Kershaw Mechanical Services Ltd v Kendrick Construction Ltd
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE JACKSON |
| Judgment Date | 02 March 2006 |
| Neutral Citation | [2006] EWHC 727 (TCC) |
| Docket Number | Case No: HC 05 329 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 02 March 2006 |
[2006] EWHC 727 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Mr Justice Jackson
Case No: HC 05 329
MR ROBERT CLAY (instructed by Hannah and Mould) appeared on behalf of the Claimant
MR SIMON HENDERSON (instructed by Bell Lax) appeared on behalf of the Defendant
This Judgment is in seven parts, namely Part One —Introduction; Part Two —The facts; Part Three —The Present Proceedings; Part Four —What is the correct approach of the court to an appeal under section 69(2)(a) of the 1996 Act? Part Five —Which, if any, of the four questions formulated by Kershaw are questions of law arising out of the award? Part Six —What are the answers to those questions which have survived scrutiny? Part Seven —Conclusion.
Part 1 —Introduction
This is an appeal under section 69 of the Arbitration Act 1996 against an arbitrator's partial award determining what sums are due to a sub-contractor on its final account.
Kershaw Mechanical Services Limited is the sub-contractor. I shall refer to this company as "Kershaw". Kershaw was claimant in the arbitration; Kershaw is also claimant in these proceedings.
Kendrick Construction Limited is the main contractor. I shall refer to this company as "Kendrick". Kendrick was respondent in the arbitration and is defendant in these proceedings.
The employer, under the main contract, is Birmingham Heartlands and Solihull NHS Trust. I shall refer to this body as "the Trust". Two firms of engineers will feature in the story. They are White, Young and Green, to whom I shall refer as "WYG", and R W Gregory, to whom I shall refer as "RWG".
The sub-contract in this case incorporated, with modifications, the standard form of sub-contract published by the JCT, known as "DOM\2", 1981 Edition.
In this judgment I shall refer to the Arbitration Act 1966 as "the 1996 Act". Section 1 of the 1996 Act provides:
"General principles.
The provisions of this Part are founded on the following principles, and shall be construed accordingly—
(a) the object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense;
(b) the parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest;
(c) in matters governed by this Part, the court should not intervene except as provided by this Part".
Section 69 of the 1996 Act provides:
"(1) Unless otherwise agreed by the parties, a party to arbitral proceedings may (upon notice to the other parties and to the tribunal) appeal to the court on a question of law arising out of an award made in the proceedings. An agreement to dispense with reasons for the tribunal's award shall be considered an agreement to exclude the court's jurisdiction under this section.
(2) An appeal shall not be brought under this section except—
(a) with the agreement of all the other parties to the the proceedings, or
(b) with the leave of the court………
(7) On an appeal under this section, the court may by order—
(a) confirm the award,
(b) vary the award,
(c) remit the award to the tribunal, in whole or in part, for reconsideration in the light of the court's determination or
(d) set aside the award in whole or in part.
The court shall not exercise its power to set aside an award, in whole or in part, unless it is satisfied that it would be inappropriate to remit the matters in question to the tribunal for reconsideration."
Having dealt with these preliminary matters, I must now turn to the facts.
Part 2 —The Facts
In the late 1990's the Trust decided to extend the Heartlands Hospital in Birmingham by constructing two new blocks of wards. The Trust's requirements for the new buildings were set out in a series of specifications, appendices, drawings and related documents. This amalgam of documents is referred to compendiously as "the employer's requirements".
In late 1999 and early 2000, Kendrick was preparing a tender for the design and construction of the new hospital buildings. Kendrick assembled a team of consultants and sub-contractors whom Kendrick intended to engage for the project in the event that the Trust accepted Kendrick's tender. Kendrick appointed WYG to design the mechanical and electrical services. Kendrick chose Kershaw as the prospective sub-contractor to supply and install the mechanical services and a different firm as prospective sub-contractor to supply and install the electrical services.
On the 8 th of March 2000 Kershaw submitted its tender for the supply and installation of mechanical services in the sum of £1,838,697.00. This figure comprised thirteen components, one of which was the sum of £59,503.00 attributed to above ground drainage.
Kershaw's tender letter included the following passage, "8. The following items are not included within our tender. A. Full conceptual design responsibility…… 13. At this stage we have made no allowance for design works. However, we have allowed to work alongside White, Young and Green, to develop the design. 14. We have allowed, within our tender, to develop sketches and schematics produced by White, Young and Green into fully co-ordinated and working drawings".
Following the receipt of tenders from Kershaw and other prospective sub-contractors, Kendrick submitted its own tender to the Trust for the overall design and construction of the two new hospital buildings. Happily Kendrick's tender was accepted and work commenced on the project.
In October 2000 Kendrick sent a letter of intent to Kershaw on the basis of which Kershaw commenced work in relation to mechanical services. In February 2001 Kendrick dispensed with the services of WYG and, instead, appointed RWG to design the mechanical and electrical services.
On 19 th April 2001 Kendrick sent a memo to Kershaw listing (a) The documents which comprised the employer's requirements in relation to mechanical services and (b) other documents upon which Kershaw's tender had been based. These other documents included "all pre-tender correspondence from White, Young and Green". This somewhat elliptical phrase was understood by all parties to cover not only letters but also drawings, sizing schedules and similar documents provided by WYG. Kendrick's memo of 19 th April also recorded certain additions to and omissions from the mechanical services, which had been agreed since the date of Kershaw's tender. The overall agreed effect of these additions and omissions was to reduce Kershaw's tender figure to £1,785,444.39.
On the 30 th of April 2001 Kendrick sent a draft order to Kershaw, requesting Kershaw to carry out the supply and installation of all mechanical works for the sum of £1,785,444.39 in accordance with the documents which were attached. These attachments included Kendrick's memo dated 19 th April and the DOM\2 Articles of Agreement with certain manuscript amendments. Those manuscript amendments included deletion of the design requirement set out in the first recital. In the DOM\2 appendix, under the heading "Part 15" Kendrick wrote: "As covered by all items referred to in our facsimile transmission dated 19 th April 2001 (four pages)".
On the 9 th of May 2001 Kershaw responded as follows: "Thank you for your faxed draft of the order and DOM\2 agreement. Comments as follows … 8. Part 15. Since your fax is a numbered document I do not see the need to incorporate what you say here. However, I am still unhappy that the document properly reports the basis of our pricing. I understood what you are saying as an objection to us incorporating our schedule of information we received from White, Young Green for tender purposes in that you currently do not have access to their files to check it is comprehensive. Although I can assure you that we are not deliberately concealing anything. Accordingly, for the avoidance of doubt I would like this statement incorporated here. "Certain information was provided on behalf of the contractor to the sub-contractor by White, Young Green as noted in the contractor's facts of 19/04/01. It is agreed that where and to the extent that the final design information, supplied by the contractor or his consultant, differs from that information previously supplied, as noted above, then the sub-contract sum will be adjusted". … Regards Jack Kirk."
The statement comprising two sentences, which Kershaw required to be incorporated, has been referred to by all parties as "the Qualification" and I shall adopt that term.
In July 2001 a formal sub-contract was concluded between Kendrick and Kershaw. The documents comprising the sub-contract included Kershaw's tender dated 8 th March 2000, Kendrick's draft order dated 30 th April 2001 plus attachments and Kershaw's letter to Kendrick dated 9 th May 2001. It can thus be seen that the sub-contract in this case was a modified version of the DOM\2 sub-contract supplemented by correspondence between the parties. This correspondence included the Qualification.
Clause 1.3 of the Standard Conditions of the DOM\2 sub-contract provides:
"Variation: Where clause 15.1 applies the term "Variation" means any of the following changes which are required by a direction of the contractor issued under the Sub-Contract:
1. the alteration or modification of the design, quality or quantity of the Sub-Contract Works including:
1. the addition, omission or substitution of any work,
2. the alteration of the kind or standard of any of the materials or goods to be used in the Sub-Contract work.
3. The removal from the site of any work, materials...
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