Thursday, 18th September 2014

Adjudication July 2008

July 2008

Aedas Architects Ltd v Skanska Construction UK Ltd [2008] ScotsCS CSOH 64
Was the validity of withholding notices a triable issue?
 
A decision from the Scottish Courts on whether a summary decree could be issued on the matter of the validity of withholding notices issued against stage payments throughout a contract. There was some discussion by Lord McEwan surrounding the issues that might impact on the validity of withholding notices and this led him to conclude that there was insufficient evidence to conclude that Skanska’s defence was ‘bound to fail’. This meant that the motion for a summary decree was denied.
 
An interesting point to come out of this judgement is that Lord McEwan appears to suggest that it is compliant with the Act to detail a number of grounds against a global figure of withholding rather than amount being attributed to each ground. This would seems at odds with other case law on the subject.
 
Avoncroft Construction Ltd v Sharba Homes (CN) Ltd [2008] EWHC 933 (TCC)
Resistance of enforcement by claiming entitlement to set-off LAD’s against decision
 
Avoncroft sought enforcement of an adjudicator’s decision awarding it £56,380 following a dispute that had arisen under the JCT 1998 PWQ contract. Sharba resisted the enforcement on the basis it was entitled to set off LAD’s against the decision. Alternatively, Sharba wanted the money paid into court pending the outcome of a second adjudication.
 
HHJ Frances Kirkham referred to Jackson J’s judgement in Balfour Beatty v Serco [2004] on the issue of set-off of LAD’s against an adjudicators award and summarised the 2 circumstances in which set-off might be permissible:
 
a)       where it follows from the adjudicator’s decision that the employer is entitled to recover LADs; or
b)       in the absence of determination in the adjudication, entitlement will depend on the express terms of the contract in relation to LAD’s.
 
HHJ Kirkham concluded that no claim was made for LAD’s during the adjudication and the adjudicator had not determined the issue in his decision. Furthermore, there was no express provision entitling Sharba to deduct and withhold LAD’s and therefore they were not entitled to withhold such sums against the decision.
 
The judge provided useful guidance on how the time period for a valid withholding notice was to be calculated. The normal payment mechanisms of the contract in respect of interim payments did not apply to an adjudicator’s decision, but the award was still ‘a sum due under contract’. In the absence of express provisions, the Act and the Scheme applied and therefore any withholding notice must be served 7 days before the final date for payment.
 
In considering whether there should be a stay of the payment pending the outcome of a second adjudication, the judge referred to Interserve Industrial Services Ltd v Cleveland Bridge Ltd [2006] in dismissing this as a valid ground.
 
L Brown & Sons Ltd v Crosby Homes (North West) Ltd [2008] EWHC 933 (TCC)
Application to serve appeal was late with no good reason for the delay
 
This case concerned a very complex set of facts involving 6 adjudications and 2 arbitrations between the parties. Documents were disclosed in the second arbitration which would have had a significant impact on the award of the first arbitration and Brown’s solicitors wrote to Crosbys’ requesting them to agree to the terms of the award being reversed. This request was ultimately turned down but Brown failed to apply for an order extending the time for a challenge to the award within the 28 days required under Section 68 of the Arbitration Act. Mr Justice Akenhead considered all the issues arising out of the two arbitrations and concluded that there was reasonable excuse for Brown’s delay in issuing its challenge to the award and their application to extend time was dismissed.
 
BSF Consulting Engineers Ltd v MacDonald Crosbie [2008] All ER (D) 171 TCC
No written agreement
 
A firm of civil and structural engineers referred a payment dispute to adjudication. The Defendant resisted the adjudication on the basis that the scope of works had not been defined in the contract and no payment rates had been agreed and therefore there was no written agreement capable of forming the reference to adjudication.
 
The Claimant argued it was entitled to claim a reasonable charge for its professional services, relying on s.15 of the Supply of Goods & Services Act 1982 and the adjudicator found for them on this basis. The court found that the adjudicator had no jurisdiction under s.107 of the HGCRA as there was no written agreement as to the scope of the work or the charges for that work. HHJ David Wilcox therefore dismissed the application for enforcement and granted MacDonald Crosbie leave to defend. (RJT Consulting Engineers Ltd v DM Engineering [2002])
 
The judge noted that had there been a contractual right to adjudication it may have been possible to rely on implied rights to receive a reasonable payment under s.15 of the SGSA 1982.
 
Cantillon Ltd v Urvasco Ltd [2008] CILL 2504 TCC
Natural justice – the adjudicator is not at fault if one party fails to address a point
 
A piling dispute was referred to adjudication in which the claimant was successful. The defendant, however, refused to comply with the decision so Cantillon commenced enforcement proceedings.
 
Urvasco attempted to resist the proceedings on the basis there had been a breach of natural justice but was unsuccessful. Mr Justice Akenhead held that if one party put forward a point which the other party failed to address, this was not the adjudicator’s fault.
 
Although not required to decide the point, the judge said that in some circumstances it may be possible to sever a decision so that the parts untainted by a breach of natural justice remained enforceable.
 
The judgement contains a very useful summary of some the key aspects of the law surrounding challenges to adjudication along with extracts from the leading cases on these issues, in particular, on the severability of adjudicator’s decisions.
 
Cubitt Building & Interiors Ltd v Richardson Roofing (Industrial) Ltd [2008] EWHC 1020 TCC
The ‘Battle of the Forms’
 
This judgment shows the confusion that can arise regarding when a contract is actually formed. Cubitt was the main contractor on a mixed residential and commercial scheme. Richardson was a specialist roofing contractor who were invited to quote for the roofing works on the project.
 
Various documents were exchanged by the parties and the question arose whether Cubitt's standard terms and conditions had been incorporated in the contract or the standard form of DOM/1 applied.
 
Contrary to what each party was arguing, the judge found that the contract had actually been formed at the pre-contract meeting when "substantial agreement on every aspect of the subcontract was reached" and recorded in the minutes of the meeting. The judge came to this conclusion despite the fact that Cubitt subsequently sent what it purported to be a letter of intent and referred to the entering into of a formal subcontract.
 
With respect to the 'Battle of the Forms', the judge concluded that although Cubitt's subsequent order referred to its own standard terms and conditions, these were never in fact provided to Richardson. Furthermore, the reference to the DOM/1 form of contract in all other documents implied that this form of subcontract had been agreed by both parties.
 
Pre-contract meetings are a common occurrence on most projects and depending on what documents are subsequently exchanged the minutes of such meetings could form a vital piece of evidence in ascertaining whether a contract has come into existence and what the terms of that contract might be.
 
Edenbooth Ltd v Cre8 Developments Ltd [2008] EWHC 570 TCC
Residential occupier under s.106 of the HGCR Act
 
The claimant had been successful in an adjudication award and sought enforcement of the decision by the court. The Defendant attempted to argue that he was a residential occupier for the purposes of s.106(1)(a) the Act and therefore was exempt from the adjudication provisions. The judge could not accept this argument on the basis that the defendant was a company rather than an individual and they had engaged the claimant in that capacity. Furthermore, the claimant was not the registered owner of the property in question.
 
Enterprise Managed Services Ltd v East Midland Contracting Ltd [2008] EWHC 727 (TCC)
Whether enforcement proceedings could be struck out by contract clause delaying litigation until after final completion
 
The claimant brought proceedings to reverse an adjudicator’s decision which meant it had to pay almost £1.2M to the defendant. The defendant issued an application requesting these proceedings to be struck out on the basis the court had no jurisdiction to decide the claim. This argument was based on a contractual clause which stated that the parties were not to commence any proceedings, other than adjudication, until the Main Works had been certified as substantially or practically complete. The judgement included much discussion on the construction of this clause in the context of the subcontract and Main Contract conditions, in particular the definition of completion and certification. HHJ Stephen Davies was not convinced by the defendant’s arguments and their application to strike out the enforcement proceedings was dismissed.
 
London Underground Ltd v Metronet Rail BCV Ltd [2008] EWHC 502 (TCC)
PPP, multi-tier dispute resolution process, correctness of adjudicator’s decision
 
The claimant maintained that the adjudicator’s decision was correct for the reasons given but the defendant contended that the adjudicator was wrong in his interpretation that a clause was legally absurd. Mr Justice Ramsey, having considered the relevant case law on interpretation, concluded that the provisions were not absurd and the defendant had a remedy under the provisions.
 
Reinwood Ltd v L Brown & Sons Ltd [2008] UKHL 12
Another House of Lords judgement on withholding notices
 
“Where under the JCT Standard Form of Building Contract, 1998 ed, Private with Quantities the architect granted the contractor an extension of time after the employer had served a withholding notice and paid under an interim certificate on the assumption that it had the right to rely on a non-completion certificate previously served, the of the extension of time did not deprive the employer of that right since it did not cancel the non-completion notice restrospectively.” WLR Daily, 10 March 2008.
 
The Lords made it clear that their conclusions were based on the very particular set of facts and the application of the contractual provisions to those facts. The judgement provides useful analysis of the interplay of the liquidated damages and withholding notice provisions in the JCT 1998 contract.
 
 
 
T & T Fabrication Ltd & T & T Fabrications (A firm) v Hubbard Architectural Metalwork Ltd [2008] EWHC B7 TCC
Contract in writing, assignment of contract
 
The claimant brought enforcement proceedings following an adjudication for a relatively small sum. The defendant resisted proceedings on the basis that the some of the terms were not in writing and therefore there was no contract in writing for the purposes of s.107 of the HGCR Act. The judge agreed that there was sufficient evidence to suggest there was an arguable case as to jurisdiction and therefore the enforcement was refused.
 
As an aside, the judge commented that, given the sums involved and the fact the enforcement proceedings were not a final resolution, the matter should have been dealt with in the county court to finally dispose of the matter.
 
Tyco Fire & Integrated Solutions (UK) Ltd v Rolls-Royce Motor Cars Ltd [2008] EWCA Civ 286
Court of Appeal: recovery of sums awarded by adjudicator recoverable under insurance policy
 
The Court of Appeal overturned the decision of Judge Gilliland QC at first instance and held that the Claimant, was liable to indemnify the defendant for damage to existing structures caused by the Claimant’s negligence, despite the defendant being contractually obliged to maintain a joint names insurance policy for specified perils.