OUTER HOUSE, COURT OF SESSION [2008] CSOH 152
CA23/08	SUPPLEMENTARY OPINION OF LORD MENZIES in the cause (FIRST) CSC BRAEHEAD LEISURE LIMITED and (SECOND) CAPITAL & REGIONAL (BRAEHEAD) LIMITED Pursuers; against LAING O'ROURKE SCOTLAND LIMITED Defenders: ________________

Pursuers: Howie, QC, M Hamilton; Maclay Murray & Spens, LLP

Defenders: Ellis, QC; MacRoberts, LLP

29 September 2008

[1] This Opinion is supplementary to that issued on 19 August 2008. It arises from the points discussed at paragraphs [62] to [65] of that Opinion. As narrated there, both parties were agreed that the point raised under paragraph (2) of the defenders' Note of Argument (No 11 of process) should be continued, and if necessary, discussed at a By Order hearing. I understood the rationale behind this agreement to be that the argument did not have the same significance as the arguments advanced at the debate in June 2008, and depending on my views on those arguments it might not be necessary to have any further discussion.

[2] The case was put out By Order on 29 September 2008. In the event, the argument under paragraph (2) of the defenders' Note of Argument (No 11 of process) was still live, and senior counsel for each party made (relatively brief) further submissions on the point.

[3] Senior counsel for the defenders summarised his position (which is set out shortly at paragraphs [62] and [63] of my earlier Opinion) under two heads - (1) the wording of the pursuers' first conclusion was in the negative and (2) the exception provided in the first to sixth lines of the first conclusion was too limited. Clause 39A.8.1 of the parties' building contract provides that the decision of the Adjudicator shall be binding: the defenders are accordingly bound by that decision, but they may deny that they were in breach of the building contract, or indeed deny causation. In non-legal terms, they are entitled to protest their innocence even if they are bound by the Adjudicator's decision. The exception, being confined to "any litigation", is in any event too narrow - the defenders are not bound in any proceedings, and the exception should include an agreement in writing between the parties. The narrowness of the exception provided in the first conclusion might create practical difficulties - for example, any settlement might be made without admission of liability. Similarly, a counterclaim on behalf of the defenders might fall outwith the scope of the present exception, and there might be circumstances in which claims were made by other parties against both the pursuers and the defenders. Senior counsel for the defenders invited me not to pronounce declarator in terms of the first conclusion.

[4] Senior counsel for the pursuers accepted that in one respect the first conclusion did not reflect the provisions of the contract. That was because it did not make provision for any agreement in writing between the parties. Arbitration was however irrelevant, because Clause 39B of the standard form of contract related to arbitration, and this had been deleted from the contract in question. In terms of Clause 8 of the contract itself (as read with Clause 1.3.1 of the Scottish Supplement) any dispute or difference was to be determined by means of a commercial action brought under Rule of Court 47 in the Court of Session.

[5] Senior counsel for the pursuers observed that it was competent to seek a declarator in the negative. The term "litigation" was habile to include any action, counter-claim or third party notice in which the parties were involved. The declarator was both competent and relevant, subject to an amendment which senior counsel moved at the bar, namely to insert after the word "litigation" in line 6 of the first conclusion the words "or any written agreement between the pursuer and the defender".

[6] Senior counsel for the defenders did not oppose this amendment (while reserving his position on expenses). However, his position was that the declarator sought was still too wide. He gave the example of a collateral warranty holder seeking to sue the defenders, and the defenders seeking to bring the pursuers into the action for their fault. He suggested that this would be struck at by the declarator, because these would not be proceedings launched to determine whether or not the pursuers were entitled to damages from the defenders. The essential problem was that the pursuers have couched the declarator which they seek in the negative, and this does not properly reflect the contractual position. In response, senior counsel for the pursuers observed that the example given was not sound, because it would not be struck at by either paragraph (i) or paragraph (ii) of the declaratory conclusion.

[7] In the absence of opposition, I allowed the amendment moved on behalf of the pursuers at the bar. I considered that senior counsel for the pursuers was correct in observing that arbitration did not form part of the contractual procedures for finally determining disputes or differences between the parties. However, the declarator as framed was in my view too wide in making no reference to written agreement between the parties. The amendment by the pursuers cured this defect.

[8] I saw no force in the argument advanced on behalf of the defenders based on this declarator being cast in the negative. I see no reason why a party should not seek a declarator cast in the negative, provided that it accurately reflects the positive obligations imposed by the contract. I reached the conclusion that the provisions of this contract justified the declarator sought. Moreover, I was not satisfied that it would have as restrictive an effect on the defenders as was suggested on their behalf. It would not in my view prevent the defenders from denying liability in proceedings to which the pursuers were not a party, nor would it prevent the defenders from asserting that the pursuers were themselves also at fault or in breach of contract. For these reasons I granted declarator in terms of Conclusion 1 as amended.

[9] Finally, with regard to expenses, senior counsel for the pursuers moved for the expenses of the whole process, including those of the By Order hearing of 29 September 2008. The whole action had been necessary in order to enforce the Adjudicator's decision, and on any view the pursuers had enjoyed very substantial success. He submitted that expenses should follow that success.

[10] Senior counsel for the defenders did not oppose a finding of expenses in favour of the pursuers for the procedure prior to 29 September 2008. However, his criticisms of the first conclusion had been available to the pursuers for a long time, and it was only on 29 September 2008 that the pursuers sought leave to amend in response to one of these criticisms. In light of this, he moved for the expenses of the By Order hearing, or in any event for some modification of the defenders' liability in that regard.

[11] I took the view that the pursuers did indeed enjoy substantial success in these proceedings, and in the absence of opposition I found the defenders liable to the pursuers in the expenses of process prior to the By Order hearing on 29 September 2008. However, their success at the By Order hearing was not without cost, in that they conceded the need to amend in light of one of the defenders' lines of attack. The defenders' argument was advanced in their note of argument and was also advanced at the debate in June 2008. It would have been open to the pursuers to have amended to take account of this at a much earlier stage of the proceedings. If they had done so, it is just possible that the defenders would not have pressed their other arguments, and the need for a By Order hearing would have been obviated. In these circumstances I considered that although the pursuers had been generally successful in their arguments at the By Order hearing, it was appropriate to reflect this factor by restricting the defenders' liability in the expenses of the By Order hearing to one-half.