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England and Wales High Court (Technology and Construction Court) Decisions |
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You are here: BAILII >> Databases >> England and Wales High Court (Technology and Construction Court) Decisions >> R J Knapman Ltd. v Richards & Ors [2006] EWHC 2518 (TCC) (12 October 2006) URL: http://www.bailii.org/ew/cases/EWHC/TCC/2006/2518.html Cite as: 108 Con LR 64, [2006] EWHC 2518 (TCC), [2006] CILL 2400 |
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QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Strand, London, WC2A 2LL |
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B e f o r e :
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R J KNAPMAN LIMITED |
Claimant |
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- and - |
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RICHARDS AND OTHERS |
Defendants |
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Sorene Court Reporting & Training Services
73 Alicia Gardens, Kenton, Harrow, Middx HA3 8JD
Telephone No: 020 8907 8249 Fax: 020 8907 5820
e-mail: [email protected]
(Official Tape Transcribers)
Mr Peter Collie (instructed by Roger Richards, Paignton) for the Defendants
Hearing date: 12/10/06
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Crown Copyright ©
JUDGE PETER COULSON QC :
Introduction
i) Is the Claimant seeking to enforce the parts of the Adjudicator's decision that it likes, whilst at the same time seeking to repudiate other parts that it does not like and, if so, is that a reason not to enforce the decision?
ii) Does it follow logically from the Adjudicator's decision that the Defendants are entitled to a particular sum by way of liquidated damages which could then be set-off against the sums found by the Adjudicator to be due to the Claimant?
The Contract.
"Certificate of non-completion
2.6 If the contractor fails to complete the works by the date for completion or within any extended time fixed under clause 2.3 then the architect/the contract administrator shall issue a certificate to that effect.
In the event of an extension of time being made after the issue of such a certificate such making shall cancel that certificate and the architect/the contract administrator shall issue such further certificate under this clause as may be necessary.
Liquidated damages for non-completion
2.7 Provided:
- the architect/the contract administrator has issued a certificate under clause 2.6 and
- the employer has informed the contractor in writing before the date of the final certificate that he may require payment of or may withhold or deduct liquidated and ascertained damages
the employer may not later than five days before the final date for payment of the debt due under the final certificate either
2.7.1. require in writing the contractor to pay to the employer liquidated and ascertained damages at the rate stated in the appendix for the period during which the work shall remain or remain incomplete and may recover the same as a debt or
2.7.2 give a notice pursuant to clause 4.2.3(b) or clause 4.6.1.3 that he will deduct liquidated damages at the rate stated in the appendix for the period during which the work shall remain or had remained incomplete".
The liquidated damages figure in the appendix to the contract was £200 a day.
Effect of Adjudicator's decision
9A.7.1 The decision of the Adjudicator shall be binding on the parties until the dispute or difference is finally determined by arbitration or by legal proceedings or by an agreement in writing between the parties made after the decision of the Adjudicator has been given.
9A.7.2 The parties shall without prejudice to their other rights under this contract comply with the decision of the Adjudicator and the employer and the contractor shall ensure that the decision of the Adjudicator is given effect.
9A.7.3 If either party does not comply with the decision of the Adjudicator the other party shall be entitled to take legal proceedings to secure such compliance pending any final determination of the referred dispute or difference pursuant to clause 9A.7.1.
The Adjudicator's Decision
a) The Defendants were responsible for the supply of windows and doors;
b) Practical completion was achieved on 29 April 2006;
c) The Claimant was entitled to an extension of time of 30 weeks from 16 September 2005 to 29 April 2006;
d) The Claimant was entitled to the repayment of the sum of £41,600 deducted by the Defendants by way of liquidated damages.
It follows from this that the only money claim in the adjudication was the return of the liquidated damages said to have been wrongfully deducted.
13 weeks x 7 days x £200 liquidated damages per day = £18,200
Interest from 9 December 2005 to 7 August 2006 = £1,139.93
Those two sums added together are £19,339.93p and that is that sum which the Claimant now seeks to enforce.
Events after the Decision
"We refer to the Adjudicator's decision dated 7 August 2006 and received on 8 August 2006.
The Adjudicator decided at 10 that the works are not practically complete as at 7 August 2006. Your client is some 8 months late in completing the works. Accordingly, our client is entitled to continue to deduct liquidated damages from sums becoming due. Accordingly, we calculate that your client's obligation to pay liquidated and ascertained damages from 9 December to the date of the Adjudicator's decision is 241 days at £200 per day i.e., £48,200. We have already deducted £44,800. This allows for the Adjudicator's decision and his award to your client.
In accordance to the exception allowed in relation to the compliance with Adjudicator's decisions where the consequence of the decision is that further liquidated damages are due to the employer, we intend to set-off these further liquidated and ascertained damages from the Adjudicator's decision.
In our calculation, after the further liquidated damages have been set off against this decision, you are indebted to us in the sum of (balance of LDs) please send your cheque made payable to £3,400 by return."
"7.2.1(a) You have unreasonably suspended the work since 24.05.06 when the drains were remedied. This was the last time a labour force of any significance attended the site.
7.2.1(b) You have failed to proceed regularly and diligently with the work since 24.5.06.
7.2.1(c) You have neglected to comply with supervising officer's instruction number SO4 removal of defective work under clause 3.14.1.
As you are aware, it has been shown that you are responsible for completing the work so please reply by Monday 14 August 2006 setting out your proposals for the completion of the contract."
"However, and without prejudice to our client's position as set out above and in the adjudication proceeding, it is prepared to assist the employer in resolving the matter of the alleged defective external door and window frames. By reference to the instruction number SO4 issued by you on 14 June 2006 we understand that you are of the opinion that the said frames should be constructed by incorporation of mortice and tenon joints. The specification and drawings forming part of the contract documents are silent on the matter of the type of joints to be utilised. Furthermore it was you who provided the details and documentation to architectural craftsmen resulting in their quotation of 18 July 2005 which was subsequently accepted by you. We invite you to produce a copy of all the documentation you provided to architectural craftsmen resulting in their quotation of 18 July 2005.
To the best of our client's knowledge and belief there is no British Standard or Code of Practice that states that oak door and window frames should incorporate a mortice and tenon joint. We invite you to produce all of the evidence that you rely on in support of your position that the external doors and window frames should incorporate mortice and tenon joints. Furthermore we would ask you to make reference to those parts of the contract documents where our client has an obligation to supply the said frames incorporating a mortice and tenon joint.
Upon you producing the information and document mentioned in the last two paragraphs then our client will put forward proposals in respect of remedial works, but strictly on the basis that it is without prejudice to its position as adopted in the adjudication proceedings."
"15 This [the reply of 14 August] was unacceptable to us as it did not address the true nature of the defective windows and as the Claimant's obligation was to comply with the decision and that they were bound by the decision until the dispute is finally determined. The best that can be said of their letter of 14 August was that they merely offered to assist the employer in resolving the defects and would reinvestigate matters. This was far from being bound by the decision of complying with the decision. They were in effect saying that they do not accept the Adjudicator's decision and would investigate for themselves and decide for themselves whether the findings of the Adjudicator are acceptable to them. The Claimant totally ignored the point that there were no longer alleged defects but defects had been found by an Adjudicator to exist...
17 By this stage the Claimant was some 8 months late even allowing for the extension of time that the Adjudicator had granted (against an original 12 month contract period). We expected the Claimant to accept the decision and set about completing the work as quickly as possible so that the works could be certified as practically complete and we could commence phase 2 which was to fit out the shelves that the Claimant was to build...
20 We took the view that Ashfords letter of 14 August demonstrated that the Claimant was not going to take seriously the position he now found himself in and was not going to comply with the parts of the Adjudicator's decision that were adverse to his wishes. We could either put up with their refusal to perform and accept their assistance or we could treat their refusal to perform seriously. Given all the delays that had gone on before and given that the works were 8 months late on the Adjudicator's determination of the extension of time we decided that it was time to act on the Claimant's unacceptable refusal to accept the Adjudicator's decisions.
21 Accordingly, on 24 August we wrote to the Claimant and terminated their employment, see the letter appended RR8, and alternatively terminated the contract because their refusal to comply with the Adjudicator's decision was a fundamental breach of contract."
Principles
"The intention of Parliament in enacting the Act was plain. It was to introduce a speedy mechanism for settling disputes in construction contracts on a provisional interim basis, and requiring the decisions of adjudicators to be enforced pending the final determination of disputes by adjudication, litigation or agreement."
"85. The objective which underlies the Act and the statutory scheme requires the courts to respect and enforce the adjudicator's decision unless it is plain that the question which he has decided was not the question referred to him or the manner in which he has gone about his task is obviously unfair. It should be only in rare circumstances that the courts will interfere with the decision of an adjudicator. The courts should give no encouragement to the approach adopted by DML in the present case; which (contrary to DML's outline submissions, to which we have referred in paragraph 66 of this judgment) may, indeed, aptly be described as 'simply scrabbling around to find some argument, however tenuous, to resist payment'.
86. It is only too easy in a complex case for a party who is dissatisfied with the decision of an adjudicator to comb through the adjudicator's reasons and identify points upon which to present a challenge under the labels 'excess of jurisdiction' or 'breach of natural justice'...
87. In short, in the overwhelming majority of cases, the proper course for the party who is unsuccessful in an adjudication under the scheme must be to pay the amount that he has been ordered to pay by the adjudicator. If he does not accept the adjudicator's decision as correct (whether on the facts or in law), he can take legal or arbitration proceedings in order to establish the true position."
"30 But to my mind the answer to this appeal is the straight forward one provided by Judge Wilcox. The intended purpose of s.108 is plain. It is explained in those cases to which I have referred in an earlier part of this judgment. If Mr Collings and His Honour Judge Thornton [in Bovis Lend Lease v Triangle Developments [2003] BLR 31] are right, that purpose would be defeated. The contract must be construed so as to give effect to the intention of Parliament rather than to defeat it. If that cannot be achieved by way of construction, then the offending clause must be struck down."
"53 I derive two principles of law from the authorities, which are relevant for present purposes.
a. Where it follows logically from an adjudicator's decision that the employer is entitled to recover a specific sum by way of liquidated and ascertained damages, then the employer may set off that sum against monies payable to the contractor pursuant to the adjudicator's decision, provided that the employer has given proper notice (insofar as required).
b. Where the entitlement to liquidated and ascertained damages has not been determined either expressly or impliedly by the adjudicator's decision, then the question whether the employer is entitled to set off liquidated and ascertained damages against sums awarded by the adjudicator will depend upon the terms of the contract and the circumstances of the case."
"28 Whilst on the facts of Ferson -v- Levolux paragraph 30 might be argued to be obiter, the Court of Appeal set out in clear terms the principle which applies to the implementation of the intention of Parliament. It is that principle which I intend to follow in approaching the two issues which arise in this case. In my judgment, the effect of those statutory provisions and of the passages in Levolux is generally to exclude a right of set-off from an adjudicator's decision...
29 The particular issue of whether liquidated damages can be deducted when the adjudicator's decision deals with extensions of time but does not deal with the consequential effect on an undisputed or indisputable claim for liquidated damages raises, I consider, a distinct question of the manner and extent of compliance with the adjudicator's decision. It does not, in my judgment, raise a question as to the ability to set-off sums generally against an adjudicator's decision."
Issue 1 : Is the Claimant seeking to enforce those parts of the Adjudicator's decision that it likes, whilst at the same time seeking to repudiate other parts which it does not like and, if so, is that a reason not to enforce any part of the Adjudicator's decision?
Issue 2: Does it follow logically from the Adjudicator's decision that the Defendants are entitled to a particular sum by way of liquidated damages which could then be set-off against the sums due?
a) Exhaustive review of delay
"Having dealt with the points at issue I shall now reach my findings on the Referring Party's claim for an extension of time due to being delayed by the Responding Party. In this adjudication the Referring Party claimed that they were delayed for three reasons. During the course of the adjudication it became apparent that there were other heads of the claim from the Referring Party for an extension of time. However, as these did not form part of the Referring Party's referral notice, I have not dealt with them here."
He then goes on to set out the three delaying factors which he considered.
b) Not within the claims made
c) No Clause 2.6 Certificate
d) Summary as to Issue 2
Conclusion