A contractor that refused to pay a subcontractor that sent a £1.1m invoice to the wrong email address has been forced to cough up, after a judge found it had mounted a “frivolous defence” in court.
The Stirling-based contractor will have to pay the subcontractor after the judge ruled its arguments in court were “nothing less than an inversion of reality”.
Tier one contractor Ogilvie Construction brought the case, arguing that an adjudicator had “breached the rules of natural justice” in awarding £1.1m in unpaid bills to a groundworks subcontractor.
Ogilvie took its complaint to Scotland’s Court of Session, but judge Lord Sandison dismissed its arguments as “entirely without merit”.
His judgement, delivered on Friday (4 October), warned that Ogilvie’s decision to not pay up before arguing the case in court did not meet the requirements of Scottish construction law, and that Ogilvie had mounted a “frivolous defence” in order to delay payment.
Lord Sandison warned similar actions elsewhere could leave other contractors “standing out” of what they are owed for “relatively lengthy periods”, even though this case was able to be heard relatively quickly,
Claims of an ‘invalid’ invoice
The case centred on a £17m project to build a housing and care facility on Newmills Road in the town of Dalkeith, near Edinburgh.
Ogilvie was appointed to work on the project in June 2021, which involved building 50 homes and a 40-bed care facility on a former school site.
Ogilvie then appointed groundworks specialist ATG Services (Scotland) Ltd – a subsidiary of Northern Ireland-based ATG Group – to deliver groundworks at the site.
But the subcontractor took Ogilvie to an adjudication after the contractor failed to pay it £1.1m.
In June, the adjudicator determined that Ogilvie should pay the £1.1m to ATG, plus interest, fees and expenses.
Ogilvie claimed, however, that ATG had used a different method of submitting the £1.1m invoice than stipulated in the contract, making it “invalid”.
The contract between the two parties said that invoices should be sent by first class recorded post, while the two firms agreed in the later meeting that invoices could be sent to two specific email addresses.
The invoice, however, was sent to a different email. But the adjudicator found Ogilvie “did not seek to argue that it had not duly received the email” until it brought up the issue in adjudication.
Ogilvie argued that the “adjudicator materially breached the rules of natural justice” in ruling in the subcontractor’s favour, and took the case to the High Court.
The main contractor also argued that the adjudicator had wrongly considered a case in English law as a partial basis for his decision, when this case took place in Scotland.
‘Without merit’
Ogilvie said this use of English law amounted to the adjudicator going off “on a frolic of his own”, which left Ogilvie “materially prejudiced”.
Ogilvie also argued that it had been “prejudiced” because the adjudicator failed to show how ATG’s invoice had been legitimately submitted.
But the judge found Ogilvie’s arguments were “entirely without merit”, adding that suggesting the adjudicator “went off on a frolic of his own is nothing less than an inversion of reality”. The specific case, Lord Sandison argued, was only used to show that invoices sent in other ways were still valid and had to be paid.
In particular, Lord Sandison said Ogilvie could have pointed out that it did not understand the application of the law during the adjudication process.
“No opportunity for injustice to be done was afforded,” the judge found.
“The squall got up by the defender about a distinction (real or imagined) between the content of Scots and English law applicable to this issue is an immaterial distraction from the true questions in this case,” he said, adding both contractors confirmed later they were aware the contract was governed by Scots law.
