FK Construction Ltd v ISG Retail Ltd
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Joanna Smith |
| Judgment Date | 05 May 2023 |
| Neutral Citation | [2023] EWHC 1042 (TCC) |
| Docket Number | Case No: HT-2023-000066 |
| Court | Queen's Bench Division (Technology and Construction Court) |
[2023] EWHC 1042 (TCC)
Mrs Justice Joanna Smith DBE
Case No: HT-2023-000066
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
TECHNOLOGY AND CONSTRUCTION COURT (KBD)
Rolls Building
Fetter Lane
London, EC4A 1NL
Mek Mesfin (instructed by Addleshaw Goddard LLP) for the Claimant
Simon Hale (instructed by Mantle Law (UK) LLP) for the Defendant
Hearing date: 19 April 2023
APPROVED JUDGMENT
This judgment was handed down remotely by email at 10.00 am on Friday 5 May 2023 by circulation to the parties or their representatives and released to the National Archives.
By its application notice dated 8 March 2023, the Claimant (“ FK”) seeks summary judgment to enforce the adjudication decision of Mr Allan Wood dated 27 February 2023, directing the Defendant (“ ISG”) to pay £1,691,679.94 plus interest and costs.
ISG resists enforcement purely on the grounds that this is a case in which it is said that the court has a discretion to order a set off or withholding against the adjudicator's award by reason of other adjudication decisions affecting the same parties.
BACKGROUND
ISG is the main contractor in relation to a project in Avonmouth in Bristol (referred to by the parties as Project Barberry). The employer is RB Avonmouth Developments Limited.
On or around 28 September 2021, ISG engaged FK on a bespoke ISG sub-contract in relation to roofing and cladding works on Project Barberry for the contract sum of £3,400,000 (“ the Sub-Contract”). Pursuant to the Sub-Contract, FK issued its Application For Payment 16 (“ AFP 16”) on 27 September 2022 in the amount of £1,691,679.94. ISG failed to issue a Payment Notice (“ PN”) in respect of AFP 16 but it submitted a Pay Less Notice (“ PLN”) on 28 October 2022. No payment was made by ISG in relation to AFP 16.
Clause 30(2) of the Sub-Contract provides that any dispute or difference arising under the Sub-Contract may be referred to adjudication in accordance with the Scheme for Construction Contracts (England and Wales) Regulations 1998 (“ the Scheme”). As required by section 108 of the Housing Grants Construction and Regeneration Act 1996, as amended 1, (“ the 1996 Act”), clause 30(4) provides that the decision of the adjudicator “shall be binding until the dispute or difference is finally determined by legal proceedings in the English Courts” 2.
The Wood Decision
By a Notice of Adjudication dated 19 January 2023, FK referred to adjudication a dispute as to the validity of ISG's PLN in response to AFP 16 relating to the period September 2022. Mr Wood was appointed adjudicator and issued his decision on 27 February 2023 (“ the Wood Decision”). In summary, he determined that (i) AFP 16 was a valid notice complying with section 110A(3) and given pursuant to section 110A(2) of the 1996 Act; (ii) ISG did not issue a PN in respect of AFP 16; and that (iii) ISG's PLN was out of time and thus invalid. He directed ISG to pay FK £1,691,679.94 plus VAT and interest (at a daily rate of £289.67 from 25 October 2022 to the date of the decision in the sum of £36,208.75 and ongoing at such daily rate until payment) within 7 days of the date of his decision. He also directed ISG to pay his fees and expenses in the sum of £8,120 plus VAT.
ISG did not comply with the Wood Decision causing FK to issue these proceedings for the sum of £1,691,679.94 plus interest on 8 March 2023. It is accepted by FK in its Particulars of Claim that, despite Mr Wood's findings, there is no VAT applicable to AFP 16 and, accordingly, it makes no claim to VAT in these proceedings.
Other Adjudication Decisions relating to Project Barberry
The Wood Decision is not the only adjudication decision concerning these parties arising in respect of Project Barberry. Three other adjudication decisions were referred to in the context of the hearing and may be summarised as follows:
a. The Shawyer Decision of 17 November 2022: this concerned FK's AFP 14 for the period July 2022 and thus preceded the Wood Decision. The Shawyer Decision determined that AFP 14 was valid, that a PLN served by ISG was invalid and that ISG must pay to FK the sum of £1,489,651.32 plus VAT together with interest. ISG has not paid this sum, but it has issued Part 8 proceedings (“ the Barberry Part 8 Proceedings”) alleging breach of natural justice and contending that AFP 14 did not constitute a valid payee's notice or default payment notice because it was not a notification given “in accordance with the contract” as required by section 110B(4) of the 1996 Act (“ the s.110B(4) Issue”). The Barberry Part 8 Proceedings are due to be heard on 13 and 14 June 2023 and are listed to be heard together with another set of Part 8 proceedings on another project involving the same parties to which I shall return in a moment. It is common ground that the s.110B(4) Issue also arises in connection with the Wood Decision.
b. The Ribbands Decision of 7 March 2023: this concerned FK's AFP 13 for the period June 2022. The Ribbands Decision determined that ISG had failed to issue either a valid PN or a valid PLN in respect of AFP 13 and accordingly that ISG must pay £1,558,641.17 plus VAT together with interest. However, this decision was made subject to the operative parts of the Shawyer and Wood Decisions not being complied with and “if not paid, subsequently declared unenforceable by the English Courts”. It is common ground that the Ribbands Decision is therefore conditional upon the outcome of the Barberry Part 8 Proceedings.
c. The Molloy Decision of 14 April 2023: this decision only became available very shortly before the hearing and after preparation of the skeleton arguments. It concerned a request by ISG for a gross valuation of the Sub-Contract as at 28 February 2023. The Molloy Decision determined a gross valuation of £3,736,679.72 and split the costs of the adjudication between the parties, with ISG to pay 60% and FK to pay 40%. Taken at face value, and given that ISG has already paid £2,829,941.55 in respect of the Sub-Contract works, this would suggest that FK's further entitlement from ISG is £906,738.20. The timing of the Molloy Decision led to both parties making new submissions at the hearing which had not been entirely foreshadowed in their skeleton arguments.
Pausing there, Mr Simon Hale, acting on behalf of ISG, made various points in his written skeleton argument in relation to the background context to the Wood Decision, including as to the “smash and grab” nature of the adjudications to which I have referred, the duplicative effect of the Shawyer, Wood and Ribbands Decisions (recognised in the Ribbands Decision) and the potential for FK to make a substantial windfall if all 3 decisions were to be enforced. He also pointed to the fact that in approximately 8 weeks' time the court will be called upon to determine the s.110B(4) Issue which, if ISG succeeds on that issue, will likely render all of these decisions unenforceable.
However, save that these matters are said to be relevant to the exercise of the court's discretion (to which I shall return later), Mr Hale did not contend that they were in themselves sufficient grounds on which to defeat enforcement proceedings in respect of the Wood Decision.
Project Triathlon
In addition to Project Barberry, FK and ISG are also engaged on another project, referred to as Project Triathlon, which relates to works for a new logistics and distribution facility in Essex. ISG has been employed on Project Triathlon by DHL Real Estate (UK) Limited and has itself engaged FK on a materially similar set of bespoke ISG sub-contract terms to those used on Project Barberry (“ the Triathlon Sub-Contract”). However, Project Triathlon is taking place in a different location from Project Barberry, involves different works and a different ultimate employer.
Three adjudication decisions in respect of Project Triathlon (together “ the Triathlon Decisions”) were referred to by the parties at the hearing:
a. The Aeberli Decision of 20 March 2023, pursuant to which it was decided that ISG was entitled to terminate FK's employment under the Triathlon Sub-Contract (which it did by notice on 7 October 2022) and that ISG was entitled to be indemnified by FK in the sum of £763,428.28. FK says that it intends to challenge the Aeberli Decision on jurisdictional grounds by way of Part 8 proceedings but it has not yet issued any such proceedings.
b. The Ribbands (Triathlon) Decision of 30 March 2023 which decided (amongst other things) that ISG was entitled to the sum of £105,011.53 payable by FK to ISG by 12 April 2023. FK accepts that this decision is enforceable but has not yet paid the sum due.
c. The Jensen Decision of 5 April 2023 which decided that FK was entitled to a payment of £801,819.13 from ISG by 12 April 2023. ISG has not yet made any payment pursuant to this decision. No jurisdictional challenges were made to the adjudicator and none has been intimated subsequently.
It was common ground at the hearing that the net effect of the Triathlon Decisions, taken at face value, is that FK owes to ISG a figure of £66,620.68 in respect of the Triathlon Sub-Contract works.
Part 8 proceedings in relation to Project Triathlon have also been commenced by ISG and (owing to the materially identical nature of the sub-contract terms) are due to be heard at the same time as the Barberry Part 8 Proceedings.
THE APPLICATION
FK contends that ISG has no real prospect of successfully defending the claim to enforce the Wood Decision because the claim is for enforcement of a valid adjudication decision which is binding by reason of the provisions of section 23(2) of the Scheme. FK says that there is no other compelling reason why the case should be disposed of at trial.
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