Hutton Construction Ltd v Wilson Properties (London) Ltd
| Jurisdiction | England & Wales |
| Judge | The Hon. Mr Justice Coulson |
| Judgment Date | 16 March 2017 |
| Neutral Citation | [2017] EWHC 517 (TCC) |
| Docket Number | Case No: HT-2016-000362 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 16 March 2017 |
[2017] EWHC 517 (TCC)
The Hon Mr Justice Coulson
Case No: HT-2016-000362
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Rolls Building, Fetter Lane, London, EC4A 1NL
Mr Jonathan Lewis (instructed by Fenwick Elliott LLP) for the Claimant
Mr William Webb (instructed by Birketts LLP) for the Defendant
Hearing date: 23 February 2017
Judgment Approved
INTRODUCTION
This is a summary judgment application by the claimant, seeking to enforce the decision of the adjudicator, in the sum of £491,944.73. The defendant does not raise any issue as to the adjudicator's jurisdiction, nor is it said that there was any breach of natural justice. Instead, the defendant seeks to defend the summary judgment application on the grounds that the adjudicator was wrong to reach the conclusion that he did and that, in consequence, there should be no judgment in favour of the claimant. The claimant denies that this is a legitimate approach on the facts of this case.
As I pointed out to the parties during the course of argument, the defendant's stance is an increasingly common one amongst those who are dissatisfied with an adjudicator's decision. It raises fundamental points of principle and practice concerning the enforcement of adjudication decisions. For that reason, having informed the parties that I would enter summary judgment for the claimant and would not permit the defendant to raise their challenge in defence of the claim, I reserved this Judgment.
THE RELEVANT PRINCIPLES
The starting point, of course, is that, if the adjudicator has decided the issue that was referred to him, and he has broadly acted in accordance with the rules of natural justice, his decision will be enforced: see Macob Civil Engineering Limited v Morrison Construction Limited [1999] BLR 93. Adjudication decisions have been upheld on that basis, even where the adjudicator has been shown to have made an error: see Bouygues (UK) Limited v Dahl-Jensen (UK) Limited [2000] BLR 522. Chadwick LJ summarised the principal reason for this in Carillion Construction Limited v Devonport Royal Dockyard Limited [2006] BLR 15: "the need to have the 'right' answer has been subordinated to the need to have an answer quickly."
There are two narrow exceptions to this rule. The first, exemplified by Geoffrey Osborne v Atkins Rail Limited [2010] BLR 363, involves an admitted error. In that case the calculation error was raised by the defendant in a separate Part 8 claim. Because the error was admitted by everyone, including the adjudicator, and because there was no arbitration clause, which meant that the court had the jurisdiction to make a final decision on the point, there were no reasons why, in that case, the error could not be corrected. If there had been an arbitration clause, the court would not have had the power to determine the issue and the decision would have been enforced: see Pilon Limited v Beyer Group PLC [2010] BLR 452.
The second exception concerns the proper timing, categorisation or description of the relevant application for payment, payment notice or payless notice, and could be said to date from Caledonian Modular Limited v Mar City Developments Limited [2015] EWHC 1855 (TCC). In that case, the defendant had raised one simple issue, in a detailed defence and counterclaim served at the outset, to the effect that a small group of documents could not have constituted a claim for or notice of a sum due for payment. If that argument was right, it was agreed that the claimant was not entitled to summary judgment. At paragraph 11 of my judgment in that case, I reiterated the general principle that it was not open to a defendant to seek to avoid payment of a sum found due by an adjudicator by raising the very issue on which the adjudicator ruled against the defendant in the adjudication. I went on:
"12. That is, of course, the general rule and it will apply in 99 cases out of 100. But there is an exception. If the issue is a short and self-contained point, which requires no oral evidence or any other elaboration than that which is capable of being provided during a relatively short interlocutory hearing, then the defendant may be entitled to have the point decided by way of a claim for a declaration. That is what happened, for example, in Geoffrey Osborne v Atkins Rail Ltd [2010] BLR 363. It is envisaged at paragraph 9.4.3 of the TCC Guide that separate Part 8 proceedings will not always be required in order for such an issue to be decided at the enforcement hearing.
13. It needs to be emphasised that this procedure will rarely be used, because it is very uncommon for the point at issue to be capable of being so confined. But in the present case, it is common ground that the proper meaning and interpretation of the documents of 13 February is a straightforward matter for the court. No other evidence of any kind is required. It is also common ground that, if the adjudicator was wrong, and those documents do not constitute a proper claim for payment or a payee's notice, then the defendant's payless notice was valid and there is no entitlement to summary judgment. Accordingly, this is one of those rare cases where the substantive point in issue can be determined at the enforcement hearing. During the course of his clear submissions on the substantive issues, Mr Webb properly did not suggest to the contrary."
What, I think, nobody could have predicted at the time of Caledonian Modular was the proliferation of what I understand are (unhappily) called 'smash and grab' cases: those adjudication claims (usually, but not always, brought by contractors) based on the contention that the other party has failed to serve proper or timeous applications for payment or payment/pay less notices, thereby automatically entitling the claiming party to the sums claimed, no matter how controversial. The significant increase in these sorts of claims seems to me to arise principally from the ill-considered amendments to the 1996 Act, and the over-prescription of the payment terms included in the standard forms of contract, which have led to provisions of unnecessary complexity. I am also aware of the widely-held view that this problem has been inadvertently compounded by the run of authorities starting with ISG Construction Ltd v Seevic College [2014] EWHC 4007 (TCC), which prohibit a second adjudication dealing with the detailed valuation of an interim payment already awarded by an adjudicator.
What should the court do on enforcement in circumstances where the claiming party — whom I shall call the claimant — has been successful, because the adjudicator has ruled that the responding party — whom I shall call the defendant — failed to serve a notice in time, or failed to comply with some other provision of the contract in relation to applications for payment or payment/pay less notices? In many ways, the answer to that is conditioned by the nature and extent of any agreement between the parties.
THE SUBSEQUENT AUTHORITIES
The authorities since Caledonian Modular demonstrate that, very often, the point taken by the defendant is a straightforward argument to the effect that the adjudicator was wrong and that, either with regard to its timing, or its content, the relevant payment notice was invalid and/or that the pay less notice was valid and prevented payment. In those circumstances, the defendant has issued Part 8 proceedings seeking a declaration to that effect. The claimant may issue its own enforcement claim or, as the cases show, the parties may agree that, if the defendant loses its Part 8 claim, it will pay the sums awarded by the adjudicator in any event.
This broadly consensual approach can be seen in a number of the cases, including:
a) Leeds City Council v Waco UK Limited [2015] EWHC 1400 (TCC), a case where LCC was given leave to defend, only on the basis that they pay the sums awarded by the adjudicator to Waco. LCC complied with that order and then brought CPR Part 8 proceedings for a declaration that Waco's application for an interim payment was not a valid application and that the adjudicator's decision was therefore wrong.
b) Manor Asset Limited v Demolition Services Limited [2016] EWHC 222 (TCC), a case where the point in issue in the adjudication was the proper construction of the contract. The losing party, MAL, then brought Part 8 proceedings seeking a declaration that the adjudicator's interpretation was wrong. DSL responded by seeking summary judgment. The adjudicator's decision was upheld, albeit for different reasons.
c) Bouygues (UK) Limited v Febrey Structures Limited [2016] EWHC 1333 (TCC), another dispute about the construction of the contract. Bouygues, who lost the adjudication, sought declarations by way of Part 8. They made plain that they would not pursue any of the issues that they had raised with respect to Febrey's enforcement proceedings, so everything turned on the Part 8 Claim.
d) Kersfield Developments (Bridge Road) Limited v Bray and Slaughter Limited [2017] EWHC 15 (TCC), a case in which there were parallel enforcement and Part 8 proceedings, which were dealt with simultaneously. The judge was required to deal with no less than six issues as to the timing and the content of various notices, and concomitant arguments about estoppel.
e) Surrey and Sussex Healthcare NHS Trust v Logan Construction (South East) Limited [2017] EWHC 17 (TCC), a case in which the Trust lost the adjudication and challenged the decision by way of Part 8. The parties agreed that the questions raised were amenable to consideration by the court by way of a Part 8 claim and that, by consent, there were no separate enforcement proceedings. The judge found...
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