Grandlane Developments Ltd v Skymist Holdings Ltd
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Jefford |
| Judgment Date | 29 March 2019 |
| Neutral Citation | [2019] EWHC 747 (TCC) |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Docket Number | Case No: HT-2019-000005 |
| Date | 29 March 2019 |
[2019] EWHC 747 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mrs Justice Jefford DBE
Case No: HT-2019-000005
Jonathan Selby QC (instructed by Goodman Derrick LLP) for the Claimant
Duncan Matthews QC and Rupert Choat (instructed by Stephenson Harwood) for the Defendant
Hearing date: 6 March 2019
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.
This is an application by Grandlane Developments Limited (“Grandlane”) for summary judgment to enforce the decision of the adjudicator, John Riches, given on 12 November 2018. He decided that Skymist Holdings Limited (“Skymist”) should pay to Grandlane the sum of £963,821.25 plus VAT and interest.
Background
The background to this matter is uncontroversial although little else is. Some of it is already set out in the judgment of Waksman J in Skymist Holdings Limited v Grandlane Developments Limited [2018] EWHC 3504 (TCC) to which I will refer.
Skymist is a company incorporated in the British Virgin Islands. It is legally and beneficially owned by Mrs Elena Baturina. In 2013, Skymist purchased Beaurepaire Park, an extensive country property in Hampshire, which was to be developed and to become Mrs Baturina's family home.
Mrs Baturina engaged Grandlane to provide development management services in connection with that development. From about May 2016, Grandlane's engagement was transferred from Mrs Baturina to Skymist.
Mrs Baturina describes Mr Olgert Deinis of Grandlane as her trusted agent with whom she had a relationship of trust and confidence. It does not appear to be in issue that Mr Deinis originally incorporated Grandlane in 2013 for the purpose primarily of managing this development and that, until about 2015, Grandlane was beneficially owned by Mrs Baturina. The company is now solely owned by Mr Deinis.
The precise terms of the contract between Skymist and Grandlane have been controversial but it is agreed that a document called the “Development Management Agreement – Beaurepaire General Terms and Conditions” evidences the key terms of the contract. These included the following provision:
“ Engaging of contractors and consultants …. When necessary and approved by the Customer, GL shall engage professionals (engineers, designers, architects, etc.) and shall agree the budget to pay for the services. At the discretion of the Customer the payment for services performed shall be made directly by the Customer or by GL at the expense of the Customer on a monthly basis ….”
One of the consultants engaged by Grandlane was the architects for the project, PTP.
By letter dated 27 October 2017 Skymist terminated Grandlane's engagement. The letter set out Skymist's dissatisfaction with Grandlane's performance and claimed that Skymist was entitled to terminate for breach or for convenience. Under the heading “Next steps”, the letter stated: “For the avoidance of doubt no further sums shall become due to Grandlane in respect of the Development Management Fee and/or your Sub-consultants' Fees.”
Thereafter, Grandlane made claims for its fees and those of consultants which Skymist disputed. Those claims were set out in a pre-action protocol letter from its then solicitors, Joseph James Law (“JJL”), dated 27 November 2017. The letter stated that the sum currently owed to Grandlane by Skymist was £280,323 plus VAT but also alleged that Skymist's termination was in breach of contract and said that Grandlane would claim damages accordingly. No quantification of that claim for damages was set out but JJL said that, if matters could not be resolved, Grandlane would seek a declaration that it was entitled to payment of 5% of the total construction cost of the project. Grandlane also claimed the sum of £194,588.57 plus VAT in respect of “the unpaid fees of professional specialists employed on the Beaurepaire Park project for period August 2017 — October 2017”. The letter was accompanied by a series of invoices relating to that claim including 3 invoices from PTP to the end of September 2017 which totalled £144,120 plus VAT.
On 18 July 2018, and in the circumstances that I refer to below, PTP invoiced Grandlane in respect of its fees. The total outstanding on the face of the invoice was £1,120,890 plus VAT. On 19 July 2018, Grandlane sent to Skymist two invoices ostensibly dated 28 October 2017 (the day after termination): one was in respect of Grandlane's fees in the sum of £570.413.00 plus VAT and the other in respect of consultants' fees in the sum of £1,061,341 plus VAT. The latter invoice expressly referred to “Claim of Unpaid fees 18.07.2018”. It is not clear to me why a lesser sum was claimed for PTP's fees but nothing turns on it.
In August 2018, Grandlane commenced an adjudication against Skymist. An adjudicator, Mr Silver, was appointed by the CIArb. Skymist took issue with his appointment on the grounds that the clause that provided for the CIArb to be the nominating body was to be found in a document referred to as the Draft Deed of Appointment (“the DOA”) which Skymist argued was not incorporated into the contract with Grandlane. In light of that objection, the adjudication was not pursued. Instead, Grandlane commenced a second adjudication by notice dated 31 August 2018 and sought appointment of an adjudicator from the RICS as a nominating body. Mr Riches was appointed by the RICS.
Skymist again took issue with that appointment and issued Part 8 proceedings on 27 September 2018, during the currency of the adjudication. Those proceedings came before Waksman J in December 2018 (after the adjudicator had given his decision) and his judgment sets out more fully the background facts and Skymist's arguments. In short, as he sets out at paragraph 12 of his judgment, Skymist contended that if the contract incorporated the DOA, as Mr Riches had by that time found it did, the appointing body was the CIArb and Mr Riches was not properly appointed. Alternatively, Skymist argued that Grandlane had approbated and reprobated: it had approbated the DOA for the purposes of submissions to Mr Riches but had reprobated the adjudication provision in applying to the RICS for an appointment. As Waksman J observed at paragraph 76 “The irony of this case is that if there is any A/R [approbation and reprobation] here, it is in my view to be found in the actions of Skymist.” He decided that Mr Riches was properly appointed. Skymist wished to appeal. Both Waksman J and the Court of Appeal refused permission to appeal. No jurisdictional issue therefore now arises.
Claims in the adjudication
In the adjudication Grandlane claimed not only their own fees but sums that they had paid or were liable to pay to other consultants in a total of £1,417,729 (including VAT). The largest sum, being £1,265,010.86, was claimed in respect of PTP's fees.
In his decision, the adjudicator recorded that Grandlane's case was that it was entitled to the following remuneration:
(i) a fee of 5% of the construction costs for the provision of development management services;
(ii) a fee of 0.5% of the estimated value of the property, being around £40 million, for planning consent;
(iii) an indemnity against all consultants' fees.
Mr Riches recorded that in broad terms Skymist accepted that Grandlane was entitled to that remuneration but that there were particular issues of interpretation.
Under (i), Grandlane claimed a sum of £620k (based on a construction cost at the date of termination of £12.4 million), less amounts paid, leaving a balance of £379,413. That sum was agreed. Under (ii), Grandlane claimed a further £220k. The issue between the parties turned on whether Grandlane was entitled to a percentage of the construction cost or the greater total development cost. Mr Riches decided that the fee was to be based on the total construction cost, so that Grandlane's recovery was only £62,000.
In respect of the consultants' fees, the decision records that there was a dispute as to whether any obligation of Skymist was conditional on Grandlane having first paid the consultants. At paragraph 124.00 of his decision, the adjudicator noted that Skymist went further and said that it disagreed that Grandlane was entitled to an indemnity as opposed to an ordinary contractual right to payment. He concluded that Grandlane was entitled to be paid consultants' fees for which it was liable to the consultants and that payment was not a pre-condition.
The claim for consultants' fees
As I have said, the largest claim in respect of consultants' fees was that of the architects, PTP. PTP had been appointed by an agreement dated 5 November 2013. The Memorandum of Agreement recorded that it was entered into by Grandlane Developments Ltd. and PTP Architects London Limited. It incorporated the RIBA Standard Conditions for Appointment for an Architect (2012 revision). Those conditions made provision for adjudication and for the final form of dispute resolution to be arbitration.
The Basic Fee for new build works was 7% of the Construction Cost. Construction Cost is defined in the Conditions as:
“— the client's initial budget for constructing the Project as specified in the Project Data or where no such amount is specified a fair and reasonable amount; or subsequently
— the latest professionally prepared estimate approved by the Client; or where applicable
— the actual cost of constructing the Project upon agreement or determination of a final account for the Project …”
It does not appear to have been an issue that featured...
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