OD Developments v OAK Dry Lining Ltd
| Jurisdiction | England & Wales |
| Judge | Waksman J |
| Judgment Date | 02 April 2020 |
| Neutral Citation | [2020] EWHC 2854 (TCC) |
| Docket Number | Case No: HT-2020-000007 |
| Date | 02 April 2020 |
| Court | Queen's Bench Division (Technology and Construction Court) |
[2020] EWHC 2854 (TCC)
IN THE HIGH COURT JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
THE TECHNOLOGY AND CONSTRUCTION COURT (QBD)
Rolls Building
7 Rolls Buildings
Fetter Lane
London
EC4A 1NL
THE HONOURABLE Mr Justice Waksman
Case No: HT-2020-000007
Mr A Singer QC (instructed by Collyer Bristow LLP) appeared on behalf of the Claimant
Mr A Hickey QC (instructed by Pinsent Masons LLP) appeared on behalf of the Defendant
APPROVED JUDGMENT
Introduction
I am concerned here with a decision of the adjudicator dated 19 December 2019. The claimant, OD Developments & Projects Ltd, to which I shall refer as OD, was the employer and main contractor and the defendant, Oak Dry Lining Ltd, to which I shall refer as Oak, was the subcontractor.
The works in particular concerned a project at 19 Bolsover Street in London, and Oak, as the subcontractor, was carrying out dry-lining works. By his decision, the adjudicator awarded to Oak £431,291.81 and directed that OD should pay his fees. Following that, OD issued a Part 8 claim on 9 January 2020. This contended that the adjudicator had been wrongly appointed and, therefore, lacked jurisdiction, so his decision was invalid and unenforceable. It further contended that there was in fact no dispute between the parties by reason of the issue of OD's final payment notice and the lack of any challenge to it within 10 days. Alternatively, the final payment notice was validly issued, and its effect is to bar the adjudication brought by Oak. Finally, that the sum of £595,479.11 was due to OD from Oak, alternatively, a slightly power sum after deduction of a retention.
That claim is resisted by Oak, who made a cross-application on 17 March for summary judgment to enforce the adjudicator's decision. This is a case where there was, on any event of its common ground, a binding Letter of Intent, whatever else there may have been. I shall refer to this in more detail later on. However the first paragraph of it states that was the intention of the parties to enter into formal contractual relations for a dry lining contract based on JCT 2001 Design and Build subcontract and then it lists information which would form part of the order. The only other term of the letter of intent which I propose to deal with, at this stage, is that on the second page it says that any dispute or difference arising out of, or in connection with, this Letter of Intent will be determined by adjudication under the current scheme. The adjudicator will be appointed by a president or vice president of the RICS.
It is common ground that no complete JCT subcontract form was ever executed or assigned and none of the requisite particulars, which preface the underlying terms, were filled in. Nonetheless, the works took place.
The Dispute
Oak made a series of requests for payments using the interim payment procedure. They more or less followed the JCT procedure but not entirely.
Practical completion was by no later than 5 December 2017.
There are then a series of documents concerning payments, of which I must read. The first one is an interim payment notice from Oak dated 29 March 2019. It states payment application number 21, for the gross sum of £1.711 million. That is the total sum, but to date, they have received £983,000, leaving a balance due of £728,000. The application is particularised by reference to, for example, measured works, variations, overheads, recovery and so on, ending up with the sum claimed.
OD's Pay Less notice in response to that was sent, in its first incarnation, on 12 April 2019. It said that, in fact, no sum was due and on the following page it claimed a payment due to it, at that stage calculated at £123,000. In other words, by that stage the position was that Oak had, in fact, been overpaid: far from any sums being due to it, there was a balance due to OD.
That was then followed by a further Pay Less Notice dated 13 May equally saying that no sum was due to Oak but adding that as a result of the overvaluation of the works there was a sum due to OD of £509,000. That was on the basis of a gross valuation of the subcontract works of some £511,000.
On 22 July 2019, OD wrote to Oak to say as follows: “Further to the letter of 17 May when we asked Oak to submit its final subcontract application within the next 4 weeks, we have had had no response….in accordance with clause 4.6.3, we enclose our calculation of Oak Dry Ltd.'s final subcontract sum”. Here, the value of Oak's subcontract work had been reduced further by OD, leading to an increased amount due to it by Oak of £625,000. On 2 August, Oak disputed this and then, on 26 September, OD sent the final payment notice which was featured heavily in the proceedings before me but, repeated the valuation which had been carried out on 22 July, and claiming again, the sum of £625,000.
That, in turn, was disputed by Oak in its letter of 30 September 2019. Oak then served its Pay Less notice in response to the final payment notice on 14 October and, at that stage, it claimed that it was owed £765,000 from OD.
By a separate letter of the same date, Oak also said that OD's final payment notice was itself invalid so that Oak was entitled to, and did, serve its own default payment notice, again claiming £765,000. In response to that, Oak served its Pay Less notice dated 16 October, again claiming £625,000 to it.
On 8 November, Oak referred the dispute to adjudication. I read out several features of that notice now. Paragraph 6 onwards read as follows:
“6. Regarding the possible Conditions of sub-Contract, the LOI states the intention is that the JCT 2011 Design & Build Sub-Contract will apply. To an extent ODL and OD proceeded on the basis that the JCT 2011 Design & Build Sub-Contract Conditions applied during the delivery of the Sub-Contract Works occasionally referring to the conditions albeit absent of reliance on any completed Sub-Contract Particulars.
7. The sub-contract sum was subsequently adjusted to £11,244,901.90 under Site Instruction No, 10 dated 22 July 2016.
8, However, the JCT 2011 Design & Build Sub-Contract was never executed and the woks proceeded with no regulated terms and conditions.
Adjudication Provisions
9' There were no Contract Particulars executed and no regulated terms and conditions and therefore ODL's option for adjudication falls to be regulated under part 1 of the Schedule to The Scheme for Construction Contracts (England and Wales) Regulations 1998 (Amendment) (England) Regulations 2011.
The Dispute
10' Although a formal contract was never executed the Parties acted as though clause 4.9, 4.10, 4.13, 4.19 and 4.20 of the intended sub-contract (JCT 2011 Design and Build Sub-Contract, applied for the purposes of Interim payments.”
The Adjudication
The adjudicator had to deal first with two jurisdictional points by OD which were also taken before me. The first was that he had no jurisdiction because he was not appointed in accordance with the terms of Letter of Intent, albeit that the method of appointment (ie by RICS), was in any event correct. He dismissed that objection.
Secondly, he dismissed the argument that he had no jurisdiction because there was, in fact, no dispute between the parties because under a JCT terms, a final notice was itself conclusive, admitting of no other arguments in an adjudication. He rejected that and held that this was a matter for the merits, not jurisdiction.
On the substance, he held as follows, in relation to contract formation, having had differing arguments put before him by both of the parties:
“244. The Letter of Intent states the intention that the 2011 JCT Design and Build Subcontract will apply.
245. It is clear the parties proceeded on the basis that the 2011 JCT Design and Build Subcontract Condition applied, referring to the Conditions albeit absent any completed subcontract particulars.
246. I further agree with OD Developments that whilst parties did not complete the Subcontract Particulars, there was nothing further to be agreed and hence a contact was formed.
247. I therefore agree with the Parties that the Conditions of the JCT Design and Build Subcontract are incorporated and apply.”
He then held as a matter of substance that the final payment notice from OD was invalid and so did not represent a conclusive determination of the monies due. He then assessed the true total value of the works at £1.41 million, somewhat less than the valuation of £1.7 million placed upon them by Oak in its interim payment application 21. After deducting payments already made, that left a balance due to Oak of £431,291.81 as I referred to at the beginning of the judgment, and all that is set out in paragraph 3.3.8 and 3.3.9 of the adjudication decision. That is all I need to say about the decision at this stage.
The core points made by OD, are on the two jurisdiction points and the question of the binding final payment notice which has been argued before me. Let me set out in more detail the issues as they emerged.
In the Part 8 claim, OD said first that the sub-contract did incorporate by reference the JCT terms. Secondly, its final payment notice was served pursuant to the JCT terms and was valid. Thirdly, because Oak issued no proceedings to challenge the final payment notice within 10 days, as per the JCT terms, the notice became conclusive and, therefore, OD is entitled to judgment from Oak in the sum of £625,000.
By its response, Oak said that the contract did not incorporate JCT terms and so there is no claim based on the final payment notice and the Part 8 claim fails on that basis. Secondly, and alternatively, if the JCT terms were incorporated then,
a. The final payment notice was itself non-compliant and had no effect.
b. If it was...
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Adjudication Matters ' December 2020
...Is an Adjudicator's Decision enforceable if it was decided upon the incorrect contract terms? OD Developments v Oak Dry Lining Ltd [2020] EWHC 2854 (TCC) Introduction In OD Developments (OD) v Oak Dry Lining Ltd (Oak), the Technology and Construction Court (the TCC) declined to enforce an A......