PT BUILDING SERVICES LTD V ROK BUILD LTD
Technology and Construction Court
Ramsey J
8 December 2008
The contractor's statements to the adjudicator in the second adjudication that the
decision in the first adjudication was valid and precluded him from proceeding meant
that it could not seek to challenge the validity of the decision
The contractor in the adjudication begun by the sub-contractor maintained its
jurisdictional challenges on a number of grounds and reserved its position to maintain
that contention subsequently but participated in the adjudication process without
prejudice to that position. The adjudicator awarded the sub-contractor a specified
sum in respect of its works and directed the contractor to pay its fees and expenses.
Whilst the contractor refused to pay the sum awarded in respect if its works, it did
pay the adjudicator's fees and expenses. The contractor's refusal to pay the sum
awarded and its jurisdictional challenges led the sub-contractor to commence a
second adjudication. The contractor wrote to the adjudicator in the second
adjudication and stated that whilst the decision in the first adjudication was
unenforceable, the dispute referred in the second adjudication was the same as the
dispute in the first with the result that the adjudicator would have no jurisdiction in the
second adjudication. The adjudicator in the second adjudication accepted this
argument and resigned his appointment. The sub-contractor brought court
enforcement proceedings in respect of the decision in the first adjudication. The subcontractor contended that the contractor took the benefit of the adjudicator's decision
in the first adjudication by using it to persuade the second adjudicator to resign and
paid the adjudicator's fees. In consequence the contractor could not now assert that
the decision was not valid and binding.
Ramsey J accepted the sub-contractor’s contention. The contractor's statements to
the adjudicator in the second adjudication that the decision in the first adjudication
was valid and precluded him from proceeding meant that it could not seek to
challenge the validity of the decision. The contractor's assertion in its
communications with the second adjudicator that there was a valid adjudication
decision arising from the first adjudication which precluded him from proceeding
meant that it elected to treat the first decision as valid. The decision of second
adjudicator not to proceed with the second adjudication was a clear benefit obtained
by the contractor in so relying on the first decision. The payment by the contractor of
the fees and expenses of the adjudicator in the first adjudication meant that it elected
to treat the adjudicator's decision on those fees and expenses as being a valid
decision. Whilst there was some force in the contractor's argument that it was difficult
to characterise that payment as amounting to it taking a benefit, the taking of a
benefit was sufficient but not necessary for there to be an election.
THE FULL TEXT OF THE JUDGMENT OF RAMSEY J
Introduction
1. The claimant ("PTB") seeks summary judgment for £314,242.18 plus interest
against the defendant ("ROK") in respect of sums held due to PTB in an adjudicator's
decision dated 1 October 2008. ROK oppose enforcement of the adjudicator's
decision on a number of grounds.
2. PTB was engaged by ROK to carry out work to kitchens and bathrooms in councilowned properties in Harlow, Essex as part of the Harlow Decent Homes project.
There is a dispute as to the contractual relationship between PTB and ROK and, in
particular, whether there was a contract in writing within the provisions of s.107 of the
Housing (Grants) Construction Regeneration Act 1996 ("The 1996 Act").
The adjudication
3. PTB contended that ROK failed to make payments or had made late payments in
respect of applications for payment that PTB had submitted to ROK. On 11 August
2008 PTB served a notice of adjudication on ROK. Attached to that notice was a
statement of dispute, together with a document which had the title: "Anticipated final
account". PTB claimed a sum of £376,224 for works completed up to 11 August
2008.
4. In response, on 13 August 2008, ROK said this:
"Contrary to your letter and attachments, we would confirm the dispute which
you are attempting to refer does not exist and your submission is flawed and
unfounded. Furthermore, any attempt on your part to continue with this action
will ultimately lead to wasted time and resources on your part, as well as our
pursuing your company for our costs in dealing with this matter.
With respect, we would refer you to our previous submissions and content of
our recent meetings whereby we have confirmed to you our view that your
works are grossly over-valued and you have attempted to misrepresent the
extent of actual works carried out and completed. This, as you have been
made aware, has and is causing ROK some difficulties and embarrassment
with our client, although we acknowledge that this is a matter for us to resolve
directly with Harlow District Council.
We would also refer you to the email issued by your Mr Jerry Twum-Asare
dated 26th June 2008 which we aver corroborates and acknowledges your
over-valuation."
5. There followed correspondence in which ROK reaffirmed that there was no
dispute. They also said that, if there was a dispute, they would not be prepared to
accept the adjudicator proposed by PTB and suggested that PTB should apply to a
nominating body for an appointment. On 20 August 2008, PTB served a second
notice of adjudication on ROK. They attached a statement of dispute, together with
an application document with the title "Final account", being an application for
payment expressed as a "Final account for works completed on the above reference
project in the sum of £411,465.94". PTB applied for an appointment to the Chartered
Institute of Arbitrators. They appointed the Adjudicator, Mr Peter Barnes, who wrote
to the parties on 22nd August 2008.
6. On 27 August 2008, PTB sent the Adjudicator a written statement of dispute. ROK
also wrote to the Adjudicator on 27 August, attaching the notice of adjudication dated
11 August 2008 and subsequent correspondence up to 14 August 2008. They then
said:
"As you will hopefully glean from such correspondence, there is no dispute
crystallised and, as such, there can be no formal adjudication. Furthermore,
ROK would confirm having received no referral notice not later than seven
days from their receipt of the notice of adjudication (11 August 2008)."
7. They then invited the Adjudicator to resign. PTB wrote to the Adjudicator and ROK
pointing out that the notice of adjudication was that dated 20 August 2008. On 28
August 2008, ROK confirmed that they had received that notice of adjudication. The
Adjudicator then wrote to the parties on 28 August 2008 and dealt with two
challenges to jurisdiction. He stated that the referral on 28 August 2008 was within
time given that the notice of adjudication was dated 20 August and there was a bank
holiday on 25 August 2008. In relation to ROK's contention that there was no
crystallised dispute, he concluded that a dispute had existed in respect of the alleged
non-payment of amounts due to the referring party prior to the notice of adjudication
dated 20 August 2008. He therefore confirmed that he intended to proceed with the
adjudication and he concluded by asking PTB to arrange for a full copy of the
contract between the parties to be provided by 29 August 2008. Documents were
then provided to him on that date.
8. On 4 September 2008 ROK served a response in which they took a number of
points on jurisdiction. They stated at paragraph 1.2 that:
"In making this response and participating in this adjudication, ROK reserves
its position as to the jurisdictional matters referred to in section 2 below and
does not confer upon the adjudicator any power or authority that he does not
have otherwise have."
9. In section 2 they referred to the following points on which they challenged
jurisdiction:
"(a) Legal entity;
(b) No written subcontract;
(c) No crystallised dispute;
(d) Wrong principles of nomination;
(e) Submission of new information and
(f) Invalid notice of adjudication and referral."
10. ROK also attached several appendices and set out an ascertainment of PTB's
application in the gross sum of £722,957.18, without prejudice to the challenge to
jurisdiction. ROK also said that the Adjudicator's powers were limited to addressing
the remedies sought and that no other amount could be awarded other than that set
out in the statement of dispute. PTB served a counter-response and wrote
correspondence dealing with the points raised by ROK.
11. In a letter dated 18 September 2008, the Adjudicator dealt with and rejected the
jurisdiction challenges (a) to (f) and the contention his powers were limited to the
remedies sought. The adjudication then continued and the Adjudicator made his
decision on 1 October 2008 in which he decided that ROK should pay PTB the sums
now claimed in these proceedings.
12. At some date afterwards ROK paid the Adjudicator the sum of £11,638.38 in
respect of his fees and expenses as set out in the decision. There was subsequently
concern by PTB that, as Mr Hough says in his statement on behalf of PTB:
"The challenge on the basis of 'No crystallised dispute' would be the source of
considerable argument and expense in any enforcement proceedings."
13. PTB therefore issued a new notice of adjudication dated 15 October 2008 and
applied for and obtained the appointment of a new adjudicator, Mr Peter Brooker, on
20 October 2008. When ROK received a letter on 21 October 2008 from Mr Brooker,
they wrote to him in the following terms:
"The exact same dispute has been the subject of a previous adjudication
commenced by PTB. It was decided by Mr Peter Barnes. We enclose a copy
of the previous adjudicator's decision dated 1 October 2008. Paragraph 17 of
that decision confirms that the dispute was in relation to payment of the final
account dated 20 August 2008. The adjudicator decided, amongst other
matters, that we should pay PTB the sum of £314,242.18. Given that a
dispute in relation to payment of the final account dated 20 of August 2008
has already been referred to adjudication, it cannot be the subject of a second
adjudication. If PTB do not agree with the existing adjudicator's decision, their
only remedy is to refer the dispute to litigation.
In the circumstances, please confirm that you will resign your appointment as
adjudicator.
For the avoidance of doubt, we have raised a number of jurisdictional
arguments in the previous adjudication. We consider that our jurisdictional
arguments have merit and so we have not paid PTB the sums awarded. In
the unlikely event that you decide to continue to act as adjudicator, we
reserve the right to raise these additional arguments in this reference."
14. ROK wrote further on 23 October 2008 and said:
"As referred to in our previous letter, we have a number of jurisdictional
challenges. However, the primary point is that the referring party has asked
you to value its final account. This is exactly the same dispute that was
decided by the previous adjudicator. We admit that we have not paid the
sums awarded by the previous adjudicator because we do not believe that his
decision is enforceable. For the avoidance of doubt, to the extent that PTB
are asking you to either enforce or challenge the first decision, you have no
jurisdiction to do so.
As regards the matters set out at paragraph 2 of the notice of adjudication,
PTB may not refer multiple disputes in relation to several interim applications
for payment to adjudication. In any event, given that the final account has
been the subject of a previous adjudication, the position at the interim stage is
redundant. We fail to see the relevance of the case referred to by PTB. The
first adjudicator issued a decision in PTB's favour. Once again, we
respectfully submit that you do not have jurisdiction given that the dispute has
already been the subject of a previous adjudication."
15. On receipt of those letters and a letter from PTB, Mr Brooker said this:
"In the matter referred to me, Mr Barnes has already taken that second step
and decided what sum was in fact due. He has done this because the
wording of the dispute referred to him had, in his opinion, sufficient latitude in
its wording to give him the jurisdiction so to do. Thus, it is my opinion that the
dispute referred to me and the remedy sought is already the subject of a
previous adjudicator's decision. Apart from this point, the only difference
between the previous referral and the dispute referred to me are that the
nature of the dispute and remedies sought have both been expanded and the
responding party, which was previously cited as ROK Maintenance, is now
cited as ROK Building Limited. In my opinion, the expanded wording merely
adds detail in terms of dates, references and description, but does not change
the issues in dispute from those already adjudicated upon. As to the name of
the responding party, I take note of this point, which was raised as a
jurisdictional challenge in the first adjudication. However, I do not consider
that differentiating ROK Maintenance from ROK Building Limited is a
significant enough step to consider the subject of this referral to be a fresh
dispute.
In the light of the above points and careful consideration, I respectfully resign
from the nomination to act in this matter."
These proceedings
16. By a claim form dated 29 October 2008, PTB sought to enforce the Adjudicator's
decision dated 1st October 2008. Directions were made on 30 October 2008 and
subsequently varied at the request of the parties, leading to the hearing on 4
December 2008. Exchange of evidence and submissions indicated that there were a
number of issues which had to be resolved on the application for summary judgment.
Those were helpfully defined at the hearing as follows:
(1) Is ROK entitled to contend that the decision is not binding in the light of:
(a) its objection to the commencement of the adjudication before Mr
Brooker;
(b) its payment of the adjudicator's fees?
(2) Is there a contract in writing within the meaning of s.107 of the 1996 Act?
(3) Is ROK entitled to resist enforcement on the basis that the claim included
work outside the scope of the contract in writing?
(4) Did the Adjudicator lack jurisdiction on the basis that the dispute referred
to him had not crystallised? Alternatively, did the manner in which the dispute
was referred amount to such a serious breach of the rules of natural justice
that the decision should not be enforced?
(5) Was there non-compliance with paragraph 7(2) of the Scheme so that
there was not a valid adjudication? Alternatively, did any non-compliance
amount to such a serious breach of the rules of natural justice that the
decision should not be enforced?
(6) Did the Adjudicator answer the wrong question so as to deprive the
decision of any effect?
17. I shall deal with each of those matters in turn.
Can ROK contend that the decision is not binding?
18. Mr Piers Stansfield, who appears on behalf of PTB, submits that by taking the
benefit of the Adjudicator's decision and using it to persuade the second adjudicator
to resign, ROK has elected to take the benefit of the decision and cannot now assert
that it is not valid and binding. He also relies on the fact that ROK has now paid the
adjudicator's fees and says that, by analogy with the decision in Shimizu Europe v.
Automajor [2002] BLR 113 at paragraph 29, ROK can no longer seek to contend that
the decision is not binding.
19. Mr Jonathan Lee, who appears on behalf of ROK, submits that ROK has made
no election which would preclude it from being able to challenge the decision. He
relies on the reservation of rights in the letter sent to Mr Brooker on 22 October 2008,
as well as the general reservation made in paragraph 1.2 of the Response. He also
submits that the payment of the Adjudicator's fees was made by mistake and that
payment of those fees cannot be said to be taking a benefit from the decision.
20. I now consider those submissions. The law on election which, Mr Stansfield
submits, prevents a party from "approbating and reprobating" or relying on and
challenging the decision of an adjudicator is of some antiquity. In Codrington v.
Codrington [1875] LR 7 HL 854 at 866, Lord Chelmsford expressed the doctrine in
these terms:
"He who accepts a benefit under an instrument must adopt the whole of it,
conforming to all its provisions and renouncing every right inconsistent with
it."
21. In Banque des Marchands v. Kindersley [1951] 1 Ch 112, a party sought to strike
out an action on the basis that a bank was nonexistent and yet at the same time it
was seeking to prove in the liquidation of the bank. The Court of Appeal, in finding
that there had been no election, referred to the phrase "approbating and reprobating"
in Scottish law, or the English phrase, "Blowing hot and cold" and said this at 119 per
Lord Evershed MR :
"From the authorities cited to us, it seems to me to be clear that these
phrases must be taken to express, first, that the party in question is to be
treated as having made an election from which he cannot resile and,
secondly, that he will not be regarded, at least in a case such as the present,
as having so elected unless he has taken a benefit under or arising out of the
course of conduct which he has first pursued and with which his present
action is inconsistent. These requirements appear to me to be inherent. For
example, in Smith v. Baker LR 8 CP 350 and Ex parte Roberston LR 20 Eq
733. See also the speech of Lord Atkin in Evans v. Bartlam [1937] AC 473 at
479:
"I find nothing in the facts analogous to cases where a party, having
obtained and enjoyed material benefit from a judgment, has been held
precluded from attacking it while he is still in enjoyment of the benefit.
I cannot bring myself to think that a judgment debtor who asks for and
receives a stay of execution approbates the judgment so as to
preclude him thereafter from seeking to set it aside, whether by appeal
or otherwise. Nor do I find it possible to apply the doctrine of election."
and the speech of Lord Russell of Kilowen at 483:
"The doctrine of approbation and reprobation requires for its
foundation inconsistency of conduct as, where a man having accepted
a benefit given him by a judgment, cannot allege the invalidity of the
judgment which conferred the benefit."'"
22. In Lissenden v. CAV Bosch Limited [1940] AC 412 the House of Lords held that
the doctrine did not prevent a party from receiving benefits under an award and
seeking to appeal the award to obtain greater benefits. Lord Atkin said at 429:
"In this country, I do not think it expresses any formal legal concept. I regard it
as a descriptive phrase equivalent to, 'Blowing hot and cold'. I find great
difficulty in placing such phrases in any legal category, though they may be
applied correctly in defining what is meant by election, whether at common
law or in equity. In cases where the doctrine does apply, the person
concerned has the choice of two rights, either of which he is at liberty to adopt
but not both. Where the doctrine does apply, if the person to whom the choice
belongs irrecoverably and with knowledge adopts the one, he cannot
afterwards assert the other. Election between the liability of principal and
agent is perhaps the most usual instance in common law."
23. In the context of adjudication claims, the principle has, in particular, been relied
on in two decisions. In Macob v. Morrison [1999] BLR 93 Dyson J, as he then was,
had to consider, in the first case of enforcement of an adjudicator's decision, whether
a party could both assert that the adjudicator's decision was invalid and also seek to
assert that proceedings in relation to the decision should be stayed to arbitration
under clause 27 of the contract. Dyson J said this at 99:
"In my view, if a defendant wished to challenge the validity of the decision, it
had an election. One course open to it was, as it did, to treat it as a decision
within the meaning of clause 27 and refer the dispute to arbitration. The other
was to contend that it was not a decision at all within the meaning of clause
27 and to seek to defend the enforcement proceedings on the basis that the
purported decision was not binding or enforceable because it was a nullity.
For the reasons stated earlier in this judgment, this second course would
have availed the defendant, but what the defendant could not do was to
assert that the decision was a decision for the purposes of being the subject
of a reference to arbitration but was not a decision for the purposes of being
binding and enforceable pending any revision by the arbitrator. In so holding, I
am doing no more than applying the doctrine of approbation and reprobation
or election. A person cannot blow hot and cold - see Lissenden v. CAV Bosch
Limited [1940] AC 412, and Halsbury's Laws, Fourth Edition, Volume 16,
paragraphs 957 and 958. Once the defendant elected to treat the decision as
one capable of being referred to arbitration, he was bound also to treat it as a
decision which was binding and enforceable unless revised by the arbitrator."
24. In Shimizu Europe v. Automajor His Honour Judge Seymour Q.C. dealt with a
case in which a party sought to challenge the jurisdiction of an adjudicator but had
also sought to correct the decision under the implied slip rule. Judge Seymour said
this, obiter, at paragraphs 29 to 30:
"In my judgment, by inviting Mr Haller to correct the award under the slip rule,
Berwins, on behalf of Automajor, accepted that the award was valid. It is true
that, in its letter to Mr Haller dated the 6th of November 2001, Berwins
asserted that the award contained an error which went to Mr Haller's
jurisdiction, but, if that were right, it would follow that the award, or the
relevant part of it, was a nullity. There would be nothing to correct. I accept
the submission of Mr Constable that the invitation to Mr Haller to correct the
award under the slip rule is only consistent with recognising it as valid. I also
accept the submission of Mr Constable that, by paying part of the sum the
subject of the award, Automajor elected to treat the award as valid."
25. He also said at paragraph 29:
"In my judgment, it cannot be right that it is open to a party to an adjudication
simultaneously to approbate and reprobate a decision of the adjudicator.
Assuming that good grounds exist on which a decision may be subject to
objection, either the whole of the relevant decision must be accepted or the
whole of it must be contested."
26. In my judgment the underlying decisions on election or approbation and
reprobation, as applied in the context of adjudication, show that a party cannot both
assert that an adjudicator's decision is valid and at the same time seek to challenge
the validity of the decision. The party must elect to take one course or the other. By
taking a benefit under an adjudicator's decision, the party will generally be taken to
have elected a particular course and will be precluded from challenging the
adjudicator's decision. In Macob the benefit was the claim to have the proceedings
stayed to arbitration in relation to the decision. In Shimizu the benefit was the right to
have the decision corrected under the slip rule.
27. In the present case, it is to be noted that, somewhat unusually, PTB had obtained
the adjudication decision from the Adjudicator but then because of concerns had
decided to seek a further decision from Mr Brooker. Mr Lee says that this itself was
inconsistent with seeking enforcement of the decision made by Mr Barnes. That, it
seems to me, is self-evidently correct. However, I do not consider that it gives rise to
an election which can effect enforceability of the current decision, particularly on the
facts of this case. Questions of enforceability might have arisen if the second
adjudication had proceeded further, especially if there had been a second decision.
28. In this case, I consider that the commencement of the second adjudication
caused a difficulty for ROK in relation to any challenges that it wished to make to the
enforceability of the first decision made by the Adjudicator. In my judgment, ROK had
to elect whether to contend that the first decision was unenforceable so that it would
not preclude PTB from commencing that second adjudication, or whether to contend
that it was enforceable so that it would preclude a second adjudication. If it chose the
first alternative, then it could repeat certain challenges to the jurisdiction of the
adjudicator in the second adjudication, but it could not assert that the first
adjudication decision prevented the adjudicator from continuing with the second
adjudication. ROK could only do so if it were to assert that the first adjudication
decision was a valid decision. ROK chose the second alternative, it chose to assert
that there was a valid adjudication decision arising from the first adjudication which
precluded the second adjudicator from proceeding. By doing so, I consider that it
elected to treat the first decision as a valid decision. In the letters of 22 and 23
October 2008, which I have cited above, ROK informed the second adjudicator that
they had raised jurisdictional challenges in respect of the first decision and had not
paid PTB. However, in making the challenge to the second decision, I consider that
they elected to rely on the benefit of that first decision and in doing so elected not to
challenge that decision. The statement in their letter did not and, in my view, could
not affect that election. The second adjudicator decided not to proceed with the
second adjudication and resigned. That was a clear benefit which ROK obtained by
relying on the first decision. In those circumstances, I do not consider that ROK can
now seek to challenge the validity of the Adjudicator's decision in these enforcement
proceedings.
29. PTB also relied on the fact that ROK had paid the Adjudicator's fees and had
thereby elected to treat the Adjudicator's decision as valid. I do not consider that, in
the absence of evidence to show that the payment was a mistake, the court can
come to that conclusion as a matter of inference or otherwise, as Mr Lee sought to
submit. Rather, the natural inference from the payment of the adjudicator's fees is
that ROK intended to make payment in respect of a valid decision requiring such
payment. Did that payment amount to an election? Mr Lee submits that it is difficult to
characterise ROK's payment as amounting to ROK taking a benefit. There is strength
in that point but, in my judgment, the taking of a benefit, whilst sufficient for there to
be an election, is not necessary. What has to be determined is whether there has
been an election. Objectively, a party who decides to pay a sum awarded against it in
an adjudicator's decision does so in reliance on that decision being valid. I consider
that, in the absence of any circumstances indicating to the contrary, by making that
payment ROK elected to treat the adjudicator's decision on fees and expenses as
being a valid decision, at least to that extent.
30. In my judgment, the election made by ROK by its reliance on the first decision
means that ROK cannot now challenge that decision. However, having heard
argument, I now turn to consider the merits of the underlying challenges.
Contract in writing
31. Section 107 of the 1996 Act requires all the terms of the construction contract to
be in writing or evidenced in writing: see RJT Consulting Engineers v. DM
Engineering [2002] BLR 217. The requirement that all the terms of the construction
contract have to be in writing has been criticised. The requirement, transferred word
for word directly from s.5 of the Arbitration Act 1996, which requires the arbitration
agreement and certain other agreements to be in writing, is evidently necessary
where the effect of the arbitration agreement is to deprive the court of jurisdiction and
other agreements have the effect of varying the non-mandatory provisions of the
Arbitration Act 1996. While it is possible to explain the requirement that all the terms
of a construction contract have to be in writing in terms of the need to have certainty,
it has proved an impracticable requirement which has given rise to a number of
challenges to enforcement of adjudicator's decisions. It is now the subject of a draft
Bill which will seek to repeal that provision. Until that happens, the law is that the
provisions of s.107 fall to be applied.
32. Were all the terms of the contract in writing or evidenced in writing in the current
case? Mr Stansfield submits that all the terms were evidenced in writing and are
included in a document with the title, "Subcontract pre-contract interview notes"
signed by the parties in February 2007. I will refer to those as "the meeting notes". In
the adjudication, ROK sought to challenge jurisdiction on the basis that the meeting
notes stated at the beginning the following:
"The notes on their own do not constitute an offer [or] acceptance unless it is
issued as part of a formal subcontract and were not a construction contract."
33. The adjudicator held that this did not preclude there being a contract which was
evidenced by these meeting notes. The matter has, however, developed further
before me. Mr Lee accepts that all the terms apart from the terms as to work scope
were evidenced in writing by the meeting notes. He says that terms as to what work
had to be carried out and where had to be agreed and that the notes do not contain
the necessary terms. It is evident that the work scope is not fully defined within the
meeting notes. Those notes refer to the project name being Harlow Decent Homes,
Brenthall Towers and to the works being kitchen and bathroom fitting, with
associated builders' works. Under paragraph 8.0, Programme, it is stated that the
date for commencement of the subcontract works on site will be between certain
dates. It refers to work at Potter Street, as apparently being completed, and, "Old
Harlow, phase 2" as commencing between 31st August 2006 and ongoing. These
are not self-evidently limited to works at Brenthall Towers. It refers to further
information to be submitted to the subcontractor within a reasonable time prior to
commencement of works, and to the period required for notice to commence works in
any section on site as being five days. Under a title of, "Brenthall Towers" there is a
general description of kitchen and bathroom works and a statement: "Kitchen, sum of
£2,286.80 plus VAT and bathroom sum of £1,935 plus VAT."
34. Under the title of Any other matters discussed, it states: "All instructions for
additional works as per submitted SORs [schedule of rates]."
35. It is evident that a full description of all works which PTB were to carry out is not
contained in the notes of the meeting. However, the meeting notes envisaged that
PTB would be provided with additional information prior to commencement of works
and that instructions would be given for additional works. The terms of the agreement
do not, in my view, limit the timing or scope of those instructions or the place where
the work was to be carried out. Where a contract contains express terms which
provide that a party will provide the other party with information about the works and
will give instructions for additional works, then, in my judgment, there is no need for
the scope of the works to be fully set out in or evidenced in writing in the underlying
contract. The relevant contract term is in writing or evidenced in writing and the fact
that it envisages performance taking place by further information or instructions,
which may be oral or in writing, does not effect the fact that the relevant contract term
itself was in writing or evidenced in writing.
36. Mr Lee referred me to the decision of his Honour Judge Coulson, Q.C, as he then
was, in Hart v. Fidler [2007] BLR 30, in which he dealt with a case where there had
been a letter of intent. One of the grounds on which it was said that there was no
construction contract in writing was because the work scope had not been defined. At
paragraph 61 of his judgment, Judge Coulson said this:
"However, the biggest difficulty comes with the consideration of the contract
work scope. The work scope, according to the letter, is work which will or
might be the subject of orders in the future, whether written or oral. That might
be sufficient for a binding contract, although I do not think it is, and, as I have
indicated, enforcement of it would be next to impossible. More importantly,
such a definition of work scope is a recipe for confusion and dispute of the
very sort which s.107(2)(c) is designed to avoid. This point can be
emphasized by reference to Hart's own pleading in this case. In paragraph 3
of the particulars of claim Hart defined the contractual work scope as
including:
'The retention and preservation of the front and side facades of the
property, the removal of the main part of the building and the
construction of the basement and the reconstruction of the building
above the new constructed basement area.'
This work scope is plainly not discernible from the letter of intent. It is based
on subsequent orders, instructions and the like, which may or may not have
been reduced to writing. If the contract document does not even begin to
define the contract work scope, it seems to me impossible to say that all the
terms, or even all the material terms, are set out in writing."
37. Evidently, on the terms of that letter of intent Judge Coulson held that the terms
of the work scope were not sufficiently contained in or evidenced in writing, on the
facts of that case. In the present case, there was some work scope defined within the
meeting notes, but that work scope was to be the subject of further information and
instructions, both to commence and in terms of instructions given under the terms of
the meeting notes. All these terms were evidenced in writing. I consider that, as a
result, such a case as this does come within s.107 and is a valid contract in writing.
38. In the present case, were there terms which were agreed but which were not
evidenced in writing? The way in which matters proceeded is described in Mr
Dauncey's witness statement submitted on behalf of ROK. He says this at
paragraphs 8 and following:
"ROK deny that [the Meeting Notes are] sufficient to fulfil the requirements of
the HGCRA. It is clearly not a document that was intended by itself to form
the subcontract. The notes were intended to be incorporated into a formal
subcontract in due course in the event that a subcontract was awarded to
PTB. Although it was anticipated that further terms and conditions would be
discussed and that the interview notes would be incorporated into that
subcontract, this did not happen. Instead, when ROK had packages of Decent
Homes work in Brenthall Towers that it wanted to subcontract to PTB,
separate instructions were issued to PTB and the scope of work to any
particular property was defined by a combination of documents and oral site
instructions.
Although the interview of the 15 February 2007 concerned kitchen and
bathroom works at Brenthall Towers as part of the Decent Homes Project,
ROK was awarded such work to a wider range of properties and, with later
agreement of PTB, ROK gave further packages of work to PTB. Over the
following months PTB's work was extended over many different properties.
ROK accept that, while there is no written contract in respect of these works,
it was agreed orally that these were to be valued and paid on the same basis
as the kitchen and bathroom works in Brenthall Towers (those rates being
revised by agreement between PTB and ROK from 1 January 2008). …
There is not, in my view, a sub-contract of which it can be said that all the
terms are in or evidenced in writing, whether in the notes of the interview that
took place on 15 February 2008 or otherwise.
This is emphasized further by the reference to the "Final Account" that PTB
provided, for the first time, with the Notice of Adjudication on 20 August 2008.
Within that account is a whole collection of works, some from Brenthall
Towers Decent Homes (which was the subject of the meeting on 15 February
2007) and many from further kitchen and bathrooms work as part of the
broader Harlow Decent Homes project that ROK was carrying out for Harlow
District Council. Also within PTB's account are claims for payment in respect
of work which is wholly unrelated and which cannot be related back to the
meeting on 15 February 2007 in any shape or form, nor to any instruction that
was issued by ROK in any extension of that work from Brenthall Towers to
other Harlow Decent Homes kitchen and bathroom works."
39. He then refers to work on void properties and to work for Kier and Harlow District
Council in respect of separate work at Harlow, for work to the Decent Homes
standard. He also refers to work at Highgate and to work at Barley Croft. In respect of
each of those, he indicates that there was a separate subcontract which arose from
instructions being given to PTB.
40. Mr Stansfield relied on further documents as evidencing the construction
contract, including these works. First, there was the document referred to as PTB
rates, application as of January 2008, which contained a breakdown of "All-in basket
scope of works" showing that the rates were to be applied for all work from that date.
Secondly, he refers to letters dated 5 and 18 March 2008 by which ROK requested
that PTB should include applications for all properties in its applications for the
Harlow Decent Homes project. Thirdly, he relies on an exchange of emails in June
2008, which are referred to further below. This led to the process which culminated in
the production of the final account document which was attached to the notice of
adjudication dated 20 August 2008.
41. The provisions of s.107(4) of the 1996 refer to an agreement being evidenced in
writing "if an agreement made otherwise than in writing is recorded by one of the
parties." There is no need for the agreement to be recorded in one document, nor is
there a requirement for when the record is to be made. In this case, it is common
ground that the meeting notes contain all the provisions except those relating to work
scope. I consider that the work scope is dealt with by the instruction of work under
the terms which are sufficiently recorded in the signed meeting notes. In any event,
the documents relied on by Mr Stansfield record the revised all-in basket rates which
formed the basis of the phase 2 claims. Further, the discussions between the parties
and the documents produced by PTB sufficiently record the scope of the works to the
extent that this might be necessary.
42. As a result, I consider that all the terms of the construction contract are
sufficiently recorded in writing to give rise to a contract evidenced in writing within
s.107 of the Act and that ROK's defence to enforcement has no real prospect of
success on that ground.
Work outside the contract
43. Mr Lee submits that, on the basis that there is a contract in writing, the Scheme
would apply and paragraphs 8(1) and 8(2) of Part I provides as follows:
"8(1) The adjudicator may, with the consent of all the parties to those
disputes, adjudicate at the same time on more than one dispute under the
same contract.
8(2) The adjudicator may, with the consent of all the parties to those disputes,
adjudicate at the same time on related disputes under different contracts,
whether or not one or more of those parties is a party to those disputes."
44. As a result, Mr Lee submits that the adjudicator can only deal with a dispute
under the same contract and not related disputes under different contracts. He refers
in particular to evidence both in Mr Dauncey's witness statement, at paragraphs 8 to
11, and in Mr Ghataura's second witness statement at paragraphs 9 to 10. I accept
that under the Scheme which applies to the construction contract in this case, PTB
can only refer a dispute under that construction contract to adjudication.
45. However, the evidence of Mr Dauncey and Mr Ghataura does not, in my
judgment, establish that the works in relation to the various properties were not in
fact carried out as part of the construction contract evidenced in writing by the
Meeting Notes and the other documents. First, it is evident that instructions were
given by ROK to PTB to carry out works in relation to a number of main contracts by
which ROK was asked to perform the work. Secondly, the arrangements made were
that the work was to be administered under the terms of the construction contract
evidenced by the Meeting Notes. No further independent subcontracts were formed
at that stage, but ROK continued to instruct work which both parties treated as and
dealt with under the one construction contract. This is also consistent with the late
evidence from Mr White, who was formerly employed by ROK, but produced a
witness statement on behalf of PTB.
46. In those circumstances, the dispute as to how much PTB had to be paid for the
work carried out under the construction contract evidenced by the Meeting Notes and
the other documents was, I consider, one dispute under one subcontract. In my
judgment, there was, therefore, no ground for asserting that the adjudication fell foul
of the provisions of paragraphs 8(1) or 8(2) of Part I of the Scheme in the manner set
out in Bothma v. Mayhaven 114 ConLR at page 131 or Grovedeck v. Capital
Demolition [2000] BLR 181.
Crystallised dispute
47. Mr Lee submits that the matters which PTB sought to refer to adjudication were
not the subject of a crystallised dispute even on the basis of the flexible approach
which has now been adopted by the courts on that question. Mr Stansfield submits
that the dispute referred to adjudication by the notice of adjudication dated 20 August
2008 had been referred to in the first notice of adjudication on 11 August 2008 and
disputed. As set out in Collins Construction Limited v. Baltic Quay Management
(1994) Limited [2005] BLR 63 at 74, and AMEC Civil Engineering Limited v. The
Secretary of State for Transport, both by Jackson J, as he then was, at first instance,
at [2004] EWHC 2339, and on appeal at [2005] BLR 227 at 234. The circumstances
from which a dispute may emerge are Protean. A process of negotiation and
discussion may be consistent with the existence of a dispute and the court is likely to
be willing readily to infer that a dispute exists so that the parties are not impeded
from starting timely adjudication proceedings.
48. In this case, when PTB served its notice of adjudication on 11 August 2008, ROK
wrote to say that a dispute did not exist but, on the other hand, said that they referred
to previous submissions and the content of recent meetings when ROK had
confirmed their view that PTB's works were grossly over-valued. PTB did not proceed
with that notice of adjudication but did proceed with its further notice of adjudication
dated 20 August 2008, which attached an amended document with the title, "Final
account". That differed from the document served on 11 August 2008. In particular,
whilst the figures under Phase 1 and Phase 1 variations remained the same, the
entries under Phase 2 works and Phase 2 variations/CVIs and Dayworks changed by
a few thousand pounds. In addition, retention was allowed at 5% in the earlier
document and 2.5% in the document of 20 August 2008. The reason for the change
in figures between the document of 11 August 2008 and that of 20 August 2008 is
not entirely clear on the documents. The main change, as confirmed by Mr Ghataura,
is that in general terms more detail was provided, particularly in relation to the Phase
2 variations/CVIs which were estimated in the earlier document.
49. I consider that the question of whether there was a crystallised dispute on 20
August 2008 has to be seen in the context of the process which led up to the notice
of adjudication in August 2008. The history of matters is set out by Mr Ghataura, who
refers to the application of 18 June 2008. He says that at about that time there were
discussions between PTB and ROK about how they were to move forward in valuing
PTB's works. He says that at a meeting between the parties on 12 June 2008 it had
been agreed that the parties should first try to agree the value of the Decent Homes
work at each property and then have discussions in relation to the value of variations.
The exchange of emails between 12 and 27 June 2008 shows the process by which
the valuation of those works was discussed. It is evident that the matters had
proceeded on the basis of those discussions up until early August 2008. By that date,
as ROK stated in their letter of 13 August 2008, they considered that PTB's works
were over-valued.
50. In light of this background, I consider that PTB's notice of adjudication of 11
August 2008 and ROK's letter in response crystallised a dispute in respect of the
valuation of the works in relation to Phase 1, Phase 2 and Dayworks to the extent
that one had not previously crystallised. The dispute was as to the proper valuation of
sums payable to PTB in respect of the works they had carried out. The fact that the
second notice of adjudication included some further details of the sums claimed by
PTB did not, I consider, mean that there was a new dispute which had not
crystallised. In my judgment, this was a continuation of the dispute about the
valuation of PTB's works which had formed the basis of discussion between the
parties from June 2008. ROK refers, in particular, to there being no dispute as to the
final account. There is no process under the meeting notes for there to be any
different way of dealing with a final account compared to the usual procedure for
application by PTB and payment by ROK. The final account in this case is, therefore,
in my judgment, merely an application for payment of a type such as the others and it
does not represent a different dispute to the dispute concerned with the proper
valuation of PTB's work in the earlier applications. Therefore, on the basis of the
exchanges between the parties from June 2008 up to 20 August 2008, I consider that
there was a sufficiently crystallised dispute as to the proper valuation of PTB's work
for the matter to proceed to adjudication. By the time of the exchange following the
first notice of adjudication, at the latest, that dispute had crystallised.
51. Nor do I consider that the additional material provided by PTB with the first or
second notices of adjudication rendered the process so unfair that the decision
should not be enforced. Mr Ghataura, at paragraphs 25 to 31 of his first witness
statement, deals with the further information provided on PTB's variation claims. He
says that it was impossible to provide a line by line response to the variations before
the response had to be served in the adjudication. He says that the best that ROK
was able to do was to suggest that a percentage should be deducted. The
adjudicator adopted that approach and used the method of a percentage reduction
derived from his findings of the Phase 1 works applied for by PTB on its property
build up sheets. Whilst I accept that ROK had to respond to new material, I consider
that the process, including the response by ROK and the meeting which the
adjudicator held on 24 September 2008, gave ROK a fair opportunity to present its
case in the context of the adjudication. Further, the adjudicator adopted that
approach put forward by ROK. There was, in my judgment, nothing obviously unfair
in this process which could render the adjudicator's decision unenforceable - see
Carillion v. Devonport [2006] BLR 15 at paragraph 85.
Paragraph 7(2) of Part I of the Scheme
52. As I have said, Part I of the Scheme applies to the contract in this case because
it does not contain an adjudication provision. The Scheme requires, at paragraph
7(2) of Part I, that:
"A referral notice shall be accompanied by copies of or relevant extracts from
the construction contract and such other documents as the referring party
intends to rely upon."
53. Mr Lee submits that the failure by PTB to provide copies of the relevant
construction contract with the referral notice means that PTB was in breach of the
procedure under the scheme. He refers me to the decision of His Honour Judge
Coulson, Q.C., as he then was, in Hart v. Fidler [2007] BLR 30, where he held that a
failure of a party to serve its referral notice within seven days of the notice of
adjudication, as required by paragraph 7(1) of part I of the Scheme, deprived the
adjudicator of jurisdiction. Mr Lee submits that this must also apply to a breach of
paragraph 7(2). Mr Stansfield submits that a failure to provide the adjudicator with the
relevant documents until, it seems, 29 August 2008, when the referral notice was
served on 28 August 2008, should not be held to deprive the adjudicator of
jurisdiction. He observes that often there may be a dispute as to what documents
form the agreement and in such cases it could be argued that, if not all the
documents had been submitted with the referral notice, the adjudicator would lack
jurisdiction. If that were to be so, he submits, then it would give rise to an
unreasonable result which could not have been intended by the terms of the scheme.
54. In approaching this issue, it is to be recalled that, where the scheme applies, it
does so as an implied term of the construction contract - see s.114(4) of the 1996
Act. The consequence of a party's failure to comply with the terms of a contract will
generally be a breach of contract, which may have a number of consequences
depending on the nature of the term and the breach. Under the 1996 Act, there are a
number of terms which are fundamental to the process of adjudication and which are
set out in s.108 of the 1996 Act. In my judgment, the central purpose of the scheme
is to incorporate those fundamental provisions which, when absent, lead to the
scheme being imposed as an implied term. The provision in paragraph 7(1) of Part 1
of the Scheme, which was considered in Hart v. Fidler, is derived from s.108(2)(b) of
the Act. That, it seems to me, makes paragraph 7(1) of the scheme one of the
fundamental provisions in the process of adjudication. On that basis, the decision
that a late referral under paragraph 7(1) of the scheme took the process outside the
scheme so as to make a decision unenforceable can be distinguished from a breach
of paragraph 7(2) which refers to an associated procedural requirement.
55. I consider that it is undesirable that every breach of the terms of the scheme, no
matter how trivial, should be seized upon to impeach the process of adjudication. To
do so would increase the tendency of parties to take a fine tooth-comb to every
aspect of the adjudication in the hope of finding some breach of the Scheme on
which to impeach an otherwise valid adjudication decision. I do not consider that that
was either intended or the natural effect of a failure to comply with the Scheme.
There may, of course, be cases where the documents included with the referral
notice are so deficient that it effects the validity of the adjudication process. However,
I do not consider that a failure to include the relevant construction contract until a day
later can do so or does so on the facts of this case. Nor do I consider that a failure to
include the construction contract can be said to amount to such a serious breach of
the rules of natural justice that the decision should not be enforced. There is nothing
obviously unfair in the documents relied on in relation to the construction contract
being received by the adjudicator later than the referral notice: see Carillion v.
Devonport [2006] BLR 15 at paragraph 85.
The wrong question
56. I have already alluded to this aspect. Mr Lee submits that the adjudicator was
asked to make a decision concerning the sums due to PTB in respect of the final
account. He says that paragraph 2.12 of the Meeting Notes makes it clear that the
subcontract final account is to follow the main contract final account. As a result, Mr
Lee submits that the adjudicator, by answering the question, "What sum was due to
PTB?" as a matter of interim accounting, failed to answer the question he was asked
but answered a different question. It is therefore submitted that the adjudicator did
not have jurisdiction to make the decision he purported to make. Mr Lee refers me to
the decision in Nikko Hotels v. MEPC [1991] 2 EGLR 103, referred to in Bouygues v.
Dahl-Jensen [2000] BLR 522.
57. Mr Stansfield submits that on the basis of the notice of adjudication the question
which was referred to the adjudicator was whether there was non-payment of
amounts due to PTB from ROK and, if so, what was the size of those non-payments?
That, he submits, is what the adjudicator decided. I consider that Mr Stansfield is
correct. The dispute referred to the adjudicator concerned sums due to PTB from
ROK. Those sums were set out in a document referred to as a "final account" but,
under the notes of the meeting, there is no final account; there are merely
applications for payment. And the applications for payment in this case were to be
treated no differently from other applications. In my judgment, the adjudicator was
entitled to come to the decision he did on the dispute before him and, in doing so, he
answered the question posed to him.
Summary
58. As a result, I find that ROK elected to treat the adjudicator's decision as binding
and they are, therefore, precluded from approbating and reprobating the decision. In
any event, in relation to the challenges to the enforcement of the decision made by
ROK, I find that there was an agreement in writing, that the disputes fell within that
one construction contract, that there were crystallised disputes, that the failure to
comply with paragraph 7(2) of Part I of the scheme did not take the adjudication
outside the scheme, that there was no breach of the rules of natural justice and the
adjudicator did not answer the wrong question. Accordingly, I find that, despite the
many grounds by which ROK has sought to challenge the adjudication and the
adjudicator's decision, none of those grounds are sustainable and ROK has no real
prospects of defending these proceedings under Part 24. PTB is therefore entitled to
summary judgment and I shall hear submissions as to the precise sum, interest and
costs.
59. I conclude by thanking both counsel for their succinct written submissions and for
the efficient way in which they developed those submissions on the many points that
I have had to consider.
Dramatis personae
Mr Barnes - The adjudicator in the first adjudication
Mr Brooker - The adjudicator in the second adjudication
Mr Dauncey - A representative of the contractor
Mr Ghataura - A representative of the contractor
Mr Hough - The sub-contractor's solicitor
Mr Lee - Counsel for the contractor
PTB - The sub-contractor
ROK - The contractor
Mr Stansfield - Counsel for the sub-contractor