Aecom Design Build Ltd v Staptina Engineering Services Ltd

JurisdictionEngland & Wales
JudgeMr Justice Fraser
Judgment Date05 April 2017
Neutral Citation[2017] EWHC 723 (TCC)
CourtQueen's Bench Division (Technology and Construction Court)
Date05 April 2017
Docket NumberCase No: HT-2017-000033

[2017] EWHC 723 (TCC)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

TECHNOLOGY AND CONSTRUCTION COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

The Honourable Mr Justice Fraser

Case No: HT-2017-000033

Between:
Aecom Design Build Limited
Claimant
and
Staptina Engineering Services Limited
Defendant

Charles Pimlott (instructed by BLM LLP) for the Claimant

Alexandra Bodnar (instructed by Walker Morris LLP) for the Defendants

Hearing date 28 March 2017

Draft distributed to parties 31 March 2017

Mr Justice Fraser

Introduction and background to the dispute

1

This is a Part 8 claim brought by AECOM Design Build Ltd ("AECOM") against Staptina Engineering Services Ltd ("Staptina") seeking certain declarations in relation to a decision by an adjudicator dated 10 January 2017 ("the Decision"). The adjudicator was Ms Gaynor Chambers, and the Decision came as a result of the third adjudication that she conducted between the parties. The subject matter of the first two adjudications, and her decisions in those proceedings, are not relevant to the Part 8 claim. The declarations sought by AECOM in these proceedings are to the effect that certain paragraphs of the Decision (paragraphs 54 to 67) and two sentences (the second sentence of paragraph 7.2 and the second sentence of paragraph 74.2) are unenforceable. The reasons for this are said to be that, in those limited respects identified in those paragraphs and those two sentences, the adjudicator acted outside her jurisdiction and/or in breach of natural justice. AECOM does not however seek to impugn the enforceability of the Decision as a whole, merely those parts of it identified. It seeks to have those parts severed from the remainder of the Decision.

2

AECOM was the main contractor to Thames Water Utilities Ltd for certain treatment works at the Long Reach treatment works. AECOM entered into a sub-contract with Staptina dated 23 May 2014 whereby AECOM engaged Staptina to undertake mechanical installation works at Long Reach. This sub-contract was on the NEC Engineering and Construction Short Subcontract form June 2005, with amendments dated September 2011, and other bespoke amendments attached to it at Appendix 1 ("the sub-contract"). The sub-contract works were commenced by Staptina, and the first adjudication concerned a dispute in relation to the validity of a Pay Less notice in respect of Application No.17. The decision in the first adjudication was dated 18 March 2016. Thereafter, by a letter dated 30 March 2016 AECOM terminated its sub-contract with Staptina ("the Termination Letter"). The Termination Letter stated that the termination was pursuant to Clause 90.3 of the sub-contract. It read "we terminate the Contract pursuant to Clause 90.3 – final sentence – Reason 5". The relevant sub-contract terms are dealt with below.

3

The Termination Letter also stated, amongst other things, as follows:

"Termination of the Contract does not affect Staptina's ongoing obligation to correct Defects. A list of Defects as at the date of this letter is attached as Appendix 2 to this letter. You are fully aware of these Defects and have been requested to return to site on numerous occasions to carry out Defect correction. This includes, without limitation, requests made on; 29 February 2016, 08 March 2016, 18 March 2016, 25 March 2016.

If these Defects are not corrected within two (2) weeks of the Termination Date the Defects will be corrected by a third party. Pursuant to Clause 42.1 of the Contract you will be responsible for these third party costs."

A second adjudication followed this, and this concerned a disputed entitlement by AECOM to make deductions from the gross valuation of Staptina's works, those deductions being for delay damages and the absence of final documentation. The decision in that adjudication was dated 18 July 2016. Both the first and second adjudications were conducted by Ms Chambers.

4

Thereafter, the parties remained in dispute about other matters. Staptina appointed a company of construction consultants, BEA, to act on its behalf and in a letter dated 28 October 2016 BEA wrote to AECOM setting out its involvement. It also issued an application "for payment of the amount due on termination". The letter from BEA continued:

"On the 30 March 2016, your company served a termination certificate pursuant to 'Reason 5'. As your company, did not terminate for reasons 1, 2, 3 or 4 then there is no entitlement to deduct costs for your company completing the works, see clause 92.2".

BEA also provided a calculation and stated that a net amount was due to Staptina of £547,105.54, after taking account of the value of previous payments made by AECOM, which amounted to just over £2.02 million. The calculation was provided on a separate sheet headed "The Amount Due on Termination 30 March 2016", and identified in conventional fashion (although at a high level) the sub-contract work value and certain Compensation Events, which demonstrated how the overall figure was calculated.

5

The reply to that letter by AECOM is important because it is relied upon by Ms Bodnar for Staptina as part of her submissions about how the dispute referred to adjudication should be construed. In a lengthy response dated 18 November 2016, with accompanying appendices, AECOM set out its assessment of the application for payment brought by BEA on Staptina's behalf. This assessment did not accept that the amount advanced by BEA was correct. The following passages are relevant:

1. In one section, headed "Staptina Outstanding Works and Defects assessed by AECOM" it was said that Staptina had been notified on 14 April 2016 "that Staptina had failed to return to site to correct the notified Defects and outstanding works. In accordance with the terms of the Sub contract the costs of these works have been assessed by [AECOM]. These are further detailed in Appendix 3".

2. In a section headed "The application for payment dated 28 th October 2016 and AECOM valuation" it was stated "Our intention to pay less is based on our valuation of the Subcontract Works; your entitlement to financial adjustments for Compensation Events (CE); our assessment of delay and prolongation costs, our entitlement to deduct Delay Damages, our entitlement to deduct the cost of Defects not rectified".

3. In Appendix 3, AECOM had identified a number of defects. Three columns appear in the appendix against each entry above a sub-heading "defects". Three other columns appear above another sub-heading, "outstanding works". Each set of three columns has the same entries – "Forward", "DCS" and "AV".

6

I was told at the hearing of the Part 8 Claim that Forward and DCS relate to sub-contractors' charges or costs to do each item of work, and are the names of different sub-contractors. AV means the average of those two charges or costs by each of those companies to arrive at an average price for the work said to be required to correct each particular defect. These different figures lead to a total for defects, namely an average, of £220,622 which appears at the foot of the final column for defects on the last page of Appendix 3.

7

The letter concluded with an invitation from AECOM to Staptina to reassess its claim, and in certain circumstances, also to provide further particulars. The parties could not agree and BEA, acting for Staptina, issued a Notice of Adjudication dated 24 November 2016.

The adjudication

8

The third adjudication in the series then commenced. There is in fact currently underway a fourth adjudication, but that does not affect the matters before the court on this application, although that adjudication has certain peculiarities to which I will return later in this judgment. That adjudication is before another adjudicator, Mr Wood, and is not before Ms Chambers. The Notice of Adjudication in the third adjudication was from BEA on behalf of Staptina, was addressed to AECOM, is dated 24 November 2016 and states the following, inter alia:

"On behalf of our client we hereby issue formal Notice of Adjudication upon you that our client intends to refer the dispute outlined below to Adjudication pursuant to clause 93 of the NEC Engineering and Construction Short Subcontract.

The dispute between our client and yourself that is hereby referred to adjudication relates to whether you can make any deductions from our client following your termination of our client's employment under the Sub Contract on 30 March 2016.

The dispute arose on or before 18 November 2016 when, by your letter of that date, you notified our client of your assessment of our client's termination account and that you intend to pay less than the sums applied for because, amongst other things, of your alleged entitlement to deduct the cost of Defects not rectified.

On a proper construction of the amount due on termination pursuant to Reason 5 (your reason for termination of our client's employment under the Sub Contract) you are not entitled to deductions for the cost of Defects or for any other reason.

The Referring Party's claim is for a declaration that following termination pursuant to Reason 5 of the Sub-Contact the Respondent was/is not entitled to make any deductions against the Referring Party's termination account for alleged Defects not rectified or at all, or such declaration as the Adjudicator deems proper".

9

In view of the court's experiences of some other adjudications, in which what might be called tactical manoeuvring by the parties takes place on a considerable scale, this adjudication then proceeded relatively smoothly. However, it would not be correct to say that tactical manoeuvring was wholly absent. The adjudicator was contacted and her availability was confirmed. She stated to the parties in an e mail dated 28 November 2016 that she could accept the appointment subject to the effect of the forthcoming...

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