Connex South Eastern Ltd v M. J. Building Services Group Plc

JurisdictionEngland & Wales
JudgeLORD JUSTICE DYSON,Lord Justice Carnwath,Lord Justice Ward
Judgment Date01 March 2005
Neutral Citation[2005] EWCA Civ 193
Docket NumberCase No: A1/2004/1469
CourtCourt of Appeal (Civil Division)
Date01 March 2005
Between
Connex South Eastern Ltd
Claimant/Respondent
and
M J Building Services Group Plc
Defendant/Appellant

[2005] EWCA Civ 193

Before

Lord Justice Ward

Lord Justice Dyson and

Lord Justice Carnwath

Case No: A1/2004/1469

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM TECHNOLOGY & CONSTRUCTION COURT, QBD

Judge Richard Havery QC

HT 04 107

Royal Courts of Justice

Strand, London, WC2A 2LL

Anthony Speaight QC (instructed by Messrs Fenwick Elliot) for the Appellant

David Ashton (instructed by Messrs Courts & Co) for the Respondent

LORD JUSTICE DYSON
1

This is an appeal from the decision of His Honour Judge Richard Havery QC who on 25 June 2004, determined four issues that arose in these proceedings in which Connex South Eastern Limited ("SE") claimed various declarations in relation to an adjudication which MJ Building Services Group Plc ("MJ") had initiated pursuant to the Housing Grants, Construction and Regeneration Act 1996 ("the Act")..

2

MJ are building contractors who are experienced in the installation of closed circuit television ("CCTV") systems. In 2000, SE held a franchise for the operation of train services on railways in Kent and part of East Sussex. A sister company, Connex South Central Limited ("SC") held a similar franchise in relation to railways in the remaining part of Sussex and parts of Surrey and Hampshire. Both companies were at that time subsidiaries of Connex Transport UK Limited ("Connex").

3

A firm called Condes provided architectural and project management services to Connex. In February 2000, Condes, acting on behalf of SC and SE issued a document entitled "Master specification for the design and installation of security CCTV systems to stations and car parks for Connex South (Central/Eastern) Ltd". This document included the specification for the works and conditions of contract. It identified the employer as "Connex South (Central/Eastern) Limited". No company of that name existed. The invitation to tender that was sent by Condes to MJ on 6 June 2000 described the contract works as "the Phase 9 installation works consisting of 50 stations across the Connex South Eastern and South Central Networks".

4

MJ submitted its tender proposal on 31 July 2000. It was accepted on behalf of Connex by Condes giving an oral instruction for the work to be carried out. The judge found that this oral instruction was evidenced in writing by the minutes of a meeting dated 15 September, and held that the contract was in writing within the meaning of section 107 of the Act. There is no challenge to this. He also held that SC and SE entered into the contract as joint contractors. It is submitted on behalf of MJ that he was wrong to do so. But before I come to this issue, I need to complete the history so far as it is relevant to the questions that are raised on this appeal.

5

On 20 September 2000, Condes wrote to MJ saying that all CCTV works were to be suspended until further notice. At a meeting on 20 November, Condes confirmed that, following the rescheduling of SE and SC stations into separate phases, Connex had given approval for the project to proceed as quickly as possible. MJ was instructed to proceed accordingly.

6

In August 2001, Govia Limited acquired the entire share capital of SC. Some time thereafter, SC decided that it did not wish to proceed with the project in its original form. On a date which is not disclosed by the evidence Condes ceased to act for SE, although they continued to act for SC.

7

On 4 December 2001, Condes notified MJ that it had been instructed by SE that no further installations were to be commenced under Phase 9 until further notice, although the installations at 4 named stations were to be completed and commissioned. At a meeting on 14 December, MJ told Condes that they had started work on 6 stations, and that they intended to complete all 6 in accordance with the programme. Condes informed MJ that SE were of the opinion that there was no contract between them. They said that they would not action certification for two reasons: (a) the works were not complete, and (b) Condes did not have an order to manage the project, and all queries should be addressed to Elyes Frickha, the Connex project manager. On 25 January 2002, MJ submitted a claim to Mr Frickha in respect of materials procured for the stations that had been withdrawn.

8

Correspondence ensued between MJ and Mr Frickha in which MJ claimed £199,326 from SE for materials purchased for the Phase 9 rolling programme installation works.

9

Meetings took place between Mr Blaquiere, facilities project manager for SC, and Mr McAnallen, managing director of MJ, with a view to restructuring the project. These culminated in an agreement which is contained in the letter of 11 February 2002 from Condes to Mr McAnallen in the following terms:

"The phase 9 CCTV contract

Since Govia's takeover of South Central, the Client has worked with you to restructure the scope of works to reach a mutually acceptable solution.

The final shape of the contract is now clear. We list below the works instructed to date and the budgeted works awaiting instruction.

We would now like to formalise your mutual agreement with the Client that the works below now represent the full extent of the "Phase 9" contract. The forecast value of Works that have been instructed or will be instructed totals £937,847.

Please note that we do expect to be able to instruct some additional works on the Epsom Downs line, which might have a value of around £60,000 but for budgetary reasons this is not certain and you should regard this as a bonus.

We would be grateful if you would please sign the bottom of this letter and return to me in order to confirm your agreement."

10

The letter was marked as being copied to Mr Blaquiere. Mr McAnallen signed the letter at the bottom as requested. The works said to have been listed below were in fact listed on a separate piece of paper.

11

During 2002, SE continued to maintain that it had no liability to pay for certain materials that had been purchased by MJ for the Phase 9 project on the grounds that the purchase had not been authorised by SE and that there was no contract between the two companies. On 29 November 2002, MJ wrote to SE stating that its denial of the existence of a contract (and therefore of its liability to pay) was a repudiatory breach of contract, which MJ accepted, thereby terminating the contract.

12

Solicitors became involved. Eventually, on 13 February 2004 MJ's solicitors wrote to SC and SE giving notice of MJ's intention to refer a dispute to adjudication pursuant to the Act. The dispute was described as the claim for damages against SC and/or SE as particularised in the report by Mr John McCombie dated 5 December 2003 arising from the failure to make payment for the Phase 9 works. The principal head of claim was for damages for loss of profit on the stations within the SE part of Phase 9 which had been removed from the contract. The total sum claimed was £362,914.26. It was put on the basis that SC and SE were jointly liable under the contract to pay the sums claimed.

13

Mr R J Crease BSc, CEng FICE FCIArb was appointed as adjudicator. The adjudication commenced thereby lapsed; but a further adjudication was commenced by a letter from MJ's solicitors to SC and SE dated 24 February 2004, whereby they gave notice of an intention to refer the same dispute to adjudication. Mr Crease was again appointed adjudicator. On 25 February 2004, he stayed the adjudication by consent pending the outcome of the current proceedings in which SE sought the following declaratory relief:

"(1) That there is no agreement between South Eastern and MJ as alleged in the notice of Adjudication dated 24 February 2004, whose terms, or whose material terms thereof, are recorded in writing, as required by section 107 of the Housing Grants, Construction and Regeneration Act 1996;

(2) That MJ no longer has any statutory right to adjudication under section 108 of the said Act; and/or

(3) That MJ's Notice of Adjudication dated 24 February 2004 is an abuse of process."

At the hearing before the judge, the following questions were identified:

"(1) Has there been an agreement to which the claimant and the defendant have been parties and which is an agreement "in writing" within the meaning of s.107 of the Act?

(2) If the answer to question (1) is yes, did the defendant still have the right to refer a dispute to adjudication under s.108 of the Act on 24 th February 2004 if the agreement had previously been discharged by the acceptance of the claimant's repudiation?

(3) If the answer to question (1) is yes, did the defendant still have the right to refer a dispute to adjudication under s.108 of the Act notwithstanding the letter of agreement dated 11 th February 2002?

(4) If the answer to questions (1), (2) and (3) are all yes,

a. Is the defendant's notice of adjudication dated 24 th February 2004 an abuse of process?

b. If so, what is the consequence?"

MJ reached terms of settlement with SC, who accordingly have played no part in these court proceedings.

14

The judge answered these questions as follows: (1) Yes. (2) Yes. (3) Yes, but only to the extent indicated in para 32 of the judgment. (4)(a) No. (4)(b) Not applicable. Accordingly, he declined to make the declarations sought. MJ does not seek (nor does it have permission) to challenge the decisions on questions ( 1) or (2). It does, however, challenge the decision on question (3). By a cross-appeal, SE seeks to challenge the decision on question (4).

15

In a nutshell, the argument advanced by Mr David Ashton on behalf of SE in relation to question 3 (which in...

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