The parties entered into a contract based on the Scottish Building Contract, Contractor’s Designed Portion, With Quantities (January 2000 revision), subject to amendments. Disputes arose and two referrals to adjudication were made by Clark. On 8 October 2003 the architect issued a final certificate under clause 38. The second Adjudicator’s Decision was issued on 7 October 2003.

Castle Inns claimed damages for defects. Clark brought the second adjudication in order to ascertain their liability to Castle Inns for:

“… the sum of £129,287.09 under the provisions of the contract and/or by way of damages for breach of contract. This sum primarily relates to defects which are alleged to exist in the works but also encompass certain sums paid by way of “loss and expense” to Dimension Shop Fitting Limited by the respondent. … For the avoidance of doubt the referring party has not referred to the adjudication to the respondents purported entitlement to recover the sum of £72,690 in respect of certain delay related costs, …” [para. 11]

Clark argued that the matters decided in the second adjudication could not be challenged by legal proceedings because the decision of the Adjudicator had become binding on the parties. Clause 30.9.4 of the contract provided that:

“Where pursuant to clause 41A.8.1 either Party wishes to have a dispute or difference on which an Adjudicator has given his decision on a date which is after the date of issue of the Final Certificate finally determined by arbitration or by court proceedings either Party may commence arbitration or court proceedings within 28 days of the date on which the Adjudicator gave his decision”. [para. 12]

Lord Drummond Young held that the time bar only related to “disputes or differences” that had been decided by the Adjudicator. If the matter had not been referred to the Adjudicator then the time bar had no application. In his view a “dispute or difference” was to be determined by reference to “the totality of the claim, and not by reference to any single element within the claim”. The matters referred related to the damages for breach of contract in respect of the rectification of defective work and payments relating to loss and expense. It did not extend to issues relating to claims for loss of profit nor delay. This was based upon the drafting of the notice.

In addition, the Adjudicator’s decision that the delay of one week caused by the defective work was not binding in relation to Castle Inns’ claim for loss of profit as a result of the late opening of their business. Finally, he considered that extremely clear wording would be needed in order to remove a party’s right to have any dispute considered by the court. The wording of Clause 30.9.4 was in his opinion insufficient to remove that right.