Jawaby Property Investment Ltd v Interiors Group Ltd and another
| Jurisdiction | England & Wales |
| Judge | The Hon. Mrs Justice Carr DBE |
| Judgment Date | 16 March 2016 |
| Neutral Citation | [2016] EWHC 557 (TCC) |
| Docket Number | Case No: HT 2016 000063 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 16 March 2016 |
[2016] EWHC 557 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
The Hon. Mrs Justice Carr DBE
Case No: HT 2016 000063
Mr Anthony Speaight Q.C. (instructed by Eversheds LLP) for the Claimant
Mr James Bowling (instructed by Fenwick Elliott LLP) for the Defendants
Hearing dates: 9th March 2016
Introduction
By this Part 8 claim the Claimant ("JPIL") seeks declaratory relief against the First Defendant ("TIG") in relation to certain payment obligations under a construction contract entered into between JPIL and TIG ("the Contract") for works at Holborn Tower, High Holborn, London WC1 ("the Property") and a related Escrow Agreement ("the Escrow Agreement"). JPIL is the current freehold owner of the Property, which is a high rise office block.
JPIL initially also sought injunctive relief against TIG and the Second Defendant ("Mr Black"), TIG's sole director, to restrain him from signing and to restrain TIG from presenting a statutory declaration so as to trigger payment from an Escrow Account ("the Escrow Account") the subject of the Escrow Agreement.
The sum in issue is £1,109,214.09. TIG is currently unable to pay to its subcontractors monies properly due to them. If payment is released, then Mr Black expects the company to continue and to continue successfully. But it cannot survive without the receipt of these monies. There is evidence of financial difficulties on the part of TIG in the past. JPIL suggests that TIG's current financial difficulties cannot be attributable, at least not exclusively, to non-payment by JPIL. There is a real "insolvency risk" that any payment received by TIG will be used to pay creditors unrelated to the Contract. TIG is currently subject to a winding-up petition presented by an unpaid creditor. A hearing of that petition has been adjourned from 8 th March 2016. In these circumstances, this matter has proceeded as a matter of urgency and on an expedited basis.
The ultimate question for the Court is whether there has been a "default" within the meaning of the Escrow Agreement. JPIL contends that TIG is not entitled to trigger payment from the Escrow Account on two grounds:
a) A valuation sent by TIG by email for Valuation 7 on 7 th January 2016 ("the Valuation") was not a valid Interim Application within the meaning of Clause 4.8.1 of the Contract;
b) Alternatively, if, contrary to JPIL's case, the Valuation was a valid Interim Application, then an email and attachments sent by Ashford Property Services Limited ("APS"), JPIL's Agent under the Contract, on 18 th January 2016 ("the 18 th January email") constituted a valid Pay Less Notice as required under clause 4.9 of the Contract and was served not later than 5 days before the final date for payment.
JPIL seeks final declarations reflecting the above. It is apparent from this that, whilst Mr Black is joined to the proceedings for the purpose of injunctive relief, the substantive dispute is between JPIL and TIG. Equally, given that JPIL seeks final declaratory relief to the effect that there has not been a default event under the Contract, JPIL's claim for injunctive relief effectively falls away. There is no suggestion that, this dispute having arisen, TIG has taken steps to make a call on the Escrow Account, despite the straitened circumstances in which it finds itself. JPIL realistically does not pursue its claim for injunctive relief in the circumstances.
TIG regards JPIL's objections as spurious excuses to deny TIG payment of monies, if necessary from the Escrow Account. Its position is that it made a valid Interim Application in response to which no valid Pay Less Notice was served. It seeks a mandatory injunction requiring payment of the monies from JPIL or alternatively from the Escrow Account.
Evidence on the claim has been served as follows:
a) For JPIL: statements from Mr Jonathan Bowley of JPIL's solicitors, Eversheds LLP ("Eversheds"), and Mr Christopher Millican of APS;
b) For TIG: a statement from Mr Black.
To the extent that the parties have attempted to go into the wider merits of their disputes under the Contract, I ignore such matters for present purposes. Mr Millican, for example, goes into significant detail on the accuracy of the Valuation, suggesting that it is a gross overvalue. This is not accepted by TIG. Such matters are either not relevant or not suitable for consideration in this limited Part 8 procedure. Additionally, there is a degree of factual dispute as to whether or not there was an agreed system between the parties for the purposes of Interim Applications under the Contract, namely as to what was an acceptable form and manner of interim payment application. Mr Black says that there was. Mr Millican says that there was no agreement to alter the payment provisions in the Contract. APS simply followed the pragmatic course of fitting in as best it could with what TIG was choosing to do. Neither party suggested that there should be cross-examination, or that the claim should be taken outside the Part 8 procedure (although TIG made it clear that, were I to find that the issues could not be concluded properly within the procedure, I should find against JPIL). So far as the witness evidence is concerned, I proceed below on the basis of such evidence as is not contested. Thus, for example, it has not been disputed by JPIL that APS requested TIG to prepare summary sheets in a certain way after Valuation 4, and TIG complied with that request. Beyond that, I proceed on the basis of what the documents themselves show.
The Contract
The Contract was entered into originally between Tekxel Limited ("Tekxel") and TIG on 31 st July 2015 for the refurbishment of the ground and main reception, and floors 2, 3, 4, 6, 7, 8 and 11 of the Property. The contract was novated subsequently from Tekxel to JPIL. It was on the standard JCT 2011 Design and Build Contract Conditions with amendments. The works are split into ten sections, with each section having a sectional completion date and rate of liquidated damages for late completion. Works to floors 1 and 10 were added as a variation. The Contract sum was £4,077,966.78.
By Article 3, save to the extent that JIPL might otherwise specify by notice to TIG, APS has " full authority to receive and issue applications, consents, instructions, notices, requests or statements and otherwise to act for [JPIL] under any of the Conditions".
By Article 14 TIG's obligations are conditional on an Escrow Agreement in an agreed form being executed by the parties and Eversheds LLP, solicitors formerly acting for Tekxel and now for JPIL, confirming that the Minimum Deposit Balance had been deposited in the Escrow Account. Such confirmation was given.
Clause 1.7 (as amended) provides materially as follows:
" Any notice, approval, request or other communication to be given by either Party under this Contract shall be sufficiently served if sent by hand, by fax or by post to the registered office, or if there is none then the last known address of the Party to be served…"
Clauses 4.8 to 4.10 (as amended) provide materially as follows:
" Contractor's Interim Applications and Due Dates
4.8.1 In relation to each Interim Application, the Contractor shall make an application to the Employer (an 'Interim Application') in accordance with the following provisions of this clause 4.8, stating the sum that the Contractor considers to be due to him and the basis on which that sum has been calculated…
4.8.3 Where Alternative B applies, for the period up to practical completion of the Works, Interim Applications shall be made as at the monthly dates specified in the Contract Particulars for Alternative B up to the date of practical completion or the specified date within one month thereafter. Subsequent Interim Applications shall be made at intervals of 2 months (unless otherwise agreed), the last such application being made upon the expiry of the Rectification Period or, if later, the issue of the Notice of Completion of Making Good (or, where there are Sections, the last such period or notice). The due date in each case shall be the later of the specified date and the date of receipt by the Employer of the Interim Application.
4.8.4 Interim Applications may be made before, on or after completion of the relevant stage or the monthly date and shall be accompanied by such further information as may be specified in the Employer's Requirements.
Interim Payments – final date and amount
4.9.1 The final date for payment of an Interim Payment shall be 30 days from its due date.
4.9.2 Not later than 5 days after the due date the Employer shall give a notice (a "Payment Notice") to the Contractor in accordance with clause 4.10.1 and, subject to any Pay Less Notice given by the Employer under clause 4.9.4, the amount of the Interim Payment to be made by the Employer on or before the final date for payment shall be the sum stated as due in the Payment Notice.
4.9.3 If the Payment Notice is not given in accordance with clause 4.9.2, the amount of the Interim Payment to be made by the Employer shall, subject to any Pay Less Notice under clause 4.9.4, be the sum stated as due in the Interim Application.
4.9.4 If the Employer intends to pay less than the sum stated as due from him in the Payment Notice or Interim Application, as the case may be, he shall not later than 5 days before the final date for payment give the Contractor notice of that intention in accordance with clause 4.10.2 (a "Pay Less Notice"). Where a Pay Less Notice is given, the payment to be made on or before the...
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