Costain Ltd v Tarmac Holdings Ltd
| Jurisdiction | England & Wales |
| Judge | The Hon. Mr Justice Coulson |
| Judgment Date | 28 February 2017 |
| Neutral Citation | [2017] EWHC 319 (TCC) |
| Docket Number | Case No: HT-2016-000171 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 28 February 2017 |
[2017] EWHC 319 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Rolls Building, Fetter Lane, London, EC4A 1NL
The Hon Mr Justice Coulson
Case No: HT-2016-000171
Mr Sean Wilken QC and Mr Adam Robb (instructed by Clyde & Co LLP) for the Claimant
Mr David Turner QC and Ms Clare Dixon (instructed by DWF LLP) for the Defendant
Hearing dates: 7 and 8 February 2017
Judgment Approved
INTRODUCTION
This is an application by the defendant to stay these proceedings pursuant to section 9(1) of the Arbitration Act 1996 ("the 1996 Act"). However, that bland description does not accurately convey the plethora of issues and sub-issues which have arisen between the parties arising out of and connected with the stay application. I should at the outset therefore express my gratitude to leading counsel for their considerable assistance, and the excellence of their written and oral submissions.
Pursuant to a sub-contract agreement dated 7 February 2014, the claimant engaged the defendant to supply concrete for the new safety barrier between junctions 28–31 on the M1 motorway. The sub-contract incorporated, amongst other things, the NEC3 Supply Short Contract conditions which, at clause 93.3, contained an adjudication provision with a restricted timetable and a time bar, and a second stage arbitration provision. It is common ground that the concrete was defective but there is a dispute between the parties as to the scope of the appropriate remedial work.
It is the defendant's case that, by December 2015, the claimant had failed to comply with the provisions of clause 93.3, such that the claimant was barred from making a claim for the difference between the cost of the remedial works which the defendant accepted, and the cost of the (more extensive) remedial works proposed by the claimant. The defendant referred that dispute to adjudication. By a decision dated 5 February 2016, the adjudicator agreed with the defendant and decided that the claimant was out of time to pursue the claim. Subsequently, the claimant issued these proceedings in the TCC, seeking to recover just under £6 million by way of damages for breach of contract. In reliance on clause 93, the defendant seeks to stay those proceedings for arbitration pursuant to s.9(1).
The claimant resists the application to stay on the grounds that the sub-contract agreement included another clause which allowed for adjudication "at any time" and made no reference to arbitration. The claimant also points to clauses in the sub-contract agreement which refer to the jurisdiction of the English courts. The claimant maintains that, as a matter of contract construction, clause 93 does not apply to this claim.
If the claimant is wrong about the construction issue, it maintains that, because of the course of dealing between the parties and their solicitors from March to December 2015, the arbitration agreement is "inoperative" in accordance with s.9(4) of the 1996 Act, so the court should not grant a stay in any event. This argument is put by reference to issues of abandonment, repudiation and estoppel (either by representation or by convention). That case is disputed by the defendant. Still further, the claimant argues, also by reference to s.9(4), that the arbitration agreement is "null and void", because the adjudicator exceeded his jurisdiction in reaching the decision he did and, without a valid adjudication decision, there is nothing to trigger the second stage arbitration agreement.
The disputes therefore range from issues of contract construction, to issues of fact concerning the parties' conduct during 2015, and on to detailed arguments about the excess of jurisdiction of the adjudicator. Although, during the course of the parties' submissions, some of these issues appeared to overlap, I shall deal with the issues one by one, in what I hope is a logical sequence. Accordingly, this Judgment is structured as follows. The first part of the Judgment ( Sections 2, 3 and 4) address the fundamental issue of contract construction: Section 2 sets out the factual background to the sub-contract agreement; Section 3 sets out the relevant terms of the sub-contract; and Section 4 addresses the issue of whether or not there was a binding arbitration agreement. Section 5 of the Judgment deals with the related, but separate, issue under s.9(1) as to whether the claim is "in respect of a matter which under the agreement is to be referred to arbitration". Thereafter, in Sections 6, 7 and 8, I deal with the arguments arising under s.9(4). Thus Section 6 sets out the dealings between the parties in 2015; Section 7 addresses the issue as to whether, as a result of those dealings, the arbitration agreement is inoperative; and Section 8 deals with the separate question as to whether the arbitration agreement is null and void as a result of the adjudicator's alleged want of jurisdiction. There is a short summary of my conclusions in Section 9.
THE FACTUAL BACKGROUND TO THE SUB-CONTRACT
It is of course important to construe the sub-contract by reference to its factual background. Although this did not seem a particularly controversial topic during the hearing, following Investors Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896, it is as well for any judge construing a contract to identify, at least in brief terms, the factual background to that contract.
On 16 February 2010, Serco, the claimant and the Secretary of State for Transport ("SST") entered into a Framework Contract which was subsequently novated to the claimant in 2013. That Framework Contract allowed SST to contract with the claimant for particular transport infrastructure projects. It appears that that Framework Contract incorporated a version of the NEC3 Framework Contract conditions.
In March 2012, SST, acting through the Highways Agency, entered into a similar Framework Contract with the defendant in respect of the supply of concrete. Again, that Framework Contract also incorporated a version of the NEC3 Framework Contract conditions.
On 19 September 2013, pursuant to its Framework Contract with the claimant, SST engaged the claimant to carry out major infrastructure works to the M1 between the junctions 28 and 31.
Part of this main contract work included the construction of a concrete safety barrier. This had to comply with what was known as the Britpave specification and had to achieve compliance certificates ("CE"). The construction of the barrier was sub-contracted to specialist sub-contractors, Extrudakerb.
The claimant had to procure the necessary concrete from a supplier who had already entered into a Framework Contract with SST, unless it could demonstrate that savings could be made by procuring from a non-framework supplier. The defendant was of course an approved supplier who had entered into the necessary Framework Contract with SST (paragraph 9 above). To that extent, at least, the terms of any sub-contract agreement between the claimant and the defendant in respect of the supply of concrete were regulated by their (separate) Framework Contracts with SST.
THE TERMS OF THE SUB-CONTRACT
The one page sub-contract agreement provided as follows:
"NOW IT IS AGREED THAT
1. The conditions of contract are the clauses of the NEC3 Framework Contract (2005) as amended by the Framework Contract "Z" clauses set out in the "Category Management: Pavement & Concrete Framework, Volume 1, Framework Contract Data Part One"
And
The NEC3 Supply (Short) Contract terms and conditions, as amended by the "Z" clauses in the "Category Management: Pavement & Concrete Framework, Volume 1, Supply Package Order Contract Data Part One Annex B [sic]" ("Data Applicable to All Supply Package Orders")."
2. The Supplier will provide the Goods in accordance with the conditions of contract
2. The Purchaser will pay the Supplier the amount due in accordance with the conditions of contract
3. The documents forming part of this agreement are:
a. Volume 2 Additional Contract Data Part 1 and Part 2
b. Volume 3 Additional Goods Information
c. J28–21 Phase 1 Lot C Price Schedule"
It is convenient to set out the relevant terms by reference to the three main areas of documentation identified in the sub-contract agreement, namely: a) the Framework Contract conditions; b) the Supply Contract conditions; and c) the documents (such as the Additional Goods Information) referred to at paragraph 3 of the sub-contract agreement.
(a) The Framework Contract
The NEC3 Framework Contract referred to in the first part of paragraph 1 of the sub-contract agreement was in two parts: the core clauses and the amending Z clauses. It is important to note when considering these clauses that, for the purposes of these terms, the Contract Data document made clear that 'the Employer' was SST and 'the Supplier' was the defendant. The claimant had only a limited involvement as 'the Contracting Body'.
As amended by the Z clauses, the Framework Contract included the following terms:
"10.1 The Employer and the Supplier shall act as stated in this contract and in the spirit of mutual trust and co-operation.
11.1 In these conditions of contract, terms identified in the Contract Data are in italics and defined terms have capital letters.
11.2(1) The Parties are the Employer and the Supplier.
(2) Framework Information is information which specifies how the Parties work together and is in the document which the Contract Data states it is in.
(3) A Work Package is work which is to be carried out under this contract.
(4) Package Order is a Supply Package Order or a Term Service Package Order as the context requires.
(8) Contracting Body is the...
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