Anjali Khurana and Another v Webster Construction Ltd
| Jurisdiction | England & Wales |
| Judge | His Honour Judge Stephen Davies. |
| Judgment Date | 20 March 2015 |
| Neutral Citation | [2015] EWHC 758 (TCC) |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 20 March 2015 |
| Docket Number | Case No A50MA136 |
[2015] EWHC 758 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
MANCHESTER DISTRICT REGISTRY
TECHONOLOGY AND CONSTRUCTION COURT
Manchester Civil Justice Centre,
1 Bridge Street West, Manchester M60 9DJ
His Honour Judge Stephen Davies
SITTING AS A JUDGE OF THE HIGH COURT
Case No A50MA136
Tina Ranales-Cotos (instructed by Blackstone Solicitors, Hale) for the Claimants
Samuel Townend (instructed by Gorvins Solicitors, Stockport) for the Defendant
Hearing date: 10 February 2015
Supplemental written submissions filed 16 and 18 February 2015
Judgment circulated in draft: 3 March 2015
APPROVED JUDGMENT
I direct that pursuant to CPR PD 39A paragraph 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
The claimants are the owners of a substantial detached house in Bowdon, Cheshire, and the defendant is a building company. In April 2010 the claimants and the defendant entered into a contract for construction works at the property ("the construction contract"). In October 2013, acting through their solicitors, they entered into an agreement to determine a dispute which had arisen between them by adjudication ("the adjudication agreement"). In September 2014 the appointed adjudicator, Mr Peter Dale, made a decision in relation to that dispute ("the decision"). In November 2014 HHJ Raynor QC decided that the decision should be summarily enforced but, due to the defendant's financial circumstances, stayed execution on conditions that the claimants: (a) paid the sum decided due by the adjudicator into court; and (b) commenced court proceedings in relation to the matters in dispute by 12 December 2014. The claimants complied with both conditions, but the defendant now applies to stay or dismiss this action, being the court proceedings thus commenced.
The issues which arise on the application are:
(a) Whether the parties agreed that the decision should be finally binding upon them; and if so
(b) Whether some or all the matters advanced by the claimants in this action have been finally determined by the decision, so as to preclude them from advancing them in these court proceedings.
Issue (a) requires the court to decide the true construction of the adjudication agreement. It also requires the court to consider the Unfair Terms in Consumer Contracts Regulations 1999 ("UTCCR") when making that decision.
Issue (b) requires the court to consider and compare the nature of the dispute referred to adjudication and the nature of the claims advanced in this action.
The application was argued on 10 February 2015, and was adjourned to allow counsel to research and make representations in writing as to the impact, if any, of the UTCCR upon this matter, being a point which was raised by the court during the course of the hearing. I received and considered written submissions in accordance with the timetable directed, and now produce this judgment. I am grateful to Ms Ranales-Cotos, counsel for the claimants, and Mr Townend, counsel for the defendant, for their oral and written submissions.
For the reasons which follow, I am satisfied that the defendant's application is well-founded and that no part of the claim should be allowed to proceed further.
The circumstances in which the parties agreed to adjudication
The construction contract is in a pre-printed form entitled "Large Works Contract", and is stated to be intended for use on projects exceeding £5,000 between a private home owner and a builder. There is no evidence as to the source of that pre-printed form, which is not one with I have previously encountered, or as to who proposed its use in this case. It contains a provision for termination by either party for cause. It provides that in such an eventuality the builder is entitled to be paid for all works and materials on-site at the time of termination, and further provides that:
"If an agreement cannot be reached as to how much is owed the services of an independent quantity surveyor (who is acceptable to both parties) should be sought and both parties should agree in writing to abide by his figure. Both parties will meet the cost."
There is a similar, but not identical, provision for resolution of any post-completion "disagreement regarding the standard of work". There is, however, no dispute resolution provision of more general application.
The defendant proceeded with the construction works but, by late 2011 or early 2012, the parties were in dispute, with the defendant claiming that it had satisfactorily completed the works and was entitled to payment under its final valuation and to release of retention, and the claimants complaining that the works had not been fully completed, that there were a number of items of unsatisfactory work, and that the project was in serious delay due to the defendant's defaults.
By September 2013 the defendant had instructed solicitors, Gorvins Solicitors of Stockport, who proceeded to serve statutory demands upon the claimants, alleging that they owed the defendant the sum of £40,653.13. The claimants had also instructed solicitors by this stage, Blackstone Solicitors of Hale, who sent a letter dated 27 September 2013 challenging the valuation on a number of grounds, including allegations that certain items of work had not been completed, allegations of defective work and delay, allegations that the claimants had suffered substantial losses as a result, and an allegation that after taking all these matters into account there was nothing due to the defendant. The claimants did not positively assert that they had, and would pursue, a counterclaim, but expressly reserved the right to do so. The letter set out the claimants' position that it was an abuse of process to proceed with a statutory demand in such circumstances, and concluded as follows:
"If your client considers that it has a genuine claim then it should in accordance with the contract appoint an independent quantity surveyor."
That provoked a response from Gorvins dated 30 September 2013 in which, having said they would take instructions on the contents of Blackstone's letter and would not issue bankruptcy petitions in the meantime, they said as follows:
"In the event … that [the] dispute … is not capable of resolution by further dialogue, our client is prepared to agree to resolution of the dispute by an independent quantity surveyor subject to certain clarifications to the contractual procedure being agreed.
In the first instance, in the event that it is not possible to agree an independent quantity surveyor that is acceptable to both parties, we seek your confirmation that either party may request that the President of the RICS make an appropriate appointment.
Secondly the contract is silent as to the relevant procedure to be adopted by the independent quantity surveyor. We seek your confirmation that the procedure to be adopted by the independent quantity surveyor should be conducted in accordance with the Scheme for Construction Contracts (England and Wales) Regulations 1998 (as amended) save that the decision of the independent structural quantity surveyor shall be binding on the parties.
We are instructed that if you agree to the above procedural clarifications we are to forthwith withdraw the strategy demands to allow matters to progress either by way of further dialogue or by reference to an independent surveyor."
Over 3 weeks later, on 24 October 2013 Blackstone responded, having taken their clients instructions, as follows:
"1. On the basis of your client withdrawing the statutory demands our clients agree to the appointment of a quantity surveyor being made in accordance with the Scheme for Construction Contracts … and that the decision of the quantity surveyor shall be binding on both parties.
2. In the event that the parties are unable to agree an independent quantity surveyor, we confirm our agreement that a request may be made to the President of the RICS to make an appropriate appointment.
Please confirm that your clients has now withdrawn the statutory demands."
By letter dated 5 November 2013 Gorvins responded, confirming that the statutory demands were withdrawn on that basis.
Unfortunately no agreement could be reached, and finally in July 2014 Gorvins served notice of adjudication. There is no need for me to refer to the detail of subsequent events, since it is common ground that the agreement to refer the dispute to adjudication was concluded by the exchange of correspondence in autumn 2013 and that subsequent events cannot assist in construing the effect of that agreement. However it is worth noting, because it has some relevance to the argument in relation to the UTCCR, that when Gorvins served an amended notice of adjudication on 6 August 2014 the accompanying letter, referring to the agreement made in October 2013, stated in terms that it had been agreed that the adjudicator's decision "would be binding on the parties on a final basis", and that Blackstone did not suggest to the contrary.
Issue (a) — did the parties agree that the adjudicator's decision should be finally binding upon them?
The applicable legal principles
It is common ground that the starting point is that the adjudication agreement is to be construed in the same way as any other contract. The relevant principles are to be found in Chitty on Contracts (31 st ed.) at §12–41 onwards. Lord Clarke JSC conducted a detailed review of the principles in Rainy Sky v Koomin [2011] 1 WLR 2900, at [§14–30], and §21 and §23 are of particular assistance in this case.
"21. The language used by the parties...
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