CSK Electrical Contractors Ltd v Kingwood Electrical Services Ltd

Hearing date: 11 March 2015

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

INTRODUCTION

In July 2014, the defendant engaged the claimant to carry out electrical works at the West Stand and in the executive boxes at Twickenham. This is an application by the claimant for summary judgment to enforce two adjudicator's decisions arising out of those contracts. Both decisions are dated 19 January 2105. In the first, the defendant was ordered to pay the claimant the sum of £60,161.40. In the second the defendant was ordered to pay the claimant £272,078.03. The defendant was also ordered to pay interest.

As is well known, the TCC will ordinarily enforce the decision of an adjudicator: see Carillion Construction Ltd v Devonport Royal Dockyard Ltd[2005] EWCA Civ. 1358. The exceptions to this general rule are where a properly arguable case can be made out that there has been a breach of natural justice, or that the adjudicator lacked the necessary jurisdiction to reach the decision. In the present case, the defendant has raised challenges under both heads. Accordingly, I propose to deal one by one with those challenges, which are:

(a) That no dispute had crystallised before the reference to adjudication;

(b) That the adjudicator's appointment was invalid;

(c) That the timetable in the adjudication was too onerous and therefore unfair; and

(d) That, if none of the above points are accepted by the court, there should, at any rate, be a stay of execution.

GROUND 1: NO CRYSTALLISED DISPUTE

It is axiomatic that a dispute must have crystallised between the parties before it can be referred to adjudication. That said, as I pointed out recently in St Austell Printing Co Ltd v Dawnus Construction Holding Ltd[2015] EWHC 96 (TCC), this point, although often taken by defendants, is rarely successful.

The starting point is the decision of Jackson J (as he then was) in AMEC Civil Engineering Ltd v Secretary of State for Transport[2004] EWHC 2339 (TCC). There he said:

"3. The mere fact that one party (whom I shall call "the claimant") notifies the other party (whom I shall call "the respondent") of a claim does not automatically and immediately give rise to a dispute. It is clear, both as a matter of language and from judicial decisions, that a dispute does not arise unless and until it emerges that the claim is not admitted.

4. The circumstances from which it may emerge that a claim is not admitted are Protean. For example, there may be an express rejection of the claim. There may be discussions between the parties from which objectively it is to be inferred that the claim is not admitted. The respondent may prevaricate, thus giving rise to the inference that he does not admit the claim. The respondent may simply remain silent for a period of time, thus giving rise to the same inference.

5. The period of time for which a respondent may remain silent before a dispute is to be inferred depends heavily upon the facts of the case and the contractual structure. Where the gist of the claim is well known and it is obviously controversial, a very short period of silence may suffice to give rise to this inference. Where the claim is notified to some agent of the respondent who has a legal duty to consider the claim independently and then give a considered response, a longer period of time may be required before it can be inferred that mere silence gives rise to a dispute."

That analysis explains the general view that, for crystallisation to occur, no more than the service of a claim by the claiming party, and subsequent inactivity for a further short period by the responding party, may be enough. The same approach was taken by Akenhead J in Ringway Infrastructure Services Ltd v Vauxhall Motors[2007] EWHC 2421 (TCC).

As I have said, the crystallisation argument is almost never successful. That can be illustrated by the relatively extreme circumstances that existed in the two cases in which the point has been upheld. Thus:

i) In Enterprise Managed Services Ltd v Tony McFadden Utilities Ltd[2009] EWHC 322 (TCC) Utilities pursued Enterprise as assignees but they did not notify Enterprise of the existence of either the assignment or their claims as assignees until the very date on which they purported to give notice of adjudication. Plainly in those circumstances, no dispute could be said to have crystallised by the date of the notice.

ii) In Beck Interiors Ltd UK Flooring Contractors[2012] EWHC 1808 (TCC) Akenhead J ruled that there was no crystallised dispute in relation to the liquidated damages claim, because that was a claim that had first been asserted in a letter sent after close of business on the last working day before the Easter weekend, and the notice of adjudication was then issued on the Tuesday after that weekend. The silence over the Easter bank holiday did not amount to a rejection of the claim.

In accordance with those principles, I am in no doubt that, in the present case, the dispute between the parties had crystallised before the reference to adjudication. That is because:

(a) The relevant invoices from the claimant to the defendant were dated 11 November 2014;

(b) The defendant did not respond to those invoices. The adjudicator found that the latest date for a valid payless notice was 11 December 2014, but no such notice was issued by the defendant by that date;

(c) On 16 December 2014, the claimant's representatives wrote to the defendant pointing out that no payless notice had been issued, and that if the outstanding monies were not paid immediately, a reference to adjudication would be made.

(d) The defendant's reply of 18 December 2014, said that the claims were "unfounded and will be strenuously defended".

Thus a dispute had crystallised between the defendant and the claimant because the defendant had (a) failed to pay the invoices in accordance with the contract; (b) failed to serve a valid payless notice within proper time; and (c) expressly said that the claims were disputed and would be defended. For those reasons, the defendant's crystallisation challenge must fail.

GROUND 2: INVALID APPOINTMENT

The defendant relies on the decision of Ramsey J in Eurocom Ltd v Siemens PLC[2014] EWHC 3710 (TCC), in which he found that the claimant's representatives had fraudulently misrepresented to the relevant appointing authority the fact that a lengthy list of potential adjudicators could not be appointed because they would have a conflict of interest. In reality, there were no such conflicts of interest, and the ruse was designed by the claimant to avoid the appointment of the adjudicators on the list. The judge found that this irrevocably tainted the appointment of the adjudicator.

There can be no doubt that the facts of Eurocom have shaken public confidence in the adjudication process. For that reason alone it is, I think, understandable as to why the defendant (who has not had recourse to legal advice) has raised the point in this case: that is one of the baleful consequences of Eurocom. However, on analysis, the fraud identified in that case simply does not arise here.

The adjudicator was appointed by CEDR. The application to CEDR for the appointment, made by the claimant's representatives, included the sentence "It is preferred that any of the adjudicators in the attached list are not appointed." The evidence is that that sentence was included as an error, and it may be that it came from a template that those representatives habitually use. But the important thing was that there was no attached list. The position therefore was that, not only was that sentence included in error, but that no list of 'preferred adjudicators not to be appointed' was ever completed or attached. In those circumstances, therefore, the situation is entirely different to that in Eurocom.

In Eurocom at paragraph 57, Ramsey J identified three issues arising in a fraudulent misrepresentation case:

"First, whether a false statement was made; secondly, whether any false statement was made fraudulently or recklessly and thirdly, the effect of any such statement."

None of those elements apply here. There was no false statement because there was no list. There can therefore be no question of fraud or recklessness, and, since there was no statement, it could not have had any effect.

In his careful skeleton, Mr Neuberger raised an additional point, namely that even if the list had been completed, it would not have amounted to a false statement, because it was simply a statement of a preference. He argued that it could not therefore amount to the sort of deliberate misrepresentation which occurred in Eurocom. Since it is unnecessary for me to decide that point in this case, I decline to do so. There may be circumstances in which a stated preference could amount to a misrepresentation, but I take the point that this would never be very straightforward.

Accordingly, for the reasons I have given, there can be nothing in ground 2.

GROUND 3: TIMETABLE

The defendant's third challenge is the suggestion that the adjudicator's timetable was too quick and put too great a strain on their resources.

Again, this point has been taken in a...