Court docket overturns ruling on cost of safety account steadiness in concluded street work contract
Court docket overturns ruling on cost of safety account steadiness in concluded street work contract
A industrial choose’s determination {that a} clause in a street work contract stating that sure monies have been to be returned to “the Contractor”, that means a three way partnership, needs to be interpreted as a substitute as a related contractor firm that was a part of that three way partnership has been overturned on enchantment to the Interior Home of the Court docket of Session.
A reclaiming movement was raised by Scot Roads Partnership Mission Ltd and Ferrovial Development (UK) Ltd, the latter of which was concerned in a three way partnership with unique pursuers Lagan Development Group Ltd, now in administration. The defenders and reclaimers argued that the Lord Abnormal had erred in his development of the related clause of the contract.
The enchantment was heard by the Lord President, Lord Carloway, along with Lord Pentland and Lord Boyd of Duncansby. Barne KC appeared for the pursuers and McLean KC for the defenders and reclaimers.
Industrial frequent sense
In June 2013 the pursuers and the second defender, Ferrovial, shaped a three way partnership for the aim of finishing up works for Scot Roads on a number of motorways. The contract outlined “the Contractor” because the three way partnership, whereas “Contractor Firm” referred to any firm forming a part of the Contractor. Each Contractor Firms acquired Letters of Credit score, which have been delivered to the primary defender by the three way partnership.
On 5 March 2018, Lagan Development went into administration, ensuing of their exclusion from additional participation within the administration and earnings of the three way partnership, albeit they might proceed to share legal responsibility for losses. The primary defender insisted on cost of the Letter of Credit score sum into the Contractor Safety Account, which was performed by the financial institution.
Sooner or later, the Letter of Credit score Discharge Date arrived, and beneath clause 5.5.6 of the contract the primary defender was to return “to the Contractor” an quantity equal to the account steadiness of the Contractor Firm Safety Account. This was paid into an account nominated by the three way partnership by letter dated 26 July 2021. It was the pursuers’ place that the monies should have been paid to themselves, and that “Contractor” in clause 5.5.6 should be learn as “Contractor Firm”.
The industrial choose reasoned that, having regard to industrial frequent sense, the aim of the account was to offer safety for the primary defender, and had each Contractor Firms develop into bancrupt it could make no sense for the funds to be retained by the three way partnership. It made sense for the funds to be returned to the one who had an obligation to account to the financial institution. The reclaimers’ place was that there have been no grounds for the choose to make use of another that means, the related components of the contract being clear and unambiguous.
No ambiguity
Lord Carloway, delivering the opinion of the court docket, started: “The case falls to be decided in response to the well-established guidelines on the interpretation of contracts, just lately repeated in Paterson v Angelline (Scotland) (2022). Events’ intention is most clearly gleaned from the language which they’ve chosen to make use of. The court docket shouldn’t usually seek for drafting infelicities to be able to justify a departure from the pure that means of that language. It ought to establish what the events agreed, not what it thinks that frequent sense could in any other case have dictated.”
Addressing the development of the related clause, he stated: “The current case isn’t dissimilar to Paterson and the end result needs to be the identical. The industrial choose was appropriate when he acknowledged that the clause started in an unambiguous method. It states that Mission Co are to return the monies to ‘the Contractor’ by transferring an equal sum right into a checking account specified by ‘such Contractor’. The Contractor is, when it comes to the occasion of the NWA, the three way partnership.”
He continued: “It’s expressly not the element corporations, every of which is outlined as a substitute as a ‘Contractor Firm’. These phrases are used fastidiously all through the NWA, upon which authorized recommendation was taken. There is no such thing as a ambiguity and thus no foundation upon which a seek for another that means, utilizing industrial frequent sense or another assist to the development of ambiguous phrases, might be embarked upon.”
Lord Carloway concluded: “Quantum valeat had regard been paid to industrial frequent sense, the court docket would have struggled to search out that it favoured the pursuers’ development. The place there may be an settlement between two individuals, considered one of whom is a three way partnership, and surplus funds exist on the finish of the contract, the apparent consequence is that these funds be returned by the get together holding them to the opposite get together, i.e., the three way partnership. What may occur to them thereafter is one thing which should be regulated by the three way partnership settlement between the Contractor Firms, which failing by the overall regulation.”
The reclaiming movement was due to this fact allowed and the case revertedto the industrial choose to find out future proceedings.