Crystal Electronics Ltd v Digital Mobile Spectrum Ltd
| Jurisdiction | England & Wales |
| Judge | Keyser |
| Judgment Date | 27 October 2023 |
| Neutral Citation | [2023] EWHC 2656 (TCC) |
| Court | King's Bench Division (Technology and Construction Court) |
| Docket Number | Case No: HT-2023-000169 |
[2023] EWHC 2656 (TCC)
HIS HONOUR JUDGE Keyser KC
sitting as a Judge of the High Court
Case No: HT-2023-000169
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
TECHNOLOGY AND CONSTRUCTION COURT (KBD)
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
James Davison (instructed by Thackray Williams LLP) for the Claimant
Crispin Winser KC (instructed by CMS Cameron McKenna Nabarro Olswang LLP) for the Defendant
Hearing dates: 17 and 18 October 2023
Approved Judgment
This judgment was handed down remotely at 10.30am on 27 October 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
HIS HONOUR JUDGE Keyser KC
Judge Keyser KC:
Introduction
The defendant (“DMSL”) was set up in 2012 as a joint venture by the four UK mobile network operators for the purpose of carrying out proactive and remedial intervention services to address the detrimental effect of 4G mobile broadband services on digital terrestrial television. DMSL outsourced these services in respect of households whose television reception had been affected. The claimant (“Crystal”) was engaged by DMSL as a contractor for those services and the relationship carried on successfully for several years. However, DMSL terminated the agreement by notice with effect from 15 February 2023.
On 10 February 2023 Crystal raised an invoice for £553,336 plus VAT for unpaid charges for works undertaken pursuant to the agreement. DMSL disputed liability for the moneys. On 29 March 2023 Crystal sent to DMSL a notice of adjudication. An adjudicator accepted appointment. DMSL challenged the adjudicator's jurisdiction on the grounds that the contract between the parties was not a construction contract. The adjudicator formed the preliminary view that he did have jurisdiction and continued with the adjudication.
In his decision dated 10 May 2023 (“the First Decision”), the adjudicator considered first the issue whether or not Crystal's contract works in relation to the disputed invoice were “construction operations” as defined by the Housing Grants, Construction and Regeneration Act 1996, as amended (“the 1996 Act”). DMSL submitted that none of the works were construction operations and, alternatively, that, if some of the works were construction operations, others were not, in which case the contract was therefore a hybrid contract. Crystal submitted that, if any part of the works were construction operations, the adjudicator's jurisdiction was limited to awarding payment of the Notified Sum; any issue of severance or apportionment would be a matter for the court on an application for enforcement. The adjudicator accepted Crystal's submission and did not consider the issue regarding “construction operations” further. The adjudicator agreed that the payment provisions of the contract did not provide a mechanism compliant with the 1996 Act and that the payment regime of the Scheme therefore applied, subject to the contractual requirements that Crystal make an application for payment and DMSL pay within 14 days of receipt of the application for payment. He held that Crystal had made a valid application for payment; that DMSL did not issue any valid payment or pay less notice; that the invoice amount became payable on 24 February 2023; and that the amount due from DMSL to Crystal was £553,336 plus VAT. He decided that DMSL should pay that sum plus simple interest to the date of his decision (£7,003.87) and simple interest at 2% over the Barclays Bank base rate from the date of his decision. The date for payment was to be immediately following the issue of the decision. He decided and declared that each side should be responsible for its own legal and expert costs and that Crystal should pay his fees and expenses of £16,500 (inclusive of VAT) and be reimbursed by DMSL.
When DMSL did not immediately make payment pursuant to the award, Crystal commenced enforcement proceedings and issued its application for summary judgment. DMSL resisted the application, which accordingly proceeded to a hearing.
Between the commencement of proceedings and the hearing of the application for summary judgment, Crystal referred a second adjudication to the same adjudicator. By a decision dated 15 August 2023 (“the Second Decision”), the adjudicator ordered DMSL to pay Crystal the further sum of £219,738 plus VAT and interest. He also ordered Crystal to pay his fees and expenses in the sum of £11,700 plus VAT and ordered DMSL to reimburse Crystal in that sum.
At a remote hearing on 15 August 2023, I refused Crystal's application for summary judgment in respect of the First Decision and gave directions for an expedited trial. As the issues between the parties had become clear, and as the parties were in agreement that it would be helpful for the trial to determine the enforceability of both the First Decision and the Second Decision, I directed that the trial be of the following issues (“the Issues”) with respect to the First Decision and, separately, the Second Decision:
1) Were the works in respect of which the Decision was made construction operations for the purposes of section 105 of the 1996 Act?
2) Did works which were not construction operations for the purposes of section 105 of the 1996 Act form more than a de minimis part of the works in respect of which the Decision was made such that the Decision is unenforceable?
This is my judgment after the trial. I am grateful to Mr James Davison and Mr Crispin Winser KC, counsel respectively for Crystal and for DMSL, for their submissions.
The Legal Framework
Section 108(1) of the 1996 Act provides:
“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.”
Section 104 provides in relevant part:
“(1) In this Part a ‘construction contract’ means an agreement with a person for any of the following—
(a) the carrying out of construction operations;
(b) arranging for the carrying out of construction operations by others, whether under sub-contract to him or otherwise;
(c) providing his own labour, or the labour of others, for the carrying out of construction operations.
(2) References in this Part to a construction contract include an agreement—
(a) to do architectural, design, or surveying work, or
(b) to provide advice on building, engineering, interior or exterior decoration or on the laying-out of landscape,
in relation to construction operations.
…
(5) Where an agreement relates to construction operations and other matters, this Part applies to it only so far as it relates to construction operations. An agreement relates to construction operations so far as it makes provision of any kind within subsection ( 1) or (2).”
Section 105(1) provides:
“In this Part ‘construction operations’ means, subject as follows, operations of any of the following descriptions—
(a) construction, alteration, repair, maintenance, extension, demolition or dismantling of buildings, or structures forming, or to form, part of the land (whether permanent or not);
(b) construction, alteration, repair, maintenance, extension, demolition or dismantling of any works forming, or to form, part of the land, including (without prejudice to the foregoing) walls, roadworks, power-lines, electronic communications apparatus, aircraft runways, docks and harbours, railways, inland waterways, pipe-lines, reservoirs, water-mains, wells, sewers, industrial plant and installations for purposes of land drainage, coast protection or defence;
(c) installation in any building or structure of fittings forming part of the land, including (without prejudice to the foregoing) systems of heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection, or security or communications systems;
(d) external or internal cleaning of buildings and structures, so far as carried out in the course of their construction, alteration, repair, extension or restoration;
(e) operations which form an integral part of, or are preparatory to, or are for rendering complete, such operations as are previously described in this subsection, including site clearance, earth-moving, excavation, tunnelling and boring, laying of foundations, erection, maintenance or dismantling of scaffolding, site restoration, landscaping and the provision of roadways and other access works;
(f) painting or decorating the internal or external surfaces of any building or structure
(Section 105(2), which excludes specified activities, is not relevant to this case.)
Section 104(5), above, refers to what have been called “hybrid contracts”: C Spencer Ltd v M W High Tech Projects UK Ltd [2020] EWCA Civ 331, [2020] BLR 334, per Coulson LJ at [50]. A claimant who seeks to enforce an adjudication award must satisfy the court that all matters included in the award (save for what can properly be considered de minimis matters) were “construction operations” within section 105(1) or were matters within section 104(2) in relation to construction operations: ibid. at [30] and [57], approving dicta of Stuart-Smith J in Severfield (UK) Ltd v Duro Felguera UK Ltd [2015] EWHC 3352 (TCC), 163 Con LR 235; see also section 104(2) and (5). A decision that includes other matters will be completely unenforceable, unless the part of the decision relating to such matters can be severed: Cleveland Bridge (UK) Ltd v Whessoe-Volker Stevin Joint Venture [2010] 1076 (TCC), per Ramsey J at [108]–[124]. It is common ground that no question of severance arises in the present case.
In the present case, Crystal contends that all the work it did under its contract with DMSL was either actual...
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