George Beattie & Sons Ltd v Gareloch Support Services (Plant) Ltd

DBN-A107-20

Beattie was engaged to assist in the removal of the Glen Mallan jetty. The contract was made up of a number of documents, including four quotations and correspondence accepting those quotations.  Having issued four invoices which were paid without objection, Beattie issued a fifth for £60,000. Gareloch issued a pay less notice in the sum of £30,000, which Beattie did not accept. Gareloch then refused to pay. An adjudicator decided that the pay less notice was invalid. 

Gareloch said that the adjudicator had exceeded their jurisdiction by considering multiple contracts, rather than a single contract, when determining the dispute. The sheriff held that the four separate quotations and acceptances amounted to a single contract and that only one contract had been referred to the adjudicator. Further, Gareloch had failed to make a valid challenge to the adjudicator’s jurisdiction.  

On appeal, Appeal Sheriff O’Carroll noted that the court should consider what the parties meant by the language used in the contract. The correct approach was to consider what a reasonable person would have understood the parties to have meant – that reasonable person possessing all the background knowledge reasonably available to the parties at the time of the contract. This was what the sheriff had done. She considered in detail the evidence and arguments for and against the one contract argument. There were a number of arguments in favour of the one contract position, including the use of “phases” by the parties to describe the works and the request by Gareloch that a single invoice number be used by for all invoices, a request which was followed.  

The sheriff also considered the factors said to point towards a series of separate contracts. However, taken singly or together, these were not enough to demonstrate that there was more than one contract. All the work carried out by Beattie was done under a single contract and that was what was referred to the adjudicator who had jurisdiction to determine the dispute arising from that contract. 

Appeal Sheriff O’Carroll considered that the appeal rested on the proposition that taking account of all the factors, the sheriff ought to have reached the opposite conclusion. In other words, Gareloch was seeking to reargue their earlier submissions. However, it was the sheriff’s task to determine the facts, analyse and weigh them appropriately, reach conclusions, and determine the legal issue. 

Appeal Sheriff O’Carroll noted that it was common ground that the dispute concerned a single invoice number 4138, which Gareloch refused to pay because Beattie refused to agree a set off of £30,000. It was also common ground that the invoice was for work referable to two or more of the quotations.

Importantly, it was also common ground that the invoice did not ascribe separate charges to work attributable to different quotations, no breakdown was given. It would not be possible for either of the parties to separate the charges in that way on that invoice. Adjudication was intended to eliminate or reduce payment delays and simplify dispute resolution. But, if Gareloch’s arguments were correct, it would have been impossible for Beattie to have referred the dispute to adjudication at all. It was only necessary to state the argument to see the manifest impracticality of such an approach. The reality, as determined by the sheriff, reflected in the composite nature of invoice 4138, was that the parties entered into a single contract for all the work involved and only a single adjudication on that invoice was required. 

This conclusion meant that the second issue fell away. However, Appeal Sheriff O’Carroll noted that, unless the respondent to a referral challenges jurisdiction properly, it will be bound by the adjudication and cannot resist subsequent enforcement proceedings on the basis of lack of jurisdiction. The judge referred to the Inner House decision in Hochtief Solutions AG v Maspero Elevatori S.p.A (2021 SLT 528) who held that in deciding whether a challenge to jurisdiction had been properly made: 

“the critical question is whether it made its challenge ‘appropriately and clearly’ … Such a threshold test is required, because the adjudicator and the referring party must be given an opportunity to assess whether the challenge is a good one. No purpose is served by continuing with a flawed adjudication.” 

Here, there was no express challenge and the test set out there was not satisfied.

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