Babcock Marine (Clyde) Ltd v HS Barrier Coatings Ltd
| Jurisdiction | England & Wales |
| Judge | Mrs Justice O'Farrell |
| Judgment Date | 28 June 2019 |
| Neutral Citation | [2019] EWHC 1659 (TCC) |
| Date | 28 June 2019 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Docket Number | Case No: HT-2019-000131 |
[2019] EWHC 1659 (TCC)
IN THE HIGH COURT OF JUSTICE
BUSINESS & PROPERTY COURTS OF ENGLAND AND WALES
TECHNOLOGY AND CONSTRUCTION COURT (QBD)
Royal Courts of Justice
Strand, London, WC2A 2LL
Mrs Justice O'Farrell DBE
Case No: HT-2019-000131
Ms Gaynor Chambers (instructed by Osborne Clarke LLP) for the Claimant
Ms Jennifer Jones (instructed by Hill Dickinson LLP) for the Defendant
Hearing dates: 18 th June 2019
Approved Judgment
I direct that pursuant to CPR PD 39A para 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.
The following matters are before the court:
i) the defendant's application for relief from sanctions and an extension of time for service of its Part 11 application contesting the jurisdiction of the court;
ii) the defendant's application for the claim form to be set aside or for proceedings to be stayed pursuant to CPR 11(6) on the ground that the Courts of England and Wales do not have, or should not exercise, jurisdiction to determine the dispute;
iii) the claimant's application for further directions, if appropriate, in the adjudication enforcement proceedings.
The Contract
By a contract dated 15 December 2014 (“the Contract”), the claimant (“Babcock”) engaged the defendant (“HSBC”) to carry out ship lift docking cradle re-preservation works at Her Majesty's Naval Base Clyde (“HMNB Clyde”).
The Contract was based on the NEC 3 Engineering and Construction Short Contract (June 2005), subject to amendment by the parties.
The total price for the works was £800,000. Clauses 50 and 51 (as amended by clause Z12) and the Contract Data provide for periodic payments to be made to HSBC against assessments made on the last Monday of each month and for such payments to be made by Babcock within 30 days of the assessment.
Clause 93 (as amended by clause Z 17) provides for a tiered dispute resolution process:
“A dispute arising under or in connection with this contract is notified to the Employer's and Contractor's commercial management organisations who shall use all reasonable endeavours to resolve through negotiation. If the dispute is not resolved within three days the matter shall be escalated to commercial senior management who shall have 3 days to resolve. If the dispute is not resolved the matter shall be escalated to commercial directors, who shall have 3 days to resolve. If resolution fails, the dispute shall be decided by the Adjudicator in accordance with clauses 93.2, 93.3, 93.4 (and 94.1 if specified in the Contract Data).”
Clause 94.1 provides for the parties to refer a dispute to adjudication at any time, where the United Kingdom Housing Grants, Construction and Regeneration Act 1996 (“the 1996 Act”) applies. The Contract Data provides that the 1996 Act applies.
The Contract Data further provides that:
“The Adjudicator is to be agreed by both parties or upon failure to be appointed by the chairman of the institute of arbitrators …
The Adjudicator nominating body is The Chartered Institute of Arbitrators (Scottish Branch).”
Clause 93.2 (1) provides:
“The Parties appoint the adjudicator under the NEC Adjudicator's Contract current at the starting date. The adjudicator acts impartially and decides the dispute as an independent adjudicator and not as an arbitrator.”
Clause 93.3(8) provides:
“The Adjudicator's decision is binding on the Parties unless and until revised by the tribunal and is enforceable as a matter of contractual obligation between the Parties and not as an arbitral award. The adjudicator's decision is final and binding if neither Party has notified the other within the times required by this contract that he intends to refer the matter to the tribunal.”
Clause 93.4 states:
“A Party may refer a dispute to the tribunal if
• the party is dissatisfied with the Adjudicator's decision
• the Adjudicator did not notify a decision within the time allowed and a new adjudicator has not been chosen,
except that neither Party may refer a dispute to the tribunal unless they have notified the other Party of their intention to do so not more than four weeks after the end of the time allowed for the Adjudicator's decision.”
The Contract Data provides that:
“The tribunal is Arbitration.
If the tribunal is arbitration, the arbitration procedure is in accordance with the Scottish Arbitration Code, prepared by the Scottish Council for International Arbitration, The Chartered Institute of Arbitrators (Scottish Branch).”
Clause 12 (as amended by clause Z18) states:
“12.1 This contract is governed by the law and statutes of the country where the site is.
12.2 No change to this contract, unless provided for by the conditions of contract, has effect unless it has been agreed, confirmed in writing and signed by the Parties.
12.3 This contract is the entire agreement between the Parties.…”
The site is identified in the Contract Data as HMNB Clyde, which is located in Scotland.
Clause Z2.1 states:
“In the event of any discrepancy in the contract the documentation shall take precedence in descending order as listed:
(a) Additional conditions
(b) Conditions of contract, NEC 3 Engineering and Construction Short Contract (June 2005)
(c) Contract Data
(d) Employer's Invitation to Tender
(e) Contractor's Tender Submission
(f) Any other documents forming part of the contract.”
The Variation Agreement
By an agreement dated 22 December 2016, signed and dated by the parties (“the Variation Agreement”), the parties agreed to revise the contract value to £1,070,056.11.
The Variation Agreement includes the following terms:
“This revised value, less the provisional sum, relates to the following:
“1) Full and final settlement of any claims relating to this contract in [its] present form with the sole exclusion of the extra over cost of treating the 6no. large Strongbacks. For the avoidance of doubt, claims for additional costs can only be made for events which may occur in the future, in accordance with the provisions of the NEC Short Contract dated 1 st December 2014 which may lead to a Compensation Event.”
…
5) Confirmation of agreement to the original Contract dated 1 December 2014 and full acceptance of the terms and conditions contained therein.
…
Application for payment shall be submitted by the 15 th of each month…”
“This agreement shall be governed by and construed in accordance with the Laws of Scotland and any dispute which may arise between the parties concerning this agreement shall be determined by the Courts of Scotland in line with the original Contract dated 1 December 2014.”
The dispute
On 15 June 2018 Babcock served a notice of termination on HSBC.
On 21 June 2018 HSBC applied for a termination payment in the sum of £967,549.42 plus VAT.
On 19 July 2019 Babcock certified £NIL in respect of the termination assessment and made no payment.
On 10 September 2018, HSBC notified Babcock that it intended to refer the dispute to adjudication. Mr Donny Mackinnon was appointed as the adjudicator. The Scheme for Construction Contracts (Scotland) Regulations 1998 (as amended by the 2011 Regulations) (“the Scottish Scheme”) applied to the extent that the terms of the contract did not comply with the 1996 Act.
On 14 November 2018 the adjudicator issued his decision (“the First Adjudication Decision”), deciding that HSBC was entitled to the sum claimed in full plus interest and fees by reason of Babcock's failure to issue a valid pay less notice. On 3 December 2018 the First Adjudication Decision was amended in respect of interest awarded.
Babcock paid the sum awarded to HSBC in accordance with the First Adjudication Decision.
Both parties issued notices of dissatisfaction in respect of the First Adjudication Decision.
On 7 February 2019 Babcock notified HSBC that it intended to refer to adjudication the dispute concerning the true value of the works. Mr Len Bunton was appointed as the adjudicator. The Scottish Scheme applied to the extent that the terms of the contract did not comply with the 1996 Act.
On 22 March 2019 the adjudicator issued his decision (“the Second Adjudication Decision”), deciding that the gross valuation of the works as at termination was £1,524,420.58 and directing that HSBC should pay to Babcock the sum of £613,338.03 (inclusive of VAT) plus interest and fees. Both parties also served notices of dissatisfaction in relation to this Decision.
HSBC failed to pay the sum awarded pursuant to the Second Adjudication Decision and wishes to challenge the validity of the same on grounds that the adjudicator failed to give reasons for his decision and failed to consider a defence advanced by HSBC.
The proceedings
On 17 April 2019 Babcock issued these proceedings to enforce the Second Adjudication Decision in the sum of £613,338.09 together with the adjudicator's fees and interest.
On 2 May 2019 Fraser J issued directions in the enforcement proceedings, including an oral hearing on 24 June 2019 for Babcock's summary judgement application.
On 14 May 2019 HSBC acknowledged service, stating that it wished to contest jurisdiction.
On 29 May 2019 HSBC issued an application seeking to set aside service of the claim form and particulars of claim, alternatively staying the proceedings based on a jurisdictional challenge.
On 7 June 2019 Pepperall J issued directions in respect of the jurisdictional challenge, including a hearing on 18 June 2019.
Both parties recognised that there was insufficient time between this hearing and 24 June 2019 for evidence to be served in the adjudication enforcement application. Therefore, that date was vacated and a...
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