contract
to the pursuers for them to check and sign, and the employers were to be
KWF. Originally she and her husband had
instructed Mr Gibb as individuals, but then she sent an email to
Mr Gibb giving the details of KWF and telling him that both projects
should run in KWF's name. This was sent
to John Thomson. Gibb Architects were
the architects on the project until she terminated their employment by the
letter dated
[56] In cross-examination Mrs Forrest was pressed as to where she
resided at various times. She stated
that in about August 2007 she thought that she was with her sister in
[57] Mrs Forrest was clear that before the second tender procedure
began, it had been decided that this project would be a commercial venture
which would result in the sale of the property rather than its occupation by
the defenders for their personal use. At
some stage between 5 September and
[58] With regard to her earlier evidence as to the number of
meetings in November 2005, Mrs Forrest was now of the view that there as
only one such meeting. She did not
recall Gordon Gibb attending that meeting.
Peter Imrie did not attend the meeting either. She could not be sure when the meeting on
[59] She saw the pursuers' tender of
[60] She had no difficulty with Gibb Architects and others referring
to the clients as Mr and Mrs Forrest - she trusted Mr Gibb and did
not perceive a problem. She asked the
bank to provide a letter of assurance regarding KWF shortly after the interview
meeting on
[61] Mrs Forrest accepted that the minutes of the pre-start meeting, and all site meetings, showed her and her husband as the clients, but at that time she did not understand the consequences; she had no great understanding of contract law. She did not know if she ever raised this matter with anybody. She never challenged her designation as employer in the architect's instructions, because her main concern was what was being instructed. She knew that she was not in a financial position to carry out this project herself.
[62] With regard to the notice about deduction of liquidate and
ascertained damages, she remembered having two meetings to discuss these
notices with Gordon Gibb, on 19 and 21 December 2006. She was almost forced to sign the letter of
[63] Mrs Forrest was asked whether the letter dated 20 April
2007 addressed to Mr Gordon Gibb and signed by her with an address
starting "KWF Homes Ltd, Flat 2/4, 169 Hamilton Road" was the first letter that
she had ever sent to Mr Gibb from KWF, and she disagreed with this and thought
that there might have been others. He
received plenty of cheques from KWF and she thought that he had other letters
from KWF. She was asked when she emailed
Gordon Gibb or John Thomson to tell them that KWF should be the client on both
the
[64] Mrs Forrest was asked about the letter dated 10 April 2007
signed by her and addressed to R J Burrows of the pursuers, on KWF headed
notepaper, and it was pointed out to her that Mr Burrows denied receiving
this letter or seeing it at all until the adjudication; she replied that she thought that it
was sent to them, because the meeting happened and Mike and Ronnie Burrows were
quite happy for Gordon Gibb to be dismissed.
With regard to the letters dated 20 and
[65] Mrs Forrest was asked why the two letters dated
20 April 2007 had a different set up and address, that addressed to
Mr Ronnie Burrows bearing a printed heading "KWF Homes Limited, 11 St
John's Boulevard, Uddingston", and that addressed to Mr Gordon Gibb bearing
a typed heading "KWF Homes Limited, Flat 2/4, 169 Hamilton Road, Mount
Vernon". She replied that she completed
the letter to Mr Gibb herself, and this was the address at which she
resided. The other letter addressed to
Mr Burrows had been prepared by her father and her husband and was only
signed by her. She was sure that the
letter of
[66] (iv) Mr
William Forrest, the second defender, was aged 57 and lived at
[67] Mr Forrest said that he really had no day to day involvement in the project - his wife was the main worker and he was more of a househusband. If his wife went to a meeting and he had nothing else to do, he would go along as well.
[68] One or two weeks after the interview meeting a pre-start
meeting was held at which Mrs Forrest handed over the bank letter regarding
KWF. Mike Burrows opened this and said
"that seems fine". He was not surprised
to get this. Mr Forrest was shown
the minutes of the pre-start meeting on
[69] He remembered the two letters dated
[70] In cross-examination Mr Forrest confirmed that he received
service of the present proceedings at
[71] Mr Forrest stated that the decision to change from the
contract being in the names of the defenders to being in the name of KWF was
taken sometime between 5 September and
[72] He was asked when the Airdrie Savings Bank were requested to provided a letter of assurance regarding KWF, and he replied that this was late 2005 or early 2006; he could not explain why this was not provided until 9 January 2006. At the pre-start meeting, there was an informal discussion between his wife and Mike Burrows when the letter from the bank was handed over and Mr Burrows said "thanks very much"; Mr Forrest believed that Mike Burrows opened it and said that it seemed fine. Mr Burrows did not say that he would have to discuss the matter with his fellow directors - as far as Mr Forrest was concerned, there was no problem and they were "all singing from the same hymn sheet". Mr Forrest accepted that he probably could have attended all of the site meetings. He thought nothing about his designation as client on the minutes of these meetings. Again, he thought nothing of his description as employer in the architect's instructions. He left this to Jane - she was doing this on his behalf as well.
[73] With regard to the letter dated
Submissions for the parties
[74] Having
set out at considerable length the evidence at the preliminary proof, I can
deal with parties' submissions more briefly, as written submissions were
helpfully lodged on behalf of each of the parties, and the submissions in court
followed these written submissions very closely. The written submissions are in the court process,
and I refer to these for their whole terms.
I summarise briefly these submissions for present purposes.
Submissions
for the pursuers
[75] Mr Smith for the
pursuers moved for decree in terms of the first and second conclusions, or in
the event that the Court was against him on any point, for the case to be put
out By Order to consider further procedure.
(Ultimately having heard submissions for the defenders, he agreed with
Mr Malone's position that the case should be put out By Order in any
event). He submitted that the
credibility and reliability of the various witnesses was central to the main
issue of the identity of the parties to the contract. He submitted that the witnesses for the
pursuers were both credible and reliable, and that their evidence was
preferable to that given by the defenders' witnesses, who were neither credible
nor reliable. The question as to whether
the adjudicator's decision was ultra
vires or not depended largely on whether there was a contract between the
pursuers and the defenders. He invited
me to find that there was such a contract, and that the adjudicator therefore
had jurisdiction. With regard to the
defenders' argument in paragraph 1.11 of their Note of Arguments (which was to
the effect that if a contract was formed between KWF and the pursuers at or before the pre-start meeting on
10 January 2006, subsequent contractual documentation falls to be construed as
relating to that contract), counsel submitted that the factual basis for this
hypothesis was absent. In any event, the
case of John Stirling v Westminster Properties Scotland Ltd [2007] BLR 537 was not
authority for the defenders' proposition.
[77] With regard to the defenders' attack on the adjudicator's decision as being contrary to the rules of natural justice, counsel observed that adjudication was a form of rough justice, intended to provide a speedy but provisional resolution of disputes. He pointed out that the adjudicator was required to reach her decision with 28 days (unless parties agreed to an extension) and that the adjudicator had power to set her own procedure and at her absolute discretion might take the initiative in ascertaining the facts and the law. The defenders' averments did not even amount to a relevant case that the adjudicator had breached any of the rules of impartiality binding upon her. The defenders' position amounted to no more than an assertion that it would have been reasonable for the adjudicator to conduct a conference call with Mr Imrie. There was no suggestion that the adjudicator acted unreasonably (in the Wednesbury sense) by adopting the procedure which she adopted. In any event, the adjudicator acted both fairly and reasonably in the circumstances and there was no substance to this complaint.
[78] With regard to the question of retention and set-off (which was
contained in paragraph B3 of the pursuers' Note of Issues and is quoted at
paragraph [3] above), the adjudicator found the defenders liable to pay the
pursuers for sums certified as due by the architects in their interim
certificates Nos 9, 11 and 12. The only Withholding
Notice that might be relevant in this regard was the pretended letter dated
[79] With regard to the defenders' subsidiary argument that in any event the right of retention or set-off is not excluded by the failure to serve a valid Withholding Notice timeously, counsel submitted that this was simply wrong. He referred me to clause 30.1.1.5 of the Contract which provided that where the employer did not give any notice pursuant to either of the immediately preceding sub-clauses, the employer shall pay the contractor the sum certified within 14 days from the date of issue of an architects' interim certificate. He referred me to Robert Morgan Building Services v David Jervis [2004] BLR 18.
[80] Counsel submitted that no valid reason had been given for setting aside the adjudicator's decision, which was properly within her jurisdiction and which was not ultra vires. It was accordingly binding on the parties until the dispute or difference is finally determined. The defenders had given no valid reason for continuing to withhold sums due in terms of the decision. The pursuers were accordingly entitled to decree in terms of the first and second conclusions of the summons.
Submissions
for the defenders
[81] Mr Malone for the
defenders submitted that on the evidence there was a contract between KWF and
the pursuers, created by Mr and Mrs Forrest as directors of KWF asking the
pursuers to contract with KWF, and the pursuers either expressly agreeing to do
so or in any event starting on site following the request to contract with
KWF. Alternatively, no contract had been
formed, because the identity of the parties was an essential term of the
contract. It was clear from the evidence
that the defenders did not intend to contract in their personal capacity, and
their actions were inconsistent with an intention to do so. In any event, there was no contract between
the pursuers and the defenders. Without
such a contract, the reference to adjudication was ineffective, and the
adjudicator had no jurisdiction.
[82] In the event of the Court rejecting the above submissions and finding that there was a contract between the pursuers and the defenders, Mr Malone made submissions regarding natural justice and that an adjudicator is in reality a type of arbiter and accordingly the courts could review misconduct on the part of the arbiter at common law.
[83] With regard to the evidence, Mr Malone invited me to prefer the evidence of the witnesses for the defenders to that of the witnesses for the pursuers. He submitted that the defenders' evidence was consistent with the verifiable facts. The pursuers were asked to contract with KWF and were provided with a bank letter to that end. They never indicated that they would not contract with KWF (and indeed on the evidence for the defenders they indicated that they were quite happy to do so), and they subsequently commenced the works. Thereafter all payments were made by KWF, which although not conclusive is consistent with the defenders' position that the pursuers' contract was with KWF.
[84] Although he conceded that Mr Imrie's evidence about the handing over of a contract was not completely clear regarding date, it was clear that a completed contract was handed over and was in the name of KWF. At no time did the pursuers state that they did not wish to contract with KWF; when they commenced work on site they knew that the defenders wished the contract to be with KWF. He submitted that the essence of performance in a building contract was that the contractor was to build and the client was to pay; in this case payment was made by KWF. The adjudicator was wrong in finding that there was no contract with KWF. In any event, even if there as no contract with KWF, there was no consensus and therefore no contract.
[85] Under reference to John
Stirling v Westminster Properties
Scotland Ltd it was submitted that if a contract was formed between KWF and
the pursuers at or before the pre-start meeting, subsequent contractual
documentation falls to be construed as relating to that contract. In this case, there was an element of
confusion all around;
the parties were not experts in contract law, and the paperwork
referring to the defenders as individuals should be construed as suggested in
[86] If the Court was against him on the arguments narrated above, and found that there was a contract between the pursuers and the defenders, the adjudication was not a statutory adjudication, but purely contractual. The contract must be in writing, as the adjudicator should not require to decide what the terms of the contract were. There was no contract in writing in this case, and accordingly the adjudicator had no jurisdiction. Moreover, as this is not a statutory adjudication, it can only be regarded as a form of arbitration. I was referred to Domsalla v Dyason [2007] EWHC 1174, Costain Ltd v Strathclyde Builders Ltd 2004 SLT 102 in which the view was expressed (at paragraph [7]) that an adjudicator must be regarded as a type of arbiter, and that the well-established rules that govern the judicial control of arbiters apply to adjudicators, and to the contrary view expressed by the Second Division in Diamond (supra) at paragraphs [19] and [20]. However, Mr Malone submitted that Diamond was concerned with a statutory adjudication, and not a contractual adjudication as in this case. He submitted that a contractual adjudication is merely a form of arbitration, binding on a temporary basis only, but otherwise having all the hallmarks of an arbitration under Scots Law. If it is properly viewed as a form of arbitration, the adjudicator's decision may be reviewed on grounds of misconduct, and if the adjudicator made an error of law so serious as to undermine the whole process this would constitute misconduct. Moreover, it is open to the defenders to set off sums awarded by the adjudicator unless the contract specifically excludes this right. Clear words in the contract would be necessary to effect such an exclusion in a situation where the 1996 Act does not apply. Moreover, although the withholding notices were in the name of KWF, it should be inferred that KWF were acting as ad hoc agents of the defenders.
[88] Finally, it was submitted that the adjudicator failed to apply her mind to the possibility that there was no contract at all - it appeared that she proceeded on the basis that if there was no contract with KWF, there must have been a contract with the defenders, but this was a non sequitur. This was an intra vires error of law, and as such it was conceded that it could not have been argued if the adjudication was a statutory adjudication; however, because it was a contractual adjudication and therefore a species of arbitration the Court was entitled to have regard to this.
[89] Mr Malone moved me to sustain the pleas-in-law for the defenders. With regard to further procedure, if I held that the pursuers' contract was with KWF, the adjudicator had no jurisdiction and decree of absolvitor should be pronounced. The same would apply if I held that there was no contract at all. Similarly, if I held that there was a contract between the pursuers and the defenders but that the adjudicator's decision was vitiated by a breach of natural justice and/or misconduct, absolvitor should be granted. If I held that there was a contract between the parties and there was no breach of natural justice and no misconduct, Mr Malone sought to have the case put out By Order in order to seek leave to lodge a counterclaim.
Discussion
[90] Understandably,
both parties laid great importance on the question of credibility and
reliability of the various witnesses, and I deal with this matter first.
[91] I found the evidence of the four witnesses led on behalf of the
pursuers to be generally credible and reliable.
Gordon Gibb in particular gave his evidence in a careful and
professional manner, without apparent exaggeration, and I found him to be a
most impressive witness. His evidence
was precise and detailed, and was consistent with the documentary evidence and
also with much of the other evidence led on behalf of the pursuers
. It was he who dealt primarily with
the clients - John Thomson was employed by his practice for about nine months
and reported to Mr Gibb, but Mr Gibb had much greater professional
experience and dealt mainly with Mr and Mrs Forrest. His own contract was with them, and his view
that the defenders were the employers of the pursuers in the building contract
was supported by much of the documentation, including both the first and second
invitations to tender, the Bills of Quantities, site meeting minutes,
architects' instructions and certificates and correspondence. His recollection of the meeting of
[92] Mr Ronnie Burrows and Mr Ken Rodger each gave their
evidence in a clear, honest and open manner and I found them to be entirely
truthful. Their evidence was internally
consistent and also consistent with that of the other witnesses for the pursuers . They spoke
to the system of logging incoming mail and deliveries, and their evidence was
consistent with the documentary productions.
Mr Rodger was clear that the pursuers did not offer to reduce their
price by £8,000 before or at the meeting of
[93] Mr Michael Burrows was also clear and open in his evidence and
had a detailed recollection of events.
He explained why he did not respond to the letter from Peter Imrie dated
[94] By contrast, I did not find the evidence for the defenders to
be satisfactory, and none of the four witnesses led for the defenders was in my
view entirely credible or reliable. John
Thomson maintained that he knew some time before the meeting on
[95] Peter Imrie was an equally unsatisfactory witness. He was unable to provide any satisfactory
explanation as to how he came to prepare the second invitation to tender, and accompanying Bill of Quantities, which was sent
out on
[96] The first defender gave her evidence in an evasive and
reluctant manner. In several passages of
her evidence she claimed to recollect an incident, but would then change this
evidence or retreat from it and claim that she could not remember what had
happened. She stated that she was
suffering from a mental illness throughout much of the relevant period and that
she could not remember much of what happened at or before the adjudication. She could explain why she did not correct
Gordon Gibb's remarks in his email dated
[97] Mr Forrest was not an impressive witness either. He claimed that he had no day to day
involvement in this project and was more of a "house husband", that he had no
knowledge of the building and adopted a "hands-off" approach. However, ultimately he accepted that he had
attended the meeting on
[98] Where there was a conflict of evidence between the evidence for
the pursuers and that for the defenders, I had little hesitation for the
reasons given above in preferring the evidence on behalf of the pursuers. I am satisfied that at the meeting on
30 November 2005, which followed upon the pursuers' revised tender to
perform works for the defenders, the question of whether KWF should be the
employers, instead of the defenders themselves, was not raised. Prior to that meeting, there had been no
request by the defenders to the pursuers to reduce their price further; at the meeting this
was discussed, and this resulted in the pursuers' letter dated
[99] The notice regarding deduction of liquidate and ascertained damages dated 19 December 2006 was issued in the defenders' own names, Mr Gibb having dictated the content and having explained to the defenders the significance of the letter coming from them as individuals. The notice referred to clause 30.1.1.4 in the Standard Terms of Contract referred to in the pursuers' tender addressed to the defenders.
[100] I am satisfied on the evidence that in the course of a heated discussion between Mr Hives and Mr Imrie towards the end of the contract Mr Hives was abusive to Mr Imrie and Mr Imrie replied that Mr Hives was "not even the client - William and Jane Forrest are the clients." Mr Gibb's appointment as architect was on behalf of the defenders as individuals.
[101 Despite the evidence of Mr Imrie, I am not satisfied that any completed standard form contract identifying KWF as the employers was ever sent, handed over or delivered to the pursuers. I am not satisfied that the two letters dated 5 May 2007 which from part of No 6/3 of process were ever received by the pursuers, nor am I satisfied that the letters dated 10, 20, 25 and 30 April 2007 which form part of No 6/5 of process were ever received by their addressees.
[102] In light of the above findings, the first question which arises,
and which is focussed in paragraph A1 of the pursuers' Note of Issues (quoted
at paragraph [3] above) is whether there was a contract between the
pursuers and the defenders which entitled the pursuers to refer the parties'
dispute to adjudication. There are three
possibilities regarding the formation of a contract - (a) there was a contract
between the pursuers and KWF, (b) there was no consensus between the parties as
to the identity of the contracting parties, and so no contract, and (c) there
was a contract between the pursuers and the defenders. In light of the evidence I am entirely
satisfied that there was no contract between the pursuers and KWF. The pursuers never offered to carry out works
for KWF, nor did they ever agree to KWF becoming the employers in a building
contract to which the pursuers were or might become a party. Nothing done by the pursuers could
legitimately give rise to the inference that they were prepared to work for
KWF. They offered to work for the
defenders; they
never responded to Mr Imrie's letter dated
[103] I have given careful consideration to the
second possibility, namely that there was no contract. However, in light of the documentary evidence
and the view which I have reached as to the credibility and reliability of the
various witnesses, on the balance of probabilities I reject this. The defenders put this project out to tender,
and the pursuers tendered for the work.
The first defender then asked, at the end of the meeting of
[104] Turning to the issues raised in paragraph A2 of the pursuers'
Note of Issues, it is correct that there is an averment in the defences which
has never been deleted to the effect that "the adjudicator has misdirected
herself in failing to take into account the evidence of Mr Thomson, and
the affidavit of Mr Imrie".
However, this criticism was not repeated in the defenders' written
submissions, nor did Mr Malone develop any argument along these lines
before me. No mention was made at all of
an alleged failure to take account of the evidence of Mr Thomson. There was discussion about the adjudicator's
attitude towards Mr Imrie, but this was in the context of the allegation that
she should have held a conference call with him between 21 and
[105] In any event, this attack by the defenders on the adjudicator's
decision amounts to little more than a complaint that the adjudicator was
guilty of an intra vires error of
law. I do not consider that it is open
to the defenders to seek to reduce the adjudicator's decision on this
basis. Mr Malone sought to
distinguish a statutory adjudication (ie one which falls within the provisions
of the Housing Grants, Construction and Regeneration Act 1996) from a purely
contractual adjudication. He submitted
that this fell into the latter category, and that purely contractual
adjudications must be regarded as a species of arbitration and accordingly the
well-established principles on which the Court may interfere with an arbiter's
decision apply equally to a case such as this.
I consider that this is an artificial and misconceived distinction. It is true that the Second Division in Diamond were considering an adjudication
that fell within the provisions of section 104 of the Housing Grants,
Construction and Regeneration Act 1996 and the Scheme for Construction
Contracts (
[106] The arguments discussed in the
immediately foregoing paragraphs also have relevance to the issue raised in
Statement B3 of the pursuers' Note of Issues, quoted at paragraph [3] above,
which relates to retention and set-off.
Several points arise in relation to this. First, the adjudicator found that the letter
dated 5 May 2007 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, whom she had found to be the defenders. I agree with her reasoning on this point. In any event, even if she was wrong on this point,
any error was intra vires and
accordingly not subject to challenge in these proceedings. Moreover, as I have indicated above, I was
not satisfied on the evidence that the letter dated
[107] However, the defenders' argument for retention and set-off does not end with the Withholding Notice. They argue that unless the contract specifically excludes the right at common law of retention and set-off then they are entitled to retain and set-off sums due to them against any decision of the adjudicator. They say that their right to retain and set-off at common law was not excluded by the contract. Having regard to the terms of the contract, I do not consider that this argument is well-founded. The scheme for payment of sums certified under architects' certificates is to be found at clause 30.1.1.1 to clause 30.1.1.5 of the contract. This scheme provides that the architect shall issue interim certificates from time to time and that the final date for payment of the sum certified will be 14 days from the date of issue. Not later than five days from the issue of the certificate the employer shall issue a notice of the amount proposed to be paid. Not later than five days before the final date for payment the employer may give a Notice of Withholding. Where the employer does not give either of these notices, the employer shall pay the contractor the amount due under the certificate.
[108] I consider that this scheme within the contract clearly excludes the right to common law retention or set-off: the only means by which an employer may properly refrain from making payment of a sum due under an architect's certificate is by the contractual mechanism contained in this scheme. 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. I consider that in the context of the present contract, no such retention or set-off is available to the defenders. I note that this is consistent with the reasoning (albeit in a somewhat different context) in Rupert Morgan Building Services (LLC) v David Jervis [2004] BLR 18, and the comments in Keating on Construction Contracts (8th edition) at 17-056. It follows that the defenders' arguments for retention and set-off, whether based on the Withholding Notice or at common law, fail.
[109] I turn finally to the defenders' argument based on alleged breach of natural justice, as contained in paragraph 3 of the Note of Argument, No 18 of process and set out above in paragraph [3]. Put shortly, the defenders submit that Mr Imrie's evidence as to who were the parties to the contract was critical; that although he provided an affidavit on this matter, he was on holiday during much of the adjudication procedure; on his return he expressed willingness to participate in a conference call; and that it would have been reasonable for the adjudicator to conduct a conference call with Mr Imrie at some time between his return from holiday on 21 September and the date on which her decision was due, being 26 September.
[110] It seems to me that the defenders have
an evidential difficulty in this regard, standing that part of Mr Imrie's
evidence before me which is summarised at paragraph [45]. Mr Imrie was not asked when he was away
on holiday, nor was he asked whether he would have
been willing to participate in a conference call, nor was he asked if he ever
expressed willingness to do so. His
position was that he did not know when the adjudication happened, nor could he
explain why he did not give evidence at it.
The best evidence of Mr Imrie's being willing to participate in a
conference call with the adjudicator would have been Mr Imrie's own
evidence. The best evidence of
Mr Imrie's availability for a conference call on or about
[111] In any event, the terms of the contract provided wide powers to the adjudicator in reaching her decision. Clause 41A.6.5 provides (in the masculine) that
"in reaching his decision the Adjudicator shall act impartially, set his own procedure and at his absolute discretion may take the initiative in ascertaining the facts and the law as he considers necessary in respect of the referral and his powers shall include the following....requiring from the parties further information than that contained in ..... any written statement provided by the parties; ... giving directions as to the timetable for the Adjudication, any deadlines...".
The defenders do not aver, nor did they submit before me, that the adjudicator acted in breach of these powers or outwith her discretion. They do not even aver that in the circumstances of this case, and the email correspondence set out in productions 6/199 to 6/211 of process, no reasonable adjudicator would have failed to conduct a conference call with Mr Imrie. The highest that the defenders' submissions go is to assert that "given the short timescales within which adjudication is meant to operate, it would have been reasonable for the adjudicator to conduct a conference call with Mr Imrie".
[112] In light of the lack of evidence from Mr Imrie to support this line of attack, 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, I do not consider that there is any force in the defenders' attack on the adjudicator based on a possibility of a breach of natural justice. The adjudicator was required to give her decision within a short timescale. She had before her the affidavit of Mr Imrie, and also had the benefit of having heard evidence from witnesses for both sides and full legal submissions together with a substantial body of documentary evidence. Even if Mr Imrie was available for a conference call at or around 21 September, and even if he was willing to participate in such a call, I do not consider that the adjudicator can be criticised for proceeding to reach her decision without such a conference call.
Conclusion
[113] It follows from the above that I reject all the ably presented submissions made on behalf of the defenders. The adjudicator had jurisdiction in this matter. There is nothing before me to suggest that she acted ultra vires. There is nothing to suggest that her decision was contrary to the rules of natural justice. Finally, there are no grounds on which the defenders may seek to retain or set-off sums against the adjudicator's decision. Standing my decision on these matters, I have doubts as to what may be achieved by putting this case out By Order. However, as I understood parties finally to be in agreement that this is what should happen following upon the issuing of this opinion, I consider that it is proper that I should follow this course of action. Unless parties indicate that they are both in agreement that I should proceed to issue an interlocutor, the case will be put out By Order as soon as practicable after the issuing of this Opinion.