| Date | 6 October 1999 |
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| Judgment | Allied London and Scottish Properties Plc -v- Riverbrae Construction Limited Court of Session, 12 July 1999 |
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| The Issue | The application of set off (compensation) in adjudication and whether adjudicators should order payment into joint accounts or deferment of payment until cross claims are resolved. |
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| Implication |
Adjudicators will normally be required order immediate payment of sums found held to be due and cannot take into account disputed matters not brought within their jurisdiction. Payment into joint accounts or making compliance with the adjudicator's decision conditional upon resolution of matters outside his jurisdiction will rarely be appropriate. |
printThe flow of legal decisions concerning adjudication is not restricted to England and Wales. In Allied London and Scottish Properties Plc -v- Riverbrae Construction, the Scottish Courts had to examine whether an adjudicator's decision should be upheld or altered upon judicial review. Riverbrae had carried out a number of works under separate contracts for London and Scottish, including office fit outs and the upgrading of lifts and stair installations. Riverbrae made claims for payment under four of these contracts. They were disputed by London and Scottish, and accordingly Riverbrae gave notice of its intention to refer these disputes for adjudication. In due course, an adjudicator was appointed and gave decisions in respect of four separate adjudications. In each case he ordered that London and Scottish pay Riverbrae sums ranging from approximately £8,000 to £110,000. In defending these claims, London and Scottish had advanced numerous arguments to the adjudicator. Primarily, it argued that it was entitled to compensation (usually termed 'set off' south of the border) in respect of debts due to it in the form of liquidated and ascertained damages which it argued arose on other contracts between the parties. These were different contracts from the four contracts which gave rise to the disputes before the adjudicator. Riverbrae disputed that any of the sums claimed by London and Scottish were due. In each of his decisions, the adjudicator rejected the claims to compensation by London and Scottish. He reasoned that compensation would only apply to liquidated claims which did not require investigation and proof, whereas in the case of the sums asserted by London and Scottish, investigations of the circumstances surrounding each claim would be required. Additionally, he found that the claim for compensation failed in each case because the parties were not debtor and creditor in the same capacity. Additionally, it was argued by London and Scottish that if the adjudicator found monies owing to Riverbrae, he should order that they be required to place any monies due into a bank deposit in the joint names of the parties pending resolution of all disputes between them. London and Scottish sought to justify this approach by arguing that Riverbrae had failed to fulfil contractual obligations incumbent upon them in respect of a number of other projects. Furthermore, it was agreed, Riverbrae had failed to provide health and safety information, again at other projects. London and Scottish argued that in light of these alleged failures of Riverbrae it was apprehensive that Riverbrae might be financially unable to meet its obligations. Again, in each of his decisions the adjudicator found for Riverbrae. He held that he had no power to direct that sums awarded to the applicant should be placed on deposit in the joint names of the parties, since this was not a power given to him by the Act or the Scheme, and neither such a term of the contract between the parties. Considering all these points, Lord Kingarth concluded that the adjudicator had been correct in ordering payment within 14 days of his decision. In the matters of compensation and the joint bank deposit, the adjudicator had proceeded in a manner which could not be the subject of attack. He had issued directions for the production of certain documents, appointed a legal adviser, and convened a hearing at which evidence had been led and argument made by legal representatives of the parties. Anticipating this judgment, London and Scottish approached the issue from a different angle. It argued that the adjudicator ought properly to have made his order for payment dependant upon resolution of the liquidated and ascertained damages claims. In other words, rather than order payment within 14 days, he should have ordered a stay of execution of his decision until these further claims were resolved. Lord Kingarth saw no merit in this argument. He noted that the adjudicator did not even have sufficient information to enable him to conclude that the apprehensions of London and Scottish as to the financial position of Riverbrae were reasonably based. He concluded that the adjudicator could not logically or lawfully have made an order postponing payment of the sums pending the existence of counter claims from London and Scottish. In his view, such an order would plainly have been to sustain the counter claims of London and Scottish for the retention of monies which the adjudicator had just rejected. Lord Kingarth concluded that it could not be suggested that the adjudicator had failed to take into account matters which he was bound to take into account, or that he had made any error of law going to the root of his jurisdiction. The orders sought by London and Scottish to set aside the decision were accordingly refused.
CJ-9938
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