Manor Co-Living Ltd v RY Construction Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Adam Constable |
| Judgment Date | 27 October 2022 |
| Neutral Citation | [2022] EWHC 2715 (TCC) |
| Docket Number | Case No: HT-2022-000169 |
| Court | Queen's Bench Division (Technology and Construction Court) |
[2022] EWHC 2715 (TCC)
Mr Adam Constable KC
Case No: HT-2022-000169
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
TECHNOLOGY AND CONSTRUCTION COURT (KBD)
Royal Courts of Justice
Strand, London, WC2A 2LL
Seb Oram (instructed by DAC Beachcroft LLP) for the Claimant
James Frampton (instructed by Sheridan Gold LLP) for the Defendant
Hearing date: 19 October 2022
APPROVED JUDGMENT
This judgment was handed down by the court remotely by circulation to the parties' representatives by email and released to The National Archives. The date and time for hand-down is deemed to be 27 October 2022 at 10.30am
Introduction
This is a Part 8 Claim brought by the Claimant Manor Co-Living Limited (‘MCL’), against the Defendant, RY Construction Limited (‘RYC’). The Part 8 Claim seeks the following declarations:
(1) that by declining to consider, and excluding from his consideration, the Claimant's case that it had had a lawful entitlement to terminate the Contract (for which it did in fact terminate the Contract); the Adjudicator deprived the Claimant of a potential Defence to the Dispute and thereby acted in breach of the requirements of natural justice;
(2) in consequence, the Decision is invalid and of no effect;
MCL relies upon a witness statement from Mr Warren Kemp dated 16 May 2022. No evidence in rebuttal was served by RYC, and the underlying facts are not materially contentious.
Background
The following factual background, relevant to the arguments deployed in the Adjudication, is drawn from the witness statement of Mr Kemp and/or from the face of the documents appended to his witness statement.
MCL and RYC were parties to a construction contract made on or around 30 October 2020 in the form of the JCT Standard Building Contract 2016, without quantities, incorporating bespoke amendments, for RYC to carry works described as “ to form 38no. bedrooms with ensuite bathrooms via a combination of conversion and extension and the creation of new rooms to provide communal kitchens, dining and living rooms, cinema and library; at Clare Hall Manor, Blanche Lane, South Mimms EN6 3LD”. The contract sum (subject to adjustment) was £2,018,014.35.
By email on 11 November 2021 the Contract Administrator served a default notice on RYC, identifying specified defaults, and warning of MCL's intention to terminate the Contract if those defaults were not remedied within 14 days (‘the Default Notice’). The Default Notice amended and replaced an earlier notice, given on 4 November 2021, the validity of which had been challenged by the RYC. That email was not sent in hard copy by post until 17 November 2021 and RYC did not receive the letter by post until 19 November 2021.
By letter dated 30 November, sent under cover of an email dated 1 December 2021, the Contract Administrator wrote a letter to RYC which concluded:
‘A result of your failure to proceed regularly and diligently, and your failure to remedy the defaults stated in the Notice of Default this letter should be considered Notice that the Contract is terminated with immediate effect in accordance with clause 8.4.2 of the Contract.’
The email was timed 13.00, but due to the time difference from the sender, the time was 6pm in the evening on 1 December 2021. The covering email pointed out that MCL had arranged for security for the site, and asked RYC not to attempt to gain access without prior arrangement.
On 2 December 2021, RYC sent a letter to MCL stating:
‘ We acknowledge receipt of an email from Smithers Purslow yesterday, 1 December 2021, at 13:01 enclosing an electronic copy of a letter of 30 November 2021 also from Smithers Purslow, in which amongst other things they purported to give us notice that “the Contract is terminated with immediate effect in accordance with clause 8.4.2 of the Contract”.
Any such notice would only be effective if and when it was either delivered by hand or by recorded, signed for or special delivery post, pursuant to clauses 8.2.3 and 1.7.4 of the contract. We have not received a hard copy of the letter delivered in this way, and therefore any such termination pursuant to clause 8.4.2 has not yet occurred.
We would also highlight that any such notice of termination given pursuant to clause 8.4.2 is supposed to be given by you, the employer, not the contract administrator. We therefore do not believe that Smithers Purslow's email and letter could amount to a valid notice in any event.
Despite these points, when our men attended site this morning they discovered that you have changed the locks and we are now unable to get onto site to carry out the works. Smithers Purslow effectively confirmed this in its email of yesterday when they said “the client has arranged for security to take possession of the site, please do not attempt to gain access without prior arrangement”. For the reasons explained above, your and Smithers Purslow's actions are premature, in breach of the contract, and you preventing us access to carry out the works in this way amounts to a repudiatory breach of the contract on your part.
In short, there is no factual basis for you to terminate the contract pursuant to clause 8.4.2, and therefore notwithstanding the procedural points made above, your purported termination is invalid in any event, and as a result also amounts to a repudiatory breach of the contract.
In the circumstances, with us having been locked out of the site, and you clearly no longer wanting us to work on the project, we have no alternative but to inform you that in light of your repudiatory breaches of the contract outlined above, you have brought the contract to an end with immediate effect.
This was followed up by correspondence from RYC's lawyers the same day, reiterating that MCL's purported termination of the contract pursuant to the Termination Notice was invalid.
The battle lines were at this stage drawn: MCL considered that it had validly terminated the contract and was justified in sending the Notice of Termination. RYC disputed this, and considered that MCL's conduct was repudiatory and accepted it, bringing the contract to an end. The debate continued in correspondence, which does not need to be set out in detail. However, to set the scene for the impending Adjudication, it is worth noting that by its letter of 25 March 2022, solicitors for MCL wrote a letter setting out what was (then considered to be) the ‘substance of the dispute’. After identifying the dispute relating to whether or not the Termination Notice had been served prematurely, it stated:
‘… Further, even if our client was in repudiatory breach (which is denied), you have not challenged the underlying entitlement to terminate. Our client was always entitled to terminate and would have done so. Your client has therefore suffered no loss because our client's termination can be justified at common law (those rights being expressly reserved: JCT Condition 8.3.1); and, separately, because our client was entitled to and would have terminated the contract in any event. Your client has not claim for damages, because it would never have been permitted to complete the works…’
Thus, the alternative case advanced at this time was not that MCL had in fact terminated the contract at common law by accepting RYC's repudiatory breach: it asserted that it had an entitlement to do so, and would have done so. This, it was said, went to the question of loss.
The Adjudication
In this section, I will set out the relevant sections of the various adjudication submissions, and make a number of observations that in due course will feed into my analysis of the parties' contentions.
By Notice of Adjudication dated 6 April 2022, RYC gave notice of its intention to refer to adjudication a dispute that had arisen. At paragraphs 10 and 11, RYC make clear what it considered to be the boundaries of what it was referring to adjudication, in the following terms:
‘10. For the avoidance of doubt, the only issue that RYC is referring to adjudication is whether MC-L correctly served its notice of termination and/or otherwise complied with the notice requirements contained in clause 8.4 of the Contract, and, if not, the effect of this.
11. The Adjudicator will not be asked to consider whether there were substantive grounds for MC-L to terminate RYC's employment, the substantive content of the notices that MC-L served, or any other procedural irregularities in relation to MC-L purporting to terminate RYC's employment. These other issues will not form part of the dispute that is being referred to adjudication; and RYC reserves the right to refer these issues to adjudication separately in due course.’
In paragraph 14 of the Notice, RYC set out the relief that it sought from the Adjudicator, comprising 5 declarations, as follows:
a) [MCL] purported to terminate RYC's employment under the Contract prematurely, before the expiry of 14 days from RYC's receipt of notice specifying alleged defaults,
b) in addition, or in the alternative, [MCL] did not otherwise comply with the notice requirements contained in clause 8.4 of the Contract,
c) as a result, [MCL]'s purported termination was wrongful and invalid,
d) [MCL] acted in breach of contract in (i) purporting to terminate RYC's employment and doing so wrongfully, and/or (ii) preventing RYC from accessing site to carry on with the Works, and/or (iii) appointing others to complete the Works in place of RYC,
e) some or all of these actions by [MCL]amounted to repudiatory breaches of the Contract, which were accepted by RYC expressly or impliedly, bringing the Contract to an end.
The Referral fleshed out the arguments advanced, but did not change or expand the matters referred, and as is usual repeated the relief...
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