Construction — Adjudication — Enforcement — Section 107 of Housing Grants, Construction and Regeneration Act 1996 — Clause 9A.7.1 of JCT management contract — Basis for adjudicator’s jurisdiction where no written contract existing between parties — Whether parties reaching final determination by agreement on disputed item so as to render adjudicator’s decision non-binding — Whether enforceability of decision affected by alleged mistakes — Whether appropriate to adjourn enforcement proceedings pending final account
The claimant contractor and the defendant employer were parties to an adjudication under the Housing Grants, Construction and Regeneration Act 1996. The adjudicator found that he had jurisdiction to conduct the adjudication notwithstanding the absence of a written contract between the parties, as required by section 107. He awarded the claimant £98,117.38. The defendant raised no objection on the issue of jurisdiction during the adjudication. The claimant subsequently applied to the court for summary judgment to enforce the adjudicator’s decision. In those proceedings, the claimant alleged, and the defendant did not dispute, that their agreement was based on the terms of the JCT management contract.
In the enforcement proceedings, the claimant reduced the sum that it sought to recover by £27,667.23; this represented payments for its works contractors that the defendant had paid directly to the contractors in question. The defendant contended that the claimant should have made further concessions on other items, which should be disallowed in the enforcement proceedings. One of these was a further sum of £10,000 that the defendant claimed it had also paid directly to a works contractor; it contended that the documents before the adjudicator represented a final determination on that item by agreement between the parties, within clause 9A.7.1 of the JCT management contract, so as to render non-binding the adjudicator’s decision on that issue. In addition, the defendant alleged that the adjudicator had reached an erroneous figure on two sums, of £35,575 and £19,457 for preliminaries and demolition work respectively, by misreading some of the evidence before him. The defendant further sought to argue that the enforcement proceedings should be adjourned to await the outcome of separate pending proceedings to determine the final account.
Held: The claim was allowed. (1) A responding party that has accepted the adjudicator’s jurisdiction, notwithstanding the absence of a clear written contract, cannot renege on that concession. In such cases, the necessary written contract is constituted by the exchanges of written submissions in the adjudication and/or the enforcement proceedings, in which an agreement other than in writing is alleged by one party and not denied by the other: see section 107(5) of the 1996 Act. The adjudicator had therefore had the necessary jurisdiction and the court was entitled to enforce his decision. (2) There was no final determination by agreement between the parties as to the disputed £10,000 payment such as to render the adjudicator’s decision on that point non-binding. Clause 9A.7.1 of the JCT management contract applies only to agreements reached between the parties after the adjudicator’s decision has been given. The only agreement alleged by the defendant was one that had been canvassed before, and expressly rejected by, the adjudicator. (3) Where an adjudicator’s decision is temporarily binding and has not been honoured, it is irrelevant that there are ongoing arbitration or legal proceedings to deal with the underlying issues; accordingly, it was not appropriate to adjourn the enforcement action pending the outcome of those proceedings. The courts should respect and enforce an adjudicator’s decision unless it is plain that the question he has decided is not one referred to him or that he has undertaken his task in an obviously unfair manner. Provided that the adjudicator has asked and sought to answer the questions referred to him, he has jurisdiction to make a mistake; the need to reach the correct answer is subordinated to the need to have an answer quickly. Accordingly, even if the adjudicator had made a mistake with the figures for preliminary and demolition works, that was a mistake that he was entitled to make and it could not now be used to defeat a claim for summary judgment.
The following cases are referred to in this report.
ALE Heavy Lift v MSD (Darlington) Ltd [2006] EWHC 2080 (TCC); [2006] Adj LR 07/31
Bouygues UK Ltd v Dahl-Jensen UK Ltd [2000] BLR 49, TCC
Carillion Construction Ltd v Devonport Royal Dockyard Ltd [2005] EWCA Civ 1358; [2006] BLR 15
Harlow & Milner Ltd v Teasdale [2006] EWHC 1708 (TCC); [2006] BLR 359
RJT Consulting Engineers Ltd v DM Engineering (Northern Ireland) Ltd [2002] EWCA Civ 270; [2002] 1 WLR 2344; [2002] BLR 217; CA
SG South Ltd v King’s Head Cirencester LLP [2009] EWHC 2645 (TCC); [2010] BLR 47
Shimizu Europe Ltd v Automajor Ltd [2002] BLR 113, TCC
This was the hearing of an application by the claimant, SG South Ltd, for summary judgment in proceedings to enforce an adjudicator’s award against the defendant, Swan Yard (Cirencester) Ltd, relating to a construction contract.
Thomas Lazur (instructed by BPE Solicitors LLP, of Cheltenham) appeared for the claimant; John Virgo (instructed by JP Fletcher & Co) represented the defendant.
Giving judgment, Coulson J said:
Introduction
[1] The claimant contractor, SG South Ltd (South), seeks by way of summary judgment to enforce an adjudicator’s award dated 22 July 2009. The original sum awarded was £98,117.37. However, for reasons that are explored below, South concedes that two elements of the decision, totalling £27,667.23, should not be the subject of the application. Accordingly, it seeks to enforce a reduced sum of £70,450.14 plus VAT, together with interest and costs. |page:8|
[2] In a letter dated 28 August 2009, following the adjudicator’s decision, the solicitor acting for the defendant employer, Swan Yard (Cirencester) Ltd (Swan Yard), made it plain that it did not dispute the award on the ground of jurisdiction. It also stated that it did not allege any breach of natural justice. Notwithstanding those concessions, from which it has never attempted to resile, Swan Yard sought to resist the enforcement of the decision.
[3] At the end of the hearing yesterday, 25 February 2010, I gave judgment in favour of South in the reduced sum sought of £70,450.14 plus VAT. I gave a brief outline explaining why I had reached that conclusion, and said that I would provide a written judgment setting out my reasons as soon as possible.
[4] I deal first with the applicable principles of law on enforcement, before going on to consider a stand-alone point concerning the basis of the adjudicator’s jurisdiction. Thereafter, I address, briefly, the irrelevant issues that were canvassed in the papers, the concession made by South and the three further items that, on Swan Yard’s case, should not form part of any judgment on enforcement.
Applicable principles of law
[5] The principles governing this kind of enforcement application are well known:
(a) adjudication is a process that requires the courts to respect and enforce the adjudicator’s decision unless it is plain that the question that he has decided was not the question referred to him or the manner in which he has gone about his task is obviously unfair: see [85] of the judgment of Chadwick LJ in Carillion Construction Ltd v Devonport Royal Dockyard Ltd [2005] EWCA Civ 1358*;
(b) an adjudicator has the jurisdiction to make a mistake, as long as he asks himself a question or questions that have actually been referred to him for decision and seeks to answer such question or questions: see Bouygues UK Ltd v Dahl-Jensen UK Ltd [2000] BLR 49 and Shimizu Europe Ltd v Automajor Ltd [2002] BLR 113. As Chadwick LJ said in Carillion, the process was such that the need to have the “right” answer has been subordinated to the need to have an answer quickly.
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* Editor’s note: Reported at [2006] BLR 15
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Adjudicator’s jurisdiction
[6] At the outset of the hearing yesterday, I raised a preliminary matter with the parties concerning the adjudicator’s jurisdiction. Although it was ultimately of no effect, it is necessary for me to address it in this short judgment.
[7] The adjudicator was Mr SK Rudd, of Construction Claims Consultants Ltd. When he was appointed as adjudicator to resolve the dispute between South and Swan Yard, he noticed that there was no written contract, and although Swan Yard had not taken any point as to his jurisdiction, Mr Rudd properly decided to carry out his own investigation into the issue. On the face of it, his conclusion was surprising. He decided that there was no written contract between the parties and that, in his words, “a contract arose either by oral agreement or by conduct or by a combination of oral agreement or conduct”. However, despite this, he went on to conclude that he had the necessary jurisdiction to act as adjudicator.
[8] On the face of it, his conclusion was erroneous. Section 107 of the Housing Grants, Construction and Regeneration Act 1996 (the 1996 Act) requires the construction contract to be in writing and, in RJT Consulting Engineers Ltd v DM Engineering (Northern Ireland) Ltd [2002] EWCA Civ 270; [2002] BLR 217, the Court of Appeal made plain, in [19], that “what has to be evidenced in writing is, literally, the agreement, which means all of it, not part of it”. Thus, in the absence of a written contract, an obvious jurisdictional challenge was open to Swan Yard.
[9] However, Swan Yard has never complained about any lack of jurisdiction on the part of the adjudicator. It did not do so during or at the conclusion of the adjudication. On the contrary, all its submissions were based on its assumption or acceptance that the adjudicator did have the necessary jurisdiction and that it was happy for him to decide this dispute. The letter to which I have already referred, of 28 August 2009, also expressly disavowed any objection on jurisdictional grounds.
[10] When these proceedings commenced, the particulars of claim was careful not to allege a concluded contract in writing. Instead, para 3 of the particulars of claim accepted that a contract was never executed and instead alleged that the parties had proceeded on the basis that the terms of the JCT management contract formed the basis of any agreement between the parties. The formal documents provided by Swan Yard in these proceedings have not sought to take issue with that averment.
[11] Section 107(5) of the 1996 Act is in the following terms:
An exchange of written submissions in adjudication proceedings, or in arbitral or legal proceedings in which the existence of an agreement otherwise than in writing is alleged by one party against another party and not denied by the other party in his response constitutes as between those parties an agreement in writing to the effect alleged.
Although the language of this subsection is a little opaque, it appears designed to prevent a responding party, which has accepted the adjudicator’s jurisdiction notwithstanding the absence of a clear contract in writing, from going back on his concession. Thus, in ALE Heavy Lift v MSD (Darlington) Ltd [2006] EWHC 2080 (TCC)*, HH Judge Toulmin CMG QC held that it was not open to the defendant to argue on enforcement that the adjudicator had no jurisdiction because of the exchange of written submissions in the adjudication that, he said, amounted to “an agreement in writing to the effect alleged”. The judge was plainly influenced by the fact that, as here, no jurisdictional challenge had been made to the adjudicator at the time of the adjudication.
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* Editor’s note: Reported at [2006] Adj LR 07/31
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[12] It seems to me clear in the present case that the exchanges in the adjudication and/or the exchanges in these proceedings have amounted to an exchange of written submissions in which the existence of an agreement otherwise than in writing has been alleged by South and not denied by Swan Yard. In those circumstances, I find that the adjudicator had the necessary jurisdiction and this court is entitled to enforce his decision.
Irrelevant matters
[13] Before going on to consider the concession made by South and the points of objection raised by Swan Yard, it is important to identify two matters, raised throughout the papers in this case by Swan Yard, that are wholly irrelevant to these proceedings.
[14] South has already been successful in one set of adjudication proceedings relating to this project: see SG South Ltd v King’s Head (Cirencester) LLP [2009] EWHC 2645 (TCC)†. In those proceedings, the defendant sought, unsuccessfully, to resist the enforcement of an adjudicator’s decision on the ground that those parts of the decision relating to South’s entitlement to interim payment, which the defendant continued to oppose, would be resolved when the final account was agreed by the parties. Because of the close links between the two contracts, the defendant in that action was represented by the same legal team as appeared for Swan Yard in this case.
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† Editor’s note: Reported at [2010] BLR 47
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[15] Despite the failure of that defence in those proceedings, Swan Yard attempted to raise the same issue again here. It has commenced separate proceedings in Bristol District Registry in which the quantum of the final account is to be determined. As a result, it sought to adjourn this enforcement hearing on the basis that the final account proceedings in Bristol ought to be the natural forum for the resolution of all the disputes between the parties. I made it plain that this was inappropriate in circumstances where there has already been an adjudicator’s decision, which decision is temporarily binding and which has not been honoured. The fact that there are ongoing arbitration or legal proceedings to deal with the underlying issues is nothing to the point: see Harlow & Milner Ltd v Teasdale [2006] EWHC 1708 (TCC); [2006] BLR 359. |page:9|
[16] Second, throughout the documents produced by Swan Yard in these enforcement proceedings, it has repeatedly complained of mistakes made by the adjudicator when assessing the parties’ respective cases on the disputed items and in calculating the sums that he considered to be due to South. I shall examine some of those matters in greater detail below: in my view, these criticisms of the adjudicator cannot be sustained. However, it is more important to note that even if the alleged mistakes could have been made out, that would not permit Swan Yard to resist enforcement. As noted in the authorities ([5]b) above), provided that the adjudicator has asked himself the right question then, if he makes a mistake in arriving at his answer, he has the jurisdiction to make that mistake and it cannot be relied on to resist enforcement.
South’s concessions
[17] Another feature of Swan Yard’s conduct has been its policy of making direct payments to the works contractors employed by South. Such payments were not in accordance with the contract mechanism envisaged by the JCT management form and it has created wholly unnecessary confusion and muddle. Employers should never make payments direct to works contractors unless it is with the express written permission of the management contractor. All the problems noted below have arisen out of Swan Yard’s direct payments.
[18] As I have said, the total amount of the adjudicator’s decision was £98,117.37. That included a sum of £12,667.23 due in respect of work carried out by Farmington Stone and a sum of £15,000 due in respect of work carried out by Gulley Electrical. During the course of the adjudication, there was a dispute as to whether direct payments had been made to these works contractors, and the adjudicator concluded that Swan Yard had not demonstrated that such payments had been made.
[19] In the course of preparing for this hearing, South has made enquiries of its works contractors as to any direct payments received. In consequence, South is satisfied that the two payments referred to above, to Farmington Stone and Gulley Electrical respectively, have now been made by Swan Yard. Accordingly, it accepts that it should not seek judgment for the total amount of £27,667.23.
[20] To the extent that the parties have operated on the basis of the JCT management contract, I note that clause 9A.7.1 provides that an adjudicator’s decision shall be binding until the dispute 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”. In respect of the £27,667.23, the documents produced for the hearing constitute such an agreement. Accordingly, I find that the parties have agreed that, up to the sum of £27,667.23, adjudicator’s decision of 22 July 2009 should not be enforced.
Disputed items
[21] There are three further elements of the decision in respect of which Swan Yard contends that although there is no similar concession by South, there should have been such a concession and that, in some way, the adjudicator’s decision should also not be enforced in respect of those three items. I consider that these points are simply not arguable. My reasons are detailed below.
(a) Woodward Projects
[22] The adjudicator found that the sum of £10,000 was due in respect of Woodward Project’s work. In the adjudication, Swan Yard argued that it had made payment of this sum direct to the works contractor. No concession was (or is now) made by South as to any such direct payment. The adjudicator concluded that no direct payment had been evidenced. There is therefore no basis on which this element of the decision could be resisted.
[23] During his submissions, Mr John Virgo argued that the documents before the adjudicator comprised an agreement as to the payment of the £10,000 in accordance with clause 9A.7.1. However, it seems to me that that argument is hopeless for two reasons. First, the documents show that the £10,000 was disputed, not agreed and, second, clause 9A.7.1 applies only to agreements made after the decision of the adjudicator has been given. The alleged agreement relied on by Swan Yard was the one canvassed before the adjudicator and that he expressly rejected. Thus, there can be no basis for challenging this aspect of his decision.
(b) Preliminaries
[24] The adjudicator awarded South £35,575 by way of preliminaries. He did this on the basis of a very detailed analysis of all the evidence relating to preliminaries, in which he arrived at his own calculation of the appropriate figure. Paragraphs 16.3.1 to 16.3.10 of his decision contained full reasons for the sum awarded.
[25] Swan Yard submits that the adjudicator erred in arriving at that figure by misreading some of the evidence. I do not accept that the adjudicator made any sort of error; indeed, on the basis of the papers before me, it is not an exaggeration to say that the adjudicator appears to have been the only person involved in the adjudication with any grasp of the applicable figures. However, even if I am wrong about that and he did make a mistake, it was a mistake that he was quite entitled to make and it cannot now be used to defeat the claim for summary judgment.
(c) Demolition works
[26] The final dispute concerns the demolition works, in the sum of £19,457. Again, the argument is that the adjudicator misread some of the documents provided to him; again, that argument is hopeless for the reasons that I have already canvassed.
[27] In respect of this item, Mr Virgo also advanced the argument that it would be wrong to give judgment in favour of South for £19,457 when its final account claim for demolition works, to be determined in Bristol District Registry, was for a net sum of just £8,800-odd. He argued that because South was now admitting that it was not entitled to £19,457 by way of its own final account claim, the court should not enter judgment for that sum by way of enforcement.
[28] On analysis, that argument could not be sustained on the facts. South’s claim in its final account is for the gross figure of £29,000-odd. The amount of the net sum due to South in respect of demolition works is, at least in part, the product of the disputed direct payments made by Swan Yard to the works contractors. Swan Yard’s contention that the net sum claimed in the final account is only £8,800-odd assumes that its case as to direct payments is correct.
[29] However, that is not an assumption that the court can make. South disputes it. I also note that, in para 16.3.10.1 of his decision, the adjudicator set out in detail the issue as to the direct payments in respect of demolition works and made plain that Swan Yard had simply failed to demonstrate that it had made the direct payments that, even now, it continues to allege. His conclusion remains temporarily binding until the final account is considered in detail in the litigation in Bristol District Registry. Thus, it cannot be said that the adjudicator’s decision was somehow inconsistent with South’s final account claim or that there is any cogent reason not to enforce this aspect of the decision of 22 July 2009.
Conclusions
[30] For the reasons set out above, I have concluded that the sum due to South on enforcement is £70,450.14 plus VAT. This is the amount of the adjudicator’s decision, less the total of £27,667.23 in respect of Farmington Stone and Gulley Electrical. There is no basis for any further deduction from the sums awarded by the adjudicator.
[31] At one point in his submissions, Mr Virgo argued in the alternative that if judgment was given in favour of South, there should be a stay of execution. However, on analysis, this did not add anything to the submissions that I have already analysed. Swan Yard did not say that South’s financial position was such that a stay was justified. Instead, the argument was that there were special circumstances to warrant a stay because the final account claims were to be considered in the Bristol litigation. As I have already explained, the mere fact that there is ongoing litigation in which the disputes will be finally resolved cannot prevent the making of an enforceable final judgment on an application such as this.
[32] The adjudicator also found that the sum of £901.87 was due by way of interest. That sum should also be added to the judgment sum. He also found an ongoing rate of interest due to South of £14.78 per day. |page:10| I have concluded that South is entitled to interest at that rate from 22 July 2009 (the date of the decision) to 29 October 2009.
[33] As noted, on 29 October 2009 Akenhead J handed down judgment in the related enforcement proceedings. I can see no reason, and Mr Thomas Lazur was not able to identify one, that justified the decision by South not to commence parallel proceedings against Swan Yard at the same time. This enforcement application could and should have been dealt with by Akenhead J in October. Accordingly, the interest claim cannot extend beyond 29 October 2009. That gives rise to a total figure of £1,463.22.
[34] As to costs, Swan Yard must pay South’s costs of these proceedings. The fact that South made a concession is nothing to the point, given that Swan Yard continued (wrongly) to resist the application in full.
[35] As to the sums claimed by way of costs, I am in no doubt that those sums were excessive on both sides. Swan Yard’s costs were £21,000; South’s costs were £18,000. That was out of all proportion to the issues. On South’s part, all that was necessary was a claim form to go with a copy of the adjudicator’s decision. The claimed total of more than 40 hours’ work done on documents and in excess of 10 hours’ attendance on South itself was simply not justified. Accordingly, for the reasons explained during the parties’ oral submissions, I have summarily assessed South’s costs in the total sum of £10,250.
Claim allowed.