Octoesse LLP v Trak Special Projects Ltd
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Jefford |
| Judgment Date | 15 December 2016 |
| Neutral Citation | [2016] EWHC 3180 (TCC) |
| Docket Number | Case No: HT-2016-000232 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 15 December 2016 |
[2016] EWHC 3180 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mrs Justice Jefford
Case No: HT-2016-000232
Mr Luke Wygas (instructed by Blake-Turner LLP) for the Claimant
Miss Krista Lee (instructed by the Bar Council's Direct Access Scheme) for the Defendant
Hearing date: 17 th October 2016
A. The Part 8 proceedings
Introduction
This matter concerns an adjudication which arose out of a project for the construction of residential and retail units in Long Acre, London WC2. The Claimant, Octoesse LLP ("Octoesse"), was the Employer and the Defendant, Trak Special Projects Limited ("Trak"), the Contractor. The parties entered into a contract dated 27 November 2013 on the standard form JCT Intermediate Building Contract (IC 2011). There were bespoke amendments to the standard form but these are not material to the present dispute. The Contract Administrator ("the CA") was Works Architecture (and, in practice, Mr Southgate, a director of Works Architecture).
The Works were certified as practically complete on 13 February 2015. On 4 May 2016, a final certificate was issued for payment. On 16 May 2016 a pay less notice was issued deducting liquidated damages of £89,250. Trak's case was that that pay less notice was invalid.
Trak commenced an adjudication claiming that further monies were due to them. It is not clear to me on what basis the sum claimed in the adjudication was calculated but the end result was that the adjudicator, Mr Bingham, in a decision made on 10 August 2016, decided that Octoesse was not entitled to deduct liquidated damages, that the pay less notice was invalid and that Octoesse should pay Trak £59,991.83 plus interest and other sums.
That decision turned on the proper construction of clauses 2.22 and 2.23 of the contract. Octoesse commenced these Part 8 proceedings seeking, in summary, declarations as to the construction of those clauses; that the pay less notice dated 16 May 2016 was valid; that Octoesse was entitled to deduct liquidated damages; and that the adjudicator's award was unenforceable. Trak counterclaimed the sums due in accordance with the adjudicator's decision and further sums which it claimed were due on invoices. CPR Part 8.7 provides that, where the Part 8 procedure is used, Part 20 (counterclaims and other additional claims) applies, except that a party may not make a Part 20 claim without the Court's permission. So far as I am aware, Trak did not make an application for permission to bring a Part 20 claim but, at the hearing on 17 October 2016, Octoesse was sensibly content for me to deal with the counterclaim for payment of the sums awarded by the adjudicator. Trak did not pursue its claims on invoices.
At the conclusion of the hearing, I gave judgment in favour of Trak and ordered payment of the sums awarded in the adjudication. Written reasons were to follow and these are my reasons.
Clauses 2.22 and 2.23
Clause 2.22 provides as follows:
"If the Contractor fails to complete the Works or a Section by the relevant Completion Date, the Architect/Contract Administrator shall issue a certificate to that effect. If an extension of time is made after the issue of such a certificate, the extension shall cancel that certificate and the Architect/ Contract Administrator shall where necessary issue a further certificate."
Clause 2.23 provides as follows:
" .1 Provided:
.1 the Architect/ Contract Administrator has issued a certificate under clause 2.22; and
.2 the Employer has notified the Contractor before the date of the Final Certificate that he may require payment of, or may withhold or deduct, liquidated damages,
the Employer may, not later than 5 days before the final date for payment of the amount payable under clause 4.14, give notice to the Contractor in the terms set out in clause 2.23.2.
.2 A notice from the Employer under clause 2.23.1 shall state that for the period between the Completion Date and the date of practical completion the Works or that Section:
.1 he requires the Contractor to pay liquidated damages at the rate stated in the Contract Particulars, or a lesser rate stated in the notice, in which event the Employer may recover the same as a debt; and/or
.2 that he will withhold or deduct liquidated damages at the rate stated in the Contract Particulars, or at such lesser stated rate, from sums due to the Contractor.
.3 If the Employer in relation to the Works or a Section has notified the Contractor in accordance with clause 2.23.1.2 that he may require payment of, or withhold or deduct, liquidated damages, then, unless the Employer states otherwise in writing, clause 2.23.1.2 shall remain satisfied in relation to the Works or Section, notwithstanding the cancellation of any certificate under clause 2.22."
Facts in brief
Under the contract, the Date for Completion stated in the Contract Particulars was 22 September 2013 (presumably a typographical error for 2014). The date was extended to 29 September because of a delay in commencement of the Works. The Works were not complete by that date and, on 3 October 2014, the CA issued a certificate of non-completion.
As I have said, the Works were certified as practically complete on 13 February 2015. On 3 July 2015 Trak submitted a claim for an 18 week extension of time. By letter dated 9 November 2015, the CA granted Trak an extension of time of 9.5 weeks. No further certificate of non-completion was issued.
As set out above, Octoesse gave notice of their intention to deduct and did deduct liquidated damages from the sum stated to be due in the final certificate.
Trak's argument in the adjudication
In the adjudication, and in these Part 8 proceedings, Trak argued that Octoesse was not entitled to make that deduction. Under clause 2.23.1, it was an express condition of Octoesse's entitlement to give notice under clause 2.23.2, and to deduct liquidated damages, that the CA had issued a certificate under clause 2.22. That condition had not been met. The effect of clause 2.22 was that the certificate of non-completion issued on 3 October 2014 had been cancelled when a further extension of time had been made in November 2015. No further certificate had been issued. The adjudicator agreed.
Octoesse's argument
Octoesse argued that the purpose of clause 2.22 was to put the Contractor on notice that the Employer may levy liquidated damages. The argument emphasised the words "where necessary" in clause 2.22. Octoesse argued that it was not necessary, on the facts of this case, for the CA to issue a further notice of non-completion. That, said Octoesse, was because practical completion had already been achieved before an extension of time was made, so Trak was already fully aware of its potential liability for liquidated damages.
The construction of the clauses
In my judgment, Octoesse's argument simply fails to give effect to the wording of both clause 2.22 and clause 2.23.
Clause 2.22, by the use of the word "shall", imposes mandatory obligations on the CA:
(i) if the Contractor fails to complete the Works by the relevant Completion Date, the CA shall issue a certificate to that effect. Completion Date is a defined term and the definition includes the Date for Completion of the Works stated in the Contract Particulars or such other date as is fixed under clause 2.19, that is, any extended date for completion.
(ii) It follows that the CA shall issue such a certificate if the Contractor fails to complete by the original Date for Completion or any extended date.
(iii) The clause makes that clear by providing (a) that the effect of an extension of time is to cancel any certificate already issued and (b) that the CA shall then where necessary issue a further certificate.
(iv) In respect of the cancellation of the certificate already issued, there is no exception where the extension is made after practical completion. In this context, I note that clause 2.19.3 expressly contemplates the making of an extension of time after practical completion.
(v) In respect of the words "where necessary", it would not be necessary for the CA to issue a certificate if the effect of the extension of time were that the Contractor had no longer failed to complete the works by the Completion Date.
In any event, since the effect of the making of an extension of time is to cancel any certificate previously issued, Octoesse could not rely on the October certificate as fulfilling the condition in clause 2.23.1.1 even if there was any merit in the argument that the issue of a further certificate of non-completion was not necessary.
On behalf of Octoesse, Mr Wygas also placed some reliance on clause 2.23.3. It does not seem to me that that clause assists his argument at all. This clause has the effect that the Employer's notification under clause 2.23.1.2 survives, so to speak, the grant of an extension of time and issue of a further certificate of non-completion. If the Employer has given notice of his intention to deduct liquidated damages but an extension of time is then made and a further certificate of non-completion issued, the Employer does not need to give notice of his intention again. The conditions in both clauses 2.23.1.1 and 2.23.1.2 are thus satisfied. There is a clear distinction here in the treatment of the Employer's notice under clause 2.23.1.2 and the certificate of non-completion. This clause cannot be construed as providing that a certificate of non-completion survives a further extension of time if the issue of a further certificate of non-completion is (on Mr Wygas's argument) not necessary.
It follows that, in the light of the extension of...
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