L Brown & Sons Ltd v Crosby Homes (North West Ltd)
| Jurisdiction | England & Wales |
| Judge | MR. JUSTICE AKENHEAD |
| Judgment Date | 23 April 2008 |
| Neutral Citation | [2008] EWHC 817 (TCC) |
| Docket Number | Case No: HT 08 25 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 23 April 2008 |
[2008] EWHC 817 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
MR. JUSTICE AKENHEAD
Case No: HT 08 25
Mark Rowlands (instructed by Messrs Hammonds) for the Claimant
Nerys Jefford QC (instructed by Messrs Eversheds) for the Defendant
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 AKENHEAD
Introduction
1. This matter relates to an arbitration award dated 24 October 2007. The losing party in the arbitration, L Brown & Sons Limited (“Brown”), seeks leave to extend its time for service of an application under Section 68(2)(g) of the Arbitration Act 2008. The case raises some relevant issues as to the approach to be adopted by the Court in relation to the principles to be applied to such an application, particularly the weight to be given to the relative strength or weakness of the underlying application.
2. Crosby Homes (North West) Limited (“Crosby”) were developers who employed Brown as main contractor to design and build a residential apartment building, Melia House, Red Bank, Cheetham Hill Road, Manchester. The building was to comprise 114 flats on 11 levels. The contract was in the standard JCT form with Design (1998 Edition); the Contract Sum was £9,349,923.32. Gardiner & Theobald Management Services (“GTMS”) were the “Employer's Agent” under the contract. Completion was to be achieved by 17 August 2004 and liquidated damages were to be the rate of £2,150 per day. It was intended that the dwellings should be sold with the benefit of NHBC (National House Builders Council) insurance.
3. Following a number of successful (from Brown's point of view) adjudications (six in number), two arbitrations have been started, one (“the First Arbitration”) by Crosby in effect to reverse the decision in the second adjudication and the second (“the Second Arbitration”) started by Brown in which it claims for loss and expense and variations. Mr Kevin Hayes FRICS FIArb was and is the arbitrator in the First Arbitration whilst Mr Paul Jensen is the arbitrator in the Second.
4. The First Arbitration was concerned with various alleged incentive agreements which were said to have been agreed between Brown by its Mr Murphy and Crosby by its Mr Teague, both managing directors of their respective companies. Each alleged or actual agreement is said to have involved bonus payments to be paid to Brown if it finished all or some of the dwellings by certain times or events and waivers of liquidated damages for arguably late completion. There were said to be five agreements of which only one was admitted by Crosby. Each of the contested agreements required oral evidence from principally Mr Teague and Mr Murphy to establish whether the agreements were made at all and in essence the credibility of each was in issue.
5. About five weeks before the issue of the award by the arbitrator, disclosure of documents was given in the Second Arbitration and by about 18 October 2007, Brown's solicitors, Hammonds became aware that, as it believed, some (seven in number) of the newly disclosed documents were documents (“the Missing Documents”) which should have been disclosed in the First Arbitration by Crosby; these, they thought, related to the motivation for Crosby to enter into the last three alleged agreements. The award, against Brown, was issued about a week later. Over the next few weeks until 23 November 2007, Brown and its solicitors formed the view that the Missing Documents were so clear in their content that they demonstrated that Mr Teague had lied and indeed committed perjury in his sworn witness statement in the arbitration.
6. On 23 November 2007, the 28 day period for issuing any challenge under Section 68 expired. On the same day, Hammonds wrote to Crosby's solicitors in effect requesting Crosby to agree to the terms of the award being reversed and threatening proceedings to set aside the award. However, although that request was turned down, it was not until 28 January 2008 that Brown applied for an order extending time for service of the Section 68 application, some 66 days late.
The arbitration
7. Following the appointment of Mr Hayes, he held a preliminary meeting in the First Arbitration on 5 February 2007 and ordered the exchange of pleadings and witness statements. Disclosure was left to be on a basis of co-operation and liaison between the parties and the order stated:
“7.Both parties seek disclosure of documents by the other. For that purpose the parties are to make written application to the other and co-operate with one another.
8. If either party wishes to apply for an order for disclosure, the application is to:
(a) be made by no later than 28 days after delivery of the Statement of Reply to Defence to Counterclaim; and
(b) be accompanied by evidence of a written request for disclosure of the documents or class of documents in question.”
A two day hearing was fixed for 9 and 10 July 2007. In fact, both parties did produce a list of documents, Crosby's being dated 23 May 2007.
8. Pleadings were exchanged and an issue arose between the solicitors about disclosure particularly about documents involving Crosby's auditors. On 7 June 2007, Mr Hayes ordered that the evidence of the witnesses concerned should be put on affidavit. Mr. Bate, the partner at Hammonds, Brown's solicitors, in his first witness statement (at Paragraph 6.38) describes this order of the arbitrator as having “effectively torpedoed the application and [meaning] that [the application for specific disclosure] was not dealt with”. I am not convinced that the verb “torpedo” is the right word. What it meant however was that there was no order as such for disclosure at all. It led to the witness statement of Mr Teague of Crosby being on affidavit.
9. Mr Bate at Paragraph 6.38 of his first statement says that, following the arbitrator's direction, Brown withdrew its application but correspondence followed in which “Crosby continued to be evasive and disingenuous in this matter”. I have looked at the 76 pages of correspondence relied upon by Mr Bate and do not see that this serious charge is made out. The context is that this correspondence is over the four week period before the hearing and there was no order requiring disclosure.
10. The substantive hearing took place on 9 and 10 July 2007 with both sides represented by experienced junior Counsel, Mr Simon Henderson for Brown and Miss Nerys Jefford (now QC) for Crosby. Written openings and closings were submitted. A verbatim transcript was taken of the proceedings. Mr Teague and Mr Murphy of Brown were both called and keenly and extensively cross-examined. Other witnesses were called, Mr Bridge, the commercial director of Crosby, Mr Hillen, a senior quantity surveyor at Brown and Mr Hawksworth, Brown's construction director.
11. The arbitrator produced his Award No 1 on 24 October 2007. He found against Brown upon the basis that there were no agreements which entitled Brown to bonuses. In effect, he reversed the second adjudicator's decision and ordered Brown to repay the sum of £208,000 paid by Crosby pursuant thereto, together with interest.
The evidence and arguments in the First Arbitration
12. I review here the evidence and argument as considered by the arbitrator in the First Arbitration.
13. Crosby's holding company was The Berkeley Group plc (“Berkeley”). In August 2003, there was an agreement for a management buyout of the Crosby Group. The buyers had to generate £450m of cashflow over seven years and had to make milestone payments to Berkeley, failing which the buyers would not receive dividends or have voting rights in respect of their shares.
14. The arbitrator then takes up the basic history, which is at least now uncontroversial:
“By April 2004 all or most of the apartments at Redbank had been sold, that is to say, contracts for their sale had been exchanged. However, the Works had been delayed. Crosby was concerned that the Plastering Completion Date of 30 April 2004 and the Date for Completion would not be met. Crosby's accounts were required to be prepared in accordance with an accounting policy imposed by Berkeley. Under the terms of the Berkeley accounting policy, if the Plastering Completion Date was achieved, then providing that contracts for sale had been exchanged, the first 70% of the profit on the Redbank apartments could be included in Crosby's accounts for the year ending 30 April 2004. At paragraph 3 of DT1 Mr Teague explains that was important because the profits in question had been included in the budget for the year and a failure to achieve the budget was likely not only to impact on the Crosby group but also on Berkeley because it is publicly quoted. Crosby therefore considered how the delay to the Works might be recovered so that Plastering Completion Date and the Date Completion could be achieved.” (Paragraph 18 of the award)
15. In short, in the First Arbitration, there were up to five possible agreements between the parties whereby Crosby was said to have offered and Brown accepted incentives to complete the Works somewhat earlier than they might otherwise have been completed with in some cases a possible waiver of liquidated damages against Brown. The five actual or alleged agreements were as follows:
(a) In April 2004, Crosby offered to Brown a completion bonus on various conditions...
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