Laker Vent Engineering Ltd ("Laker") v Jacobs E&C Ltd ("Jacobs")

JurisdictionEngland & Wales
JudgeMr Justice Ramsey
Judgment Date08 April 2014
Neutral Citation[2014] EWHC 1058 (TCC)
Docket NumberCases No: HT-14-26 and HT-14-54
CourtQueen's Bench Division (Technology and Construction Court)
Date08 April 2014

[2014] EWHC 1058 (TCC)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

TECHNOLOGY AND CONSTRUCTION COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

The Hon Mr Justice Ramsey

Cases No: HT-14-26 and HT-14-54

Between:
Laker Vent Engineering Limited ("Laker")
Claimant
and
Jacobs E&C Limited ("Jacobs")
Defendant
And Between
Jacobs E&C Limited
Claimant
and
Laker Vent Engineering Limited
Defendant

Simon Lofthouse QC (Instructed by Systech Solicitors) on behalf of Laker.

Steven Walker QC (Instructed by Fenwick Elliott LLP) on behalf of Jacobs

Hearing date: 14 March 2014

Mr Justice Ramsey

Introduction

1

These two sets of proceedings arise out of a sub-contract entered into on 30 March 2012 ("the Sub-Contract") under which Laker agreed to supply, fabricate and install pipe-work at Markinch Biomass Combined Heat and Power (CHP) Plant ("the Plant") in Fife, Scotland. This formed part of the work which Jacobs had agreed to carry out under a main contract ("the Main Contract") with RWE Npower Renewables (Markinch) Limited ("RWE"). The Main Contract was for the design, manufacture, supply, construction, installation, testing and commissioning of the Plant.

2

In the first set of proceedings Laker seeks summary judgment in the sum of £808,123.69 plus VAT and £27,375.00 and £1000.00 as adjudicators' fees and administration charges, together with interest arising out of three adjudication decisions made on 7 January 2014, as corrected on 12 January 2014.

3

In the second set of proceedings Jacobs seeks two declarations as to the relationship between extensions of time and the mechanism for taking-over under the Sub-Contract. Laker seeks to stay those proceedings to arbitration.

4

On 17 March 2014 I notified the parties of my conclusions on the applications and I now set out my reasons for those conclusions.

Adjudication enforcement proceedings

5

I shall deal first with the adjudication enforcement proceedings which were commenced on 24 January 2014, supported by the first witness statement of Julian Ives.

6

Directions were given that led to the service of the first witness statement of Jeremy Robert Glover dated 11 February 2014 and the first witness statement of Alan Davenport also dated 11 February 2014. These were responded to by the second witness statement of Julian Ives dated 16 February 2014. There was then a second witness statement of Jeremy Robert Glover dated 5 March 2014 and a third witness statement of Julian Ives dated 10 March 2014.

7

In these proceedings Jacobs raises three grounds of challenge to the Adjudicator's decisions.

8

First, Jacobs says that because the Sub-Contract did not contain any provision for adjudication the only way for adjudication to apply would be if the Sub-Contract was a construction contract under the Housing Grants, Construction and Regeneration Act 1996, as amended by the Local Democracy, Economic Development and Construction Act 2009, ("the Act). In that case under s.108(5) of the Act, the Scheme for Construction Contracts ("the Scheme") would apply in the absence of an adjudication provision in writing in the Sub-Contract.

9

Jacobs says that the Sub-Contract is not a construction contract because it is not an agreement for carrying out of construction operations under s.104(1) as the relevant operations under the sub-contract were not construction operations. Jacobs submits that the work under the Sub-Contract was work of assembly and installation of plant on a site where the primary activity is power generation and is therefore expressly not construction operations by reason of s.105(2)(c) of the Act.

10

In response Laker says that in fact by reference to the proper analysis of the "site" the primary activity is paper production as the Plant was constructed to provide electricity and steam for the paper mill of Tullis Russell Papermakers Limited ("Tullis Russell") to replace a coal and gas fired power plant which had been operating there for some 60 years.

11

Secondly Jacobs says that the Adjudicator made inconsistent decisions. In a decision which he referred to as Award No 1 he granted an extension of time to what he referred to as "Practical Completion" which was evidently 11 October 2013 but in a further decision, Award No 3, he decided that the works were complete and ready for taking-over on 30 August 2013 which is some 6 weeks before the date on which he decided the works were "Practically Complete" in Award No 1.

12

Laker says there is no inconsistency in having taking-over earlier than the contractual time for completion, as extended.

13

Thirdly, Jacobs says that the Adjudicator was, in any event, not properly appointed as he was appointed under the Scheme for Construction Contracts which applies to England and Wales and expressly provides that it "shall extend only to England and Wales" when, in fact, the Plant is located in Scotland.

14

Laker says that under the Sub-Contract it was agreed in the Special Conditions that the Sub-Contract " shall in all respects be governed by and in accordance with the Laws of England and shall be subject to the jurisdiction of the English Court." On that basis Laker submits that the laws of England apply and so the relevant Scheme is the Scheme which applies in England and Wales.

15

However, Laker also takes an initial point and submits that the court does not need to deal with the merits of those three issues raised by Jacobs because there is a threshold defence to Jacobs' challenges. After receipt of the Adjudicator's three decisions Jacobs applied successfully under the slip rule for a correction to be made and therefore, Laker submits, Jacobs elected to affirm the decisions and in doing so is now precluded from pursuing any of the challenges. I shall therefore first deal with that objection.

Affirmation of the decisions

16

Laker refers to the decision of Mr Justice Akenhead in Wales & West Utilities Limited v PPS Pipelines Systems GmbH [2014] EWHC 54 (TCC). In that case there was an issue whether the decision in a third adjudication was enforceable. At [42] Akenhead J, having found that the decision in the third adjudication was unenforceable added " it may well be the case that by paying without reservation the sum awarded by the decision in the adjudication Wales has elected not to challenge the decision (as it now seeks to do)."

17

He referred to the decision of His Honour Judge Seymour QC in Shimizu Europe Limited v Automajor Limited [2002] EWHC 1571 (TCC) in which the losing party in an adjudication had asked for amendments to the decision to be made under the slip rule and had also made some payment. It then sought to avoid enforcement on grounds of jurisdiction.

18

Mr Justice Akenhead also referred to PT Building Services Limited v ROK Build Limited [2008] EWHC 3434 (TCC) in which at [20] to [25] I set out the law on election. At [26] and [29] I set out my conclusions as follows:

" 26. In my judgment the underlying decisions on election or approbation and reprobation, as applied in the context of adjudication, show that a party cannot both assert that an adjudicator's decision is valid and at the same time seek to challenge the validity of the decision. The party must elect to take one course or the other. By taking a benefit under an adjudicator's decision, the party will generally be taken to have elected a particular course and will be precluded from challenging the adjudicator's decision. In Macob the benefit was the claim to have the proceedings stayed to arbitration in relation to the decision. InShimizuthe benefit was the right to have the decision corrected under the slip rule.

29. PTB also relied on the fact that ROK had paid the Adjudicator's fees and had thereby elected to treat the Adjudicator's decision as valid. I do not consider that, in the absence of evidence to show that the payment was a mistake, the court can come to that conclusion as a matter of inference or otherwise, as Mr Lee sought to submit. Rather, the natural inference from the payment of the adjudicator's fees is that ROK intended to make payment in respect of a valid decision requiring such payment. Did that payment amount to an election? Mr Lee submits that it is difficult to characterise ROK's payment as amounting to ROK taking a benefit. There is strength in that point but, in my judgment, the taking of a benefit, whilst sufficient for there to be an election, is not necessary. What has to be determined is whether there has been an election. Objectively, a party who decides to pay a sum awarded against it in an adjudicator's decision does so in reliance on that decision being valid. I consider that, in the absence of any circumstances indicating to the contrary, by making that payment ROK elected to treat the adjudicator's decision on fees and expenses as being a valid decision, at least to that extent."

19

Mr Simon Lofthouse QC, who appeared on behalf of Laker, submitted that it is not in issue that, in this case, Jacobs sought to have Award No 1 corrected under the slip rule. He referred to the email sent on 9 January 2014 by Jacobs' solicitors to the Adjudicator. In that email it was stated:

I confirm receipt of the three Decisions. Having reviewed the same, we believe there may be a small slip at paragraph 8.8 of Award Number 1 re the extension of time.

We have attached a note which shows what we believe to be the effect of this on your collection set out at paragraph 8.8.

We would be grateful if you could consider this and, if you agree, amend the decision accordingly.

As before, we fully reserve our client's position in relation to your jurisdiction and for the avoidance of doubt, this email is written without prejudice to that general reservation of our client's position in relation to your jurisdiction."

20

Mr Lofthouse submitted that although Jacobs attempted...

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