Barrier Ltd v Redhall Marine Ltd
| Jurisdiction | England & Wales |
| Judge | Judge Behrens,Judge Behrens: |
| Judgment Date | 30 March 2016 |
| Neutral Citation | [2016] EWHC 381 (QB) |
| Date | 30 March 2016 |
| Court | Queen's Bench Division |
| Docket Number | Case No: B90NE087 |
[2016] EWHC 381 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
NEWCASTLE UPON TYNEDISTRICT REGISTRY
The Court House
Oxford Row
Leeds LS1 3BG
His Honour Judge Behrens Sitting As A Judge Of The High Court In Leeds
Case No: B90NE087
Hari Menon (instructed by Allyn Walton) for the Applicant
Hannah McCarthy (instructed by Hawkswell Kilvington) for the Respondent
Hearing dates: 17 February 2016
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.
Introduction
This is an application, issued on 2.7.15, of the Applicant (Barrier) for pre-action disclosure under CPR r.31.16 against the Respondent (Redhall).
In December 2001 Redhall entered into a contract with BAE for the construction of Astute Class submarines for the Ministry of Defence ( MoD). In January 2002 Redhall then sub-contracted part of its functions under the Main Contract to Barrier. Barrier's role under the Sub-Contract related mainly to painting the submarines internally and externally.
The Sub-Contract is for 3 submarines only – Boats 1 to 3. It is common ground that Barrier carried out work on 3 other submarines, Boats 4 to 6.
It will be necessary to refer to the Subcontract in more detail later in this judgment. It is, however, common ground that under clauses 4.2 and 4.3 Redhall is only obliged to pay Barrier out of moneys that have been paid to it by BAE under the Main Contract.
Barrier contends that substantial sums have been deducted by Redhall in respect of the sums otherwise due to them. These are set out in the agreed case summary as follows:
A. Deduction by Redhall of sums of between £88k and £130k due to Barrier on "the Workscope".
B. Deduction by Redhall of £240k on the Workscope.
C. Deduction of £60k from the Workscope, ostensibly in anticipation of an audit to be carried out by BAE for 2013–14.
D. Non-payment of 50% of the "Fixed Lump Sum". This relates to Boats 4 to 6 and quantum is undetermined.
Barrier is contemplating proceedings against Redhall to recover these sums. However it appreciates that if these deductions have in fact been made by BAE the action will fail. The purpose of this application is to discover whether there any documents in Redhall's custody, possession or power which will show what payments have been made by BAE and whether these deductions have in fact been made.
Redhall seeks to defend the application on a number of grounds. First, it asserts that the subcontract incorporates an arbitration agreement. If so any proceedings are liable to be stayed with the result that there is established authority that there is no jurisdiction to make an order for pre-action disclosure. Second, it asserts that no such documents exist. Third it contends that the order sought is too wide.
Barrier does not accept that any arbitration agreement was incorporated into the subcontract. It further distinguishes between Boats 1 – 3 and Boats 4 – 6. Even if the contract for Boats 1 – 3 incorporated the arbitration clause it does not accept it was incorporated for Boats 4 to 6.
Incorporation
It is convenient to deal with the incorporation issue first in relation to Boats 1 – 3.
The contract documentation.
The Purchase Order
Redhall was previously known as Chieftain Insulation Ltd. (CIL). It changed its name to Redhall on 1 st April 2011.
It is not in dispute that in December 2001 CIL sent Barrier a purchase order in respect of painting and scaffolding work on Astute Submarines. The Purchase Order was numbered 122274. It purported to come from Chieftain Power Services Ltd (CPSL) which is not the same company as CIL but is a company within the same group. On the face of the document there appears this sentence.
"The terms overleaf must be read and strictly adhered to."
The evidence establishes that there are at least two copies of every purchase order. The top copy is designed to be sent to the client has CIL's standard conditions on the back. The carbon copy, which is yellow, is retained by CIL and has nothing on the back. All the companies within the group use the same standard conditions and similar forms of purchase order.
Barrier has produced the purchase order that was sent to it in December 2001. It appears that for some unexplained reason it was sent the yellow carbon copy with no conditions on the back.
The Standard Conditions of CIL include as Condition 18:
"18. Arbitration.
Any dispute or indifference (sic) arising from the Contract shall on application of either Seller or Purchaser be submitted to arbitration in accordance with the Arbitration Act 1950 or any amendment or re-enactment thereof for the time being in force."
It is not in dispute that, if incorporated, this would be an effective arbitration clause which would be effective to prevent the application for pre action disclosure.
In the course of his submissions Mr Menon drew my attention to a number of the Standard Conditions which he submitted were unsuitable for a contract such as this. These included a clause about packing and a clause about patents. It is not necessary to refer to them in detail.
The Main Contract
The Main Contract between BAE and CIL is lengthy and detailed. It contains an arbitration clause in clause 19 and a privacy clause in clause 20.
Clause 19.03 – "If within 30 days of either party giving the other notice of any matter or thing which constitutes a dispute, difference or question relating to the Contract, other than a matter or thing as to which the decision of any person or persons named in the Contract shall be final and conclusive and except to the extent to which special provision for arbitration is made elsewhere in the Contract, and the Shipbuilder and the Contractor have failed to reach agreement, then subject as expressly provided in this Contract such dispute, difference or question shall on either party serving a notice of arbitration on the other, be referred to the arbitration of two persons, one to be appointed by the Shipbuilder and one by the Contractor, or their Umpire, in accordance with the provisions of the Arbitration Act 1996."
Clause 19.05 – "If any dispute, difference or question raised under this contract raises issues which are substantially the same as or connected with the issues between the Shipbuilder and any Sub-contractor, sub-Sub-contractor and so on of the Contractor, then, at the option of the Shipbuilder such dispute shall also be referred to arbitration under this Contract …"
Clause 19.06 – "For the avoidance of doubt it is agreed between the parties that the arbitration process and anything said, done or produced in or in relation to the arbitration process (including any awards) shall be confidential as between the parties, except as may be lawfully required in judicial proceedings relating to the arbitration or otherwise. No report relating to anything said, done or produced in or in relation to the arbitration process may be made beyond the tribunal, the parties, their legal representatives and any person necessary to the conduct of the proceedings, without the concurrence of all parties to the arbitration."
Clause 20.14 – "The Contractor shall procure that all Sub-Contracts include a resolution of disputes provision and that any question, disputes or differences raised in connection therewith are settled in private."
The Subcontract
The subcontract is dated January 2002 and made between CIL and Barrier. It is short 3 page document containing only 10 clauses. I was referred in particular to clauses 1, 9 and 10.
Clause 1 – "This Agreement relates to the three submarines covered by BAE Systems Marine Limited's Purchase Orders addressed to CIL and dated 14 December 2001 and numbered AC22T0589, AC23T0589 and AC24T0589 and the terms and conditions and the Schedules referred to therein, copies of which has been provided to Barrier and is hereafter referred to as "the Contract". Barrier participated with CIL in negotiating and agreeing the Contract terms."
Clause 9 – "The terms of the [Main] Contract shall be incorporated into this Agreement so as to bind Barrier to perform its terms save only where inconsistent with the express terms of this Agreement. For the avoidance of doubt and without limitation this shall include BAE SYSTEMS break clause (section 1, Contractors Clauses and Conditions Ref: V/SSC/1 (astute Class) Issue 10/99, Clause 12)."
Clause 10 – "Subject to paragraph 9 of this Agreement, CIL's standard terms and conditions, a copy of which was on the reverse of the CIL Purchase Order number 122274 dated 21 December 2001, shall be incorporated into this Agreement save only where inconsistent with its express terms, including, without limitation, the terms of the Contract incorporated by paragraph 9 above. For the avoidance of doubt, Purchase Order number 122274 dated 21 December 2001 is otherwise superseded by this Agreement."
A number of points can be made at this stage:
As is clear from clause 1 it only expressly applies to 3 submarines. Furthermore Barrier had some specified part in the negotiations.
Clause 10 expressly incorporates CIL's standard terms and identifies them by reference to the Purchase Order. However it refers to it with a date and as being a "CIL" Purchase Order whereas, as noted above, the copy produced by Barrier is a CPSL purchase order without any terms on the reverse.
Submissions and Discussion
M s McCarthy...
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