Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2011] CSOH 62
CA144/10	OPINION OF LORD GLENNIE in the cause SGL CARBON FIBRES LIMITED Pursuers; against RBG LIMITED Defenders: ­­­­­­­­­­­­­­­­­________________

Pursuer: Howie, Q.C.; MacRoberts

Defender: Lake, Q.C.; Maclay Murray & Spens

31 March 2011

Introduction

[1] The pursuers, SGL Carbon Fibres Limited, seek to enforce the decision of an adjudicator, Mr George Ross, in terms of which he found the defenders, RBG Limited, liable to pay them the sum of £1,074,609.99 plus VAT, together with interest of £45,266.11 on the principal sum awarded. The pursuers quantify the VAT as being at least £161,191.50 (on the basis that the rate of VAT having been at least 15% at all material times). Mr Ross' decision was made on 8 October 2010 and was corrected in respect of certain clerical mistakes by letter dated 22 October 2010. I shall refer to the decision as corrected simply as "the decision". Because the parties adopted opposite roles in a previous adjudication and, as pursuer and defender in a previous action relating thereto, I shall, to avoid confusion, refer to them in this Opinion by the abbreviations "SGL" and "RBG". Similarly, because there have been two adjudications before different adjudicators, I shall refer to Mr Ross by name rather than, as is more usual, simply calling him the adjudicator.

[2] RBG resist enforcement on two grounds. The first is that the decision, or part of it, was made in breach of the principles of natural justice in that, in reaching his decision on certain issues, Mr Ross made use of his own knowledge and experience (a) to make factual determinations for which there was no evidence and (b) without giving them a reasonable opportunity of commenting thereon. The second is that he failed to exhaust his jurisdiction or, alternatively, acted in excess of it, the two criticisms in this case being simply opposite sides of the same coin. In their defences, RBG seek to have the decision set aside ope exceptionis (by way of exception).

[3] The matter came before the court for debate, it being agreed that the relevant facts appeared sufficiently from the documents before the court. At the beginning of the hearing, Mr Lake, QC, for RBG, indicated that he would also be seeking reduction of the decision. To this end, without objection from Mr Howie QC, who appeared for SGL, RBG lodged a petition in which they, as petitioners, sought reduction of the decision on those same grounds. The petition was in short form, incorporating by reference the contentions of the parties in the Summons and Defences in the main action. This came on for hearing at the same time as the debate, it being agreed that the disposal of the petition would follow from the decisions reached at debate in the main action.

The contract

[4] The contract between the parties was entered into on 10 June and 30 July 2008. In terms of that contract, RBG agreed to construct an additional production line at SGL's factory premises. The work included the installation of pipework, plant and ducting, the construction of an extension to part of the existing factory premises and the execution of associated infrastructure works. The contract was substantially on the terms of the NEC 3 form of contract with amendments and additions as agreed by the parties. It provided two alternative methods of dispute resolution, the applicable method depending upon whether or not the contract works were subject to the Housing Grants, Construction and Regeneration Act 1996. The works here were subject to the 1996 Act, and the method of dispute resolution in clause W2 applied. That provided for disputes arising under or in connection with the contract to be referred to and decided by an adjudicator. It contained provisions regulating the conduct of the adjudication. These included, at clause W2.3(4), a provision that the adjudicator was entitled to "take the initiative in ascertaining the facts and the law related to the dispute". It provided also, in clause W2.3(11) that the adjudicator's decision was binding unless and until revised by the tribunal - the chosen tribunal in this case being arbitration - and, further, it made a decision by the adjudicator a condition precedent to any reference to arbitration.

The first adjudication

[5] The adjudication with which this action is concerned is the second to have taken place between the parties under this contract. The first adjudication was commenced by RBG by notice dated 19 November 2009. The adjudicator was Robert Fleming. The reference was in respect of the following disputes:

(i) whether the Completion Date should be changed to 16 January 2009;

(ii) whether SGL were due to pay RBG the sum of £250,049.93 plus VAT, or some greater or lesser sum, in respect of invoice SINV/0036570;

(iii) whether SGL were due to pay RBG the sum of £45,703.47 plus VAT, or a greater or lesser sum, in respect of invoice SINV/0036578;

(iv) whether SGL were due to pay RBG the sum of £508,629.36 plus VAT, or some greater or lesser sum, in respect of invoice SINV/0036591;

(v) whether SGL were due to pay RBG the sum of £139,482.61 plus VAT, or some greater or lesser sum, in respect of invoice SINV/0039421;

(vi) whether SGL were due to pay RBG the sum of £972,192.01 plus VAT, or some greater or lesser sum, in respect of invoice SINV/0039657; and

(vii) whether the above payments should be made with interest.

The five invoices referred to were all issued in 2009, and those identified in paragraphs (iv) to (vi) above were issued in respect of work carried out after 31 December 2008.

[6] On 18 January 2010 Mr Fleming issued his decision in the first adjudication. On 29 January 2010 he corrected various clerical errors. No sums were found due to the defenders in respect of the matters referred to at paragraphs (ii) and (iii) above. Payment of £183,212.46 with VAT at 15% was found due in terms of paragraph (iv). Payment of £139,482.61 with VAT at 15% was found due in terms of paragraph (v). Payment of £612,020.58 with VAT at 15% was found due in terms of paragraph (vi). The total sum due to the defenders was £934,715.65 plus VAT.

[7] RBG raised proceedings to enforce that decision. Those proceedings were defended by the SGL. After hearing parties on RBG's motion for summary decree and at debate, Lord Menzies refused the motion for summary decree and dismissed the action. His decision is reported as RBG Ltd. v SGL Carbon Fibres Ltd. [2010] BLR 631. He held that Mr Fleming had failed to exhaust his jurisdiction as a result of misconstruing his remit. The question he had had to answer concerned RBG's entitlement to be paid in respect of five invoices under deduction of certain credits. The contract provided that the amount payable at each date for payment was the accumulating value of the Price for Work Done to Date ("PWDD"). Mr Fleming had correctly rejected the argument that the accumulating value of the PWDD was fixed and could not be revisited. It was necessary for him, therefore, in considering RBG's entitlement to payment in respect of the five invoices before him, to revisit the PWDD and consider whether it contained any element of overpayment by SGL, SGL's contention being that no further payment was due to RBG in respect of the 2009 invoices because of earlier overpayments. Mr Fleming had declined to have regard to evidence concerning those earlier overpayments and to this extent had failed to exhaust his jurisdiction.

[8] In addition to refusing the motion for summary decree and dismissing the action, Lord Menzies also sustained SGL's fifth plea-in-law and set aside the decision ope exceptionis. There was no separate petition by SGL for reduction. The effect of that appears to be that the decision stands but it cannot be relied upon by the parties to it and cannot be revisited by the adjudicator: see Vaughan Engineering Limited v Hinkins & Frewin Limited 2003 SLT 428 at para.[35].

The current adjudication

[9] Notice of Adjudication in the adjudication with which this action is concerned was served by SGL on 7 April 2010. On 9 April 2010 Mr Ross was appointed to act as adjudicator and wrote to the parties informing them of his selection. The dispute was identified in the Notice of Adjudication in the following terms:

"3.1 The dispute between the parties is in relation to the cumulative amount due to date to RBG, and payment to SGL for the change in the amount due."

The "Redress Sought" was set out in para.4 of the Notice of Adjudication. SGL sought a determination that RBG was in breach of contract and that the cumulative amount of £11,710,534 claimed by RBG was not justified. They contended as their primary case that the amount due to RBG was only £5,310,520.85. RBG had already been paid the sum of £9,540,989.18. On the basis that the amount due was only £5,310,520.85, they sought an order for repayment by RBG to them of £4,230,468.30 (or such other sum as might be found due), plus VAT and interest as appropriate.

[10] Mr Ross produced his decision on 8 October 2010, various extensions of time having been agreed between the parties to enable him to do so. His decision runs to some 217 pages. He corrected his decision on 22 October 2010, the corrections consisting of revisions to the Summary in the last four pages. As I have said, he found RBG liable to pay SGL the sum of £1,074,609.99, plus £45,266.11 by way of interest on that sum, together with VAT where applicable. He approached the matter by considering the issues under 20 broad headings. Issues 1-4 were of a general nature, relating to the form of contract operated by the parties, early warning notices, and an analysis of SGL's primary and secondary positions. Issues 5-20 related specifically to the matters in dispute. Thus, Issue 5 was described as:

"Section 1 - Site Set Up and Management

(Relative to PWDD up to 31 December 2008)"

The descriptions of other issues took a similar form, each being qualified by the words, in brackets,

"(Relative to PWDD up to 31 December 2008)".

After a consideration of each of these issues in turn, at p.213 of his decision Mr Ross gave a summary entitled:

"PWDD up to 31 December 2008 Summary (Adjudicator's Evaluation)".

He then listed Issues 5-20, giving a figure for each. Most of those figures showed sums due to RGB. The last three, Issues 18-20, concerned criticisms of the work done by RGB and, on his findings, resulted in sums to be deducted from the PWDD. Having added and subtracted the various figures, Mr Ross arrived at a sum of £7,771,329.94 as being the "True PWDD up to 31 December 2008". His calculations thereafter are somewhat complex, and I refer to them in detail below, but what he then did was, in effect, this. He added in certain sums (totalling £695,049.25) relating to matters for which SGL had already been given credit in the first adjudication, to produce a total of £8,466,379.19, and deducted this from the sum already paid by SGL (£9,540,989.18) to arrive at the sum due to SGL (£1,074,609.99). I shall refer to this in more detail when considering the second ground of challenge to enforcement of Mr Ross' decision.

The first argument - breach of natural justice

[11] RBG contend that, in reaching his decision, Mr Ross failed to observe the principles of natural justice. This issue is focused on his determination in respect of Issues 18 and 19. Issue 18 was concerned with "Loss of Productivity (Inefficiency)". Issue 19 was concerned with "Pipework/HBAC Labour Productivity". The complaint, in summary, is that in respect of each of these issues, Mr Ross made his decision not on the basis of the evidence provided to him by the parties or on the basis of any evidence gathered from his own investigation as to the facts on site, but on the basis of assumptions purportedly derived from his own experience, without providing parties with a proper opportunity of making submissions to him about the course he proposed to adopt or as to the relevance of his experience or as to the assumptions upon which he proposed to proceed.

[12] Fairness requires that an adjudicator must be impartial and must give each side a fair opportunity to present its case: see, for example, per Lord Drummond Young in Costain Limited v Strathclyde Builders Limited 2004 SLT 102 at para.[7], and per Dyson LJ in Amec Capital Projects Limited v Whitefriars City Estates Limited [2005] BLR 1 at para.[14]. The requirement that both sides must be given a fair opportunity to present their cases means, inter alia, that in a case where the adjudicator makes his own investigations of fact, or intends to rely upon his own experience in order to supplement the evidence presented by the parties, or to decide the dispute on a different basis from that advanced by the parties, he must inform the parties of his intention and give them a reasonable opportunity of commenting thereon. It goes without saying that he must give them sufficient information about what he proposes to do to enable them to make an informed response. The adjudicator may have fallen into error in his own researches, or in his assessment of the relevance of his own experience, and the parties must be given an opportunity of pointing this out. If no opportunity is given, any error may stand uncorrected: Costain para.[14]. At para.[15] in Costain, Lord Drummond Young cited from the judgment of Judge Humphrey Lloyd, Q.C. in Balfour Beatty Construction Limited v London Borough of Lambeth [2002] BLR 288 at 301-303. Included within that passage is the following:

"Is the adjudicator obliged to inform the parties of the information that he obtains from his own knowledge and experience or from other sources and the conclusions which he might reach taking their sources into account? In my judgment it is now clear that, in principle, the answer may be: Yes. Whether the answer is in the affirmative will depend on the circumstances ...

An adjudicator is of course entitled to use the powers available to him but he may not of his own volition use them to make good fundamental deficiencies in the material presented by one party without first giving the other party a proper opportunity of dealing both with that intention and the results. ..."

At para.[20], Lord Drummond Young set out a number of principles which he thought emerged from the authorities on adjudication and arbitration. Amongst them was the following:

"6. An adjudicator is normally given power to use his own knowledge and experience in deciding the question in dispute; ... if the Adjudicator merely applies his own knowledge and experience in assessing the contentions, factual and legal, made by the parties, I do not think that there is any requirement to obtain further comments. If, however, the adjudicator uses his own knowledge and experience in such a way as to advance and apply propositions of fact or law that have not been canvassed by the parties, it will normally be appropriate to make those propositions known to the parties and call for their comments. As I have indicated, the timescale may be very short."

This is, in my opinion, a correct statement of the law. A distinction always has to be drawn between the case where the adjudicator uses his own knowledge and experience in order to inform his decision on the factual and legal arguments presented to him by the parties, in which case there may be no requirement on him to obtain any further comments from the parties - he is, after all, chosen in part because he has such experience to bring to bear on the matters in dispute in deciding the reference - and the case where an adjudicator uses his own knowledge and experience to introduce new matters which the parties have not raised and to decide the case, in part at least, on the basis of those matters, in which case he should make his intentions known to the parties and invite their comments.

[13] A related question, adverted to in Costain, is that of timing. In an adjudication the timescale is, from the start, very short. Time will often be extended by agreement, as it was here, but even then there is seldom the opportunity for a very long period for further comments or submissions, particularly if points are raised at a late stage. One consequence of this is that if the adjudicator intends to proceed on the basis of his own knowledge and experience, in circumstances where he is required to give the parties a reasonable opportunity of commenting on what he proposes to do, he should raise the issue with the parties as soon as he is aware of it and must do so in time to allow adequate opportunity for comment. If he does not raise the issue until just before the deadline for producing his decision, he is in great danger of not providing the parties with a proper opportunity to respond.

[14] I turn now to consider the two issues in respect of which this point is taken.

Issue 18

[15] Issue 18 is concerned with "Loss of Productivity (Inefficiency)". SGL's contention, as recited at para.10.336 of the decision, was that RBG's labour was inefficient due to the shift patterns adopted by RGB. Some operatives were working 12 hours per day, 7 days per week for sustained periods. They submitted that it was recognised that such long shifts resulted in losses of productivity by up to about 50%. RBG's response was that they worked a shift pattern appropriate to delivery of SGL's needs. SGL had asked them to increase their resources on site and they had done so. SGL's contention therefore was unsubstantiated.

[16] On 22 September 2010 Mr Ross wrote to the parties in the following terms. The letter was sent by fax and appears to have been sent out after 5pm on that date.

"I hereby advise the Parties that I intend using my own knowledge in respect of the loss of labour productivity which I am considering for the works carried out by RBG in the above contract.

My knowledge is based on similar types of construction contracts to that at Muir of Ord whilst employed by National Contractors.

Frequently, different factors interact to influence productivity on specific projects, especially those projects which include day/night shift working.

Such factors include, but are not limited to the following:-

·       effect of overcrowded work areas on labour efficiency

·       learning curves

·       errors in judgment

·       carelessness

·       general lethargy

·       irritability and poor mental attitude

·       decrease in quality of workmanship

·       general slowdown of work pace

·       working prolonged periods of overtime

·       crew over manning

Because of the interaction of different factors upon labour productivity the assessment of lost productivity is at best a range of losses that can be assessed rather than a single lost productivity value.

I therefore consider the loss of labour productivity to be in the range of between 10% and 20% of the labour value in Section 2 and/or other labour elements which I deem appropriate.

I will however, make a finding on a single percentage in my Decision.

However, at this stage I inform the parties of my consideration of a range between 10% to 20% for loss of labour productivity and hereby give the Parties the opportunity to comment on same by 5.00pm on Thursday, 23 September 2010."

The time for commenting was just under 24 hours. In the context of a dispute of this type, where the adjudication had been under way for some months, that is remarkably short. It is apparent that there was some communication by telephone with the parties. On 23 September 2010 Mr Ross wrote to the parties in the following terms, after referring to that telephone conversation:

"For the avoidance of any doubt what I am considering, based upon my knowledge and experience, is the inefficiency of the labour force in providing the works, in particular during nightshift working.

Perhaps the word 'loss' of labour productivity is misleading. What I mean is the loss of hours due to inefficient labour working in providing the works.

I trust that the above clarifies the situation.

I now look forward to receiving the Parties' comments on what I am considering which may be making a percentage reduction in the labour hours expended by RBG in the provision of the works."

Later on 23 September 2010 Messrs Maclay Murray & Spens, on behalf of RBG, wrote to Mr Ross (with a copy by fax) stating that his proposed course of action

"... (a) is not in accordance with the Contract (b) demonstrates bias towards the Referring Party [RBG] and (c) will, if you follow it through, amount to a breach of natural justice."

They expanded on these points in some detail. They accepted that, in terms of the dispute resolution provisions in clause W2.3(4), Mr Ross was entitled to take the initiative in ascertaining the facts and the law relating to dispute. But what he proposed to do had nothing to do with ascertaining the facts.

"What you propose to do is apply your experience of productivity on other (un-named) projects (as you explained, by telephone, from your time with Bovis) and apply them to this dispute.

Every project is different. You have no power under Clause W2.3(4) to ascertain the facts of another project and apply them to this project. Not only is that course of action beyond your powers, it demonstrates bias towards the Referring Party. On the basis of no evidence at all, you are proposing to assist the Referring Party by making what is no more than an arbitrary percentage deduction from the labour cost of this project to take account of a number of random factors, none of which have been specifically discussed during the course of the evidence in this adjudication."

They went on to say that Mr Ross had no first hand knowledge of what happened on site, not having been present when the works were carried out, had not sought to ascertain the relevant facts pertaining to productivity on the project, had not questioned the key witnesses who were on site about this issue, had not been able (on his visit to the site) to access the full height at which operatives were working, and had not investigated the specific conditions under which the work was performed, for example the areas affected by fumes, the areas where work was carried out at height and areas where work was needed to clear contamination.

[17] I should note, in fairness to Mr Ross, that the allegation of bias has not been pursued. It formed no part of RBG's challenge to his decision in these proceedings.

[18] On 24 September 2010 Mr Ross acknowledged receipt of a fax from Maclay Murray & Spens on that day (which I have not seen). He pointed out that both parties had now lodged their closing submissions and that he would "disregard any new evidence submitted by the parties after the closing date". He added that the knowledge and experience that he was considering using was not related only to his time at Bovis but to "over 25 years experience in working for National Contractors at Senior/Director level".

[19] In a letter of 28 September 2010, Maclay Murray & Spens, on behalf of RBG, commented that it made no difference that his experience came from working for National Contractors at Senior/Director level in addition to his time at Bovis. He was proposing to apply his knowledge and experience of other projects in which he had been involved of which the parties had no knowledge. They said this:

"RBG cannot hope to be in a position to comment meaningfully on that. They do not know what your knowledge and experience is. If you proceed in this way, RBG will not have been afforded an opportunity to comment on your assessment and explain to you why it may be inappropriate. ...

In any event, for your knowledge and experience to be in any way useful in assessing the value of the labour applied for by RBG, our clients are of the view that you would need to have gained experience of constructing a carbon fibre production line in a live carbon fibre facility. If you do not have significant experience in this discipline, RBG's position is that your knowledge and experience of other projects is entirely irrelevant to the present dispute."

Mr Ross responded on 4 October 2010, faxed to the parties at about 3.30pm that day, in the following terms:

"I have previously advised the Parties that I am considering using my own experience and knowledge especially that gained over many years in contracting, especially working nightshift in construction operations.

...

In my experience, I found that the nightshift labour force do not manage to achieve as much work as the day shift labour force. The loss of inefficiency in my view can vary subject to whether or not senior management is on duty during the nightshift.

I personally found that when I worked as Contract Manager on nightshift the efficiency of the labour force was higher as compared to times when nobody from senior management was on duty during the nightshift.

I also found that the efficiency of the dayshift was significantly higher than the nightshift.

On using my experience of the above, I am considering reducing the hours worked by the nightshift by 15% to take cognisance of the fact that nobody from RBG senior level of management was on duty during the nightshift throughout the course of nightshift working.

I hereby give the parties the opportunity to comment on the above by 3.00pm on Tuesday 5 October 2010."

As I have already noted, that fax was sent at 3.30pm on 4 October 2010. The deadline for response was, again, just under 24 hours from then.

[20] Maclay Murray & Spens did in fact respond within the allowed time in a letter dated 5 October 2010, sent to Mr Ross by fax. They made the following points:

"Your proposed reductions for inefficient labour working, a lack of allocation sheets and nightshift labour will amount to a 40% - 50% reduction of the labour claimed by RBG. You are intending to make these reductions based on your own knowledge and experience. You have not received any evidence from SGL to support these reductions. You have not uncovered any evidence to support these reductions. You were not present during this project and could not therefore witness the events and circumstances which contributed to the level of labour utilised on site. Using your knowledge and experience (which is unknown to either party) as extraneous 'evidence' on these matters and then determining these matters on that basis is an inappropriate course of action. We would strongly advise you against taking this approach."

The reference to the lack of allocation sheets and the total reduction of about 40% - 50% is a reference to the combined effect of the Adjudicator's proposal to use his own personal knowledge and experience in relation to Issues 18 and 19. I shall return to consider the material relating to Issue 19, but for present purposes I should complete the recital of the relevant parts of RBG's letter of 5 October 2010:

"We note that your letter ..., which attempted to clarify your proposed 10% - 20% reduction for inefficient labour outlined in your fax ..., states that 'For the avoidance of any doubt, what I am considering, based upon my knowledge and experience, is the inefficiency of the labour force in providing the works, in particular during nightshift working'. It is therefore clear to RBG that you are proposing to make a 10% - 20% reduction for the purported inefficiency of the nightshift labour under cover of your letters referenced 194 and 196, as well as making a 15% reduction for the purported inefficiency of the nightshift labour under cover of your letter referenced 209. Obviously, this will lead to a double reduction for the purported inefficiency of the nightshift labour. Such a course of action is highly prejudicial to RBG.

We ask that you note the following points before embarking upon your proposed course of action with regard to the arbitrary reductions outlined in your letters referenced 194, 195, 196 and 209."

The letter then went on to make a number of points. It repeated the point that Mr Ross had not given any indication of what relevant experience he had to draw upon. It pointed out that in the absence of relevant knowledge or experience, Mr Ross could only determine what was a "reasonable utilisation percentage" if SGL submitted evidence about it, including empirical data. It noted that the principal witnesses for SGL had not identified productivity as an outstanding issue, despite Mr Zinke having been on site every day on their behalf and having carried out detailed checks on labour and resources. Although Mr Ross might, if he had relevant knowledge and experience, be able to decide what was the level of reasonable utilisation of labour, in the absence of evidence from SGL he could not make any findings about actual utilisation of labour so as to compare the two. There was therefore no material upon which he could make any reduction to the labour charge - any percentage reduction would be arbitrary.

[21] In his decision, Mr Ross referred briefly to the exchanges to which I have referred. At para.10.342, he said this:

"I initially indicated in correspondence to the Parties that I was presently minded to make use of my own knowledge and experience of the operation of contracts such as the present and in relation to the inefficiency of labour and so forth to make reductions on account of that. The challenge from RBG is that I cannot do that because it would be in breach of natural justice or some level of bias. In my opinion both of these submissions from RBG are themselves erroneous. The Authorities indicate that I am perfectly at liberty to make use of my own knowledge and experience and indeed it is the common experience of people in the construction world that Adjudicator's (sic) are often selected specifically because they are possessed of knowledge and experience in some particular field thought to be pertinent to the dispute to be adjudicated upon. The reason that is done is for making use of that knowledge and experience. I am also given the ability by the 1996 Act for example, to investigate the law and facts of the case. I am not restricted [to] assessing what the parties (with respect) put in front of me. However, there is a qualification in my ability to use my own knowledge and experience and that is that if I am proposing to do it I should give the Parties an intimation of an outline that I am proposing to use and invite their comment on same. I confirm that is what I have done in this Adjudication. I have intimated to the Parties what I am minded to do and invited comment on it. I have received comment on it from both sides. Before making my decision on the matter of inefficiency of RBG labour at nightshift I have taken account of the Parties' comments in response to my intimations that I propose to do it. I therefore consider that there can be no objection to me making use of my knowledge and experience tempered by the Parties' comments on the subject and that, in my view, is no way indicative of any form of bias or breach of natural justice for me to make use of my own knowledge and experience."

[22] His conclusions on this issue are set out at paragraphs 10.345 - 10.348 of the decision:

"10.345 I decide that RBG nightshift labour be reduced as in accordance with Clause 11.2(25) of the Conditions of Contract in that RBG resources were not used to Provide the Works (after allowing for reasonable availability and utilisation) due to the inefficiency of the labour during the sustained nightshift working.

10.346 The reason for such a reduction being that RBG failed to ensure proper and adequate Senior Management during the nightshift to control and manage the resources deployed.

10.347 I gained support in coming to this decision as RBG admitted to the absence of Senior Management during periods of nightshift working at various Adjudicator's 'Inspection of Accounts and Records' meetings.

10.348 I decide that RBG Nightshift labour hours claimed value (after taking account of my earlier Decision relative to deductions in respect of 'Breaks', 'Tool Box Talks' and 'Clocking Off Early' within 'Section 2 - Site Labour') be reduced by 15% which equates to a deduction of £277,904.26."

Issue 19

[23] Issue 19 concerns "Pipework/HVAC Labour Productivity". It was SGL's contention that although the material element of the work had not increased to any great extent, if at all, the labour element claimed by RBG had increased by over £6,000,000. RBG had offered no explanation as to how and why their labour costs had escalated to that level despite the material element of the works remaining constant.

[24] In this part of his decision, Mr Ross began by setting out the contentions of the Parties. He then said this, at para.10.369:

"In my letters dated 22 and 23 September 2010 and 7 October 2010 ... in respect of "labour productivity" (ie. the inefficiency of the labour force in providing the works) I advised the Parties of my intention of using my own knowledge and experience in respect of the inefficiency of the labour force in providing the works relative to Pipework Installation/HVAC."

I have already referred to the letters of 22 and 23 September 2010 in connection with Issue 18. In his letter of 7 October 2010, faxed to the parties at 15.03 on that date, Mr Ross referred to those earlier letters, advised the parties further that he intended using his own knowledge and experience on this matter and added this:

"With this in mind I would intimate the outline of my proposed method of carrying this out as follows:

·       Calculate the labour hours allocable to this element of the works.

·       Take account of Nightshift inefficiency of labour.

·       Take account of reduction of hours in terms of Tool Box Talks/Breaks.

·       Take account of 'stoppages' for gases.

·       Taking account of the requirement of work at height.

·       Take account of timing of receipt of drawings/information and pipework routing clashes.

·       Take account of Adjudicator's consideration of the reasonable number of hours required to carry out the work in circumstances where no constraints exist.

·       Arrive at the number of hours remaining (if any) with these representing the loss of labour productivity (ie. the inefficiency of the labour force in providing the works) for which the Responding Party would have responsibility.

I hereby give the Parties the opportunity to comment on the foregoing proposal by 10.00am on Friday 8 October 2010."

The time for commenting was in this instance even shorter than that previously allowed. It gave the parties the remainder of the afternoon of 7 October and only until 10.00am the following morning (8 October), the day the decision was issued.

[25] Despite the shortness of time given for a response, Maclay Murray and Spens responded on behalf of RBG on 8 October 2010, commenting in particular on the proposed methodology identified by Mr Ross in the various bullet points in his letter. As regards the second bullet point (nightshift inefficiency of labour), they referred to the earlier correspondence which I have set out in relation to Issue 18. They also referred to previous correspondence on the issue of "Tool Box Talks/Breaks". On the question of him taking account of "stoppages" for gases, they said that RBG:

"do not consider that you have been provided with any evidence from SGL, nor have you uncovered any evidence, in order for you to make any adjustment for 'stoppages' for gases".

They said the same in respect of Mr Ross' intention to take account of the timing of receipt of drawings/information and pipework routing clashes. Their responses in respect of the firth and seventh bullet points were as follows:

"5. TAKING ACCOUNT OF THE REQUIREMENT OF WORK AT HEIGHT

RBG consider that you may only use relevant knowledge and experience when considering the efficiency of the labour force when working at height, that is to say, knowledge and experience which has been gained whilst constructing a carbon fibre production line at height in a live carbon fibre facility. You would also have to take into account in applying that relevant knowledge and experience the actual working conditions that applied and other pertinent circumstances, such as working with fumes. If you do have such relevant knowledge and experience you would of course also require to tell us what it is, so that we can meaningfully comment. In the absence of such relevant knowledge and experience, you can only determine if a reduction should be made as a result of the labour force working at height if SGL had submitted persuasive evidence to that effect. They have not.

7. TAKE ACCOUNT OF ADJUDICATOR'S CONSIDERATION OF THE REASONABLE NUMBER OF HOURS REQUIRED TO CARRY OUT THE WORK IN CIRCUMSTANCES WHERE NO CONSTRAINTS EXIST

Further to our comment under point 5 above, the notion of applying 'industry norms' to this specific issue has already been rejected by you (at the hearing on 12 May 2010).

Our notes from the hearing show that after Mr Hill had talked you through his analysis of reduction of the labour hours, you asked RBG if Mr Hill's analysis was flawed. Mrs Olson confirmed that [it] was. In response to your question, we have noted that Mrs Olson stated the following:

'Yes. The scope changed. Secondly the contract does not include industry norms as means of calculating costs. I refer you to paragraph 192 of the Response. It is a theoretical exercise. Most importantly, it does not account for what was actually happening on site.'

We have also noted that you agreed with Mrs Olson's statement.

Accordingly, without evidence from SGL, RBG consider you will not be able to determine a 'reasonable number of hours' required to carry out this work."

[26] Finally, on the question of arriving at the number of hours representing the loss of labour productivity for which RBG were responsible, the letter noted, as it had in relation to Issue 18, that the list of outstanding issues from Mr Zinke, who was on site every day on behalf of SGL carrying out detailed checks on labour and resources, did not identify productivity as an outstanding issue. If SGL's representative did not see productivity as an issue, there was no basis for Mr Ross, as Adjudicator, to invent a case where none existed.

[27] There was no further communication between the parties in the light of this letter from Maclay Murray and Spens on behalf of RBG. Mr Ross proceeded to his decision on that day. His decision included, in respect of Issue 19, a paragraph in similar terms to para.10.342 which I have set out at para.[21] above.

Discussion

[28] The criticism made by RBG essentially combined two different points. The first is that Mr Ross went far beyond ascertaining the facts. He applied his own knowledge and experience not just to help him understand and decide upon the evidence led before him but also to make assumptions about the factual position which were not supported by any evidence led before him or any case initially presented by the parties. The second is that he sought to apply his own knowledge and experience without giving the parties any reasonable opportunity of commenting upon what he was proposing to do.

[29] It is clear that an adjudicator is permitted to take the initiative in ascertaining the facts and the law applicable to the dispute. Clause W2.3(4) expressly permitted that in this case. But he must be careful to make sure that he does not deprive the parties of a proper opportunity of presenting their respective cases. It is, of course, open to the adjudicator to bring his experience to bear on the submissions made by the parties and the evidence led by them. That is why, in many cases, an adjudicator having practical experience of the construction industry is chosen. If he has relevant experience, he would be failing the parties if he failed to take advantage of it. In such a case there is no requirement that he notify the parties that he is proposing to do so. That he will use his experience to evaluate the evidence and submissions presented to him in this way is implicit in the whole process.

[30] But bringing his experience to bear on the submissions made and the evidence led is one thing. It is quite another for an adjudicator to use his knowledge and experience to add to the evidence led by the parties; or to use it to explore for himself, and introduce into his decision making process, matters upon which the parties have not focused their attention and upon which they have led no evidence. That may still be legitimate - an argument that he should not fashion an argument or fill in the gaps so as to relieve a party from the consequences of its failure to adduce sufficient evidence, though raised in the correspondence, was not pressed before me, and I do not, therefore, propose here to suggest that there is a line which he cannot cross or, if there is, to attempt any definition of where it is to be drawn. Much will depend on the circumstances. But, if he follows that course, it is incumbent upon him to provide the parties with an full explanation of his intended approach, the nature of the experience he brings to bear relevant to the particular matters, and the conclusions of fact or law to which that experience drives him, all in sufficient detail and at a time which enables them to comment sensibly and on an informed basis.

[31] What that time is will, again, depend on the circumstances. In adjudication, time is short, and a party cannot expect to be indulged as he might be in arbitration or ordinary litigation. Equally however, the imminence of the final date for reaching a decision cannot be an excuse for not providing adequate time for comment. That simply emphasises the importance of the adjudicator raising such issues promptly. In some cases, where there have been witnesses of fact who might have been able to give relevant evidence had they been asked, it may by a certain time simply be too late to open up a wholly new area of fact, however many days are given to the parties for comment on the proposed findings, without providing the opportunity for the parties to introduce further evidence as well as submissions. Even at a late stage, this may be possible, though further extensions of time may be required: c.f. RSL (South West) Ltd. v Stansell Ltd. (HH Judge Richard Seymour QC, unreported 16 June 2003, [2003] EWHC 1390 (TCC)) at para.32.

[31] In the present case it is clear, and not disputed, that the adjudicator sought to use his knowledge and experience to arrive at a conclusion on Issues 18 and 19 on the basis of "facts" which went beyond those brought out in the evidence. Those "facts" included the consequences of, for example, the absence of allocation records, errors in judgment, irritability and poor mental attitude, and the absence of senior management on duty during the nightshift (I cite selectively, for purposes of illustration only, from Mr Ross' letters of 22 and 23 September and 4 October 2010). Those points might well be relevant, and it is possible that Mr Ross would legitimately have come to the conclusion he did in fact come to had the parties been given a full opportunity of responding. But it is clear to me that they did not have any proper opportunity of responding. On each occasion when the points were raised, the parties were given a day or less to comment. That does not appear to me to be an adequate opportunity to respond. And on the last occasion the time for responding (less than a day) ended on the morning that Mr Ross was to produce his full decision, which was presumably then in draft - which raises a question as to how much chance there was of Mr Ross changing his mind in light of any comments he received.

[32] But the problem is more fundamental than that, for two reasons. The first is that evidence had already been given on the issues in dispute. The witnesses who gave evidence would almost certainly have been able to offer material evidence on the points raised by Mr Ross, either supporting Mr Ross' views or contradicting them, or giving a more nuanced response, but in any case providing a fuller picture of what was going on, so as to enable fuller submissions to be made and enabling Mr Ross himself to test his provisional conclusions by reference to that evidence and those submissions. To raise those points in late September and October, in a process that commenced in April and when the witnesses had been and gone, did not enable either party to respond properly. It is no answer to say that Maclay Murray & Spens did comment in some detail, pointing out, amongst other things, the absence of relevant evidence. Had the points been raised at the proper time, that absence might have been remedied.

[33] The second reason is that, in raising the points with the parties, Mr Ross failed to identify the relevant experience that he brought to bear on the issues and failed also to set out the basis of his approach in sufficient detail to enable a meaningful response. He was asked specifically whether he had experience of work being conducted in the particular conditions applicable to the contract in question, and subject to the particular constraints to which the work was subject. He failed to respond to this. His only answer was that he had experience from having worked at Bovis and on similar types of construction contracts whilst employed by National Contractors. He was asked whether he had experience of constructing a carbon fibre production line in a live carbon fibre facility. It was made clear to him on behalf of RBG, that there were issues as to the work being affected by fumes, and having to be carried out at height, and additional work having to be carried out to clear contamination. He gave no indication as to whether or not he had any experience of these matters. All that RBG could do was protest. The only considered response that they were able to give was that without that experience he had no relevant experience to bring to bear. Had he answered the question about his experience, parties might have been able to comment more precisely on whether his experience was relevant and what, if any, were its limitations. They might have persuaded him to have second thoughts. Further, in indicating the matters which, based on his experience, led him to assess labour inefficiency at a certain percentage, he gave no sufficient detail to permit of a meaningful critique. This was, in part, because, as I have already pointed out, the evidence had not touched these issues, and there was therefore no hard fact against which to test Mr Ross' speculation. But even allowing for this, his summary of what he proposed to do was wholly inspecific and unsatisfactory.

[34] For these reasons, I do not consider that RBG were given an adequate opportunity of presenting their case. Mr Ross breached the requirement of natural justice and his decision should not be enforced.

[35] A separate argument was advanced on behalf of RBG, to the effect that in using his experience of other contracts, Mr Ross had not "taken the initiative in ascertaining the facts ... related to the dispute", as the contract permitted him to do, but had found other facts, unrelated to the dispute, and decided the dispute on the basis of those other facts. There is, to my mind, some force in this point. Knowledge and experience can be brought to bear on the issues in the case. Based on that knowledge and experience, an adjudicator may properly call for evidence on a particular point, or ask questions, or do his own research on the facts relevant to the dispute before him. In the present case, he used his knowledge and experience of other contracts to conclude that certain facts were typical of contracts of this sort. Where the line is to be drawn is often a matter of some difficulty. Standing my decision to refuse enforcement of his decision on other grounds, I do not think it would be helpful for me to comment further on this issue.

The second argument - failure to exhaust his jurisdiction
[36] I have already referred to the first adjudication conducted before Mr Fleming. Mr Fleming had been concerned with the sums payable in respect of five invoices issued by RBG in 2009. Enforcement of his decision was refused by Lord Menzies on the ground that he failed to exhaust his jurisdiction as a result of him having misconstrued his remit. He had recognised that the PWDD was not fixed but could be revisited even though it had earlier been the subject of agreement by the parties' surveyors. In assessing what was due in respect of the five invoices issued in 2009, Mr Fleming ought to have revisited the PWDD and considered whether it contained any element of overpayment which should be set against the sums due to RBG under the 2009 invoices. It was SGL's case that, because of the state of the PWDD, no payment fell to be made in respect of the 2009 invoices, but Mr Fleming declined to have regard to evidence of earlier overpayments. In those circumstances, enforcement of his decision was refused and his decision was set aside ope exceptionis.

[37] I should explain the effect of setting aside Mr Fleming's decision ope exceptionis. To do so I should refer in more detail to the decision in Vaughan Engineering to which I have already referred. The case was concerned with the question of whether a party defending an action to enforce the decision of an adjudicator required to invoke the supervisory jurisdiction of the court, by bringing proceedings for judicial review seeking reduction of the decision, or whether he could take the objection ope exceptionis (or by way of exception) in his defence to the enforcement action. Lord Clarke held that a party was entitled to take the point in his defences without the need to seek decree of reduction in separate judicial review proceedings. However, he recognised that that might leave some "unfinished business". He said this about it at para.[35]:

"It has to be accepted that the result of the defenders successfully taking an objection ope exceptionis, without having the decision reduced, would be to leave some unfinished business which might not always be altogether satisfactory. While the issue as between the parties to the action would be res judicata, the decision itself still stands. The adjudicator cannot himself revisit it, at the invitation of the pursuers, or, indeed, the defenders for that matter. Moreover, where the attack on the decision involves allegations of dishonesty or fraud or corruption, or the like, against the adjudicator it may be necessary to allow the adjudicator to defend himself (as was expressly recognised by Lord Lees in the case of Nivison and by the sheriff in the case of Sundt & Co). In the latter situation that opportunity could, it seems, only, nowadays, be provided for the adjudicator, if a petition for judicial review seeking to attack his decision were raised and he was called upon to enter appearance for any interest he may have in the matter. But these considerations only point to the expediency or appropriateness of bringing proceedings for judicial review in particular cases. They do not in themselves support a proposition that defenders can only defend themselves competently in cases like the present by way of proceedings for judicial review to have the decision reduced."

The analysis in Vaughan Engineering is important. The effect of the decision being successfully challenged is that it cannot be enforced. But unless reduced by the court in a petition for judicial review, the decision "still stands". As between the parties, the decision of the court to refuse enforcement is res judicata. But since the decision itself is not reduced, the adjudicator himself cannot revisit it (except, presumably by agreement of both parties).

[38] Applications for enforcement of decisions made by adjudicators are frequently raised as commercial actions. It is not uncommon for a defender to such an action both to defend the case on the merits, pointing to some excess of jurisdiction on the part of the adjudicator or unfairness in the proceedings, and at the same time, because decree of reduction can only be granted in judicial review proceedings, to lodge a petition for judicial review seeking reduction of the decision on the same grounds. Reduction of the decision is thought to be necessary in order to remove an impediment to the commencement of a new adjudication in respect of the same dispute, for reasons which I shall mention below. In such a case, both the action and the petition for judicial review now tend to be brought on for hearing at the same time and, if the defenders are successful in their defences to the action, decree of reduction will normally be granted in the judicial review petition; and because the court is now able to deal with both the action and the petition at the same time (the enforcement action being heard before a commercial judge, while the petition comes before the same judge at the same time sitting as a non-commercial judge in the Outer House), the problem that arose in Vaughan Engineering, where the defender applied to sist the enforcement action to allow judicial review proceedings to be raised as the vehicle for challenging the adjudicator's decision, is unlikely now to arise.

[39] However, in the action at the instance of RBG to enforce Mr Fleming's decision, which came before Lord Menzies, the defenders to that action (SGL) were content to resist enforcement in their defences without separately bringing judicial review proceedings for reduction. Therefore, although enforcement was refused and the decision was set aside ope exceptionis, the decision itself was not reduced.

[40] The setting aside of the decision ope exceptionis created a problem for Mr Ross in the present adjudication which he himself recognised. The problem arose (a) from the fact that despite having been set aside ope exceptionis, the decision in the first adjudication still stands; and (b) the rule that an adjudicator cannot decide a dispute which is the same or substantially the same as one which has already been referred to adjudication and a decision has already been taken in that adjudication. Neither of those points was in dispute here. The first is vouched by the decision of Lord Clarke in Vaughan Engineering. A decision which is set aside ope exceptionis cannot be enforced - but it has not been reduced and cannot be revisited. The second is clear from the 1996 Act and the Regulation 9(2) of the Scheme for Construction Contracts (Scotland) Regulations 1998, which provide a default scheme for adjudication in circumstances where the Act applies but the parties have not made specific contractual arrangements for adjudication compliant with the Act: see e.g. Quietfield Ltd. v Vascroft Construction Ltd. [2007] BLR 67. Although the parties here did make their own valid contractual provisions for adjudication, and there is no equivalent therein to Regulation 9(2) of the Scheme, it was common ground that that rule applied, and that Mr Ross was not entitled to make any decision on the invoices which had been the subject of the unenforceable (but unreduced) decision of Mr Fleming.

[41] The difficulty for Mr Ross was this. The dispute referred to him as defined in the Notice of Adjudication dated 7 April 2010 was as to the cumulative amount due to date to RBG, and the repayment due to SGL in consequence of that determination. The cumulative amount due to 7 April 2010 would include the sums due under the 2009 invoices which were the subject of the adjudication before Mr Fleming. But he had made a decision on those invoices which, though not reduced, was held to be unenforceable. What was Mr Ross to do about valuing the work which was the subject of those invoices?

[42] The solution urged upon him by SGL was this. The first step, they said, was relatively uncontroversial. The adjudicator must work out the PWDD down to 31 December 2008, asking himself what figure was expended by RBG and justified by its books and records. For the purpose of the "worked example" requested by the adjudicator, they assumed that the PWDD to 31 December 2008 ("PWDD 2008") came out at £5 million. They then said this (I have numbered the paragraphs, starting at para.3, for ease of reference later):

"3. The value of the amount due to RBG would be the aggregate of the PWDD 2008 and the element of the five 2009 invoices which was justified as aforesaid. This latter element the Adjudicator need not, and indeed cannot, determine for himself, as it is already decided for him - whether rightly or wrongly - by Mr Fleming. Behind Mr Fleming's determination of the sums payable for the period of the invoices, the Adjudicator cannot go. He must simply add the figure ordered to be paid by Mr Fleming, for otherwise he would be treating Mr Fleming's Decision as being re-adjudicable, which it is not. On ones [sic] assumption above, this would make the amount due to RBG £6,074,923.

4. Since SGL has already paid the sum of £9,540,923 to RBG, which is a sum greater than the sum due to that company of £6,074,923, the difference between those figures, namely £3,426,066 is prima facie the sum repayment of which by RBG to SGL should be ordered in order to correct the overpayment complained of by the Referring Party [SGL].

5. However, Mr Fleming's reasoning discloses that he arrived at the figures which feature in his Decision having made some deductions to reflect not only over-claimed sums relative to things which did or did not happen after 1 January 2009 (all of which you would ignore), but also some matters which related back to the pre-2009 period. In working out the true value of the PWDD 2008 the Adjudicator will already have made what he considers to be proper allowance for these and so SGL would accept that if a deduction in Mr Fleming's Decision related exclusively to pre-2009 matters ... it should in turn be deducted from the prima facie repayment as a correction figure. It should be noted that in this exercise one is not seeking to ascertain the true adjustment which ought to have been made on account of the matters for which Mr Fleming made his deductions, but only to identify value of the deduction for the matters which (rightly or wrongly) Mr Fleming did in fact make.

6. In point of fact, Mr Fleming's reasons are not unhelpful when it comes to attributing them to either the post 1 January 2009 period which fall to be ignored for correction purposes or pre-2009 period which are to be taken into account as deductions from the prima facie repayment figure. The Adjudicator will require to form his own view in relation to the appropriate value of the deductions. For the purposes of the worked example below, we have left a blank space in this regard.

7. Finally, the Adjudicator is required to add back the value of the Fleming Decision on account of the fact that the present Adjudicator cannot inadvertently enforce the Fleming Decision which, though binding, is unenforceable.

8. The ultimate calculation on our assumed figures would therefore be as follows:-

(i) PWDD 2008 - assumed to be £5,000,000

(ii) Add Decision on Five Invoices £1,074,923

£6,074,923

(iii) Sum Paid £9,540,989

Less (£6,074,923)

£3,423,055 Prima facie Repayment

(iv) Deduct Corrections: (£----------)

£

(v)               Add back the value of the

Fleming Decision: £1,074,923

£ Total Net Repayment

to be ordered, together with interest ..."

[43] It is apparent that Mr Ross accepted this submission. This appears from pp.214Rev - 215Rev of his decision (as corrected), in which he sets out the following Summary:

"It is my view that the following tabulation takes cognisance of those matters which fall into the category of 'Corrections' which I require to take account of to establish the 'True PWDD up to 31 December 2008'. I am aware that I also have to take into consideration the previous Adjudicator's Decision dated 18 January 2010 to establish the 'True PWDD up to 31 December 2008' and I have done so within this tabulation:-

PWDD up to 31 December 2008 £7,771,329.94

(Adjudicator's Evaluation)

Add

Previous Adjudicator's Decision (excluding VAT) £ 934,715.65

£8,706,045.59

Sum Paid £9,540,989.18

Less £8,706,045.59

Prima Facie Repayment £ 834,943.59

Less

Corrections

·       Tool Box Talks/ Breaks £507,127.57

·       Clocking Off Early

(Post December 2008) (£ 12,557.05)

·       Steel Fabrication Paintwork £ 36,636.00

·       Steelwork Tonnage £ 98,066.00

·       Craneage and Handling £ 1,191.10

·       Craneage and Handling £ 4,800.00

·       Welding Equipment £ 23,197.86

·       Variations £ 46,187.77

£ 695,049.25

£ 139,894.34

Add

Previous Adjudicator's Decision (excluding VAT) £ 934,715.65

Total Net Repayment (excluding VAT) £1,074,609.99"

[44] Whilst at first glance the Summary appears mystifying, with the help of the explanation given in the submission by SGL, which I have set out in the preceding paragraph, it is possible to understand Mr Ross' reasoning. It is clear that in arriving at the Total Net Repayment to SGL of £1,074,609.99, Mr Ross has not included any sum claimed by RBG under the five 2009 invoices. He has assessed the PWDD up to 31 December 2008. As regards 2009, he has, it is true, initially added in the amount of Mr Fleming's Decision , but he has then excluded it at the end of the calculation - it is recorded as being "Added" on both occasions, but on the second occasion it is added to the sum repayable to SGL, thereby in effect removing it from the value of the work carried out by RBG. The explanation for this is given in para.7 of the submission from SGL quoted at para.[41] above. It was to avoid inadvertently enforcing Mr Fleming's decision which "though binding, is unenforceable".

[45] The result is that although he was appointed to determine a claim for repayment to SGL having regard to the sums already paid by SGL as compared with the cumulative amount due to RBG to date, i.e. to 7 April 2009, Mr Ross has effectively refused to include in the PWDD to that date any sums accruing due to RBG after 31 December 2008. To that extent he has failed to exhaust his jurisdiction, in that he has failed to ascertain the PWDD for the period after 1 January 2009. It is a failure which, if uncorrected, would be highly prejudicial to RBG, since they would be obliged to repay SGL a sum which, on the assumption that Mr Fleming's assessment of the value of those 2009 invoices is broadly correct, is likely to be in the region of £935,000 more than ought to be repaid. If RBG were entitled to enforce the Fleming decision in their favour, no harm would be done. But they are not, since Mr Fleming failed to take account of adjusted values for the work done before 31 December 2008 and enforcement has been refused. Having succeeded in resisting enforcement of the Fleming decision on that ground, SGL managed to persuade Mr Ross to commit the same error, and exclude from consideration sums covered by the 2009 invoices. In failing to take the 2009 invoices into account, when he was required to ascertain the sum repayable having regard to the PWDD to 7 April 2009, Mr Ross has failed to exhaust his jurisdiction. The other side of the same coin is to say that in ruling that no effect was to be given to Mr Fleming's decision, or to the 2009 invoices, Mr Ross has exceeded his jurisdiction. I prefer the former analysis. The result is that his decision should not be enforced: Ballast plc v The Burrell Company (Construction Management) Ltd. 2002 SLT 1039 (Lord Reed), 2003 SLT 137 (IH), RBG Ltd. v SGL Carbon Fibres Ltd. (Lord Menzies).

[46] Mr Howie for SGL argued that Mr Ross had not failed to exhaust his jurisdiction. He was entitled to disregard the 2009 invoices because (a) he could assume that the amount awarded by Mr Fleming had been paid or (b) because he was rightly concerned not to enforce even indirectly a decision which the court had ruled unenforceable. The first submission flies in the face of reality. SGL's submission, which I have quoted, made it clear that the Fleming decision had not been honoured and that Mr Ross was being urged not to enforce it. The second submission has some superficial attraction, at least on the legal approach which both parties submitted I should adopt (see para.[40] above). On that basis, Mr Fleming's decision was unenforceable but since it still stood, not having been reduced, it was not open to Mr Ross to make any findings about the value of the work after 1 January 2009. Mr Ross had done everything he was permitted to do. The problem is, however, that the dispute referred to him required him to assess the PWDD up to 7 April 2009. He did not make an assessment of the PWDD after 31 December 2008. If his failure to complete the exercise entrusted to him was caused by the fact (if it be the case) that he was not entitled to consider the 2009 invoices because they were the subject of a decision by Mr Fleming which had not been reduced, so be it. There may have been reasons for his failure to exhaust his jurisdiction, but he failed to exhaust it nonetheless, and that has caused prejudice to RBG. Put another way, if he came to the view that he was not entitled to deal with part of the dispute referred to him because of the existence of an unreduced decision by Mr Fleming covering certain of the invoices, he ought to have resigned. He could not legitimately accept the remit but then decline to deal with all the issues remitted to him.

[47] I have proceeded on the agreed basis that the unreduced but unenforceable decision of Mr Fleming prevents any further adjudication in relation to the 2009 invoices. However, I do not consider that that is in fact the law. It is, of course, trite that, even in a case where the Scheme does not apply, and even where the contractual adjudication rules do not provide for the adjudicator to resign if the dispute referred to him is the same or substantially the same as one which has previously been referred to adjudication and a decision has been taken in that adjudication, once a dispute has been determined by adjudication there cannot be another adjudication about that same dispute. But I do not consider that this has the effect of barring a second adjudication where the decision in the first has been held to be unenforceable. In my opinion the correct approach to a problem such as this is essentially one of construction of the 1996 Act and the Scheme. A purposive construction would appear to me to require that the decision of an adjudicator is binding unless and until found not to be (or until the merits have been finally determined in litigation or arbitration). While it is binding, there should be no possibility of a further adjudication of the same dispute. But if the decision is held not to be binding on the parties, because of excess of jurisdiction, want of natural justice, or whatever other ground is relied on, then the parties (or one of them) should be free to refer the dispute again to adjudication if they so wish. Such an approach contravenes no principle of finality or res judicata. I note that in the English cases which are frequently placed before the court, the judgment on the enforceability or otherwise of the adjudicator's decision tends to arise on an application by the successful party for summary judgment. I am not familiar with the details of the English practice concerning decisions of adjudicators, but in these cases refusal of summary judgment does not appear to be accompanied by any order setting aside or reducing the decision. Yet in such cases, where enforcement is refused because of excess of jurisdiction or want of natural justice, it does not seem that the unenforceable decision operates as a bar to a further attempt to have the point decided by adjudication. In Scotland, as I have observed, resistance to enforcement is now usually accompanied by a petition for reduction of the decision. But I can see no proper basis for holding that, where the decision in the first adjudication is held to be unenforceable, the parties should be entitled to pursue a second adjudication where the first decision has been reduced but not where it has simply been set aside or refused enforcement. Mr Howie emphasised that Mr Fleming's decision, though set aside ope exceptionis, remained binding. To my mind the concept of a decision which is binding but unenforceable, having been set aside but not reduced, is, in this context at least, conceptually nonsensical. In so far as it has substance - and I do not seek to question the analysis in Vaughan Engineering - it turns on the vagaries of Court of Session and Sheriff Court procedure which is now of little relevance. Lord Clarke in that case was not considering the effect of his analysis on the ability of a party to a dispute to refer that dispute again to adjudication when the decision in the first adjudication has been held to be unenforceable. I do not see any reason why the 1996 Act and the Scheme should be so construed as to prevent a further reference in such circumstances. But since the point was not argued before me, I do not decide the case on this basis.

Disposal

[48] For the reasons set out above, I shall sustain the defenders' (RBG's) first plea-in-law, repel the pleas-in law for the pursuers (SGL), and dismiss the action.

[49] I shall also grant the prayer of RBG's petition and reduce Mr Ross' decision. There was some discussion about whether this would impact upon the arbitration which has been commenced in respect of this dispute. Mr Lake, however, insisted on his prayer for reduction of the decision and he is entitled to it.