Construction – Adjudication – Dispute – Scheme for Construction Contracts (England and Wales) Regulations 1998 – Contractor issuing payment notice claiming final payment under contract – Employers failing to pay – Adjudicator determining payment notice to be invalid – Contractor issuing further notice for same sum and commencing second adjudication – Whether second adjudicator having jurisdiction – Whether second adjudication contrary to regulation 9.2 of Scheme for Construction Contracts on ground that dispute the same or substantially the same as that decided in first adjudication
The appellants employed the respondent contractor on the terms of a JCT Minor Works Building Contract (2011 ed) to demolish a dwelling-house at Ashtead in Surrey and build a new house, for a price of £496,578 or such other sum as might become due under the contract.
After completion of the works, the architect purported to issue a final certificate under the contract and the respondent sent a letter to the appellants claiming that a final payment of £111,450.50 was due. That sum went unpaid, with the result that a dispute was referred to adjudication pursuant to the Scheme for Construction Contracts (England and Wales) Regulations 1998.
The respondent accepted that the architect’s final certificate had not been issued in accordance with the relevant contractual provisions. However, it sought to rely on clause 4.8.4 of the contract, which provided that, in such circumstances, the contractor could serve a payment notice stating what it considered to be the final payment due to it and that, unless the employer notified the contractor of its intention to pay a lesser sum not later than five days before the final date for payment, then the sum specified in the payment notice would become payable.
Rejecting that argument, the adjudicator found that the respondent’s letter was not a valid payment notice for the purposes of clause 4.8.4 and that accordingly no sum was payable.
Thereafter, the respondent sent a further letter to the appellants, claiming a final payment under clause 4.8.4, and issued a second notice of adjudication. The appellants disputed the adjudicator’s jurisdiction on the ground that he was being asked to decide the same, or substantially the same, dispute as had been decided in the first adjudication, contrary to regulation 9.2 of the Scheme for Construction Contracts, since the same sum of money was in issue in both disputes.
The second adjudicator found that the respondent’s second letter was an effective notice under clause 4.8.4 and that the appellants’ refusal to make payment created a dispute which was not the same or substantially the same as the one previously decided. He ordered the appellants to pay £115,440.46 to the respondent, with interest, plus his fees of £1,944.
The respondent applied successfully to the court for summary judgment to enforce the second adjudicator’s decision. The appellants appealed.
Held: The appeal was dismissed. When asking, as a question of fact and degree, whether the dispute referred to an adjudicator is the same or substantially the same as has already been decided in an earlier adjudication, the court should give due respect to the adjudicator’s decision on that point. In the instant case, the dispute in the second adjudication was not the same or substantially the same dispute as the one that had been decided in the first adjudication. While both parties were bound by the express finding in the first adjudication as to the invalidity of the architect’s final certificate and the respondent’s first payment notice, the second adjudicator was being asked to decide whether a different notice, served several months later, had different consequences. Although both adjudications were dependent on the ineffectiveness of the final certificate and both claimed the same sum, the respondent was not seeking the redetermination of any matter that had been decided by the first adjudicator. The relevant event was the respondent’s second payment notice issued pursuant to clause 4.8.4 of the contract. Neither that notice nor the consequences which flowed from it, namely the entitlement to be paid if no counternotice was served, gave rise to disputes which had been referred to the first adjudicator. The respondent was not making good a shortcoming in the earlier letter, but was instead approaching its claim by a new and different route which relied on the later letter and thereby raised a different dispute. It was the new notice, and only the new notice, which founded the respondent’s entitlement to be paid.
Dr Timothy Sampson (instructed by direct access) appeared for the appellants; Richard Bradley (instructed by CE Law, of Birkenhead) represented the respondent.
Giving judgment Simon LJ said:
Introduction
1. This appeal from the judgment of HH Judge Raynor QC raises a short issue as to whether an adjudicator (appointed under the terms of a building contract) had jurisdiction to decide a dispute between the parties. The appellants’ contention is that he had no jurisdiction because he was being asked to adjudicate the same or substantially the same dispute as had been decided by another adjudicator in an earlier adjudication. The respondent contends, as the judge found, that he did have jurisdiction.
The facts
2. By the terms of a JCT Minor Works Building Contract (2011 Ed.) dated 22 December 2011 (“the Contract”) the respondent agreed with the Appellants to demolish a dwelling house (at Ashtead in Surrey) and to build a new house for a price of £496,578, or such other sum as might become due under the contract.
3. The Architect certified practical completion on 9 April 2013, and issued a Certificate of Making Good Defects on 25 October 2013.
4. On 31 October the Architect issued a “Final Certificate” under the Contract and, on 20 December 2013, the respondent sent a letter claiming that a final payment of £115,450.50 was due.
5. The sum was not paid and a Notice of Adjudication was sent on 7 February 2014 (‘”the First Adjudication Notice”).
6. Section 7 of the Contract was headed “Settlement of Disputes”, and clause 7.2 provided:
“If a dispute or difference arises under this Contract which either Party wishes to refer to adjudication the Scheme shall apply except that for the purposes of the Scheme the Adjudicator shall be the person (if any) and the nominating body shall be that stated in the Contract Particulars.”
7. No Adjudicator was named in the Contract Particulars but on 10 February 2014 the nominating body appointed Mr CJ Calcroft as Adjudicator under the terms of clause 7.2.
8. The respondent accepted that the Architect’s Final Certificate was uncontractual in that it was not issued in accordance with clause 4.8.1 but relied on clause 4.8.4 of the Contract which provided:
“If the final certificate is not issued in accordance with clause 4.8.1,
1. the Contractor may give a payment notice to the Employer with a copy to the Architect/Contract Administrator stating what the Contractor considers to be the amount of the final payment due to him under this Contract and the basis on which the sum has been calculated and, subject to any notice under clause 4.8.4.3, the final payment shall be the final amount.
…
3. If the Employer intends to pay less than the sum specified in the Contractor’s payment notice, he shall not later than 5 days before the final date for payment give the Contractor notice of that intention … and the payment to be made on or before the final date for payment shall not be less than the amount stated as due in the Employer’s notice.”
9. Clause 4.8.5 established that where the Employer did not give a counter notice under clause 4.8.4.3 it was obliged to pay the Contractor the sum stated as due in the Contractor’s notice.
10. On 1 April Mr Calcroft issued his Adjudication (“the First Adjudication”). He concluded (as was common ground) that the Final Certificate issued on 30 October 2013 was ineffective; but also found that the Respondent’s letter of 20 December 2013 was not a valid payment notice for the purposes of clause 4.8.4.1. His reasons for reaching this conclusions were (a) it was based on the Final Certificate being issued late, whereas it was in fact invalid (sections 60-64), and (b) the terms of the 20 December letter did not comply with clause 4.8.4.1 in view of the way it was expressed: it did not make clear that it was (i) a notice (ii) issued pursuant to clause 4.8.4.1 (section 72). He found that, since no payment notice had been served, no sum was payable.
11. On the same day, 1 April 2014, the Respondent sent a letter described as a “notice pursuant to Clause 4.8.4.1 of the Contract” and, on 24 April, issued a Notice of Adjudication (“the Second Adjudication Notice”).
12. Although Mr CJ Hough was appointed Adjudicator on 29 April, the Appellants disputed his jurisdiction, essentially on the basis advanced later before Judge Raynor QC and this court: namely, that Mr Hough was being asked to decide the same, or substantially the same, dispute as had been decided by Mr Calcroft in the First Adjudication. On this basis they declined to participate in the adjudication and did not serve a notice under clause 4.8.4.3.
13. It is common ground that the Scheme referred to in clause 7.2 is the Scheme for Construction Contracts (England and Wales) Regulations 1998 (1998/SI/649) of which regulation 9.2 provides:
“An adjudicator must resign where the dispute is the same or substantially the same as one which has previously been referred to adjudication, and a decision has been taken in that adjudication.”
14. Mr Hough issued his decision (“the Second Adjudication”) on 27 May 2014. He found that the dispute he was being asked to decide was not the same or substantially the same dispute as had been referred to Mr Calcroft. He found that Mr Calcroft had decided that no certificate had been issued in accordance with clause 4.8.1 and that this decision was binding on both the parties and him. However, he also decided that the 1 April 2014 notice was an effective notice under clause 4.8.4.1 and the appellant’s refusal to make payment created a dispute which was not the same or substantially the same as the one previously referred to Mr Calcroft and decided by him.
15. On this basis, having noted that the appellants had not given a counter notice under clause 4.8.4.3, he decided that the appellants were obliged by the terms of the Contract to pay £115,440.46 to the respondent within 7 days, with interest of £817.70 up to the payment date and thereafter at a rate of £17.90 per day. The appellants were also ordered to pay the Adjudicator’s fees of £1,944.
16. The sum was not paid, and on 11 June 2014 the respondent began proceedings in the Manchester District Registry (TCC), and was granted permission to issue an application for Summary Judgment. The appellants applied for an adjournment, coupled with an application to transfer the proceedings from Manchester to London, although without the requisite fee.
17. On 10 July 2014, Judge Raynor QC refused the application to adjourn, gave judgment in the respondent’s favour in the sum of £118,500, with costs summarily assessed at £6,000, but stayed execution of the judgment until 8 August 2014, with a requirement that any application to set aside be issued by then.
18. On 31 July the appellants applied to set aside the Order of 10 July and to transfer the hearing to London. On 14 October 2014, the appellants’ application to set aside the 10 July judgment was dismissed by Judge Raynor QC in a fully reasoned judgment, and they were ordered to pay costs, summarily assessed at £5,750.
19. It is from this judgment that the appellants appeal with the limited leave of the Single Lord Justice.
The issue and the argument
20. Although a number of decisions were referred to by the parties the applicable principles are conveniently summarised by Coulson J in Benfield Construction Ltd v Trudson (Hatton) Ltd [2008] EWHC 2333 (TCC) at para 34, adopting the summary set out by Ramsay J in HG Construction Ltd v Ashwell Homes (East Anglia) Ltd [2007] EWHC 144 (TCC) at para 36:
“(a) The parties are bound by the decision of an adjudicator on a dispute or difference until it is finally determined by court or arbitration proceedings or by an agreement made subsequently by the parties.
(b) The parties cannot seek a further decision by an adjudicator on a dispute or difference if that dispute or difference has already been the subject of a decision by an adjudicator.
(c) The extent to which a decision or a dispute is binding will depend on an analysis of the terms, scope and extent of the dispute or difference referred to adjudication and the terms, scope and extent of the decision made by the adjudicator. In order to do this the approach has to be to ask whether the dispute or difference is the same or substantially the same as the relevant dispute or difference and whether the adjudicator has decided a dispute or difference which is the same or fundamentally the same as the relevant dispute or difference.
(e) The approach must involve not only the same but also substantially the same dispute or difference. This is because disputes or differences encompass a wide range of factual and legal issues. If there had to be complete identity of factual and legal issues then the ability to readjudicate what was in substance the same dispute or difference would deprive clause [9.2] of its intended purpose.
(f) Whether one dispute is substantially the same as another dispute is a question of fact and degree.”
21. The reference to “fact and degree” derives from the observations of Dyson LJ in Quietfield Ltd v Vascroft Contractors Ltd [2006] EWCA Civ 1737:
“45. Paragraph 9(2) provides that an adjudicator must resign where the dispute is the same or substantially the same as one which has previously been referred to adjudication and a decision has been taken in that adjudication. It must necessarily follow that the parties may not refer a dispute to adjudication in such circumstances.
46. This is the mechanism that has been adopted to protect respondents from having to face the expense and trouble of successive adjudications on the same or substantially the same dispute. There is an analogy here, albeit an imperfect one, with the rules developed by the common law to prevent successive litigation over the same matter: see the discussion about Henderson v Henderson (1843) 3 Hare 100 abuse of process and cause of action and issue estoppel by Lord Bingham of Cornhill in Johnson v Gore Wood & Co (a firm) [2002] 2 AC 1, 30H-31G.
47. Whether dispute A is substantially the same as dispute B is a question of fact and degree. If the contractor identifies the same Relevant Event in successive applications for extensions of time, but gives different particulars of its expected effects, the differences may or may not be sufficient to lead to the conclusion that the two disputes are not substantially the same. All the more so if the particulars of expected effects are the same, but the evidence by which the contractor seeks to prove them is different.
48. Where the only difference between disputes arising from the rejection of two successive applications for an extension of time is that the later application makes good shortcomings of the earlier application, an adjudicator will usually have little difficulty in deciding that the two disputes are substantially the same.
22. Dr Timothy Sampson’s central submission was that Mr Hough was being asked to determine the same or substantially the same dispute as Mr Calcroft had been asked to determine. The same sum of money was in issue in both disputes and the only difference was that in the First Adjudication there had been no valid clause 4.8.4.1 notice, while in the Second Adjudication the respondent’s case was advanced on the basis of contractual notice under clause 4.8.4.1. In the words of Dyson LJ in Quietfield, the respondent was, Dr Sampson argued, avowedly but impermissibly trying to “make good the shortcomings” in the earlier application.
Decision
23. As was made clear from the recent decision of this Court in Harding (t/a MJ Harding Contractors) v Paice [2015] EWCA Civ 1231, Jackson LJ at para 57,
“It is quite clear from the authorities that one does not look at the dispute or dispute referred to the first adjudicator in isolation. One must look at what the first adjudicator actually decided. Ultimately it is what the first adjudicator decided which determines how much or how little remains for consideration by the second adjudicator.”
24. The terms of para 9.2, the approach in Quietfield of both May LJ at para 32 and Dyson LJ at para 48, and that of Jackson LJ in Harding at para 57, indicate that the starting point is the Adjudicator’s view of whether one dispute is the same or substantially the same. This has often been described (see for example in Quietfield at para 47) as being “a question of fact and degree”; and it is important that the court gives due respect to the adjudicator’s decision, see for example, Carillion Construction Ltd v Devonport Royal Dockyard Ltd [2005] EWCA Civ 1358, Chadwick LJ at para 85.
25. In my view Mr Hough was both entitled and correct to conclude that he was not considering the same or substantially the same dispute as Mr Calcroft. He recognised that both parties were bound by the express finding in the First Adjudication that the Final Certificate was ineffective and that the letter of 20 December 2013 did not constitute a valid notice under clause 4.8.4.1. Mr Hough was being asked to decide whether a different notice served 4 months later had different consequences. Although both adjudications were dependent on the ineffectiveness of the Final Certificate and claimed the same sum, the respondent was not seeking the redetermination of any matter that had been decided by Mr Calcroft. The “Relevant Event” was the Respondent’s clause 4.8.4.1 notice of 1 April 2013. Self-evidently neither this notice nor the consequences which flowed from it (the entitlement to be paid if no counter notice were served) gave rise to disputes which had been referred to Mr Calcroft. The respondent was not making good a shortcoming in the earlier letter; it was approaching its claim via a new and different route, one which relied on the letter of 1 April and thereby raised a different dispute.
26. As Judge Raynor QC put the matter in para 68 of his judgment:
“… what was decided in the First Adjudication was the ineffectiveness of the notice given in December 2013. That was not raised at all as an issue in the Second Adjudication.”
27. The analysis might have been different if the respondent had tried in some way to cure a defect in the earlier notice so as to rely on it, but that was not the position here. It was the new notice and only the new notice which founded the respondent’s entitlement to be paid.
28. For these reasons, which are effectively the same as those given by Mr Hough and Judge Raynor QC, I would dismiss the appeal.
Sir Robin Jacob said:
29. I agree.
Beatson LJ said:
30. I also agree.
Appeal dismissed