Judge rules in favour of SIC on £2.5 million Sumburgh runway dispute

Shetland Islands Council has won its appeal against paying Highlands and Islands Airports Limited £2.5 million to rebuild a defective runway extension at Sumburgh Airport. 

The compensation order was overturned due to a procedural error made last year by an independent adjudicator, George Ross of the Institute of Civil Engineers, prior to finding the council liable for the runway repairs. The error was only spotted by chance by the council’s solicitors.

The local authority designed the extension to the east end of the east-west runway and acted as project manager to contractor Balfour Beattie when it was built in 2006. 

Since then the runway has suffered frequent and serious damage during south-easterly gales with violent waves displacing large rocks and sucking infill from below the tarmac into the sea.

HIAL plans major remedial works this year to cure the problems and expected the council to foot the bill after being found in breach of contract by Mr Ross. However, the council challenged the adjudication process and Court of Session judge Lord Menzies ruled today that Mr Ross’s decision was unenforceable.

The adjudication was deemed “tainted” because Mr Ross failed to inform either party that he had sought legal advice by telephone and therefore denied them a chance to comment on the advice received.

During a court hearing shortly before Christmas, Mr Ross maintained he had not obtained advice in the short phone call, merely confirmation that his reading of the meaning of a particular legal clause relating to construction contracts was correct. But Lord Menzies ruled his action unfair and a breach of natural justice.

Commenting today, the council said it was “pleased” and “satisfied” with the decision. It said HIAL refuses to admit that it agreed to a compromise on the quality of the runway extension due to budget limitations, accepting at the time that it would result in higher ongoing maintenance costs.

The council re-iterated its belief that it was not in breach of contract to HIAL. “The council was the designer of the runway and is confident that at all times it fulfilled its obligations to HIAL. 

“When the runway was being procured, budget limitations meant that HIAL had to accept a higher ongoing maintenance obligation for the runway rather than a much higher initial capital expenditure. In more recent times HIAL has refused to accept that this compromise had been reached.”

The council also hit back at claims made in The Shetland Times by HIAL managing director Inglis Lyon that the council had repeatedly refused to engage with the airport authority to sort out the runway problem. It said: “Contrary to the earlier reports, Shetland Islands Council engaged with HIAL at length and we had earlier worked very well together in the design, procurement and construction of the runway.”

The council said it remained willing to provide whatever assistance it could to HIAL and hoped for an amicable resolution to a dispute which it could not be in the public interest to continue.

A HIAL spokesman said: “HIAL has received the decision today and will be reviewing the available options over the next two or three days.”