PBS Energo A.S. v Bester Generacion UK Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Pepperall |
| Judgment Date | 17 April 2019 |
| Neutral Citation | [2019] EWHC 996 (TCC) |
| Docket Number | Case No: HT-2018-000382 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 17 April 2019 |
[2019] EWHC 996 (TCC)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
TECHNOLOGY AND CONSTRUCTION COURT (QBD)
Rolls Building
Fetter Lane, London EC4A 1NL
THE HONOURABLE Mr Justice Pepperall
Case No: HT-2018-000382
Karen Gough (instructed by Keystone Law) for the Claimant
Steven Walker QC and Tom Owen (instructed by Watson Farley & Williams LLP) for the Defendant
Hearing date: 13 February 2019
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
By an adjudication decision dated 7 December 2018, Douglas Judkins ordered that Bester Generacion UK Limited should pay PBS Energo A.S. the sum of £1,701,287.22 plus interest of £81,801.62 by 14 December 2018. No payment was made and PBS now seeks summary judgment upon its claim to enforce the decision. Bester resists the application on the basis that the decision was procured by fraud.
THE BACKGROUND
On 29 April 2016, Bester entered into a contract with Equitix ESI CHP Wrexham Limited to design and build a biomass-fired energy-generating plant in Wrexham. On 10 May 2016, Bester entered into a sub-contract with PBS for the engineering, procurement, construction and commissioning of the plant. The sub-contract price was £14,230,000 plus VAT.
Unfortunately, the parties fell into dispute. On 24 May 2017, PBS gave notice of its intention to terminate the sub-contract. On 14 June 2017, it confirmed its purported termination. PBS asserted a claim upon termination in the sum of £7,711,818.71. Bester did not accept that PBS was entitled to terminate the sub-contract. It first sought to affirm the sub-contract and then, by letter dated 7 August 2017, purported to terminate the contract. Equitix called on the performance security provided by Bester, which in turn triggered the counter-guarantees provided by PBS in the sum of £2,709,277.99. Bester asserted a claim against PBS on an interim account in the sum of £7,467,660.29. Meanwhile, Equitix gave notice and subsequently terminated the main contract with Bester.
On 14 November 2017, PBS issued proceedings against Bester in claim number HT-2017-000330. The claim is defended and indeed Bester counterclaims on the basis that it maintains that PBS wrongfully terminated the contract. This main action is listed for a 12-day trial in July 2019.
Meanwhile, the parties' respective claims were referred to adjudication and Simon Tolson, a partner of Fenwick Elliott LLP was appointed. By his decision dated 23 January 2018, Mr Tolson decided that PBS was entitled to terminate, and had validly terminated, the sub-contract with effect from 15 June 2017. Mr Tolson did not deal with the quantum of PBS's claim, but he did order that Bester should repay the performance security of £2,709,277.99.
Bester did not pay and accordingly PBS commenced further proceedings in this court in order to enforce the Tolson adjudication. On 13 April 2018, Stuart-Smith J gave summary judgment in favour of PBS. It is clear from his subsequent costs decision that the judge was not impressed by Bester's conduct in respect of the Tolson adjudication:
“Bester's conduct has been unreasonable at almost every turn. Having started and lost the adjudication before Mr Tolson, it did not pay, did not respond to requests for payment and, when PBS issued proceedings, indicated an intention to defend proceedings although there was no defence to the claim. It raised spurious issues in its Defence which, apparently, it never had any real intention of pursuing. It unreasonably did not consent to judgment and only acknowledged that PBS was entitled to judgment when submitting its skeleton argument for the hearing on 13 April 2018. Bester says that evidence submitted on 8 March 2018 ‘was clear in seeking a stay.’ But given Bester's previous record of non-cooperation, non-payment and non-response, the material fact is that it never consented to judgment, formally or otherwise. In the light of my ruling rejecting the stay of execution, given on 13 April 2018, it is not unfair to characterise Bester's conduct as adopting every and any device to stave off the evil moment of payment.”
Even then, Bester did not pay either the judgment sum or Mr Tolson's fees. PBS only received full payment on 16 July 2018.
The Tolson adjudication dealt with questions of liability and the repayment of the performance security. On 5 November 2018, PBS served notice of adjudication seeking the valuation and payment of its claims under clauses 15.8 and 16.4 of its contract with Bester. Mr Judkins accepted his appointment on 9 November 2018 and, after considering the parties' submissions, issued his decision on 7 December 2018.
In the Judkins adjudication, PBS pursued a claim under clause 15.8(i) of the contract, which provided that following termination of the contract under clause 16.4:
“The Employer [Bester] shall … take over and pay the corresponding part of the Contract Price for the Works, including the Temporary Works, which have been performed up to the termination of the Contract.”
The principal issue in the Judkins adjudication was whether the value of the works that had been performed exceeded, and if so by how much, the payments already made and the value of the equipment that had been manufactured at the time of termination of the contract. Bester argued that no further sums were due under clause 15.8(i). It specifically argued that PBS was required to give credit for the value of the equipment that had not been delivered up under the contract and which PBS retained.
The adjudicator first considered the value of the milestone payments. At paragraph 2.67 of his decision, he found that the total value of milestone payments to which PBS was entitled at termination was £3,842,100. At paragraphs 2.22 and 2.70, he rejected, however, any direct connection between the milestones and the proper valuation of the “corresponding part of the contract price for the works … performed up to the termination of the contract.”
Both parties' experts sought to value the works performed to termination by reference to the fourteenth monthly progress report issued by PBS (“MPR14”). MPR14 recorded that the close-up progress was then 43%, but also showed overall progress (calculated by reference to PBS's cost-value reconciliations) at 54%. Although not his original approach, PBS's expert, David Daly, offered valuations based on both 43% (the close-up progress number from MPR14) and 54% (the overall progress calculation from the same report). In turn, Bester's expert, Carlos Loayza, offered valuations on the basis of 43% and 33.7%, being his own recalculation of the true value of the works carried out to termination. Rejecting the two extremes, Mr Judkins found, at paragraph 2.89 of his decision, that PBS had completed 43% of the contract works.
On the basis of that finding, Mr Judkins found that Bester was liable to pay £1,701,287.22 pursuant to clause 15.8. The agreed maths that underlies this finding was as follows:
| 43% of the contract price | 6,118,900.00 |
| Value of variations | 120,173.00 |
| Total value of work done | 6,239,073.00 |
| Less monies paid | (4,537,785.78) |
| Net liability | £ 1,701,287.22 |
At paragraph 2.90, the adjudicator considered Bester's mitigation argument. He said:
“The respondent submits that the claimant is required to mitigate against its loss by selling on or using the items of plant on some other facility. I disagree; it is the respondent which has caused the claimant to manufacture the plant items which the evidence shows that it has done and which, as Mr Košťál has averred, are now stored at the claimant's factories in the Czech Republic. When the relevant proportion of the Contract Price has been fully paid over to the claimant the plant belongs to the respondent which is responsible for collecting and disposing of the plant as it sees fit.”
Accordingly, Mr Judkins ordered Bester to pay the sum of £1,701,287.22 plus interest of £81,801.62 by 14 December 2018. Upon Bester's failure to pay, PBS issued this third set of proceedings on 19 December 2018 in order to enforce the Judkins adjudication. PBS now seeks summary judgment. Bester resists the application on the basis that the decision was procured by fraud. In the alternative, it argues that the court should give Bester conditional leave to defend. Bester's case is set out in the witness statement of its solicitor, Rebecca Williams, dated 25 January 2019.
THE LAW
Rule 24.2 of the Civil Procedure Rules 1998 provides that, on a claimant's application for summary judgment, the court may give judgment if it considers that the defendant has no real prospect of successfully defending the claim and there is no other compelling reason why the case should be disposed of at trial. The onus is upon the claimant to establish the absence of a triable issue.
Summary judgment is of course the usual means by which parties enforce adjudication decisions in their favour made pursuant to the statutory scheme in the Housing Grants, Construction & Regeneration Act 1996. By section 108(3) of the Act and regulation 23(2) of The Scheme for Construction Contracts (England & Wales) Regulations 1998, the decision of the adjudicator is binding upon the parties and must be complied with unless or until their underlying dispute is finally determined whether by litigation, arbitration or agreement. Adjudication is founded on the “pay now, argue later” principle: per Dyson J (as he then was) in Macob Civil Engineering Ltd v. Morrison Construction Ltd [1999] B.L.R. 93 and Coulson J (as he then was) in Mead General Building Ltd v. Dartmoor...
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