Mpb v Lgk

JurisdictionEngland & Wales
JudgeVeronique Buehrlen
Judgment Date23 January 2020
Neutral Citation[2020] EWHC 90 (TCC)
Date23 January 2020
Docket NumberCase No: HT-2019-000363
CourtQueen's Bench Division (Technology and Construction Court)
Between:
MPB
Claimant
and
LGK
Defendant

[2020] EWHC 90 (TCC)

Before:

Veronique Buehrlen Q.C

SITTING AS A DEPUTY HIGH COURT JUDGE

Case No: HT-2019-000363

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

TECHNOLOGY AND CONSTRUCTION COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Mark Chennells (instructed by Systech Solicitors Ltd) for the Applicant

Michael Wheater (instructed by direct access) for the Respondent

Hearing dates: 14 January 2020

Approved Judgment

Veronique Buehrlen QC:

1

This is an application to set aside a Tribunal award on jurisdiction dated 12 September 2019 (“the Award”) pursuant to section 67 of the Arbitration Act 1996 (“the Act”) on the grounds that there was no arbitration agreement between the parties, such that the Tribunal had no substantive jurisdiction over the dispute referred to it.

2

The application is concerned with whether the contract incorporated clause 11 of the Respondent's (“LGK”) standard terms and conditions which made provision for the resolution of disputes by adjudication followed by arbitration under the Construction Industry Model Arbitration Rules (“CIMAR”). It is common ground that if incorporated into the Contract, clause 11 is a written agreement to arbitrate.

3

If clause 11 is not incorporated into the contract, LGK rely on the doctrine of approbation and reprobation as prohibiting the Applicant (“MPB”) from challenging the incorporation of clause 11.

Background

4

MPB is a building contractor. It was engaged on a project at King's Court in Primrose Hill, London NW3. LGK are suppliers and installers of structural steel work. In about April/early May 2016, the parties entered into a contract for the supply and installation of structural steel work to MPB's project (“the Contract”). The evidence surrounding the formation of the Contract is incomplete. What is known or common ground follows.

5

On 29 March 2016 MPB requested a quotation for the structural steel work required for the project. In so doing MPB provided LGK with a table setting out a description of the work with columns for LGK to complete for rates and total prices. By email dated 6 April 2016 LGK provided quotation no. Q17729 Rev A to MPB. The email refers to an original quote no. Q17729 dated 23 October 2015. I have not seen copies of either of these quotations.

6

Following a request from MPB for additional items to be priced, LGK provided MPB with a further revised quotation dated 11 April 2016: Quotation Q17729 Rev. B (“the Quotation”). It is common ground that the Quotation was accompanied by LGK's standard terms and conditions of contract (“LGK's Terms”).

7

A site meeting followed between the parties on 12 April 2016 together with email correspondence dated 13 April 2016 in which LGK provided MPB with further pricing and information as to the scope of work. LGK's email dated 13 April 2016 confirmed LGK's price for the steelwork at £92,500.

8

On the same day, that is 13 April 2016, MPB issued a document entitled “Sub-Contractor Order” no. MP761/05. Again no copy of that document was provided to the Court. However, LGK responded by email dated 15 April 2016 raising a number of points in relation to the order and concluding “[t]rust these points are helpful and agreed”. MPB replied by email dated 28 April 2016 agreeing the majority but not all of the matters raised by LGK. What is agreed by both parties to be the final version of order no. MP761/05 includes certain manuscript annotations including a reference to MPB's email of 28 April 2016. I refer to this final version of the document as “the Order”.

9

The first material part of the Order set out a table comprised of columns entitled “Description of Work” and “Value”. Included in the table is the statement “based on quotation Q177129 Rev B dated 11/04/2016, meeting minutes dated 13/04/2016 and subsequent e-mail correspondence dated 13/04/16”.

10

The Order then went on to state:

“All Subcontract Orders are placed in conjunction with PM Appendix 1 Subcontract Order Notes and are deemed to take precedence”

Appendix 1 comprised MPB's standard terms and condition (“MPB's Terms”) including a provision by which:

“Sub-contractors shall allow for all works in accordance with the documentation as stated on the order.”

11

Under a further section entitled “Terms” the Order went on to state:

“The work to be executed in accordance with our Terms and Conditions and those of the main contract – it is required that you withdraw any of your conditions which are at variance with the conditions contained therein *” (original strike through)

The * was referred to at the bottom of the Order coupled with a manuscript annotation stating:

“See attached email MPB 28 April 2016 11.01 Appendix 1 Point 1”

Point 1 stating that LGK had not been provided with a copy of the main contract.

12

I was informed at the hearing that the parties believe that the manuscript annotations (including the deletions) were made by LGK. The Order is unsigned. The works commenced in May 2016.

13

In the event, the parties fell out and MPB engaged other contractors to complete LGK's works. A series of adjudications followed. The first two adjudications were commenced by LGK. The third adjudication (to which I refer below as Adjudication no. 3) was commenced by MPB. It was commenced with reference to clause 11 of LGK's Terms. By clause 11:

“The Contractor and Customer agree that either party may refer a dispute to adjudication at any time, following the rules and procedures of the Scheme for Construction Contracts Part 1 (the Scheme). The Decision of the Adjudicator shall be binding on the parties until the dispute is finally resolved through agreement for by Arbitration under the CIMAR rules.”

14

Adjudication no. 3 resulted in Mr Riches holding that LGK's account under the Contract was in the sum of £135,103.43 and that MPB was entitled to recover £76,056.67 once remedial / completion work was taken into account. Successful enforcement proceedings followed.

15

The fourth adjudication was also commenced by MPB but is not pertinent to the matters at hand.

16

LGK commenced arbitration proceedings in relation to Mr Riches' decision in Adjudication no. 3 by Notice dated 5 July 2019. MPB immediately took issue with jurisdiction. Without prejudice to MPB's position on jurisdiction, the parties agreed to appoint Mr Jonathan Cope as arbitrator. Following the exchange of submissions on jurisdiction, Mr Cope issued his award on jurisdiction on 12 September 2019. He held that there was an arbitration agreement through the incorporation of clause 11 of LGK's Terms into the Contract and that therefore he had substantive jurisdiction over the parties' dispute.

Issue 1: Did the Contract incorporate clause 11 of LGK's Terms?

The Law

17

The application has been brought under section 67(1)(a) of the Act (“challenging any award of the arbitral tribunal as to its substantive jurisdiction”) and asks that, in line with section 67(3)(c) of the Act, the Court set aside the Award. It is common ground that a challenge under section 67 proceeds by way of a de novo rehearing of the jurisdiction issues. The proper approach was helpfully recently summarised by Butcher J in The Republic of Korea v Mohammad Reza Dayyani & Ors [2019] EWHC 3580 (Comm) at [26] in these terms:

“A challenge under s. 67 proceeds by way of a de novo rehearing of the jurisdiction issue(s). The award of the arbitrators has no automatic legal or evidential weight. Nevertheless, and given that the arbitral tribunal has considered the same issues, the Court will examine the award with care and interest. If and to the extent that the reasoning is persuasive, then there is no reason why the Court should not be persuaded by it.”

18

By section 6 of the Act:

“(1) In this Part an “arbitration agreement” means an agreement to submit to arbitration present or future disputes (whether they are contractual or not).

(2) The reference in an agreement to a written form of arbitration clause or to a document containing an arbitration clause constitutes an arbitration agreement if the reference is such as to make that clause part of the agreement.”

19

Since this is a case that falls within category 1 of Christopher Clarke J's four categories in Habas v Sometal [2010] EWHC 29 (Comm), that is a case in which A and B made a contract in which they incorporate standard terms, the Court will apply the usual approach to the incorporation of terms considering what, as a matter of construction, the parties intended. In turn, the proper approach to questions of contract construction is well known. Quoting the passage at paragraph 15 of Lord Neuberger's judgment in Arnold v Britton [2015] UKSC 36:

“15. When interpreting a written contract, the court is concerned to identify the intention of the parties by reference to “what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean”, to quote Lord Hoffmann in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] 1 AC 1101, para 14. And it does so by focussing on the meaning of the relevant words, in this case clause 3(2) of each of the 25 leases, in their documentary, factual and commercial context. That meaning has to be assessed in the light of (i) the natural and ordinary meaning of the clause, (ii) any other relevant provisions of the lease, (iii) the overall purpose of the clause and the lease, (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence of any party's intentions…”

20

In the context of the incorporation of the terms of one document into another, further guidance was given by Rix LJ in Tradigrain SA v King Diamond Marine [2000]...

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