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	England and Wales High Court (Technology and Construction Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Technology and Construction Court) Decisions >> Science and Technology Facilities Council v MW High Tech Projects UK Ltd [2015] EWHC 2889 (TCC) (21 October 2015) URL: http://www.bailii.org/ew/cases/EWHC/TCC/2015/2889.html Cite as: [2015] EWHC 2889 (TCC)

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IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT

		Royal Courts of Justice Rolls Building London, EC4A 1NL
		21/10/2015

 


Mr Justice Fraser:

Introduction

1. This is an application by the Claimant for summary judgment, seeking to enforce two decisions of an adjudicator in the sum of £292,570.88. The parties entered into a contract dated 20 October 2009 on the GC/Works/1 Single Stage Design & Build (1998) with Amendment 1 (2000) standard form and further amendments in a Schedule of Supplementary Conditions. The adjudicator was appointed on 7 November 2014 concerning a dispute "about [the Defendant's] entitlement to extension of time for completion of the works and the liquidated damages for delay to completion payable to [the Claimant] under the Contract"^[1]. The precise circumstances immediately before his appointment will be addressed further below. He issued two decisions concerning the dispute that was referred to him. He did, however, prior to that, deal with two separate jurisdictional challenges raised by the Defendant, and issued written decisions on each of them.
2. His first decision, on the substantive dispute (as opposed to either of the jurisdictional challenges) was issued on 8 December 2004, and in that decision he awarded the Claimant £232,400.00, together with £29,654.88 in respect of interest, those sums to be payable forthwith. By agreement of the parties, his decision concerning the parties' costs was issued separately and this was dated 22 December 2014. In that decision he decided that the Defendant should pay to the Claimant the sum of £30,516.00 in respect of the Claimant's costs of the adjudication, and he also allocated his costs between the parties.

Issues

3. The Defendant disputes the validity of the decisions because it is said that the adjudicator did not have jurisdiction under the contract between the parties to determine the dispute at all. This is said by the Defendant to be because the provisions of section 108 of the Housing Grants Construction and Regeneration Act 1996 (which applies to this contract) and which sets out certain requirements for the adjudication provisions, were not complied with in the contractual adjudication provisions in clause 59 of the standard form. It is said the effect of that would be that, rather than the contract having its own adjudication provisions, those in the Scheme for Construction Contracts (England and Wales) Regulations 1998 in SI 1998 No.649 would (by default) apply. Because this adjudicator was appointed under the contractual provisions, and not under the Scheme, he had no jurisdiction to decide the dispute. There is a fundamental difference between the two because the Scheme does not provide for the adjudicator to decide whether one party to the adjudication shall bear the costs (in whole or part) of the other party, but the challenges by the Defendant do not just go to the costs decision. The Defendant relies upon the non-compliance with the Act of the contractual provisions as undermining the jurisdiction of the adjudicator and hence both decisions, the substantive one as well as the one regarding costs.
4. It is submitted by the Defendant that if an adjudicator is appointed under a contractual provision that does not apply, that appointment is invalid. The fact that the Scheme would also enable an adjudication to proceed is not relevant, as this decision (or these decisions) would be unenforceable. The fact that (for example) the same appointing body might be available under both the contract and the Scheme, or under two competing versions of contractual terms, does not matter; Twintec Ltd v Volkerfitzpatrick Ltd [2014] BLR 150. In my view, this is correct. If the Scheme were to be held to be applicable to adjudication of a dispute under the contract, the appointment of Mr Redmond would have been made under the wrong set of provisions and neither of his decisions would be enforceable.
5. There are points upon which the Claimant relies, if the Defendant's points concerning the contract terms and non-compliance of section 108 of the Act were to be accepted by the court. These are that the Defendant entered into what is called an "ad hoc" agreement to have the dispute decided by adjudication by this adjudicator. The other is that by paying the adjudicator's fees, the Defendant has treated the decision of the adjudicator as binding and has waived any right to challenge his jurisdiction. In my view, it is helpful to deal with those points first.

Analysis

6. Mr Hanna for the Claimant describes one of his points as a "threshold" point, although each of the points relied upon by the Claimant would prevent the Defendant from being permitted to argue in this court that the adjudicator lacked jurisdiction. It is therefore convenient to deal with those two points prior to dealing with the two issues on the contract terms dealing with adjudication relied upon by the Defendant. I shall do so chronologically.
7. The Claimant, by its solicitors, issued a Notice of Intention to Refer a Dispute to Adjudication dated 4 November 2014. By a letter dated 5 November 2014, the Defendant's solicitors stated that they were instructed and also wrote:

"Our instructions on the above matter and the content of this letter does not constitute any acceptance whatsoever of any jurisdiction regarding the notice. [The Defendant] reserves its rights to raise any jurisdiction and/or other issues in due course, whether previously raised or not and whether within the forum of adjudication or other proceedings. [The Defendant's] participation in this adjudication (if it does) is entirely without prejudice to this right."

This was the first communication from the Defendant, or its solicitors, in respect of the adjudication to which I have been referred and it amounts to a clear reservation of rights concerning the adjudication.

8. By a letter dated 6 November 2014, the Defendant's solicitors the next day stated as follows:

"[The Defendant] maintains that the Notice and any appointment of an adjudicator under it is fundamentally flawed and will result in any adjudicator appointed lacking the necessary threshold jurisdiction to determine the matter you seek to refer…. However, as you have imposed a deadline of 12 noon today to the agreement of one of your proposed adjudicators or you will seek nomination from the Chartered Institute of Arbitrators, in order to ensure that a suitably competent person has the opportunity to review the jurisdiction which will be raised following his/her appointment, then we agree to John Redmond. For the avoidance of any doubt whatsoever this agreement is not intended to confer any jurisdiction on Mr Redmond or the reference as a whole. This is merely a pragmatic way of moving forward to having the issues regarding jurisdiction resolved."

With the exception of the final sentence, there can be nothing in the terms of that agreement to the appointment of Mr Redmond that dilutes, contradicts or undermines the reservation of the right to challenge jurisdiction that was made in the letter of the preceding day. Unless Mr Hanna for the Claimant succeeds in showing that the sentence stating Mr Redmond's appointment "is a pragmatic way of moving forward to having the issues regarding jurisdiction resolved" means that, objectively construed, those words demonstrate an intention on the part of the Defendant to be bound by the findings of Mr Redmond on the issue of jurisdiction, then the Defendant is entitled in my view to challenge jurisdiction on enforcement.

9. In my view those words are not sufficient to have the effect for which Mr Hanna contends. The letter of 6 November 2014, when read as a whole, makes it clear that jurisdiction is being challenged and it is on that basis that Mr Redmond's appointment is agreed by the Defendant. Although I entirely agree with Mr Hanna that a party which reserves its rights in this way should limit its jurisdictional challenge to the adjudicator to a single occasion – to do otherwise runs the risk of simply derailing the whole process and frustrating the will of Parliament that adjudications are dealt with speedily in order to provide a quick decision – I do not consider that the terms of the Defendant's agreement of Mr Redmond mean that the Defendant has lost the right to challenge jurisdiction on enforcement.
10. I should say in the Claimant's favour that Mr Hanna's criticism of how the Defendant has behaved concerning jurisdiction is justified in this sense. Two separate challenges were made (on different grounds) to the adjudicator, and the number of challenges and their basis has shifted constantly. There are considerable concerns raised by the Claimant to which it may be necessary to return at the stage of costs, concerning the veracity of the Defendant's witness evidence in this court about whether a dispute had crystallised. Finally, at the enforcement stage, only two grounds remained which were argued skilfully by Mr Wygas. The "no crystallised dispute" was not one of them. However, whether this amounts to the Defendant "scrabbling around" to find an excuse not to satisfy the decisions, or not, depends upon whether either of those remaining grounds is valid. If there is a valid objection to jurisdiction, then the Defendant is entitled to argue that point, and the agreement to have Mr Redmond appointed was not in my view made in terms that prevent the Defendant from arguing jurisdiction at the enforcement stage.
11. The next of the Claimant's points, described as a "threshold" point, arises in the following way. In the decision of 8 December 2014, Mr Redmond^[2] stated that his costs were in total £8,232.00, and that the parties were jointly and severally liable for them. He stated that he would apportion them in his subsequent decision on costs. In that later decision of 22 December 2014, as well as dealing with the payment of costs by the Defendant to the Claimant, he stated that of the new total of his fees of £9,408.00, £7,056.00 would be payable by the Defendant and the balance of £2,352.00 would be payable by the Claimant. There is no evidence in the witness statements served by the parties for the enforcement application about payment of his fees by the Defendant, although suspicions were raised by the Claimant in their evidence that the Defendant had paid them. However, at the hearing of the application it was confirmed by the Defendant that it had indeed paid the adjudicator the sum for his fees that he had ordered. This was done by way of BACS transfer and so there was no covering letter explaining the basis upon which the payment had been made. The Claimant relied upon this as demonstrating that the Defendant had treated the decision as valid, and as a result the Defendant could not now challenge it as invalid. Shimizu Europe Ltd v Automajor Ltd [2003] BLR 381; PT Building Services Ltd v ROK Build Ltd [2008] EWHC 3434 (TCC) and Wales and West Utilities Ltd v PPS Pipeline Systems GmbH [2014] BLR 163 were all relied upon by the Claimant in this respect.
12. The Defendant relied upon the adjudicator's terms and conditions which had been sent to them by email on 11 November 2014. Those terms expressly provided as follows:

"1. Each party to the reference shall be liable for my fees on a joint and several basis save that if, in my sole discretion, I consider that I have no jurisdiction to proceed with the reference my fees shall be payable solely by the Referring Party…

3. My fees will be payable notwithstanding that my decision is subsequently found by a court to be unenforceable by reason of lack of jurisdiction".

13. The Claimant objects to the Defendant relying upon the terms in this way as after the adjudicator had sent each party his terms and conditions neither party had expressly accepted them. The Claimant submits that silence cannot amount to acceptance and so the terms and conditions were not agreed. Linnett v Halliwells LLP [2009] EWHC 319 (TCC) is relied upon as authority for the proposition that silence does not amount to acceptance of the adjudicator's terms and conditions. In that case, Ramsey J set out in paragraphs [64] to [71] the various options available to a party who objects to jurisdiction but who nevertheless continues to participate in an adjudication. Whilst entirely respecting that decision, it is (as Ramsey accepts in paragraph [71]) a matter of contract as between the adjudicator and the relevant party. It is therefore a fact specific situation. Here, the agreement of the Defendant to Mr Redmond as adjudicator was done following the full reservation of rights on 5 November 2014. I was told that neither party had accepted his terms and conditions in an express way. However, regardless of the Claimant's contractual agreement with the adjudicator, it is the Defendant's that is relevant. Further, it is possible to signify acceptance of proposed contract terms by conduct and I find that is what the Defendant did. The Claimant probably did that too – it would be difficult to argue that it did not, given the participation in the adjudication.
14. If I am wrong about that, I do not accept that by merely paying the fees the Defendant has in these specific factual circumstances lost the right to challenge jurisdiction on enforcement. PT Building Services Ltd v ROK Build Ltd [2008] EWHC 3434 (TCC) is distinguishable. Paragraph [26] of that judgment makes it clear that:

"the decisions on election, or approbation and reprobation, 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…..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 that case, the party, ROK, which was challenging the validity of the decision, had deployed it in a second adjudication to persuade that second adjudicator to resign. This was found by the learned Judge to be "a clear benefit which ROK obtained by relying on the first decision" in paragraph [28]. The learned Judge also found, when considering ROK's submission that paying the fees did not amount to a benefit, "strength in that point" in paragraph [29] although he found "in the absence of circumstances to the contrary" that by making the payment ROK was treating the decision as valid. It will of course be different in every case because "what has to be determined is whether there has been an election". I consider that the deployment of the first decision by ROK to obtain an undoubted benefit – the cessation of the second adjudication –was an important factual component of that case. There is no similar component here.

15. Wales and West Utilities Ltd v PPS Pipeline Systems GmbH [2014] BLR 163 goes no further than stating that "it may^[3] well be the case that by paying without reservation the sum awarded by the decision in the adjudication Wales has elected not to challenge the decision (as it now seeks to do)". That case also deals with the ratio in Shimizu, where a party had asked an adjudicator to make amendments under the slip rule and had paid the fees prior to challenging it. In the absence of proper evidence about the basis upon which these fees were paid by the Defendant – for example emails notifying the adjudicator of payment, or the way in which the adjudicator may, or may not, have chased the Defendant for payment of those fees and the terms of those communications – I am not persuaded that the circumstances are sufficiently clear cut in this case to conclude that the Defendant has lost the ability to challenge jurisdiction. This is a fact specific issue to this particular case, and should not be seen as authority or encouragement to parties in other cases to decide that the cases which I have distinguished should not be followed. In the instant case, the express terms of the letter of 5 November 2014 and clause 3 of the adjudicator's terms and conditions, either of which is sufficient but both together are compelling, permits the Defendant to challenge jurisdiction on enforcement regardless of the payment by the Defendant to the adjudicator of his fees.
16. Turning then to the two points relied upon by the Defendant by the time of the hearing, the "no dispute had crystallised" point having been very sensibly abandoned, the issues relied upon by the Defendant are as follows:

i) Clause 59(3)(c) of the Contract terms does not comply with section 108(2)(a) of the Housing Grants Construction and Regeneration Act 1996;

ii) Clause 59(3)(c) does not comply with section 108(2)(b) of the Housing Grants Construction and Regeneration Act 1996.

17. Clause 59(3)(c) states as follows:

"The adjudicator, unless already appointed, shall be appointed within 7 Days of the giving of a notice to refer a dispute to adjudication under paragraph (1). The Employer and the Contractor shall jointly proceed to use all reasonable endeavours to complete the appointment of the adjudicator and named substitute adjudicator. If either or both such joint appointments has not been completed with 28 days of the acceptance of the tender, either the Employer of the Contractor alone may proceed to complete such appointments. If it becomes necessary to substitute as adjudicator a person not named as adjudicator or substitute adjudicator in the Abstract of Particulars, the Employer and Contractor shall jointly proceed to use all reasonable endeavours to appoint the substitute adjudicator. If such joint appointment has not been made within 28 Days of the selection of the substitute adjudicator, either the Employer or the Contractor alone may proceed to make such appointment. For all such appointments, the form of adjudicator's appointment prescribed by the Contract, shall be used, so far as is reasonably practicable. A copy of each such appointment shall be supplied too [sic] each party. No such appointment shall be amended or replaced without the consent of both parties."

18. The Abstract of Particulars provides for the parties to nominate an adjudicator, and a substitute adjudicator, with a process for the parties to agree upon an adjudicator if either the nominated adjudicator or substitute adjudicator "is deceased or unwilling or unable to act" or ceases to be independent. If an adjudicator cannot be agreed, then the Chartered Institute of Arbitrators is to be the appointing body (or the Scottish Branch of the same institute if the Contract is a Scottish contract).
19. Mr Wygas accepted that the first sentence of clause 59(3)(c) which states "the adjudicator, unless already appointed, shall be appointed within 7 Days of the giving of a notice" complies with the Act. His first point is however that the following provisions within that clause "carve out exceptions" to the ability to commence an adjudication "at any time" that is required in section 108(2)(a), and that the right to adjudicate is thereby stifled. This is surprising, given the provision in clause 59(1) that either party "may at any time notify the other of his intention to refer a dispute, difference or question…" to adjudication. However, the following provisions within the clause upon which Mr Wygas concentrated all deal with a process whereby "completing the appointment" of the adjudicator, or substitute adjudicator, will take place, for that person or those persons to be named within the Abstract. Here, no such process ever took place and nobody was named in the Abstract, which was left blank. This point was called during oral agreement "the Appointment point".
20. I do not consider this is the correct analysis of clause 59(3)(c) of the standard contract terms and I reject it. The whole of clause 59, headed "adjudication", must be construed together and clause 59(1) makes it clear that each party has the necessary contractual right to refer a dispute to adjudication at any time. This is what the Act requires in section 108(2)(a) and this contract contains it. Clause 59(3)(c) must be read as subject to the right in clause 59(1). Further, in circumstances where the Abstract of Particulars names nobody as either adjudicator or substitute adjudicator, the fact that certain words were left within clause 59(3)(c) that relate to what is, or is not, to occur in respect of those individuals concerning "completion" of their appointment, means there is no contractual impact upon the first sentence of clause 59(3)(c) in any event by the words Mr Wygas relied upon. This "completion" procedure is not properly construed as being concerned with the appointment of an adjudicator for a specific dispute. It is something entirely different, namely where individuals are to be identified in the Abstract of Particulars. Mr Wygas accepted, as he must, that the first sentence of clause 59(3)(c) complies with section 108(2) of the Act. The words that come later are, in the context of this contract and the non-entries in the Abstract of Particulars, of no effect whatsoever. This part of the clause refers to completion of appointments of adjudicator/substitute adjudicator to be identified in the Abstract, should the parties wish to have done that. These parties did not do so, and neither did they operate the process whereby, absent agreement between them, either of them could appoint an adjudicator to be identified in this way. None of this, in my view, constitutes a fetter upon the right of either party to refer a dispute to an adjudicator at any time. That right is unqualified and contained within clause 59(1).
21. The Defendant also submits that the contract fails to comply with section 108(2)(b) of the Act in that it fails to provide a timetable with the objective of securing an appointment within 7 days of giving notice of adjudication. The second point, which was termed "the 28 day point" deals with the terms of the same clause and relies upon there being a potential lacuna in the period 28 days after acceptance of the tender due to the wording of clause 59(3)(c). There is a potential lapse, it is said, in the right to adjudicate between the time when the tender is accepted and the time when the contract is formed, or at the very least an appointment could be potentially delayed by 28 days. However, here, the tender was accepted on 15 January 2008. The contract was executed on 20 October 2009. The lacuna, if that is what it would be, would have expired some time in February 2008, or about 20 months prior to the formation of the contract. It would be extraordinary, in my view, if a contract formed in October 2009 on otherwise unobjectionable terms (so far as the right to adjudicate is concerned) would be construed to have a potential fetter on that right which must, on any view, have expired so long before the formation of the contract itself.
22. Mr Wygas also relied, in explaining this point, upon the provisions of the Scheme in terms of a timetable, and he contrasted that with the terms of clause 59. He explained that all clause 59(3)(c) did was to provide a deadline (7 days from the giving of a notice of intention to refer) whereas the Scheme sets out a very detailed timetable, although he accepted that the end result was the same. He used an analogy of a railway timetable and a train from London to Manchester. The Scheme would set out the intermediate stops along the way, to arrival in Manchester at a set time. The contract term simply stated at what time the train would arrive in Manchester. However, in my view, he was wrong to use the Scheme in this way, as though a timetable had to comply with, or be similar, to the one in the Scheme in order to be Act-compliant. It is the Act that sets out what a contract must include, in order for the contract to comply with the statutory requirements. If the contract fails to do so, the Scheme applies. The contractual is not one that must follow the Scheme; it is one that must comply with the Act. Timetables may, or may not, be similar or identical to those in the Scheme. However, what matters is that the requirements of the Act be complied with, and the terms of this contract do so. To apply that to the analogy used by Mr Wygas, all the Act requires is that the time of arrival in Manchester is provided.
23. Finally on this point, Mr Hanna pointed out that this is a standard form of contract and there is no authority yet on any failure of the terms to comply with the Act, in the manner contended for by the Claimant. I have not taken that into account, although Mr Hanna is right in that the ingenuity deployed to avoid enforcement of adjudication decisions has been considerable over the years. This case makes it clear that this ingenuity is not yet exhausted. The widespread and varied attempts by the Defendant from November 2014 onwards to raise jurisdictional objection means that some 11 months after the Notice of Intention to Refer was served, the sums that the adjudicator found were due and payable by the Defendant to the Claimant have still not been paid. That does not strike me as being how the process of adjudication is intended to operate. A number of sub-issues and distractions have occurred during the adjudication itself and since the enforcement proceedings were issued, and the parties collectively have spent in legal costs a sum of approximately £65,000. In my view this is an example of a party "scrabbling around" trying to find reasons not to comply with an adjudicator's decision – in this case, two decisions – rather than behave as intended by the legislation, which is to pay the sum awarded and then commence substantive proceedings to resolve with finality the underlying dispute.
24. I remind myself of the words of Coulson J in one of the cases relied upon in argument, Dalkia Energy and Technical Services v Bell Group UK (2009) 122 Con LR 66. That was an application under CPR Part 8 for final determination. The learned Judge said at paragraph [44]:

"However, this is not an ordinary case: it does not arise before me on enforcement where, if this jurisdiction point had arisen, it could have been comprehensively dispatched for the reasons that I have noted. Instead, the point arises here in Pt 8 proceedings, where the court is being asked to give a final and binding determination on the issue: were Bell's standard terms and conditions incorporated into the contract?"

This is not a Pt 8 case, where the court will give final and binding decisions on matters such as incorporation of terms. These jurisdiction points arise in enforcement proceedings, and they arise on what is plainly an ordinary case and on sophisticated standard terms. They are highly technical and wholly hypothetical jurisdictional challenges.

25. In my judgment there is nothing in these points raised by the Defendant, as there was nothing in the other points challenging jurisdiction on other grounds that were argued, twice, before the adjudicator himself. The decisions should be enforced and I grant the Claimant summary judgment on them to which it is entitled.
26. I will hear counsel further both on the precise terms of the relevant order and in respect of costs.

Note 1   Paragraph 19 of the Decision quoting from the Notice of Adjudication    [Back]

Note 2   Paragraph 75 of the decision    [Back]

Note 3   Emphasis added    [Back]