Contractor awarded £1m damages from car dealership over showroom development dispute

Alexandra Parade, Glasgow
Alexandra Parade, Glasgow

A construction company which sued a car dealership for “breach of contract” after its agreement to build a new showroom was terminated while development work was ongoing has been awarded more than £1 million damages.

A judge in the Court of Session upheld a decision of an adjudicator, who ruled that the company was entitled to payment.

Lord Tyre heard that in August 2015 the purser Bell Building Projects Limited (BBP) contracted with the defender Arnold Clark Automobiles Limited (ACL) to design, supply and erect a new car showroom at Alexandra Parade, Glasgow.

Work commenced in June 2015 and continued until March 2016 when ACL terminated the contract over alleged “defective work” by BBP.

The parties’ dispute was referred to adjudication and on 22 June 2016 the adjudicator, Lindy Patterson QC, decided that ACL had been in repudiatory breach of contract and that that breach of contract had been accepted by BBP, bringing the contract to an end on 8 March 2016.

BBP sought payment of damages from ACL, but the sum claimed to be due was disputed by ACL and the issue was also referred for adjudication.

On 26 September 2016, in response to a request in terms of the parties’ contract by the pursuer to the Royal Institution of Chartered Surveyors (RICS), another adjudicator was appointed and four days later BBP referred the dispute to the adjudicator under the Scheme for Construction Contracts (Scotland).

The court was told that the adjudication was complex, with a large number of disputed matters and a considerable volume of documentary material submitted to the adjudicator.

The deadline for production of the adjudicator’s decision was initially 30 October 2016, but this was subsequently extended by agreement to 11 November, then to 18 November, and finally to 21 November. ACL submitted a written response on 7 October, BBP submitted a reply on 24 October, and ACL a rejoinder on 11 November.

By Monday 14 November 2016, two of the remaining outstanding issues were: BBP’s claim for loss and expense, consisting mainly of staff costs, said to have been incurred as a result of various delays for which ACL was responsible; and a contra-charge claimed by ACL in respect of the cost of works carried out by the contractor instructed to complete the building in order to rectify defective work by BBP.

The adjudicator issued his decision on 21 November, finding BBP entitled to payment of the sum of £1,010,323.08, including a sum of £28,751.09 in respect of the loss and expense claim, and rejected ACL’s contra-charge claim.

In this action BBP sued for payment of that sum, but ACL contended that in respect of these two issues the adjudicator denied it a fair opportunity to present its case or to respond to the case made by BBP.

ACL argued that the adjudicator’s decision should be reduced ope exceptionis on the ground that it was arrived at in “breach of the rules of natural justice”, but the judge rejected that submission.

In a written opinion, Lord Tyre said: “This was a complex adjudication in which the adjudicator required to consider and give his decision on a number of issues. Three extensions of time were agreed, and it is not suggested by either party that the adjudicator was not doing his best to complete the task given to him within the restricted period allowed.

“It is obvious that some matters will inevitably have to be left to be dealt with close to the deadline for the issuing of the decision, and it is unsurprising that adequacy of vouching may be the last to be dealt with, after decisions on the merits of a claim have been taken. In the present case, the adjudicator had two matters still to address with a week to go, one of which was the loss and expense claim.

“ACL and their advisers chose neither to engage in that process nor to respond to the adjudicator’s suggestion of a further extension of time, and cannot now complain of unfairness.”

He added: “ACL’s rectification works contra-charge claim was the other issue left by the adjudicator to be addressed and determined towards the end of the adjudication period. Again he adopted the reasonable approach of dealing with the merits of the various aspects of the claim before turning to satisfy himself that the expenditure had been adequately vouched.

“I do not accept that the adjudicator is open to criticism for leaving this matter until the last minute and then, as counsel for the defender put it, holding the parties hostage to rolling extensions of time. Something had to be done last and, given the size of the adjudicator’s task, it was highly likely that if the matter left to last gave rise to questions, they would have to be addressed within a very short time.

“In the event ACL was able to respond, and its complaint, in substance, was that the adjudicator ought to have been satisfied by the response. His decision to proceed to deal with, and to reject, the claim on grounds inter alia of inadequate substantiation was not therefore, in my view, a breach of the rules of natural justice.”

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