Kew Holdings Ltd v Donald Insall Associates Ltd
| Jurisdiction | England & Wales |
| Judge | Mrs Justice O'Farrell |
| Judgment Date | 15 July 2020 |
| Neutral Citation | [2020] EWHC 1862 (TCC) |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Docket Number | Case No: HT-2020-000083 |
| Date | 15 July 2020 |
[2020] EWHC 1862 (TCC)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
TECHNOLOGY AND CONSTRUCTION COURT (QBD)
Rolls Building
Fetter Lane, London, EC4Y 1NL
Mrs Justice O'Farrell DBE
Case No: HT-2020-000083
Howard Smith (instructed by Cardium Law Limited) for the Claimant
Paul Cowan (instructed by Kennedys Law LLP) for the Defendant
Hearing date: 10 th June 2020
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 matters before this court are the Defendant's applications for:
i) an order striking out the claim for non-compliance with the order dated 5 February 2019;
ii) alternatively, a stay of proceedings pending the Claimant's payment in satisfaction of the judgment dated 5 February 2019; and
iii) an order for security for costs.
Background
The Claimant is a single purpose vehicle company, registered in the Cayman Islands. It is the registered proprietor of The King's Observatory, Old Deer Park, Twickenham road, Richmond under a long leasehold interest (“the Property”). The Claimant has no other assets. Mr Brothers is a director of the Claimant and resident in Hong Kong.
The Defendant is a company providing architectural services. The Defendant was retained by the Claimant in connection with the conversion and refurbishment of the Property to form a private residence.
In 2018 disputes arose between the parties concerning the Defendant's entitlement to unpaid fees. The Defendant referred the dispute to adjudication and obtained an adjudication award in its favour in the sum of £202,509 (including interest and the adjudicator's fees but excluding VAT).
The Claimant failed to pay the sums due and the Defendant commenced proceedings to enforce the adjudication award. On 5 February 2019 summary judgment was granted to the Defendant in the sum of £208,287.84 (inclusive of VAT), together with interest, the adjudicator's fees and costs summarily assessed in the sum of £24,400.
The Claimant's application for permission to appeal was refused by the Court of Appeal on 29 March 2019.
The Claimant failed to pay the judgment sum by 19 February 2019 as ordered or at all.
On 15 March 2019 the Court granted an interim charging order over the Property in respect of the outstanding judgment sum.
On 10 May 2019 the Court granted a final charging order over the Property in respect of the outstanding judgment sum, then £268,488.05, plus costs of the application, summarily assessed in the sum of £5,000.
On 13 September 2019 the Defendant commenced Part 8 proceedings pursuant to CPR 73.10C for a sale order in respect of the Property to enforce the judgment sum. Those proceedings are ongoing. The Claimant opposes an order for sale of the Property on the grounds set out in the witness statement of Mr Brothers dated 13 March 2020. The Claimant's position is that it has a claim against the Defendant for damages for professional negligence and breach of contract, which claim amounts to an equitable set-off.
On 6 March 2020 the Claimant commenced these proceedings, claiming damages against the Defendant of £2 million approximately. The allegations include late and inadequate drawings, inadequate advice and overcharging for the Defendant's services.
The application
On 27 April 2020, the Defendant issued this application seeking the following orders:
i) pursuant to CPR 3.4(2)(b) and/or (c) and/or the Court's inherent jurisdiction, the Claimant's claim shall be struck out unless the claimant pays the Defendant the sums ordered by this Court on 5 February 2019 within seven days;
ii) alternatively, pursuant to CPR 3.1(2)(f) and/or the Court's inherent jurisdiction these proceedings shall be stayed unless and until the claimant pays the Defendant the sums ordered by this Court on 5 February 2019 within seven days;
iii) further or alternatively, pursuant to CPR 25.12 and/or CPR 3.1(5), the Claimant shall pay into Court within fourteen days the sum of £700,0000 or such other sum as the Court shall determine as security for the Defendant's costs in these proceedings, failing which the Claimant's claim shall be struck out.
Application to stay proceedings
CPR 3.1(2)(f) provides that the Court may stay the whole or part of any proceedings either generally or until a specified date or event.
In Anglo-Swiss Holdings Ltd v Packman Lucas Ltd [2009] EWHC 3212 (TCC) the court considered whether an established refusal to honour or satisfy a previous adjudication decision and court judgement would justify the stay of separate legal proceedings concerning the same subject matter, pending payment. Having reviewed the relevant authorities and considered the provisions of the Housing Grants, Construction and Regeneration Act 1996 as amended (“the HGCRA”) together with the overriding objective, Akenhead J summarised the following principles at [21]:
“(i) The Court undoubtedly has the power and discretion to stay any proceedings if justice requires it.
(ii) In exercising that power and discretion, the Court must very much have in mind a party's right to access to justice and to issue and pursue proceedings.
(iii) The power is one that is to be used sparingly and in exceptional circumstances.
(iv) Those circumstances include bad faith and where the claimant has acted or is acting particularly oppressively or unreasonably.”
In this case the Claimant's position has been set out in a letter dated 4 May 2020 and confirmed by Mr Smith, counsel for the Claimant. The Claimant does not oppose the application to stay these proceedings pending payment of the sums due pursuant to the Order dated 5 February 2019.
The other applications, to strike out the proceedings and/or for security for costs, are opposed.
Application to strike out
CPR 3.4(2) provides that:
“The court may strike out a statement of case if it appears to the court:
…
(b) that the statement of case is an abuse of the court's process or is otherwise likely to obstruct the just disposal of the proceedings; or
(c) that there has been a failure to comply with a rule, practice direction or court order.”
Mr Cowan on behalf of the Defendant submits that the claim has been wrongly commenced without having discharged the payment required by the adjudicator's decision and without having complied with the Court's Order dated 5 February 2019. This constitutes an abuse of process and is contrary to law. Further, he submits that the claim has been commenced with the improper collateral purpose of facilitating its opposition to the Defendant's claim for a sale order over the Property.
Mr Cowan submits that a paying party is not entitled to commence a fresh claim seeking the determination of the parties' true entitlements unless and until it has first discharged its obligation to pay the amounts determined as payable in a prior adjudication. Reliance is placed on the decisions in S&T (UK) Ltd v Grove Development Ltd [2018] EWCA Civ 2448 (CA) and M Davenport Builders Ltd v Greer [2019] EWHC 318 (TCC) in support of his argument that the Claimant's claim is contrary to law and an abuse of process.
In S&T v Grove the contractor was awarded a substantial amount of money in an adjudication award based on the adjudicator's finding that the employer's purported pay less notice was invalid. The contractor sought to enforce the award by summary judgment. The employer issued proceedings seeking declarations that the pay less notice was valid and that it was entitled to commence a further adjudication to determine the contractor's true entitlement to payment. Coulson J (as he then was) granted the declarations and refused to grant summary judgment. The Court of Appeal upheld the judgment, agreeing with the judge's conclusion that, if the pay less notice had been invalid, the employer would have been entitled to commence a further adjudication to determine the true value of the relevant payment application. In concluding that such right could be exercised only after the employer had paid the notified sum, as required by section 111 of the HGCRA, Jackson LJ stated:
“[107] Both the HGCRA and the Amended Act create a hierarchy of obligations, as discussed earlier. The immediate statutory obligation is to pay the notified sum as set out in section 111. As required by section 108 of the Amended Act, the contract also contains an adjudication regime for the resolution of all disputes, including any disputes about the true value of work done under clause 4.7. As a matter of statutory construction and under the terms of this contract, the adjudication provisions are subordinate to the payment provisions in section 111. Section 111 (unlike the adjudication provisions of the Act) is of direct effect. It requires payment of a specific sum within a short period of time. The Act has created both the prompt payment regime and the adjudication regime. The Act cannot sensibly be construed as permitting the adjudication regime to trump the prompt payment regime. Therefore, both the Act and the contract must be construed as prohibiting the employer from embarking upon an adjudication to obtain a re-valuation of the work before he has complied with his immediate payment obligation.
[108] One important policy of the HGCRA and the Amended Act is to promote cashflow in the construction industry. In other words, there should be prompt payment followed...
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