John Graham Construction Ltd v Tecnicas Reunidas UK Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Morris |
| Judgment Date | 27 January 2022 |
| Neutral Citation | [2022] EWHC 155 (TCC) |
| Docket Number | Claim No: HT-2021-000378 |
| Year | 2022 |
| Court | Queen's Bench Division (Technology and Construction Court) |
[2022] EWHC 155 (TCC)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
TECHNOLOGY AND CONSTRUCTION COURT (QBD)
Royal Courts of Justice,
Rolls Building
Fetter Lane, London, EC4A 1NL
THE HONOURABLE Mr Justice Morris
Claim No: HT-2021-000378
Neil Dowers (instructed by Carson McDowell LLP) for the Claimant
Andrew Rigney QC and Carlo Taczaski (instructed by Stephenson Harwood LLP) for the Defendant
Hearing dates: 6 December 2021
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.
THE HONOURABLE Mr Justice Morris
Introduction
This is an application by John Graham Construction Limited (“the Claimant” (or “JGCL”)) for summary judgment to enforce the decision of Mr Christopher Ennis (“the Adjudicator”) dated 16 April 2021 (and corrected on 20 April 2021) (“the Decision” or “Adjudication 4”). By Adjudication 4, the Adjudicator ordered Tecnicas Reunidas UK Limited (“the Defendant” (or “TR” or “TRL”)) to pay sums. The Defendant has paid part of those sums. However it has not paid fully the part of the Adjudication 4 relating to a disputed contra charge in the sum of £355,724.95. The contra charge was in respect of “ provisional costs incurred appointing another subcontractors [sic] to carry out Graham's abandoned works” (“the Contra Charge”). The total sum now outstanding and claimed by the Claimant is £346,101.18 (which includes interest up to the date of the hearing).
The Claimant was employed by the Defendant, pursuant to a sub-contract (“the Subcontract”), as a subcontractor in respect of the construction of the Tees Renewable Energy Plant Biomass Power Station. There have been a number of disputes between the parties, resulting in four adjudications and two arbitrations. The first arbitration (“Arbitration 1”) concluded in early 2021 and, by two partial awards (together “Award 1”) made a final determination of matters which were referred to the arbitration tribunal. The second arbitration is continuing. As will be explained, Award 1 overturned the decision of the adjudicator in the first adjudication (“Adjudication 1”).
The Defendant has not paid the Contra Charge because it contends that it is a severable and distinct part of Adjudication 4 and because, by reaching the decision that that sum was payable by the Defendant, the Adjudicator exceeded his jurisdiction. The Adjudicator wrongly decided that the decision in Adjudication 1, despite being overturned by Award 1, continued to have effect and “insulated the Claimant from liability for breach of contract”. In so doing, the Adjudicator exceeded his jurisdiction.
In response, the Claimant contends that the Defendant participated in Adjudication 4 without reserving its position and has waived its right to raise a jurisdictional challenge; and in any event the Adjudicator did not exceed his jurisdiction.
The Factual Background
During the course of 2018 the Claimant and the Defendant were in dispute as to the scope of the works covered by the Subcontract. The Claimant considered that the subcontract works were limited to works necessary to achieve certain “Milestones” set out in the Subcontract and began to refuse to carry out works which it considered to extend beyond those Milestones and/or refused to carry them out for the rates and prices agreed in the Subcontract.
Adjudication 1
In February 2019 the Claimant referred the dispute as to scope of the works to adjudication in what was Adjudication 1. The adjudicator in Adjudication 1 agreed with the Claimant and on 5 March 2019 declared that the scope of the Subcontract works was limited as the Claimant alleged.
Arbitration Award 1
On 3 June 2019 the Defendant referred the dispute about the Claimant's scope of works to arbitration (Arbitration 1) for final resolution. The dispute was stated to be as follows:
“The dispute relates to the scope of work required to be carried out by Graham and as to whether, contractually or otherwise, that scope relates, or was or is to be treated as relating, to all civil works in connection with the project, save for certain identified exceptions, or is that described in the intermediate milestones (‘the Milestones’) set out or referred to in the Subcontract documentation. The pleadings identify issues relating to the construction and interpretation of the Subcontract and as to various estoppel and rectification matters.”
The proceedings in Arbitration 1 were split. There was an initial hearing in April 2020 in relation to the parties' cases on contractual interpretation. This led to the First Partial Award dated 26 June 2020. There was a later hearing in December 2020 and a Second Partial Award dated 24 February 2021, which considered the parties' cases on estoppel and rectification. The outcome of Arbitration 1 was that the decision in Adjudication 1 was held to be wrong. In the First Partial Award, the tribunal held that the scope of the work contracted to be carried out by the Claimant “was defined by reference to the works set out in the Unit Price List [the BOQ]” and included all civil works in connection with the Project identified in the Unit Price List, including but not limited to the works identified in that List required to complete the foundation work broadly identified in Milestones 1–14. Thus the scope of the work was not limited as the Claimant alleged, but was wider, as the Defendant had contended.
Alternative contractors employed by the Defendant
By the time of Award 1, the Claimant had refused to undertake various items of works and the Defendant had arranged for alternative contractors to undertake various of those items. According to the Defendant, the Claimant's refusal to undertake those works had started prior to, and had continued after, Adjudication 1.
Dispute as to Interim Payment Application no 47
In the meantime in December 2020 a dispute between the parties crystallised as to the true value of the Claimant's interim payment application no 47. As part of its payment notice in response, the Defendant applied the Contra Charge. The Contra Charge represented the Defendant's provisionally quantified costs of others undertaking some of the works (falling within the scope as determined by Award 1) and represented claimed damages for breach of contract on the part of the Claimant in having failed and/or refused to carry out those works.
Adjudication 4
Reference and the Parties' contentions
On 5 March 2021 the Claimant gave notice of its intention to refer to adjudication a dispute “as to the correct value of Interim Payment Application Number 47”, thereby commencing Adjudication 4. On the same date the Claimant set out the dispute as to the validity of the Contra Charge in the Notice of Adjudication, simply stating that “the Contra charge is invalid and that JGCL is entitled to be certified and paid the amount deduced [sic] by TR”. In its Referral dated 12 March 2021, the Claimant addressed the Contra Charge, arguing that the Defendant had not demonstrated that it was entitled to levy the Contra Charge, as it had not demonstrated breach of contract, causation or loss and damage.
In its Response dated 26 March 2021, the Defendant addressed the Contra Charge, stating that the Claimant had not completed works within its scope as defined in Award 1, and set out the contractual basis on which it relied to justify the Contra Charge. At paragraph 125, the Defendant summarised the position as follows:
“Regrettably, … as the project progressed Graham did not accept that all of the work within [sic] was within its scope was in fact within its scope. It refused to carry out certain works, and when it left Site, it left a quantity of Works unfinished and abandoned. Those works had to be completed by others.”
It is notable that, earlier at paragraphs 102 and 103 of the Response in relation to a different part of the claim, the Defendant put down a marker that if the Adjudicator considered himself bound by comments made by the adjudicator in Adjudication 2 and declined to consider the fresh evidence it put forward in this Adjudication, then that would be a breach of natural justice and that the Defendant would rely on such breach in any subsequent enforcement proceedings.
The Claimant's Reply
On 1 April 2021, the Claimant submitted its Reply. In relation to the Contra Charge, it put forward three arguments. Significantly, the second argument was that the Claimant was not in breach of contract because it was, at the time that it left site, following the temporarily binding decision in Adjudication 1. In a summary of its position, at paragraphs 14 to 18, the Claimant submitted that Adjudication 1 was a crucial element in the legal and factual matrix. It was binding until Award 1, by which time the Claimant had left the site by mutual agreement. Refusal was not a breach of contract because Adjudication 1 was binding on the parties. The fact that Award 1 decided the scope differently is irrelevant to the conduct of the parties as at the time Adjudication 1 was binding and there was no relevant breach of contract. The Claimant was obliged to follow Adjudication 1 from 5 March 2019 until Award 1, which itself was issued long after the Claimant had finished its works at the site.
The Claimant then addressed this second argument in detail at paragraphs 87 to 95, submitting in particular as follows:
“90. […] JGCL did not refuse to undertake any works until after Adjudicator's decision no 1 dated 5 March 2019 that decided that JGCL's scope of works was limited. JGCL was not in breach of contract as it was complying with ...
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