Adjudication
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KEYWORDS: |
Housing Grants Construction and Regeneration Act 1996, Interim Remedies, Revisiting Interim Remedies, Onus of Proof, Incorrect Advice, Breach of Warranty, Negligence, Contractual Indemnity, Contributory Negligence, Judge Coutts |
In the scots case of Citex Professional Services Limited v Kenmore Developments Limited [2004] in the Outer House, Court of Session on 28 January 2004, Judge Coutts was required to give an opinion on when an Adjudicator's Decision can be revisited. He then was required to decide whether an Adjudicator's Decision changed the onus of proof. Finally he had to consider whether a party could raise contributory negligence as a defence against breach of contract.
Kenmore engaged Citex as project managers in relation to the extension and refurbishment of premises in Edinburgh under contracts dated 8 and 23 June 1998. There was damage to the premises. The works were not insured. Clause 16.1 provided for disputes to be referred to adjudication and the procedure under the Scheme applied. One matter was whether Citex was liable for alleged advice given in relation to insuring the works.
Citex stated that the Adjudicator found that on 12 May 1998 Citex had incorrectly advised Kenmore that Trentham was liable for insuring the works and that such advice was in breach of clause 2.9 of Appendix 1 of the Agreement. Citex also stated that the Adjudicator also determined that such advice was in breach of the warranty in Clause 7.1 of Appendix 1 and was also a negligent act giving rise to indemnity under Clause 2.6 of Appendix 1.
Clause 16.2 of the Contract provided for arbitration, but arbitration had not taken place. Citex had presented a petition seeking judicial review but that was dismissed on 5 October 2001. A decree was pronounced by Lord Macfadyen under which Citex was required to pay Kenmore, which it did.
The action before Judge Coutts was brought to revisit the adjudicator's decision awarding payment to the Defendants.
Three issues arose which were decided by Judge Coutts.
Kenmore had in its possession a sum of money already paid to them in terms of a court decree and did not require to do anything further. As there was no concurring litigation or arbitration, unless Citex investigated some procedure to re-visit the interim remedy of the adjudicator's decision, Kenmore were in right of the money and the status quo. Judge Coutts recognised that the matter of how the interim remedy of adjudication could be revisited in all circumstances had not been explicitly dealt with.
Citex conceded that it needed to present its action differently. Rather than propose an amendment Citex moved the court to determine whether there was a relevant case on merits and to decide on which party the onus of proof lay.
Citex argued that the adjudicator had erred in his decision. Citex submitted that any incorrect information passed to Kenmore on 12 May 1998, was not provided by the pursuers in the "performance of the Services" or the discharge of any obligation under the Agreement. Citex submitted that for the same reasons, the Adjudicator erred in his conclusion that the indemnity under Clause 2.6 was applicable. Citex concluded that in the circumstances, there was no proper basis in fact and law for holding Citex to be liable to make reparation to Kenmore in respect of breach of contract or liable to make payment under a contractual indemnity as the Adjudicator held.
Judge Coutts held that since Citex had averred that the adjudicator erred in both fact and law it was inevitable that the underlying facts i.e. whether erroneous advice was given and if so what the consequences were, required proof before answer. Citex's pleadings in this regard might turn out to be somewhat less than frank. If that be so, disapproval could be expressed in an award of expenses.
Judge Coutts commented that had Citex made an admission of the erroneous advice, he would have decided that Citex were liable at least for the amount awarded in the adjudication. His decision would have been based on the reasons given by the adjudicator, which he considered to be correctly found in the terms of the contract between the parties.
There was also a counterclaim by Kenmore which, it was argued, could stand on its own by way of an action. Judge Coutts held that would involve consideration of the same issues in order to give rise to the extended damages claim. Kenmore would have the onus at that point.
Judge Coutts held that he would not dismiss the principle action and if an action was differently formulated to allow a proof before answer.
Kenmore argued for the straight forward approach that it was for a pursuer (in this case Citex) and not a defender to establish the essential facts.
Citex argued that the adjudicator's decision was of no consequence in determining where the onus of proof law and could not subvert it. As Citex's liability depended on Kenmore establishing that the alleged misinformation was given, Kenmore in the instant situation had likewise to establish their entitlement.
Judge Coutts was referred to City Inn Limited v Shepherd Construction Limited [2002] SLT 781 where it was consider by Lord Macfadyen to be
"no part of the function of an adjudicator's decision to reverse the onus of proof",
that
"the burden of poof in any such action lies where the law places it and is unaffected by the terms of the adjudicator's decision".
Judge Coutts agreed with that view. He stated that it was frequently said that onus has little relevance once the facts are before the Court. The facts could be presented either by way of admissions or on enquiry. He held that onus was not of material significance when what was being considered was the effect of contractual provisions on proved facts.
Judge Coutts observed that the pursuer in any action had an initial obligation to set the matter before the court, but held that had little to do with questions such as who might lead at a proof or the correct interpretation of a contract. In the instant case, the pursuer by way of averment and such proof as was necessary would require to set up a factual background and it was against the factual background that the Court determined liability.
Judge Coutts held that it was neither appropriate nor sensible at that stage to attempt to answer academic questions about onus of proof.
Citex argued that if they were in breach of contract then Kenmore's losses were in part occasioned by Kenmore's negligence. Citex argued that Kenmore could have dealt with insurance themselves without having inquired of Citex.
Judge Coutts was referred to the case of Forsikrings Vesta v Butcher [1988] 2 AER 43 under reference to the English Law Reform (Contributory Negligence) Act 1945, where it was stated that where a defendant's liability in contract was the same as his liability in negligence, independently of the existence of any contract, the court had power to apportion blame and reduce the damages recoverable, even though the claim was made in contract.
Kenmore attacked the suggestion that contributory negligence applied to breach of contract. Kenmore argued that simply because the contract liability under paragraph 2.9 was strict, that did not equate to negligence.
Judge Coutts held that there was no reason as a matter of scots law not allow proof in relation to contributory negligence, based on the fact that one does not sue "in tort" in Scotland but merely sues for damages. In any event he could not affirm that the plea would be bound to fail.
Judge Coutts held that if it was accepted as fact, that misleading information was given by Citex in relation to the insurance matters then he would hold that, subject to contributory negligence, there was no relevant case available on the terms of the contract to demand repayment of the sum found due on adjudication in the principal action. It would then follow that there was no relevant defence on the merits to the counterclaim which would then proceed to proof on quantum and contributory negligence. It was left to Citex to consider whether and to what effect it wished to amend the general form of its action.