Carillion Construction Ltd v Devonport Royal Dockyard Ltd

JurisdictionEngland & Wales
CourtQueen's Bench Division (Technology and Construction Court)
Judgment Date26 April 2005
Neutral Citation[2005] EWHC 778 (TCC)
Date26 April 2005
Docket NumberNo: TCC 30/05 HT-05–82

[2005] EWHC 778 (TCC)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

TECHNOLOGY AND CONSTRUCTION COURT

Court No 7

TECHNOLOGY AND CONSTRUCTION COURTS

St Dunstan's House

133–137 Fetter Lane

London EC4A 1HD

Before

The Honourable Mr Justice Jackson

No: TCC 30/05 HT-05–82

Between
Carillion Construction Limited
Part 7 Claimant/Part 8 Defendant
and
Devonport Royal Dockyard
Part 7 Defendant/Part 8 Claimant

MR N DENNYS QC and MR S LOFTHOUSE (instructed by Pinsent Masons) appeared on behalf of the Part 7 Claimant/Part 8 Defendant.

MR S FURST QC and MISS L RANDALL (instructed by Herbert Smith) appeared on behalf of the Part 7 Defendant/Part 8 Claimant.

MR JUSTICE JACKSON
1

: This judgment is in ten parts, namely:

Part 1. Introduction.

Part 2. The facts.

Part 3. The adjudication.

Part 4. The present proceedings.

Part 5. The law.

Part 6. The first challenge to the adjudicator's decision (target cost and jurisdiction).

Part 7. The second challenge to the adjudicator's decision (target cost and natural justice).

Part 8. The third challenge to the adjudicator's decision (defects).

Part 9. The fourth challenge to the adjudicator's decision (interest).

Part 10: conclusion.

Part 1: Introduction

2

This is the trial of two actions between a main contractor and a subcontractor concerning the validity and enforceability of an adjudicator's decision. The main contractor is Devonport Royal Dockyard Limited, to which I shall refer as "DML". The sub-contractor is a company which used to be called Tarmac Construction Limited and is now called Carillion Construction Limited. In order to avoid confusion, I shall refer to this company as "Carillion" at all stages of the story.

3

The Ministry of Defence, which was the employer of DML under the main contract, will be referred to in this judgment as " MoD".

4

The statutory framework within which this litigation arises is provided by the Housing Grants, Construction and Regeneration Act 1996, to which I shall refer as "the 1996 Act". Section 108 of the 1996 Act provides:

"(1) A party to a construction contract has the right to refer a dispute arising under the contract for adjudication under a procedure complying with this section.

"For this purpose 'dispute' includes any difference.

"(2) The contract shall—

"(a) Enable a party to give notice at any time of his intention to refer a dispute to adjudication;

"(b) Provide a timetable with the object of securing the appointment of the adjudicator and referral of the dispute to him within seven days of such notice;

"(c) Require the adjudicator to reach a decision within 28 days of referral or such longer period as is agreed by the parties after the dispute has been referred;

"(d) allow the adjudicator to extend the period of 28 days by up to 14 days, with the consent of the party by whom the dispute was referred;

"(e) impose a duty on the adjudicator to act impartially; and

"(f) enable the adjudicator to take the initiative in ascertaining the facts and the law.

"(3) The contract shall provide that the decision of the adjudicator is binding until the dispute is finally determined by legal proceedings, by arbitration (if the contract provides for arbitration or the parties otherwise agree to arbitration) or by agreement.

"The parties may agree to accept the decision of the adjudicator as finally determining the dispute.

"(4) The contract shall also provide that the adjudicator is not liable for anything done or omitted in the discharge or purported discharge of his functions as adjudicator unless the act or omission is in bad faith, and that any employee or agent of the adjudicator is similarly protected from liability.

"(5) If the contract does not comply with the requirements of subsections (1) to (4), the adjudication provisions of the Scheme for Construction Contracts apply."

5

Section 114 of the 1996 Act provides:

"(1) The minister shall by regulations make a scheme (the Scheme for Construction Contracts) containing provision about the matters referred to in the preceding provisions of this Part …

"(4) Where any provisions of the Scheme for Construction Contracts apply by virtue of this Part in default of contractual provision agreed by the parties, they have effect as implied terms of the contract concerned."

6

By the Scheme for Construction Contracts (England and Wales) Regulations 1998, the Secretary of State made a Scheme for Construction Contracts in accordance with section 114 of the 1996 Act. That Scheme for Construction Contracts, which I shall refer to as "the Scheme", is set out in the schedule to the regulations. The Scheme includes the following provisions:

"1. (1) Any party to a construction contract (the 'referring party') may give written notice (the 'notice of adjudication') of his intention to refer any dispute arising under the contract, to adjudication.

"(2) The notice of adjudication shall be given to every other party to the contract.

"(3) The notice of adjudication shall set out briefly—

"(a) the nature and a brief description of the dispute and the parties involved,

"(b) details of where and when the dispute has arisen,

"(c) the nature of the redress which is sought, and

"(d) the names and addresses of the parties to the contract (including, where appropriate, the addresses which the parties have specified for the giving of notices) …

"12. The adjudicator shall—

"(a) act impartially in carrying out his duties and shall do so in accordance with any relevant terms of the contract and shall reach his decision in accordance with the applicable law in relation to the contract; and

"(b) avoid incurring unnecessary expense.

"13. The adjudicator may take the initiative in ascertaining the facts and the law necessary to determining the dispute, and shall decide on the procedure to be followed in the adjudication. In particular he may—

"(a) request any party to the contract to supply him with such documents as he may reasonably require including, if he so directs, any written statement from any party to the contract supporting or supplementing the referral notice and any other documents given under paragraph 7(2),

"(b) decide the language or languages to be used in the adjudication and whether a translation of any document is to be provided and if so by whom,

"(c) meet and question any of the parties to the contract and their representatives,

"(d) subject to obtaining any necessary consent from a party or third parties make such site inspections as he considers appropriate, whether accompanied by the parties or not,

"(e) subject to obtaining any necessary consent from a third party or parties carry out any tests or experiments,

"(f) obtain and consider such representations and submissions as he requires, and, provided he has notified the parties of his intention, appoint experts, assessors or legal advisers,

"(g) give directions as to the timetable for the adjudication, any deadlines, or limits as to the length of written documents or oral representations to be complied with, and,

"(h) issue other directions relating to the conduct of the adjudication.

"14. The parties shall comply with any request or direction of the adjudicator in relation to the adjudication …

"17. The adjudicator shall consider any relevant information submitted to him by any of the parties to the dispute and shall make available to them any information to be taken into account in reaching his decision …

"19(1). The adjudicator shall reach his decision not later than—

"(a) 28 days after the date of the referral notice mentioned in paragraph 7(1), or,

"(b) 42 days after the date of the referral notice if the referring party so consents, or,

"(c) such period exceeding 28 days after the referral notice as the parties to the dispute may, after the giving of that notice, agree …

"20. The adjudicator shall decide the matters in dispute. He may take into account any other matters which the parties to the dispute agree should be within the scope of the adjudication or which are matters under the contract which he considers are necessarily connected with the dispute. In particular, he may—

"(a) open up, revise and review any decision taken or any certificate given by any person referred to in the contract unless the contract states that the decision or certificate is final and conclusive,

"(b) decide that any of the parties to the dispute is liable to make payment under the contract (whether in sterling or some other currency) and, subject to section 111(4) of the Act, when that payment is due and the final date for payment,

"(c) having regard to any term of the contract relating to the payment of interest, decide the circumstances in which, and the rates at which, and the periods for which simple or compound rates of interest shall be paid …

"22. If requested by one of the parties to the dispute, the adjudicator shall provide reasons for his decision.

"23(1) In his decision, the adjudicator may, if he thinks fit, order any of the parties to comply peremptorily with his decision or any part of it.

"(2) The decision of the adjudicator shall be binding on the parties and they shall comply with it until the dispute is finally determined by legal proceedings, by arbitration (if the contract provides for arbitration or the parties otherwise agree to arbitration) or by agreement between the parties."

7

Having set out the statutory framework, I must now turn to the facts of the present case.

Part 2. The facts

8

Devonport Royal Dockyard refits and refuels warships and nuclear submarines for the Royal Navy. In March 1997, DML purchased the dockyard from the Secretary of State for Defence. At the time when the dockyard was privatised, it was decided that the existing facilities should be upgraded and new facilities should be...

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