ATG Services (Scotland) LTD against Ogilvie Construction LTD
[2024] CSOH 94
Ogilvie refused to pay an adjudicator’s decision of £1 million claiming that there had been breaches of natural justice. ATG had been appointed a sub-contractor for a groundworks package at a project for the construction of a housing and care facility. The dispute arose in connection with an interim payment application made by ATG. The adjudicator decided that ATG had made a valid application for payment, that there was no valid payment notice and that no valid pay less notice had been issued by Ogilvie, and that the final date for payment had passed without full and proper payment of the notified sum.
Ogilvie said that the sub-contract required notices served under it to be sent by first class recorded delivery post to a stipulated address or to such further address as might be notified in writing from time to time, or else by fax. It was further agreed at a pre-contract meeting that any applications for payment had to be submitted to two specified email addresses. The application in question took the form of an attachment to an email sent to a different email address, albeit one that was associated with Ogilvie.
Ogilvie did not seek to argue that it had not duly received the email. Rather, it maintained that the use of a method of service other than that stipulated in the contract rendered what was sent invalid as an application for payment of a notified sum. ATG said that the parties had adopted a course of conduct which treated applications served other than in accordance with the provisions of the contract as nonetheless valid.
Lord Sandison held that Ogilvie’s defence was: “entirely without merit” noting that:
“To describe an adjudicator as having gone off on a frolic of his own is to maintain that his decision depends to some material extent on a ground which was not suggested to him by the parties and on which he gave them no sufficient opportunity to comment. It is that lack of opportunity to state one's case which permits the categorisation of such a frolic as a breach of the requirements of natural justice.”
Here, both parties accepted that a live question in the adjudication was whether the Ogilvie’s behaviour in having accepted and dealt with earlier payment applications from ATG which had not been made by the means prescribed by the contract meant that it was no longer entitled to insist on the contract requirements. The legal principle being asserted by ATG was entirely clear. It was open to Ogilvie to submit whatever it chose in response. Instead, Lord Sandison said that Ogilvie: “contented itself with the somewhat delphic pronouncement that ATG had failed to evidence any principle of Scots law upon which it is seeking to rely in relation to its submissions on course of conduct”, adding later that ATG had “failed to provide a Scots law principle or any authority for their assertions”.
The judge said that the adjudicator was perfectly entitled to prefer ATG’s submissions, and even if the adjudicator was wrong in their determination of the law, that would represent no more than an error of law, about which Ogilvie could have no relevant complaint in the context of an adjudication enforcement.
Lord Sandison reminded Ogilvie that: “It may be tempting to forget from time to time that it is no part of the function of this court to act as a general appeal tribunal in respect of the adjudicator's decision, but it must not be lost sight of that the criticism of the adjudicator in this connection is that he breached the requirements of natural justice by going off on a frolic of his own”. The suggestion here was: “nothing less than an inversion of reality. No opportunity for injustice to be done was afforded”.
Lord Sandison concluded that the legislative policy of “pay now, argue later” that lay behind the relevant sections of the HGCRA judicial policy ought to be to discourage, as far as properly possible, frivolous defences such as those advanced here. This “unreasonable behaviour” justified an award of expenses on “the agent and client, client paying scale”, which is effectively the Scottish equivalent of indemnity costs.
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