NETWORK RAIL INFRASTRUCTURE LTD AGAINST (FIRST) FERN TRUSTEE 1 LTD & Ors [2021] ScotCS CSOH

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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> NETWORK RAIL INFRASTRUCTURE LTD AGAINST (FIRST) FERN TRUSTEE 1 LTD & Ors [2021] ScotCS CSOH_107 (21 October 2021) URL: http://www.bailii.org/scot/cases/ScotCS/2021/2021_CSOH_107.html Cite as: [2021] ScotCS CSOH_107, 2021 GWD 35-458, [2021] CSOH 107

OUTER HOUSE, COURT OF SESSION

[2021] CSOH 107

CA23/21 & CA56/21

OPINION OF LORD TYRE

In the cause

NETWORK RAIL INFRASTRUCTURE LIMITED

Pursuer

against

(FIRST) FERN TRUSTEE 1 LIMITED, (SECOND) FERN TRUSTEE 2 LIMITED, (THIRD)

McLAUGHLIN & HARVEY LIMITED, (FOURTH) THE SCOTTISH MINISTERS, and

(FIFTH) SCOTT WILSON RAILWAYS LIMITED

Defenders

And in the cause

THE SCOTTISH MINISTERS

Pursuers

Against

(FIRST) McLAUGHLIN & HARVEY LIMITED, (SECOND) FERN TRUSTEE 1 LIMITED,

(THIRD) FERN TRUSTEE 2 LIMITED, (FOURTH) NETWORK RAIL INFRASTRUCTURE

LIMITED, and (FIFTH) SCOTT WILSON RAILWAYS LIMITED

Defenders

Pursuer (Network Rail Infrastructure Limited): D Thomson QC; Dentons UK & Middle East LLP

Pursuers (Scottish Ministers): Massaro; Morton Fraser LLP

Defenders (Fern Trustee 1 Limited and Fern Trustee 2 Limited): Barne QC; Gillespie Macandrew

Defenders (McLaughlin & Harvey Limited): Lake QC; Balfour + Manson LLP

Defenders (Fern Trustee 1 Limited and Fern Trustee 2 Limited): Barne QC; Gillespie Macandrew

Defenders (Network Rail Infrastructure Limited): D Thomson QC; Dentons UK & Middle East

LLP

Defenders (Scott Wilson Railways Limited): No appearance

21 October 2021

Introduction

[1]

Fern Trustee 1 Limited and Fern Trustee 2 Limited ("Fern") are the proprietors of a

large multi-storey office block in Glasgow city centre ("the premises"). Network Rail

Infrastructure Limited ("Network Rail"), the Scottish Ministers and Scott Wilson Railways

Limited are all tenants of parts of the premises. In about 2002-2004, works were carried out

to the premises by McLaughlin & Harvey Limited ("the contractor") in pursuance of a

building contract with the then proprietor. Fern acquired the premises in 2006, at which

time the contractor granted a collateral warranty to Fern in respect of the works that had

been carried out.

[2]

In about 2008 certain defects became apparent in the works. Court proceedings were

raised against the contractor by, separately, Fern, Network Rail, the Scottish Ministers and

Scott Wilson Railways Limited. Following negotiations among the parties, separate

agreements were entered into in 2016 between the contractor and the respective pursuers to

settle the court actions. Each of the settlement agreements provided for the contractor to

carry out and complete, at its own cost, certain remedial works to the premises. All of the

parties hereto entered into a further agreement ("the Remedial Works Agreement"), as

provided for in the various settlement agreements.

[3]

Remedial works were carried out by the contractor. Disputes have now arisen

between, on the one hand, Fern and the contractor and, on the other hand, Network Rail and

the Scottish Ministers, as to whether the remedial works have been satisfactorily completed

and accordingly whether Completion, as defined in the Remedial Works Agreement, has

occurred. The two actions with which this opinion is concerned raise effectively the same

issues for determination. Scott Wilson Railways Limited has not entered the process in

either action.

The settlement agreements

[4]

The Network Rail settlement agreement, dated 5 July 2016, provided inter alia as

follows:

"2.1

The Defender shall carry out and complete the Remedial Works at its own

cost in accordance with the Remedial Works Agreement.

2.2

The Pursuer shall be entitled to make a claim and recover damages in respect

of any losses that are incurred by the Pursuer as a result of a breach of the Remedial

Works Agreement by the Defender, so far as is permitted by the Remedial Works

Agreement...

2.3

The Defender agrees to pay the Pursuer by way of damages the sum

of £840,000...

...

3.1

If Completion has not occurred by the Liquidated Damages Date or any later

date fixed under clause 3.4, then the Defender shall pay the Pursuer liquidated

damages for delay at the rate of £52,500 (fifty-two thousand five hundred pounds)

per week or part thereof between the Liquidated Damages Date and the date of

Completion and the Pursuer shall not be entitled to any other damages in respect of

delay in achieving Completion..."

The Liquidated Damages Date was defined as 30 September 2018 or any later date fixed

under clause 3.2 of the settlement agreement.

[5]

The Scottish Ministers' settlement agreement, dated 18 and 21 October 2016,

contained similar but not identical provisions. Clause 2.1 stated:

"The Defender shall carry out and complete the Remedial Works at its own cost in

accordance with the Remedial Works Agreement. Notwithstanding any other

provision of this Agreement and for the avoidance of doubt either Party shall be

entitled to make a claim and recover damages as a result of breach of the Remedial

Works Agreement by the other Party, so far as is permitted by the Remedial Works

Agreement."

The amount payable by way of damages was £750,000. Clause 2.4 stated:

"In addition, from the date of the commencement of the Remedial Works under the

Remedial Works agreement until Completion, the Defender shall pay to the Pursuer

by way of damages for the Future Claims the Monthly Payment in accordance with

clause 3 below."

Clause 3 set out various sums payable by way of damages for Future Claims, subject to an

overall maximum amount of £189,000. The definition of Future Claims excluded any

entitlement of the Scottish Ministers to claim damages in respect of losses incurred as a

result of breach by the contractor of the Remedial Works Agreement.

The Remedial Works Agreement

[6]

The Remedial Works Agreement was entered into on 5 July 2016. Recital G stated:

"In terms of the Settlement Agreements, some of which may not yet have been

entered into as at the date of this Agreement but pursuant to which, if and when

entered into, the Parties have or will have (as the case may be) agreed to settle the

Court Proceedings on the basis that the Defender carries out and completes the

Remedial Works to the Property at its own cost on the terms of this Agreement. For

the avoidance of doubt, any references in this Agreement to the Settlement

Agreements shall apply in respect of each of the Pursuers if and when they enter into

their respective Settlement Agreement."

As already mentioned, the Network Rail settlement agreement was entered into on the same

date as the Remedial Works Agreement. The Scottish Ministers' settlement agreement was

entered into several months later.

[7]

Clause 1.1.8 defined Completion as "the date on which satisfactory completion of the

Remedial Works shall be deemed to have taken place in accordance with clause 3.30 of this

Agreement."

[8]

For present purposes, the key provisions of the Remedial Works Agreement were

contained in Clauses 3.26 to 3.31, which so far as material stated:

"3.26 Within 7 days of completion of the Remedial Works, the Defender shall notify

the Pursuers in writing, through the Architect, that it considers that the Remedial

Works have been completed in accordance with this Agreement ("the Defender's

Completion Notice").

3.27

Within 7 days of receipt of the Defender's Completion Notice, the Owner

shall confirm in writing (copied to the Tenants) whether or not it accepts that the

Remedial Works have been satisfactorily complete ("the Owner's Completion

Notice"). The Owner shall liaise with the Tenants regarding acceptance of whether

or not the Remedial Works have been satisfactorily completed and shall add any

elements of the Remedial Works it considers have not been completed satisfactorily

to the Owner's Completion Notice.

3.28

If the Owner does not accept that the Remedial Works have been

satisfactorily completed:

3.28.1 the Owner shall specify in the Owner's Completion Notice what

elements of the Remedial Works it considers have not been completed

satisfactorily and why;

3.28.2 the Defender shall within 7 days of receipt of the Owner's Completion

Notice notify the Owner in writing whether it agrees or disagrees with any of

the matters raised by the Owner;

3.28.3 if the Defender agrees with any of the matters raised by the Owner it

shall carry out and complete such works that are reasonable to address the

matters raised by the Owner and then issue a fresh Defender's Completion

Notice in accordance with clause 3.26 above and the Parties shall thereafter

follow the procedure set out in clauses 3.26 to 3.30 of this Agreement;

3.28.4 if the Defender does not agree with any or all of the matters raised in

the Owner's Completion Notice then the Defender may refer the question of

satisfactory completion of the Remedial Works to adjudication as provided

for at clause 21 of this Agreement.

...

3.30

The date on which satisfactory completion of the Remedial Works shall be

deemed to have taken place shall be:

3.30.1 the date of the relevant Defender's Completion Notice, when accepted

by the Owner; or

3.30.2 a date determined by the Adjudicator pursuant to clause 21 of this

Agreement (such decision to have temporarily binding effect as provided for

by the Scheme for Construction Contracts (Scotland)).

3.31

Upon Completion:

3.31.1 the Owner shall (without prejudice to the Defender's other obligations

under this Agreement, including those in clauses 3.34 3.37 and liability for

latent defects) assume responsibility for the insurance and ongoing care of the

Remedial Works; and

3.31.2 the Defects Period will commence."

[9]

It is agreed that the references in clauses 3.28.4 and 3.30.2 above to clause 21 ought to

be to clause 20, which conferred upon parties a right to refer any dispute to adjudication, to

be conducted in accordance with the Scottish Scheme for Construction Contracts ("the

Scheme"), and for the decision in such adjudication to have temporary binding effect and to

be complied with by the parties unless and until the subject matter of the dispute had been

determined by court proceedings. Clause 21 stated that, except as otherwise stated in the

agreement, any disputes arising out of, under, or in connection with the agreement were to

be determined by the Court of Session which would have exclusive jurisdiction.

Events giving rise to the present dispute

[10]

On 17 December 2019, the Architect issued the Defender's Completion Notice in

terms of clause 3.26. Agents on behalf of Network Rail and the Scottish Ministers wrote to

Fern setting out various aspects in respect of which they considered that the Remedial

Works were defective or incomplete. On 23 December 2019, Fern's agents issued the

Owner's Completion Notice, pursuant to clause 3.27, stating that Fern did not accept that the

Remedial Works had been satisfactorily completed, and attaching correspondence from

Network Rail and the Scottish Ministers setting out the elements of the remedial works that

they considered had not been completed satisfactorily.

[11]

The contractor did not agree with the matters raised in the Owner's Completion

Notice. Protracted correspondence followed between Fern and the contractor. In the course

of that correspondence, agreement was reached, with the consent of the various tenants,

regarding the approach to be taken to certain of the matters raised in the Owner's

Completion Notice, but disagreement continued with regard to others. In about

September 2020, Fern's agents indicated to the tenants that it was minded to agree that

Completion had occurred on 29 May 2020. Network Rail and the Scottish Ministers

intimated their objection to such a proposed course of action, contending that Completion

had not occurred.

[12]

On 1 February 2021, the contractor referred its dispute with Fern to adjudication.

The dispute referred bore to be between the contractor and Fern, and to be concerned only

with whether Completion had occurred on 17 December 2019, as contended by the

contractor, or on 29 May 2020, as contended by Fern. Neither Network Rail nor the Scottish

Ministers were convened as parties to the adjudication. On 6 March 2021, the adjudicator

issued a decision finding that Completion had occurred on 17 December 2019.

[13]

In its action, Network Rail seeks a declarator that, in terms of the Remedial Works

Agreement, Completion has not occurred, and has not been deemed to occur in terms of

clause 3.30. For their part, the Scottish Ministers seek a declarator in the same terms, and

also a declarator that the contractor is yet to discharge its obligation under the Remedial

Works Agreement and the settlement agreement to complete "the Works" as defined in

those agreements.

The issue

[14]

The issue in each of the present actions focuses on clause 3.27 of the Remedial Works

Agreement, and in particular on whether Fern were entitled to take and intimate the

decision that the remedial works had been satisfactorily completed when Network Rail and

the Scottish Ministers continued to contend that they had not.

Argument for Fern

[15]

On behalf of Fern it was submitted that the pursuers were not entitled to the

declarators sought. The matter could be characterised either as one of contractual title to sue

or of relevancy. Paragraphs 3.26 to 3.28 of the Remedial Works Agreement made clear that

the determination of the date on which satisfactory completion occurred was a matter for

Fern and the contractor, failing which the adjudicator. Although the contractor was obliged

to notify both Fern and the tenants (who, together, comprised the "Pursuers" in the

Remedial Works Agreement) of the fact that it considered that the remedial works had been

completed, it was, in terms of clause 3.27 and 3.28.1, Fern who had to confirm by notice

whether or not they accepted that Completion had occurred. There was an obligation on

Fern to "liaise" with the tenants on the issue of satisfactory completion, but it was for Fern

alone to decide what elements, if any, of the remedial works should be added to the Owner's

Completion Notice as not having been completed satisfactorily. This was to be contrasted

with the contractual mechanism in terms of which the tenants and owners notified the

contractor of defects that arose during the defect liability period. Under clause 3.36.1, Fern's

obligation to liaise with the tenants regarding the identification of defects was supplemented

by a requirement for Fern to "add any defects ... identified by any of the Tenants to the

schedule of defects to be specified by the Owner".

[16]

Following upon the service of the Owner's Completion Notice, clause 3.28 required

the contractor to engage with Fern, and not the tenants, in relation to disputed matters

related to Completion. If the contractor disagreed with the contents of the Owner's

Completion Notice, it could refer the question of satisfactory completion to adjudication, but

the wording was not mandatory and did not prevent Fern and the contractor from entering

into negotiations. Identification of the deemed completion date was a matter for Fern and

the contractor, failing which the issue had to be resolved by adjudication. This was not

surprising: to have multiple parties arguing about whether or not the works had been

satisfactorily completed would be unworkable in practice. The remedial works involved

common parts, and different tenants might have different views. Whose view was to take

precedence? Network Rail and the Scottish Ministers' interpretation of the Remedial Works

Agreement would require Fern not only to include in the Owner's Completion Notice any

matter, however trivial, that the tenants considered should be included, but also to

adjudicate at its own risk on all matters notified by the tenants, even if Fern did not agree

with them. The pursuers' reference to addition to the notice of matters which in their

reasonable view had not been satisfactorily completed was an attempt to imply a term into

the agreement and not a question of its proper interpretation.

[17]

There was no merit in the argument that when the Remedial Works Agreement was

read together with the relevant settlement agreement, it had to be construed as giving the

tenants certain enforceable rights relating to the content of the Owner's Completion Notice.

The terms of the Remedial Works Agreement were clear and there was no need to have

recourse to extrinsic material. In any event, Fern were not a party to the settlement

agreements, and the tenants were not parties to settlement agreements other than their own.

The settlement agreements contained confidentiality clauses. It could not be said that the

terms of the individual settlement agreements formed part of the "matrix of fact" that would

be known to the various parties and would inform how the Remedial Works Agreement

ought to be construed.

[18]

Network Rail's contention that Fern's construction deprived them of any remedies

should also be rejected. Completion had no effect on the collateral warranty granted by the

contractor to each of the other parties to the Remedial Works Agreement. The defects

liability period began to run on Completion. The consequences of Completion were

significant but limited.

Argument for McLaughlin & Harvey Limited

[19]

The argument on behalf of McLaughlin & Harvey was broadly in accord with that of

Fern, but with greater emphasis placed on whether the pursuers had title to the remedy they

sought. Title in private law required the identification of a right; no contractual right had

been identified here. There was also a question as to the scope of the jurisdiction of the court

in determining whether Completion had occurred. In terms of the Remedial Works

Agreement it could only occur in one of two ways: by agreement or by determination by an

adjudicator. Here there had been no agreement but there had been a determination by an

adjudicator. There was no contractual scope for the court deciding whether or when

Completion had occurred. If the adjudicator's decision were to be reduced by the court, the

issue would have to go back to the adjudicator for re-determination, because the parties had

chosen to contract on the basis that the adjudicator's decision was what determined

Completion, with the practical consequences set out in clause 3.31.

[20]

As regards the second declarator sought by the Scottish Ministers, it added nothing

to the first one. The court could not go behind the adjudicator's decision on this issue; there

was nothing produced that would entitle the court to reach a contrary decision.

Argument for Network Rail

[21]

On behalf of Network Rail it was submitted that no issue arose in relation to its title

and interest to pursue the declarator sought. The action was predicated on the Remedial

Works Agreement. Network Rail was a party to that agreement. There was no basis upon

which Network Rail could in these circumstances be without title and interest. The issue

was one of relevancy and not title or interest.

[22]

The construction of the Remedial Works Agreement contended for by Fern and by

McLaughlin & Harvey was untenable. The relevant provisions had to be interpreted not in

isolation but in the context of that agreement as a whole, and in the context of the Network

Rail settlement agreement which formed part of the same overall transaction. The purpose

of the settlement agreements was to facilitate resolution of the court proceedings on the

basis that McLaughlin & Harvey would carry out the remedial works, whose scope was to

be defined in the Remedial Works Agreement. The Network Rail settlement agreement was

therefore part of the factual matrix, playing a role in ascertaining what the Remedial Works

Agreement would objectively convey to the reasonable person.

[23]

Placed in their proper context, the relevant provisions of the Remedial Works

Agreement were reasonably capable of bearing more than one meaning. A literal

construction might be thought to give Fern alone the ability to accept or reject that the

remedial works had been satisfactorily completed, but such a construction would take place

in the type of vacuum that the courts have cautioned against, ignoring the enduring

relevance of the Network Rail settlement agreement. On a proper approach, the combined

effect of clauses 3.26 to 3.30 was to require the inclusion in the Owner's Completion Notice

of all and any elements of the remedial works which in the reasonable view of Network Rail

had not been completed satisfactorily. Before McLaughlin & Harvey's obligations to

Network Rail were discharged under the Network Rail settlement agreement, there first had

to be completion in terms of the Remedial Works Agreement. A construction which

deprived Network Rail of the ability to reject that Completion had been achieved would

defeat its rights under the Network Rail settlement agreement. It would reduce to nothing

the obligation to "liaise" with, inter alios, Network Rail. Faced with ambiguous provisions,

the court was entitled to prefer the construction which best accorded with commercial

common sense. It made no commercial sense to allow Fern to exercise sole judgement

without taking account of reasonable concerns of the tenants.

[24]

It was not contended that clause 3.27 conferred a right of veto on Network Rail or the

other tenants; they could merely each insist upon the addition to the Owner's Completion

Notice of concerns that were reasonable. It should not be assumed that the difference

between clause 3.27 and clause 3.36.1, which imposed an express obligation to include

defects identified by the tenants, was intentional. The drafting of the Remedial Works

Agreement was not perfect and regard should be had to the overall intention of the parties.

It made no commercial sense to read the agreement as conferring different entitlements.

Provisions regarding collateral warranties and the defects liability period did not address

the question of whether the works had been satisfactorily completed.

[25]

As regards the jurisdiction issue, there was nothing in the language of clause 3.30 to

deprive the court of jurisdiction. Clause 3.30.2 was one of two options and did not impose

adjudication on the parties as the only means by which disputes could be resolved.

Clause 3.30.2 referred to any decision of an adjudicator as having a "temporarily binding

effect": it was implicit that the court would have jurisdiction. The option afforded to either

party to refer a dispute to adjudication was inconsistent with the assertion that adjudication

was the only option available to them as a means of resolving a dispute. Such an

interpretation would fetter the rights of the parties to seek a final determination by the court

of matters in dispute. There was a presumption that parties did not intend to give up such a

fundamental right.

Argument for the Scottish Ministers

[26]

The arguments presented on behalf of Network Rail were adopted mutatis mutandis

on behalf of the Scottish Ministers. It was further submitted that the fact that the Scottish

Ministers' settlement agreement was entered into some time after, and not

contemporaneously with, the Remedial Works Agreement strengthened their argument. It

was clear that the obligation in clause 2.1 of the settlement agreement was a distinct

obligation, supporting the second declarator sought by the Scottish Ministers.

Decision

Title and interest or relevancy?

[27]

In my opinion it makes no practical difference whether the issue in the present action

is seen as one of title and interest to sue or of relevancy. As Lord Reed made clear in AXA

General Insurance Co Ltd v Lord Advocate 2012 SC (UKSC) 122 at paragraphs 166-169, different

considerations apply to title and interest (or standing) in private law cases on the one hand

and applications for judicial review based on public interest on the other. As regards the

former, the observations of Lord Dunedin in D&J Nicol v Dundee Harbour Trs, [1915] AC 550

at pages 12-13, remain apposite: for a person to have title and interest to sue in private law,

including contract,

"...he must be a party (using the word in its widest sense) to some legal relation

which gives him some right which the person against whom he raises the action

either infringes or denies."

[28]

In the present case, the right asserted by Network Rail and the Scottish Ministers is to

have their complaints, so far as reasonable, that the remedial works have not been

satisfactorily completed included in the Owner's Completion Notice. The issue between the

parties is whether such a right exists. If, on a proper construction of the Remedial Works

Agreement, no such right exists, then the only ground founded upon by the respective

pursuers in these actions for declarator that Completion has not occurred is removed. In

these circumstances I see little or no difference between characterising the issue as being

whether the respective pursuers have demonstrated a contractual title (it not being in

dispute that they may have a financial interest) to require such inclusion, or as being

whether they have pled a relevant case that they are entitled to require such inclusion.

There may be cases in which the distinction is important, but it appears to me to be

academic here. On either approach, the essence of the parties' dispute lies in the proper

interpretation of the Remedial Works Agreement.

[29]

I do not, however, accept the submission by Network Rail that the mere fact that it is

a party to the Remedial Works Agreement is sufficient to confer title to sue, regardless of the

matter at issue. The argument to this effect was supported inter alia by reference to

Lord Dunedin's observation in D&J Nicol (above, at page 13) that "the relation of contract

gives the one party a right to insist on the fulfilment of the contract by the other", and to a

dictum of Lord Johnston in Scottish Enterprise v Archibald Russel of Denny Ltd 2002 SLT 519, at

paragraph 6, that a "plea of no title to sue can never arise in relation to a contracting party

seeking to sue upon his or her contract". These observations should not be relied upon out

of context. Lord Dunedin's statement was clearly concerned with a contract between two

parties, as was the Scottish Enterprise case. They provide no guidance as to the extent of the

contractual title of a party to a multipartite agreement such as the Remedial Works

Agreement where different parties are granted differing rights against one or more of the

others. In my view the proper approach to the question "on whom was the right of

enforcement conferred?" is as stated by Gloag, Contract (2

ed) at page 218: namely, that it is

a question of the intention of the party who undertook the obligation, to be determined by

application of the normal rules of contractual interpretation.

Construction of the Remedial Works Agreement

[30]

The principles of interpretation of contractual provisions, enunciated by

Lord Neuberger of Abbotsbury PSC in Arnold v Britton [2015] AC 1619 at paragraphs 14-23

and by an Extra Division in Ashtead Plant Hire Co Ltd v Granton Central Developments Ltd 2020

SC 244 (Lord Drummond Young at paragraphs 9-17), are well established. In the context of

the issue arising in the present case, the following points may be noted.

[31]

Firstly, as Lord Neuberger observed at paragraph 17 in Arnold v Britton, the language

used by the parties must be accorded due respect:

"...(T)he reliance placed in some cases on commercial common sense and

surrounding circumstances (eg in Chartbrook [2009] AC 1101, paras 16-26) should not

be invoked to undervalue the importance of the language of the provision which is to

be construed. The exercise of interpreting a provision involves identifying what the

parties meant through the eyes of a reasonable reader, and, save perhaps in a very

unusual case, that meaning is most obviously to be gleaned from the language of the

provision. Unlike commercial common sense and the surrounding circumstances,

the parties have control over the language they use in a contract. And, again save

perhaps in a very unusual case, the parties must have been specifically focussing on

the issue covered by the provision when agreeing the wording of that provision."

[32]

Secondly, as Lord Neuberger emphasised at paragraph 20, while commercial

common sense is a very important factor to take into account when interpreting a contract, a

court should be slow to reject the natural meaning of a provision as correct simply because it

appears to be an imprudent term for one of the parties to have agreed. The purpose of

interpretation is to identify what the parties have agreed, not what the court thinks that they

should have agreed.

[33]

Thirdly, it is clear that the use of commercial common sense in construing a contract

is appropriate where a word or phrase is capable of having more than one meaning. As

Lord Drummond Young observed in Ashtead Plant Hire at paragraphs 12 and 13:

"...(T)he authorities supporting [the use of commercial common sense] are quite

clear; they include most of the recent cases where the approach to contractual

interpretation has been discussed. Contractual disputes frequently involve wording

that is capable of having more than one meaning. This may involve conflict between

the most literal meaning of a word or phrase and an alternative meaning that makes

better commercial sense in context and according to the fundamental purposes of the

contract...

...

...Thus in any case where a contractual provision is capable of bearing more than

one meaning, the court should adopt the construction that best accords with

commercial common sense."

Accordingly, although as Lord Drummond Young noted it is not necessary to conclude that

a literal construction would produce an absurd result before having regard to commercial

common sense, it is at least necessary for the court to be satisfied that the provision in

question, read in the context of the contract itself and the background knowledge of the

parties at the time of contracting, is capable of bearing more than one meaning. If that were

not so, the court would risk substituting its own view of what the parties ought to have

agreed for what they did in fact agree.

[34]

In my opinion clause 3.27 is not capable of bearing more than one meaning. Its terms

and purpose are unambiguous. A distinction is clearly drawn between the rights and

obligations of the Owner on the one hand and of the Tenants on the other. The Owner's

obligation is to liaise with the Tenants: ie to consult them before intimating to the contractor

whether or not it accepts that the works have been satisfactorily completed. But the clause is

clear that the decision whether or not to add any elements to the notice is to be made by the

Owner alone ("...it considers..."). That phraseology is continued in clause 3.28: "If the

Owner does not accept..."). No further reference to the Tenants is made in any of

clauses 3.27 to 3.31, and in my view there is nothing in those clauses that renders them

capable of bearing the meaning contended for by Network Rail and the Scottish Ministers.

In these circumstances there is, in my view, no foundation for an argument that commercial

common sense requires clause 3.27 to be interpreted as conferring an obligation upon Fern

to include any or all of the tenants' complaints, reasonable or otherwise, in its notice to the

contractor. I agree with Fern's characterisation of the argument as an attempt to imply a

term into the contract rather than interpretation of the terms that were agreed. This is

readily apparent from the fact that the pursuers accept that their entitlement to have a

complaint included in the Owner's Completion Notice is subject to the qualification that the

concern must be a reasonable one. The pursuers have not pled circumstances in which the

legal requirements for implication of such a term may be held to have been met.

[35]

Nor does the construction contended for by Network Rail and the Scottish Ministers

find support from reading the Remedial Works Agreement as a whole. The contrast with

clause 3.36, where the tenants are given a right not only to be liaised with but also to have

their complaints added to the Owner's schedule of defects, is a stark one. It affords a strong

indication that the parties intended different rights to be conferred upon the tenants under

clause 3.27. In my opinion it accords with commercial common sense to treat these two

clauses as conferring different rights. The principal purpose of clauses 3.27 to 3.30 is to

determine whether and if so when Completion has occurred, giving rise to the consequences

in clause 3.31, namely assumption of responsibility by Fern for the insurance and ongoing

care of the remedial works and commencement of the defects liability period. In my view it

makes commercial sense to place the decision as to whether to accept that the works have

been satisfactorily completed in the hands of the party upon whom responsibility for their

care and insurance is being assumed. It is important to note that by virtue of clause 3.36, the

tenants remain entitled to raise issues relating to defects and other faults in the remedial

works and to require to have these included in a schedule of defects.

[36]

I accept that the various settlement agreements constitute a part of the context and

background against which the Remedial Works Agreement must be construed. The

agreements contain references to one another and were clearly entered into by the respective

parties as interlinked ingredients of the resolution of the disputes that had arisen in relation

to the premises. However, I find nothing in the settlement agreements to indicate that

clause 3.27 ought to be interpreted in the manner contended for by Network Rail and the

Scottish Ministers. The fact that their differing entitlements to liquidated damages were

effectively terminated by the occurrence of Completion clearly gave them an interest to

argue that Completion had not yet occurred, but it does not follow that the Remedial Works

Agreement must be construed as conferring upon them a right to require their concerns to

be included in the Owner's Completion Notice. That, in my view, would amount to

rewriting the parties' agreement.

[37]

For these reasons, I hold that the tenants, including Network Rail and the Scottish

Ministers, had no contractual entitlement to insist upon their concerns being added to the

Owner's Completion Notice. From that it follows that they had no contractual entitlement

to challenge Fern's decision to accept that the works had been satisfactorily completed by

29 May 2020 and to enter into adjudication with the contractor on that basis.

[38]

As it turned out matters did not progress, as envisaged by clause 3.28.3, by means of

the contractor carrying out the works needed to address the matters raised by Fern and then

issuing a fresh Defender's Completion Notice, so there has never been acceptance by Fern of

any Defender's Completion Notice. Instead, the matter was referred for adjudication. In

terms of clause 3.30, the date of Completion is therefore to be determined by the

adjudicator's decision. The adjudicator has given a decision and that is the date upon which

satisfactory completion of the Remedial Works is deemed to have taken place. That being

so, there is no basis in law upon which either Network Rail or the Scottish Ministers are

entitled to a declarator that Completion has not occurred or been deemed to occur. Whether

this is characterised as a question of relevancy or of absence of contractual title, the result is

the same.

[39]

The Scottish Ministers also seek a declarator that the contractor is yet to discharge its

obligation under the Remedial Works Agreement and the settlement agreement to complete

"the Works". As I understood it, the argument was that because the Scottish Ministers'

settlement agreement was entered into some time after the Remedial Works Agreement,

they were entitled to rely upon clause 2.1 of their settlement agreement as conferring a

separate and stand-alone right to make a claim as a result of a breach by the contractor of the

Remedial Works Agreement. There is, however, no separate pleaded case in support of the

second conclusion, and in my opinion the same considerations apply to it as apply to the

first conclusion, with which I have dealt. The fact that the settlement agreement was

executed later appears to me to be of no legal significance. I have set out above the terms of

Recital G of the Remedial Works Agreement, which envisaged that the agreements might or

might not be entered into contemporaneously, and which seem to me to confirm that the

parties attached no significance to matters of timing.

[40]

I have reached my decision on the issue of contractual interpretation without

requiring to consider the question raised by the contractor as to the scope of the jurisdiction

of the court. Determining whether Fern were entitled to reach and intimate their view that

the works had been satisfactorily completed, and to participate in an adjudication with the

contractor on that basis, without having regard to the concerns expressed by the tenants

which remained outstanding, does not require consideration of the consequences of a party

raising court proceedings in which ascertainment of the date of satisfactory completion is

put in issue. Moreover, since, so far as I am aware, no such court proceedings have been

raised, the question is academic. I shall, however, briefly express my view on it.

[41]

I agree with the submission by Network Rail that there is nothing in the Remedial

Works Agreement to exclude or restrict the jurisdiction of the court. Indeed, the parties

seem to have gone out of their way to emphasise that a decision by an adjudicator will have

only temporary binding effect unless and until the subject matter of the dispute has been

determined by court proceedings. It is unclear to me why it was considered necessary to

include this phraseology in clause 3.30.2 and yet again in clause 20.2 when it is contained in

paragraph 23(2) of the Scheme itself, applied to the agreement by clause 20.3. Whatever the

reason for that may be, it is clear that a dispute about whether Completion has occurred, and

if so when, is as open for determination by court proceedings as any other dispute arising

under or in connection with the agreement. I reject the proposition that in such a dispute the

role of the court would be restricted to quashing the adjudicator's decision without making

its own determination. On the contrary, it seems to me that on a proper construction of the

agreement, the parties have contemplated that the date of Completion, carrying the

consequences set out in clause 3.31, could eventually be held by the court to have occurred

on a date different from that determined by the adjudicator.

Disposal

[42]

In the action at the instance of Network Rail, I shall sustain the first and second pleas

in law for Fern and the second and third pleas in law for the contractor, repel the pleas in

law for Network Rail, and dismiss the action.

[43]

In the action at the instance of the Scottish Ministers, I shall sustain the third and

fourth pleas in law for the contractors and the first and second pleas in law for Fern, repel

the pleas in law (including the preliminary plea added by way of amendment during the

debate) for the Scottish Ministers, and dismiss the action.

[44]

Any questions regarding expenses are reserved.

Scottish Court of Session Decisions