Hitachi Zosen Inova AG v John Sisk & Son Ltd

Hearing date: 30th January 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.

Introduction

The central issue for determination is whether the adjudicator in the eighth adjudication arising out of the contract between the parties has jurisdiction to decide what sums are properly payable for additional works that were carried out by the Defendant [“Sisk”]. The Claimant [“Hitachi”] says that the adjudicator has no jurisdiction because the same or substantially the same question has already been decided by an earlier adjudication, which was the second.

The essential facts are within a fairly narrow compass and are not materially in dispute. Similarly, the legal principles involved are essentially well established. Despite that, this application generated over 2750 pages of documents and a bundle of 12 authorities. The great majority of this excessive documentation was not referred to in the hearing and will not be referred to in this judgment.

Factual Background

Hitachi was employed to specify, design, engineer, construct, commission and test a multi-fuel power plant on the site of the existing coal-fired power station at Ferrybridge in Yorkshire. It engaged Sisk to provide design and construction services for the project by a contract dated 29 March 2012 (“the Contract”) for a consideration in excess of £44 million, or such other sums as might become payable under the Contract. For some reason which is not explained, the parties habitually called additional works under the Contract “Events”. This case directly concerns Event 1176.

The potentially relevant contractual provisions are set out in Annex A. They impose obligations on both Sisk and Hitachi in relation to payment for variations and claims for interim payment, and adjudications. In summary:

i) Pursuant to Clause 14.2, where Sisk receives an instruction or direction from Hitachi to vary the works and the instruction does not set out the value or the basis for calculating the value of the instruction then (a) Sisk is obliged to comply with Clause 30 and (b) Hitachi is required to determine the adjustment to the Contract Price “acting reasonably in the circumstances at the time”. Where the instruction sets out the value or means of calculating the value of any adjustment to the Contract Price, Hitachi shall issue a Variation Order that clearly identifies the amount payable or the means by which the amount payable shall be calculated. Hitachi shall also issue a Variation Order in all other cases where Hitachi, acting reasonably, is satisfied that Sisk has properly demonstrated an entitlement to be paid pursuant to Clause 30;

ii) Where Hitachi's instruction does set not out the value or the basis for valuing a related adjustment to the Contract Price, Clause 30.1 provides that Sisk shall be entitled to all reasonable and unavoidable additional direct Cost and Expense incurred by Sisk. The level of entitlement shall be based upon the actual Cost and Expense “substantiated by contemporary records and audits of [Sisk's] books of account” or, in Hitachi's absolute discretion, any suitable relevant rates or prices used by Sisk for agreeing the Contract Price;

iii) Clause 30.4 imposes tight time-limits upon Sisk for giving notice to Hitachi of its intention to make a claim (5 days) and the provision of detailed evidence (a further 15 days) to enable Hitachi to evaluate the validity and value of the claim. Hitachi has the right to request further substantiation to be provided within a stipulated time if the evidence submitted by Sisk does not, in Hitachi's opinion, enable Hitachi adequately to ascertain the validity and value of the claim. Sisk is not entitled to any additional Cost and Expense pursuant to Clause 30 if it fails to comply with such a request from Hitachi. This is emphasised by Clause 30.6;

iv) Pursuant to Clause 37.2(c) the Purchaser's Representative may adjust any previous over or under payment in a Payment Notice subsequently issued. There is no contractual qualification or limitation of the circumstances which may lead the Purchaser's Representative to make such adjustments.

v) Clause 51 provides for reference to adjudication and the incorporation of the TECSA Rules.Rule 16 of the TECSA Rules gives the adjudicator the like power to open up and review any certificates or other things issued or made pursuant to the Contract as would an arbitrator appointed pursuant to the Contract and/or a Court.

vi) Pursuant to Clause 51.7 the decision of the adjudicator is binding until the dispute is finally determined by legal proceedings or by agreement; but, pursuant to Clause 52.2, if an adjudicator's decision is not referred to the Court within 10 Business Days then it becomes final and binding on the parties.

The Second Adjudication

On 16 October 2015 Sisk issued its Application for Payment of Events No. 6 [“Application No. 6”]. Application No. 6 followed a familiar pattern: it identified the cumulative value of the Events to date (£8,340,152.92) and the amount previously paid (£3,806,230.00) and claimed the difference between those two figures (£4,533,922.92) plus VAT. The schedule accompanying the application included an entry for Event 1176, described as “Acceleration Works to the Boiler Hall construction as agreed … during the meetings of 29 ^th August, 18 ^th September and 1 ^st October 2014”. The amount brought into the schedule was £1,092,497.45. The works were said to be 100% complete and the comment was added “As per Sisk's Substantiated Pack – Letter 2957”.

On 9 November 2015 Hitachi submitted a Payment Notice with respect to Application No. 6. It rejected the claim for any payment for Event 1176 and asserted as an overall position that Sisk had been overpaid £2,720,683.52. Given this dispute, Sisk referred some of the items included in Application No. 6 to adjudication. The items included Event 1176, which was recorded by Schedule 4 to the Notice as being “not accepted”. By its notice of intention to refer the dispute to adjudication, Sisk claimed:

“4.1.1 A declaration as to the correct valuation of each of the items in dispute that have been referred to the adjudicator in this adjudication ..

4.1.2 An order that [Hitachi] shall pay to Sisk the sum of £3,947,187.42 plus VAT or such other sum as the adjudicator may decide (plus VAT);

…”

Sisk's referral notice set out its explanation and intended substantiation of the sum claimed for Event 1176, to which Hitachi replied by its Response to the Referral Notice. Sisk served a Reply to that Response; Hitachi responded again with a Rejoinder; and, finally, Sisk served a Surrejoinder. Each of these documents advanced submissions and evidence about Event 1176. There can be no doubt that Sisk was asking the adjudicator to evaluate Event 1176 in the sum claimed or such other sum as he found to be proved and that Hitachi was trying to persuade the adjudicator that the sums claimed were not proved to the necessary contractual standard.

The adjudicator, Mr Pontin, issued his decision on 14 April 2016 and issued a correction on 18 April 2016. The terms of his decision are critical to the issues that now fall for resolution and I therefore set out the relevant passages in full:

i) Having summarised the submissions and timetable he said at [11]:

“Accordingly this decision does not rehearse each and every issue raised by the Parties but it does address the Dispute referred, namely whether the items are Variations or matters for deduction, whether a time bar or other agreement applies and what the proper valuation is and sum due for the purposes of Application 6.”

ii) At [38]–[45] he considered the basis for valuation under Clause 30.1 and continued at [46]:

“Both Sisk and [Hitachi] at times seek to rely on unsupported costs in their respective valuations. Absent common ground in the parties' approach to valuation, I have applied contract rates and allowances where I am directed to them and am satisfied that they are sufficiently evidenced, alternatively Costs and Expense where sufficiently evidenced. If I have insufficient evidence to conclude a valuation I have had regard to any admissions made by either party and applied those to my valuation. In very many cases however the detail provided both in Application 6 and Payment Notice 6 falls short of that required by clause 30.1 and in such situations I have been unable to conclude a valuation for the purposes of Interim Application/Payment Notice 6. This is not to say that no value is due on a subsequent application, but rather, that none could be ascertained as due for this Application 6/Payment Notice 6.”

iii) At [83], under the heading “Valuation” he wrote:

“My valuation is set out in summary terms in Appendix 1 to this decision for the Variations that Sisk identify …. . The appendices are copies of the schedules provided in Referral Section E with additional columns added for my Valuation and comments.”

iv) At [89] under the heading “Directions”, he wrote (as amended on 18 April 2016):

“I therefore Decide, Declare and Direct:

(a) The correct valuation of each of the items in dispute that have been referred to me in this adjudication, being the items in the schedule at Appendix 4 to the Notice of...