The parties contracted on 2 May 2001 to carry out works in Perth. This comprised alterations to a building in order to produce a water-tight shell. The contract incorporated the conditions of the Scottish Building Contract without Quantities, Contractor’s Design Portion (January 2000 revision), with amendments. The work began on 7 May 2001 and a certificate of non-completion was issued on 19 November 2001. The work was completed on 18 February 2002.

Clark referred interim certificate number 10 to adjudication in June 2003. A second referral was made by Clark in September 2003 in respect of a claim by Castle Inns relating to defects, damages and loss and expense in respect of the fitting out of the project.

Three issues arose before the court. First, should that part of the adjudicator’s decision relating to fee and disbursements be enforced? Second, could Castle reclaim the adjudicator’s fees on the principle of unjust enrichment? Finally, did the final certificate cover the same matters as the second adjudication and were the legal proceedings commenced after the time bar in the final certificate became effective?

Reference

In Lord Drummond Young’s opinion, an implied term for the recovery of an adjudicator’s fee was a more likely mechanism than a restitutionary obligation based upon unjust enrichment. However, an adjudicator’s decision was not subject to an appeal, and therefore a court or arbitrator could not open up and review the fees and expenses of an adjudicator. It may be possible to recover sums paid pursuant to an adjudicator’s decision on the basis of an unjust enrichment, although in this case the pleadings would need to have been rectified in order for the judge to have considered the position further.

The final certificate was issued on 8 October 2003. The second adjudication had already commenced on 16 September and the decision was given on 7 November 2003. The final certificate became conclusive pursuant to clause 30.9.1 after, among other things, the adjudication procedure had concluded.

*Full case details
Castle Inns (Sterling) Ltd t/a Castle Leisure Group v Clark Contracts Ltd
29 December 2005, Outer House, Court of Session
Opinion of Lord Drummond Young [2005] CSOH 178

Contact Fenwick Elliott on 020 7421 1986 or NGould@fenwickelliott.co.uk

Postscript

The outcome of an adjudication in respect of an interim certificate may well impact on the final account. The particular issue decided by an adjudicator might therefore be relevant to a question of fact in respect of the final account, and so whether the final account time bar were effective would need to be decided on a case by case basis. However, clause 30.9.4 only introduced a time bar in respect of a referral to adjudication; it did not fetter the court’s power to review and revise the final certificate.