J. Murphy & Sons Ltd v W. Maher and Sons Ltd
| Jurisdiction | England & Wales |
| Judge | Sir Robert Akenhead |
| Judgment Date | 23 May 2016 |
| Neutral Citation | [2016] EWHC 1148 (TCC) |
| Docket Number | Case No: HT-2016000108 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 23 May 2016 |
[2016] EWHC 1148 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Sir Robert Akenhead
(Sitting as a Judge of the Technology and Construction Court)
Case No: HT-2016000108
Mr Simon Hughes QC (instructed by Hawkswell Kilvington) for the Claimant
Mr Edmund Neuberger (instructed by Pinsent Masons LLP) for the Defendant
Hearing date: 12 th May 2016
These Part 8 proceedings between a sub-contractor, J. Murphy & Sons Ltd ("Murphy"), and its earth shifting sub-sub-contractor, W. Maher & Sons Ltd ("Maher") raises a short and simple but interesting point about the jurisdiction of an adjudicator, namely, where there is a dispute as to whether there has been a full and final settlement agreement between the contractual parties of the final account, whether the dispute arises "under" the sub-contract or under the alleged settlement agreement or both. I have used Maher's Counsel's Skeleton Argument as a basis for reciting the largely undisputed facts.
The Facts
Murphy was engaged as a sub-contractor by Balfour Beatty Civil Engineering Ltd in 2013 to carry out shaft and tunnel work on what was called the Man Trunk 0178/0222 project at Trafford Park, Manchester.
By a sub-sub-contract made in February 2014, Murphy engaged Maher to provide "all labour plant, material and supervision" to carry out spoil (or arisings) removal in relation to this project and in particular to piling, shaft and tunnel excavations. The sub-sub-contract was contained in or evidenced by Murphy's Order dated 25 February 2014 which incorporated much of the NEC 3 Engineering and Construction Subcontract form (June 2005 with June 2006 and September 2011 amendments). A Payment Schedule identified 9 payments with applications between 17 November 2013 and June 2014 and corresponding payment due dates between January and August 2014. An Activity Schedule identifies what appears to be a lump sum of £406,190 for work to 3 shafts and 2 tunnels as well as 4 rates for materials "from other activities".
Option W2 for the NEC3 Conditions provided that: "Any dispute arising under or in connection with this subcontract is referred to and decided by the Adjudicator". Part 1 of the completed Subcontract Data section identified that the TCC was to be the "Adjudicator nominating body".
Maher started work in January 2014 and made some 16 payment applications for payment until and including for April 2015. Murphy paid some £466,832, which was less than applied for. It is common ground that there were some extra works. Although Maher carried on further work pursuant to the Subcontract its later monthly payment applications for payment yielded, it is said, neither acknowledgement nor further payment. Work by Maher of removing arisings and supplying aggregate, it is said, continued for the Project until early September 2015, with the last call off for work then occurring in around September 2015.
Maher submitted to Murphy what has been its final payment application (No.21) on 28 September 2015 for a gross sum of £763,980.24 with a net sum of £297,149 said to be due. Murphy, it is said, did not acknowledge or respond to this Application for Payment No.21 and did not respond to Alistair Kirk's of Maher covering email. On 8 October 2015 Maher wrote to Murphy as follows:
"Despite efforts to contact yourselves about our outstanding payments, we still await both a reply and payment from yourselves.
Our June & July applications for payment are overdue, August is due shortly and September will be due for payment in a few weeks. As no certificates of withholding/payment notices have been issued for June & July these are now due in full.
July's balance being £304321.00…"
Maher's claims consultants, BEA, wrote to Murphy on 3 November 2015 as follows:
"We have been instructed to act on behalf of W Maher & Sons Limited in matters arising out of their contract with J Murphy & Sons Limited under which they were to carry out spoil removal the MAN Trunk project (the Subcontract Works). Please note our interest.
A dispute exists which if not resolved within the next 14 days will be referred to Adjudication."
There followed a number of communications between Mr Meaney of Murphy contacted and Mr Kirk of Maher, by way of correspondence and by telephone, in relation to the final sum due to Maher. Maher's case is that in a telephone conversation on 12 November 2015 a 'final account sum' was agreed at £720,000. Since Maher had received £466,831, this meant a net payment of £253,169. This alleged agreement of £720,000 was subsequently confirmed in writing by email from Mr Kirk to Mr Meaney on 12 November 2015:
"Further to our discussions yesterday, we confirm out discussions that we agree to a final account sum of £720,000.00 (Seven Hundred and Twenty Thousand Pounds) as offered to bring this account to a conclusion.
Please can you arrange a payment as discussed in the next "couple of weeks" and also forward any paperwork that may also need completing for your records to prevent the payment being delayed."
Mr Meaney replied on the same day:
"Thank you for the confirmation, I will prepare the paperwork and the associated information in the next couple of days to close out the account with an update of the exact dates."
There was no written challenge by Murphy to what Mr Kirk had written notwithstanding reminders on 25 November and 11 December 2015. No further payment was made in spite of further e-mails. On 2 March 2016 Mr Kirk emailed Murphy again, recording that Maher had been told 'on the telephone that payment would be made on Friday 26/02/16'. Murphy's answer was that it was awaiting sign off from head office, adding:
"I am currently awaiting for the final sign off from head office as to the payment situation and I should be able to give you a full update tomorrow. Apologies for the further delay."
Murphy by letter on 3 March 2016 wrote to Maher, not referring to any agreement relating to £720,000 but setting out its gross valuation of Maher's work at £483,529.03. The small balance as against what had been paid to Maher has not been paid.
BEA issued Maher's first Notice of Adjudication on 7 April 2016, stating it to be "pursuant to Option W2 of the NEC 3 Engineering and Construction Subcontract" and noting that, given the reference in the Subcontract Data to the Adjudicator nominating body being the TCC, an application would be made to RICS. Mr Paul Jensen was appointed by the RICS as adjudicator and the Referral Document served. Murphy's solicitors ("HK") wrote to Mr Jensen on 15 April 2016 raising two jurisdictional issues and asking him to resign, firstly, because the specified nominating body was not a nominating body, there was no contractual basis for Maher to apply to RICS, continuing:
"Indeed, if a contractual adjudication provision is in any way deficient (which appears to be the case in this instance), it is trite law that the adjudication provisions contained in [the Scheme] must apply in their entirety…"
The secondly point was that Mr Jensen had no jurisdiction as a dispute in relation to the alleged settlement agreement and that it must be pursued through the Courts.
Maher replied on 18 April 2016:
"The Referring Party will be pragmatic if the Respondent wishes to take this point. The Referring Party can serve a New Notice of Adjudication pursuant to the Scheme and can make a new application to RICS for nomination of an adjudicator today."
It was also pointed out that there has been no "settlement agreement", but the dispute concerned payment under the terms of the existing Subcontract. The Adjudicator declined to resign.
Maher applied for a new appointment to the RICS, serving a second Notice of Adjudication on 19 April 2016. Although he formally resigned from his first appointment as adjudicator, Mr Jensen, as confirmed in his email of 20 April 2016 was again appointed as Adjudicator. In its second Notice of Adjudication Maher stated that the dispute was referred pursuant to the Scheme (as amended). In later correspondence, Murphy maintained the second of its previous jurisdictional challenges, which it elaborated on in its letter of 25 April 2016 and it still maintains.
This second Notice of Adjudication dated 19 April 2016 was contained within a letter from BEA, on behalf of Maher, to Murphy is in the following terms, so far as is material:
"We have been instructed to act on behalf of [Maher] in matters arising out of their Sub-Contract with [Murphy]…
On behalf of our client we hereby issue formal Notice of Adjudication upon you that our client intends to refer the dispute outlined below to Adjudication pursuant to the Scheme…
The dispute that is hereby referred to adjudication is [Murphy's] failure to make payment of the final payment.
[Maher's] Mr Kirk and [Murphy's] Mr Meaney in a telephone conversation on 11 November 2015 agreed the final account and the final payment. The parties agreed the final account of £720,000 in relation to [Maher's] last interim application for payment no. 21 dated 28/09/15 in the sum of £763,980.24.
[There is then set out verbatim parts of e-mails dated 12 November 2015 in relation to such agreement]
[Murphy's] reply can only be taken as a confirmation of the previous day's agreement to a final account of £720,000 and that the appropriate payment would be made within days …
The parties concluded a binding agreement on the 11 November 2015. [Murphy's] obligation arising from the acceptance of [Maher's] off was...
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