Northern Regional Health Authority v Derek Crouch Construction Company Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE DUNN,LORD JUSTICE BROWNE-WILKINSON,THE MASTER OF THE ROLLS |
| Judgment Date | 17 February 1984 |
| Judgment citation (vLex) | [1984] EWCA Civ J0217-3 |
| Docket Number | 84/0067 |
| Court | Court of Appeal (Civil Division) |
| Date | 17 February 1984 |
and
[1984] EWCA Civ J0217-3
The Master of the Rolls
(Sir John Donaldson)
Lord Justice Dunn
and
Lord Justice Browne-Wilkinson
84/0067
1983 N. No. 2557
1983 N. No. 2607
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
On APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(OFFICIAL REFEREE'S BUSINESS)
(HIS HONOUR JUDGE SMOUT, Q.C.)
Royal Courts of Justice.
MR. SWINTON THOMAS, Q.C. and MR. DAVID BLUNT (instructed by Messrs. Ingledew Botterell Roche & Pybus) appeared on behalf of the (Plaintiffs) Appellants.
MR. RUPERT JACKSON (instructed by Messrs. McKenna & Co.) appeared on behalf of the (First Defendants) Respondents.
MR. COLIN REESE (instructed by Messrs. Bristows Cooke & Carpmael) appeared on behalf of the (Second Defendants) Respondents.
This is an appeal from a judgment of His Honour Judge Smout, Q.C. sitting as an official referee on the 12th December, 1983 whereby he dismissed the plaintiff's applications for injunctions restraining the defendants from seeking awards in two references to arbitration dated respectfully the 4th and 30th November, 1983. The dispute arises in relation to the construction of a hospital at Barrow in Furness, and in particular to the installation and commissioning of the boilers. The plaintiff (the health authority) was the building owner or employer, the first defendant (Crouch) was the main contractor and the second defendant (Crown) was one of a number of nominated subcontractors. The contractual arrangements are contained in three relevant contracts. The first in point of time was an agreement dated the 3rd November, 1977 (the warranty agreement) between the health authority and Crown made under clause 27(c) of the standard form of building contract issued by the Joint Contracts Tribunal (JCT), 1963 edition. The second contract (the main contract) was dated the 22nd December, 1977 between the health authority and Crouch made on the standard form of building contract issued by JCT, 1963 edition. The third contract (the sub-contract) was dated the 15th May, 1978, and was made as the result of an instruction by the architect to Crouch dated the 9th December, 1977 to enter into a sub-contract with Crown for the installation of the mechanical services. Pursuant to that instruction the sub-contract was made on the standard form for use where the sub-contractor is nominated under the main contract.
Crouch took possession of the site on the 13th February, 1978 and the completion date for the whole of the main contract works was the 10th November, 1981. The sub-contract provided for the boilers to be operational by the 5th October, 1980, for Crown to complete the installation by the 19th April, 1981, and for a six months' commissioning period until the l8th October, 1981. It is common ground that the main contract works were very substantially delayed, the causes of which are in dispute. However, on the 10th May, 1983 the architect issued an instruction in accordance with clause 23(e) of the main contract stating that in his opinion the works had been delayed, and extending the contract completion date to the 24th June. On the 12th May, 1983 the architect consented to an extension of time for completion of the sub-contract works down to the same date.
The sub-contract specification required the installation of three "Cochrane Coalmaster" boilers, which were delivered to the site in May 1980, but for various reasons were not brought into operation until December 1982. It was then found that the coal handling plant was incapable of dealing with the specified coal "Maryport Smalls" because the aperture at the bottom of the bunker was too small, and the coal compressed in the bunker neck and blocked the system. On the 21st February, 1983 the architect issued an instruction (No. 861) requiring the use of a different coal "Bickershaw Singles". It was not possible for Cochrane to adjust the boilers so that the heat output required by the specification was achieved with the "Bickershaw singles", and on the 14th June the architect notified Crouch by letter that:
"Boilers should be set to work at the optimum burning rate for the fuel referred to in Architect's Instruction No. 861" [the Bickershaw singles]…"commensurate with obtaining complete combustion of the fuel in the boilers."
Following receipt of that letter, tests were carried out during July and on the 30th September the architect wrote to inform Crouch (a) that the contents of the letter of the 14th June did not amend his instruction No. 861; and (b) on the basis of the results of the tests with Bickershaw singles the boilers as installed were not acceptable, and Crouch's proposals for remedying the situation were required. On the 28th October the architect notified Crouch that the consulting engineers had advised them that the boiler installation was practically complete. The boiler house was handed over on the 25th November and the final phase of the main contract was complete on the 12th January, 1984.
Meanwhile on the 21st September, 1982 Crouch issued a writ against the health authority claiming declarations as to entitlement to extensions of time, and reimbursement of loss and expense under the main contract by reason of matters occurring down to the 31st July, 1982. In those proceedings Crouch referred to claims which Crown had made against it, but Crown were not a party to the proceedings and took no part in them. The health authority withdrew an application to stay the proceedings under section 4 of the Arbitration Act 1950, which had been opposed by Crouch on the ground, inter alia, that resolution of the very substantial claims by Crown and another sub-contractor, coupled with a claim of Crouch itself, would only be possible if one tribunal heard all matters. The proceedings had been transferred to the official referee and an application for an interim payment was refused by His Honour Judge Sir William Stabb, Q.C. on the 30th March, 1983. A date for the hearing has been fixed for February 1985.
On the 27th July, 1983 Crouch wrote to the health authority in the following terms:
"Please accept this letter as our formal notice of reference to arbitration under clause 35 of the contract between us on the following grounds.
(1) Your expressed intention to deduct damages.
(2) Your Architect's failure to issue meaningful instructions to facilitate the completion of the boiler house which is in our opinion an essential pre-requisite to the practical completion of the contract.
(3) Your Architect's refusal to grant further extension of time in relation to item No. 2 and various other matters."
It was agreed that that dispute should be referred to Mr. Norman Royce, F.R.I.B.A., a most experienced arbitrator in this field, and it was also agreed that the terms of reference should expressly exclude the issue as to the boilers. As a result of that exclusion, Crown took no part in the reference, which was settled between the health authority and Crouch on the 22nd November, 1983. One of the terms of the settlement was that there should be a further arbitration in relation to the boilers (the boiler house dispute).
By letter dated the 17th November, 1983 Crouch applied under the contract to the president of the R.I.B.A. for an arbitrator to be appointed for the boiler house dispute, and on the 10th November the president appointed Mr. Royce as arbitrator in that arbitration (which I shall call the "Crouch arbitration"). The terms of reference were contained in a telex from Crouch dated the 27th October and were as follows:
"(1) For what reason or reasons is the boiler plant inoperable in accordance with the conditions of the contract between the parties dated 22nd December 1977, and the responsibility therefor?
(2) Was the boiler-house practically complete on 24th June 1983 and if not in what respect?
(3) If the answer to (2) is No did the works in the boilerhouse achieve practical completion at any time thereafter, and if so, when?"
The health authority agreed that paragraphs (2) and (3) should be referred to Mr. Royce, but disputed the reference of paragraph (1). On the 30th November the health authority issued an originating summons seeking an injunction restraining Crouch from seeking an award in relation to any of the matters set out in paragraph (1) of the telex.
Meanwhile Crown wished to commence its own arbitration in relation to the boilerhouse dispute, and on the 14th October, 1983 Crouch notified Crown that it was free to proceed in Crouch's name in accordance with the terms of the sub-contract. On the 10th November, 1983 solicitors for Crown wrote to the health authority in the following terms:
"In conclusion, we think it would be convenient to set out the matters of dispute or difference which exist between Crouch and the Authority. They are:
A. The boilers can achieve the contractually specified outputs and efficiencies using 'Maryport Smalls' but the coal handling plant cannot deliver that fuel. The boilers cannot achieve those outputs and efficiencies using 'Bickershaw Singles' but the coal handling plant is able to deliver that fuel. Accordingly, the design team must decide which of the two alternatives they wish the sub-contractor to achieve. The design teams requiring 'experiments' to be carried out using 'Bickershaw Singles' without their then accepting the results by...
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