Perth sheriff orders rock processing company to repay overpayment of £58,000 to civil engineering contractor

About this case:

• Citation:
  [2024] SC PER 48
• Judgment:
  External link
• Court:
  Sheriff Court
• Judge:
  Sheriff D Hamilton

Priority Construction UK Ltd argued that it had only paid the undue sum to Advanced Material Processing Ltd because the defender was attempting to have the company wound up on the basis that the pursuer was its creditor. The defender argued that the pursuer had chosen not to oppose the petition and was the author of its own misfortune.

The case was heard by Sheriff Derek Hamilton at Perth Sheriff Court. Massaro, advocate, appeared for the pursuer and Whirter, advocate, for the defender.

Illegitimate petition

In 2019, the pursuer was compiling a Tender Submission for a prospective instruction in respect of construction at a landfill site in Lochgilphead. Part of the submission included a quotation for the excavation of rock from the site of a prospective landfill cell and the processing of that rock for use in the project. The pursuer invited tenders, including from the defender, for the crushing and processing of the excavated rock.

The pursuer wished for the pricing used by the defender to be calculated in cost per cubic metre of rock. However, the defender sought to convert the volume of rock to weight of rock, doing so using a conversion factor inappropriate for compacted rock in the ground, and sought to charge the pursuer on that basis. Because of the conversion method used by the defender, the volume of rock apparently processed was almost double the volume calculated by the pursuer to have been excavated from the site.

Two invoices were submitted by the defender to the pursuer. The pursuer paid the first invoice but disputed the second, which led to the defender presenting a winding up petition to Edinburgh Sheriff Court alleging incorrectly that the pursuer was its creditor. After an exchange of correspondence between the parties’ solicitors, the pursuer confirmed that payment of the £58,608.71 plus expenses would be made on the condition that the petition was dismissed. In doing so the pursuer continued to deny liability for the debt, stated the payment was being offered despite that, and reserved its right to seek to claim the sum back.

It was submitted for the pursuer that there was no lawful justification for the defender to keep the money, which was paid only to prevent the damage of a winding up petition being advertised. The defender could not use an illegitimate winding up petition to avoid the need to prove that it had processed more than the volume of rock the pursuer claimed had been processed.

For the defender it was submitted that it had been open to the pursuer to oppose the winding up petition, but it chose not to do so. If unjustified enrichment was found, it was not equitable to compel the defender to redress the enrichment, as the pursuer was either at fault or the author of its own misfortune by paying the invoice.

Disruption and damage

In his decision, Sheriff Hamilton said of the pursuer’s main argument: “The speedy lodging of the winding up petition could be perceived to have been done to apply commercial pressure to obtain payment of a disputed debt. Disruption and damage could have been caused to the Pursuer’s business by the presentation and advertisement of a winding up petition. There is a need to ensure that such potential for damage is not used by a petitioner. I am satisfied that the Pursuer made the payment to settle Invoice 2111, interest thereon and the expenses claimed in order to avoid first orders being granted in a winding up petition.”

He continued: “I consider there is merit in the Pursuer’s submission. To find otherwise would mean that an unscrupulous creditor could raise an inflated invoice and then lodge a winding up petition. If that was challenged in a reasonable way, it would not be for the challenger to prove the extent of the debt due.”

Assessing whether it was fair to order the defender to provide redress, Sheriff Hamilton said: “I do not agree with the Defender’s submission. Firstly, the Pursuer paid the first invoice timeously. There was no expectation that the figures would be scrutinised at that stage because the contract to process all the rock extracted from the ground had not been completed. Secondly, the Pursuer would not know what exact volume of rock was to be processed until a final survey had been carried out at the conclusion of the excavation.”

He concluded: “Had the Defender been clearer at an earlier stage of proceedings of the basis of its choice of figure for a conversion factor, that might have alerted parties that the answer to the widely differing volume figures lay in assessing the true density of the rock, and not in significant failings in the measurement of volume or weight, and that may have allowed parties to limit the time taken by this court to deal with this dispute.”

It was therefore determined that the pursuer was entitled to the remedy of unjust enrichment and payment from the defender in the sum of £58,608.71, plus the charged interest and expenses.