HS Works Ltd v Enterprise Managed Services Ltd
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE AKENHEAD |
| Judgment Date | 08 April 2009 |
| Neutral Citation | [2009] EWHC 729 (TCC) |
| Docket Number | Case No: HT 09 72 & HT 09 106 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 08 April 2009 |
[2009] EWHC 729 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Before: The Honourable Mr Justice Akenhead
Case No: HT 09 72 & HT 09 106
Steven Walker (instructed by Donald Pugh) for the Claimant
Simon Lofthouse QC (instructed by HBJ Gateley Wareing LLP) for the Defendant
Hearing dates: 27 March 2009
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.
MR JUSTICE AKENHEAD:
Introduction
HS Works Limited (“HSW”) is a civil engineering company carrying out construction works in the utilities sector. Enterprise Managed Services Ltd (“Enterprise”) is a utilities contractor which was retained by Thames Water in March 2004 to carry out clean water and network repair and maintenance services; this contract was known as Lot 8. By a written sub contract dated 1 February 2006 (“the Sub-Contract”), HSW was employed by Enterprise to carry out construction work which involved repair, reinstatement and re- surfacing of highways (“the Sub-Contract Works”) at various locations in and around Greater London.
Following completion of the Sub-Contract Works or the termination of the Sub-Contract in late 2007 or early 2008, issues arose between the parties in relation to the evaluation of the final account and to a number of contra-charges said to be due to Enterprise. There have been two adjudications involving two different adjudicators who produced two decisions in February and March 2009.
In the first decision, the adjudicator decided that £1,835,252.26 interest plus VAT and the adjudicator's fees should be paid by Enterprise. In the second decision the adjudicator decided and declared that the proper valuation of the Sub Contract Works allowing for contra charges was £23, 253, 931.09. The effect of this second decision could mean that all or part of the sum decided to be due under the first decision should be repaid, if paid at all. Each party argues that the decision which was adverse to its interests was an invalid decision on the grounds of jurisdiction or natural justice.
The Sub-Contract
The Sub-Contract contains the following material terms:
“31.1.1 The Sub-Contractor is entitled to payment for work undertaken properly and fully completed to permanent reinstatement stage and following the submission and validation of a job pack for each work order…
31.2 …The Sub-Contractor shall make an application to payment in accordance with Table 1… Prior to the date on which each payment becomes due. The application shall be in such a form and contain such particulars as the contractor may from time to time direct…
31.3 Under no circumstances shall the sum stated in an application for payment from the Sub-Contractor necessarily be considered as the sum due to be paid under the provisions of this clause.
31.4 Not later than the date identified by Table 1…the Contractor shall calculate the value of the Sub-Contractor's works and shall issue a payment certificate to the Sub-Contractor specifying the said value and the basis upon which the value is calculated…. The payment certificate shall further indicate the amount of retention to be withheld (or released as the case may be)…
31.5 Subject to clause 31.6, the Contractor shall make payment of the amount proposed to be paid under clause 31.4 not later than the final date for payment identified by column D of Table 1.
31.6 Notwithstanding the notice referred to in clause 31.4, if the Contractor intends to withhold payment, in whole or in part, after the final date for payment referred to in clause 31.5, the Contractor shall give notice to that effect not later than the date identified by Column E of Table 1. Such a notice shall state the amount proposed to be withheld and the grounds for withholding payment or, if there is more than one ground, each ground and the amount attributable to it. Without prejudice to the generality of this clause, the Contractor shall (subject to the notice) be entitled to withhold payment from monies otherwise payable under this Sub-Contract, for monies due and owing by the Sub-Contractor to the Contractor under or in connection with other Sub-Contracts…
31.7.5 …the Sub-Contractor shall, within [a specified period] submit to the Contractor a final application for payment setting out all items and amounts to which the Sub-Contractor considers he is entitled under or in connection with the Sub-Contract…
31.7.6 Any amount to be paid in relation to the final application for payment referred to in clause 31.7.5 above shall become due on the date identified by Column G of Table 1…The provisions of clauses 31.4, 31.5 and 31.6 shall thereafter apply.
37.4 Either party may decide…to refer the Dispute at any time to adjudication…”
The General History
The Lot 8 Sub-Contract Works proceeded over several years albeit that it seems (and I make no finding about this) works ceased in late 2007. There may have been agreed changes to the rates and prices at some stage prior to that. The nature of the work involved work being executed at numerous different locations, involving mostly excavation and reinstatement in the carriageway coupled with repairs to existing water mains. Works varied in value from a few hundred pounds to six figure sums. Enterprise, at least generally, would send to HSW orders, usually electronically, and each order had a Work Record (“WR”) number.
Although the Lot 8 accounting seems at some stage to have become combined with one or more other sub-contract between the parties, HSW submitted what they considered was their final account for Lot 8 to Enterprise on 14 May 2008. This was sent in electronic format. The total was £30,963,763.25. Identified on the face at least of a summary page was a reference to there having been a deduction for contra charges in the sum of £1,862,197.92 by Enterprise.
There then followed a period of discussions and negotiation between the parties. It is abundantly clear that there were disputes between the parties both as to the proper value of HSW's works as well as the contra charges.
There was no dispute before me that Enterprise served any relevant withholding notice pursuant to Clause 31.6 on HSW after 14 May 2008. An issue arose between the parties as to whether any further notices were required.
By 16 October 2008, Enterprise set out in an email to HSW on a spreadsheet an “updated summary” of what was its view as to what was due to HSW for Lot 8. The total of the “Agreed” column, reflecting what Enterprise was then indicating it agreed, was as follows:
“Contract Value Sub-Total £24,707,783.92
Lot 8 Charged Contras (£1,835,252.26)
Outstanding Contra Charges Lot 8 (£42,651.35)
Lot 8 (Unsettled) Insurance Claims… (£56,702.56)
Contra Charge Total (£1,934,606.17)
Retention Held Lot 8 (£250,000.00)
Grand Total (£22,809,259.49)
On 18 November 2008, HSW wrote to Enterprise saying:
“It is our intention to commence adjudication proceedings in the very near future against [Enterprise] with regards the dispute in relation to the Lot 8 contra-charges of which HSW dispute circa £1.2m of the £1.8m levied against the account in relation to this element…”
On 16 December 2008, HSW gave Notice of Adjudication (“the First Adjudication”). Mr Peter Cousins, a Chartered Engineer, was nominated as adjudicator on 18 December 2008 and the Referral was served on 22 December 2008. After various challenges and two extensions, he issued his decision on 2 February 2009, requiring Enterprise to pay an amount equivalent to the Lot 8 Charged Contras, £1,835,252.26 and additional relief. I will return to the relevant events and the decision in that adjudication below.
On 12 January 2009, Enterprise e-mailed to HSW a “summary document” recording “the current Lot 8 position based on the various documents that the parties have exchanged”. This revealed identical total figures for what Enterprise agreed, that is a gross of £24,707,783.92 and contra charges of £1,934,606.17. It indicated a total figure paid of £22,809,259.49. On 13 January 2009, HSW responded to the effect that:
“HSW's position on the final account values has not changed and…we maintain that on the Lot 8 contract alone a final account value of £29,017,687.72 is applicable for which Enterprise has previously certified £24,894,511.75 but paid £22,809,259.79 as contra-charge deductions of £1,835,252.26 have wrongly been made…”
On 2 February 2009, Enterprise gave Notice of Adjudication (“the Second Adjudication”). Mr Don Smith, a Quantity Surveyor, was duly nominated as adjudicator and the Referral was served on 6 February 2009. After various challenges and one extension, he issued his decision on 12 March 2009; he declared that the value of the Final Account allowing for contra charges was £23,253,931.09. I will return to the Second Adjudication later.
These Proceedings
HSW issued its claim, HT 09 72, to enforce the First Adjudication decision on 20 February 2009. Enterprise issued its claim, HT 09 106, to enforce the Second Adjudication decision, on 16 March 2009. Both have issued summary judgment applications. Mr Justice Ramsey gave directions so that the hearing of both applications was heard at one hearing on 27 March 2009.
The issues are in simple terms:
(a) In the First Adjudication, did the Adjudicator exceed or fail to fulfil his jurisdiction in failing to address the merits and quantum of the contra charges? Did he in that respect fail to comply with natural justice? How, if at all, should the decision in the Second Adjudication impact on the First Adjudication decision?
(b) In the...
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