When a ceiling collapsed at a Scottish cinema project, the client started an adjudication against Laing O’Rourke. Here’s what happened next …
The collapse of a ceiling in a multiplex cinema in Braehead shopping centre on the outskirts of Glasgow has been the source of a number of skirmishes over the past few months. To date we have two court judgments and an adjudicator’s decision. The main protagonists are the two developers, CSC Braehead Leisure and Capital & Regional (Braehead), and Laing O’Rourke Scotland.
CSC employed Laing O’Rourke to construct the development, which included a 12-screen multiplex. The form of contract was the Scottish version of JCT98 With Contractor’s Design. Odeon, the operator of the cinema, was to carry out tenant’s fit-out works. From September 2005 to March 2006 Laing O’Rourke’s works and the tenant’s fit-out works overlapped. On 7 March 2006 the ceiling in auditorium seven collapsed. After the collapse, the ceilings in other cinemas were replaced as there were concerns over their safety.
In January of this year CSC commenced adjudication proceedings against Laing O’Rourke. The dispute was about whether the contractor had caused or materially contributed to the problems with the ceilings. The timescale for the issue of the adjudicator’s decision was extended on a number of occasions culminating in a deadline of 12 noon on 7 April 2008. The adjudicator issued his decision, together with his reasons, by email timed 11.56am on 7 April 2008. He found that Laing O’Rourke had contributed to the collapse.
As to how much the contractor should pay, the adjudicator’s covering email said: “You will see I envisage some further minor written procedure to take account of a matter touching on overall quantum. Please confirm that you agree to further extend the adjudication procedure until 5pm on Friday 11 April for that stated purpose alone.”
The decision itself required “parties to furnish me by Friday 11 April with a statement indicating their respective approaches to an appropriate sum to be deducted from the figure of £4,856,172”. The challenge for the adjudicator was by how much that sum should be discounted. Figures of £490,000 for liquidated damages and £2.6m for “certain contested items” were mentioned. The adjudicator also said he was holding off making any finding as to the parties’ liability for the expenses of the adjudication until Friday 11 April.
The decision went on to say “accordingly I find in favour of the partnership in the sum of £3,518,979 with simple interest thereon”.
Laing O’Rourke refused to consent to any continuation, and indicated its view that the adjudicator’s decision was a nullity.
The judge admitted that the decision was ‘untidy’ and ‘unsatisfactory’ but he considered that the adjudicator had done his best in the time available.
CSC started enforcement proceedings. The argument centred around the “interim” reference in the adjudicator’s decision and the fact that he had still to “firm up” the sum awarded. Laing O’Rourke argued that the adjudicator had failed to issue a proper decision. It said he had failed to exhaust his jurisdiction as he had not dealt with all the matters referred to him.
This was in principle a valid argument as there have been instances where the courts have refused to uphold decisions for failure to answer the matters put before them. For example, in the case of Ballast vs Burrell, the adjudicator was to decide the amount due. He failed to do this, and the court declared the decision to be a nullity.
In CSC the facts were different. The adjudicator did reach a decision on the figure to be awarded. He referred to it as an “interim” figure and required parties to furnish him with further submissions. It is not difficult in those circumstances to understand why Laing O’Rourke took the view that the adjudicator had not made a final decision. Indeed, the judge noted that if he found the decision to be an “interim” decision, then he would have had to find that it was unenforceable because the adjudicator would not have completed his job.
The judge decided it was a final decision. Although he admitted it was “untidy” and “unsatisfactory”, he considered that the adjudicator had done his best in the time available. Despite the references to an “interim” award, the judge found it to be final and therefore enforceable.
So what did he make of the adjudicator asking for more information? He decided it was simply an offer to “refine” the decision if the parties gave the adjudicator more time to do so.
This is a clear example of the courts doing everything possible to support the adjudication process. The question must be asked whether this time they have gone too far?
Lindy Patterson is a partner in Dundas and Wilson