Bouygues (uk) Ltd (Claimant/Appellant) v Dahl-jensen (uk) Ltd
| Jurisdiction | England & Wales |
| Judgment Date | 31 July 2000 |
| Judgment citation (vLex) | [2000] EWCA Civ J0731-4 |
| Docket Number | A2/2000/0181 |
| Court | Court of Appeal (Civil Division) |
| Date | 31 July 2000 |
[2000] EWCA Civ J0731-4
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
(Mr Justice Dyson)
ON APPEAL FROM THE QUEENS BENCH DIVISION
Royal Courts of Justice
Strand
London WC2A 2LL
lord Justice Peter Gibson
Lord Justice Chadwick
Lord Justice Buxton
A2/2000/0181
MR S FURST QC (Instructed by J R Jones, 56A The Mall, Ealing, London, W5 3TA) appeared on behalf of the Applicant.
MR SEAN BRANNIGAN (Instructed by Messrs Hammond Suddards, Devonshire Square, London) appeared on behalf of the Respondent.
LORD JUSTICE PETER GIBSON: I will ask Buxton LJ to give the first judgment.
LORD JUSTICE BUXTON: This appeal from Dyson J arises out of a reference to adjudication of differences arising during a construction contract, under the procedure envisaged by section 108 of the Housing Grants and Reconstruction Act 1996. That provides that the parties may at any time refer disputes to adjudication and, by section 108(3), the decision of the adjudicator shall be binding until the dispute is finally determined by legal proceedings or arbitration. The purpose of this procedure is to enable a quick and interim, but enforceable, award to be made in advance of the final resolution of what are likely to be complex and expensive disputes. That feature is reinforced by the provisions of the Construction Industry Model Procedure, by which the adjudication in this case was governed. Rules 4 and 5 of that procedure provide as follows:
"4.The Adjudicator's decision shall be binding until the dispute is finally determined by legal proceedings, by arbitration … or by agreement.
The Parties shall implement the Adjudicator's decision without delay whether or not the dispute is to be referred to legal proceedings or arbitration."
As Dyson J himself explained in the earlier case of Macob v Morrison [1999] BLR 93 at page 97:
"It is clear that Parliament intended that the adjudication should be conducted in a manner which those familiar with the grinding detail of the traditional approach to the resolution of construction disputes apparently find difficult to accept. But Parliament has not abolished arbitration and litigation construction disputes. It has merely introduced an intervening provisional stage in the dispute resolution process. Crucially, it has made it clear that decisions of adjudicators are binding and are to be complied with until the dispute is finally resolved."
The effective claim in the present proceedings is an application by Dahl-Jensen (UK) Ltd ("Dahl-Jensen"), one of the parties to a substantial building sub-contract, for summary judgment under Part 24 of the CPR to enforce an award of an Adjudicator, Mr William Gard. That award arose as follows.
Bouygues (UK) Ltd ("Bouygues"), was the main contractor for building works under a PFI contract. Dahl-Jensen was the mechanical sub-contractor. The sub-contract contained both an arbitration and an adjudication clause, and also provided for retention of 5% of the contract price, pending certification under the main PFI contract. In due course Bouygues, being dissatisfied with Dahl-Jensen's work, determined Dahl-Jensen's employment and arranged for the subcontract work to be completed by others.
Dahl-Jensen issued a notice to adjudicate, claiming payment for work done but allegedly not valued under extensions of the sub—contract, and also damages for breaches by Bouygues of the sub-contract and for its wrongful repudiation. Bouygues shortly thereafter issued its own notice to adjudicate, claiming the refund of payments already made in respect of work allegedly overvalued under the sub-contract, damages for delayed completion, and damages for costs incurred by the termination of Dahl-Jensen's employment. Both notices were referred to Mr Gard. It was agreed that he should treat Bouygues' claim as a counter-claim to the claim by Dahl-Jensen. Before us, there was some consideration of whether that had been an appropriate course, but it was the course taken by agreement and, although it was the direct cause of the difficulty to which I shall shortly advert, it has not been sought to attack Mr Gard's award on that ground.
It will have been seen that much of the dispute concerned the valuation of work performed under the sub-contract before its termination, Dahl-Jensen claiming in respect of extensions of the works and Bouygues claiming that work within the contract had been overvalued. That meant that Mr Gard had to review the whole of the progress of the sub-contract, and not just the items specifically arising out of its termination. Mr Gard set out his conclusions in more than one form in his very detailed award and, in order to understand the issues in this appeal, it is necessary to some extent to reconstruct his reasoning from those sources. That I attempt in what follows. Although the figures are important for understanding the issues, there is no dispute about them as figures, and therefore I shall for brevity use rounded figures expressed in thousands of pounds rather than the full detail appearing in the award.
First, Mr Gard made no award on Bouygues's claim in respect of overpayment based on excessive valuation, subject, as he said in paragraph 16.8.1.1 of his award, to Bouygues right to set-off against payments already made any losses caused by breaches by Dahl-Jensen in the performance of the contract. Mr Gard valued the contract works, the original tender sum plus extensions, at a sum of £7,240,000. This sum is expressed in the award to be stated "gross": meaning thereby, as I infer, that it is the actual contract sum without any deduction of the retention monies. At the date of the award the retention monies had not yet become due for payment, and therefore that fact would need to be taken into account when any award of actual payment was made. The exercise that I presently describe was, however, simply a calculation of the contract sum in the light of the disputes that had been referred to Mr Gard.
Mr Gard then took three further steps. First he deducted from the £7,240,000 a sum of £647,000 that he awarded to Bouygues in respect of damages arising out of the termination, and he expressed the result in his award as the "contract sum minus deductions" of £6,593,000, again stated to be "gross". Second, he deducted from that revised "contract sum" the amount actually paid by Bouygues under the sub-contract of £6,772,000, to produce a balance in favour of Bouygues of £179,000, stated to be gross. Third, he then added back to the earlier contract sum of £7,240,000 an award of £387,000 that he had made to Dahl-Jensen in respect of additional works performed by Dahl-Jensen and claims for damages sustained by them while the contract was subsisting. That addition increased the gross "contract sum minus deductions" due to Dahl-Jensen from the figure stated above of £6,593,000 to £6,979,000. That in turn altered the overall calculation from the balance in favour of Bouygues of £179,000 to a balance in favour of Dahl-Jensen of, in round terms, £208,000. Mr Gard's award was therefore that Bouygues should pay that sum of £208,000 to Dahl-Jensen.
On receipt of that award Bouygues' solicitors immediately protested. They pointed out that since the calculations had been done on the basis of the "gross" contract price, thus including the 5% retention, the effect of the award was to require Bouygues to pay the 5% retention to Dahl-Jensen, even though it was not yet due under the contract. The solicitors contended that in order to put the matter right there should be deducted from the award to be paid 5% of the final contract sum of £6,979,000. That would reduce that sum to £6,630,000, and thus produce a payment to Bouygues of £141,000 in place of the ordered payment to Dahl-Jensen of £208,000. That sum, being the result of applying the 5% figure not to the contract sum but to a sum reached after the addition of liquidated damages may not have been mathematically the correct claim; but nothing turns on that for present purposes, and the calculation did certainly serve to raise the point of principle, namely the position in respect of the 5% retention.
It is not challenged in this appeal that, however Mr Gard chose to approach the calculation of the sums due under the contract, he was wrong to make an actual award requiring payment under that contract without taking account of the fact that the 5% of the contract sum that represented the retention monies was not yet due for payment. The award, therefore, was wrong: but is that a ground on which its enforcement can be resisted?
The judge directed himself that he should approach that question according to the same principle as applies in the case of an expert valuer: as stated by Knox J in Nikko Hotels (UK) Ltd v MERPC Plc [1991] 2 EGLR page 103, at page 108B,
"If he has answered the right question in the wrong way, his decision will be binding. If he has answered the wrong question, his decision will be a nullity."
I did not understand that principle to be disputed. Mr Furst QC for Bouygues, however, argued that the concept of answering the wrong question extended to a case such as the present where the Adjudicator had in fact decided something that fell outside his jurisdiction, namely the release of the retention monies. Mr Gard's award therefore could not stand, even if it was clear, at least on the face of the documents used in the award, that he did not intend or purport to rule on the retention monies.
This is a very short point. I am satisfied that the judge was right in rejecting Bouygues' argument....
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