D McLaughlin & Sons Ltd v East Ayrshire Council

[2021] CSOH 122

DM&S was engaged by EAC to construct a new single storey extension at a primary school. A dispute arose regarding sums claimed and DM&S issued a claim in the sheriff court. DM&S later successfully referred certain matters to adjudication. DM&S then issued summary enforcement proceedings which EAC defended. EAC also lodged a counterclaim. The court enforced the award, EAC paid, but the counterclaim remained, as did the original sheriff court action. 

The key dates were as follows: on 17 July 2019, a Final Certificate was issued which valued the works at £3.3million. EAC paid this sum. On 12 September 2019, DM&S issued proceeding arguing that the Final Certificate did not accurately reflect the proper value of the works, including variations. On 23 March 2020, DM&S started the adjudication and the decision was issued on 11 May 2020. 

In the adjudication, DM&S argued that payment was due under an Interim Payment Notice. EAC, amongst other arguments, said that, even if payment was due under the Interim Payment Notice, the award should be nil because the Final Certificate was conclusive evidence of the sums due, and that sum had been paid. 

The Standard Building Contract with Quantities for use in Scotland (SBC/Q/Scot) 2011 included the following in respect of the Final Certificate:

1.9.3  If adjudication, arbitration or other proceedings are commenced by either Party within 60 days after the Final Certificate has been issued, the Final Certificate shall have effect as conclusive evidence as provided in clause 1.9.1 save only in respect of the matters to which those proceedings relate.

1.9.4  In the case of a dispute or difference on which an Adjudicator gives his decision on a date after the date of issue of the Final Certificate, if either Party wishes to have that dispute or difference determined by arbitration or legal proceedings, that Party may commence arbitration or legal proceedings within 28 days of the date on which the Adjudicator gives his decision.

As a starting point, Lord Clark noted that the factual details of the work done, and its true value, remained in issue in the separate court action. Specifically, DM&S said that the Final Certificate did not reflect the variations and the measured works. This action was raised within 60 days of the Final Certificate being issued. 

In essence, EAC’s position was that, as the adjudication commenced outside the 60-day period stated in clause 1.9.3, the Final Certificate was, for the purposes of the counterclaim, conclusive evidence of the sum due. Here, the adjudication had proceeded and the adjudicator reached the view that the Final Certificate was not conclusive evidence, but on a proper construction of the contract terms, in any form of proceedings commenced after the specified period, the Final Certificate must be conclusive evidence. 

Lord Clark considered an English decision, Trustees of the Marc Gilbard Settlement Trust, [2015] EWHC 70 (TCC), where Mr Justice Coulson as he then was) considered the exception to the Final Certificate being conclusive evidence as expressed here, in clause 1.9.3, as “save only in respect of the matters to which those proceedings relate”. Those words were taken to limit the exception only to the proceedings raised within the specified period. The Judge rejected the alternative construction put to him (also relied upon by DM&S here) that, if the same matters are raised in proceedings after the specified period, the exception will also apply. 

Lord Clark accepted that clause 1.9 was not expressed with absolute clarity  but agreed with Mr Justice Coulson (and so EAC),  holding that the clause, limited the period during which the exception to the Final Certificate being conclusive would apply. 

However, as Lord Clark noted, there was a “twist in the tale.” The Judge referred to the case of Jerram Falkus Construction Ltd v Fenice Investments Inc [2011] EWHC 1935 (TCC), where the adjudicator rejected a challenge to the final account and no proceedings were raised within 28 days. The adjudicator’s decision was, therefore, conclusive. Here, EAC’s counterclaim was lodged on 17 July 2020,  but the adjudicator’s decision was issued on 11 May 2020, more than 28 days earlier. On that basis alone, Lord Clark said the challenge must fail.

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