Pilon Ltd v Breyer Group Plc

JurisdictionEngland & Wales
CourtQueen's Bench Division (Technology and Construction Court)
JudgeThe Honourable Mr Justice Coulson
Judgment Date23 April 2010
Neutral Citation[2010] EWHC 837 (TCC)
Date23 April 2010
Docket NumberCase No: 2010-TCC14822

[2010] EWHC 837 (TCC)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

TECHNOLOGY AND CONSTRUCTION COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

The Honourable Mr Justice Coulson

Case No: 2010-TCC14822

Between:
Pilon Limited
Claimant
and
Breyer Group Plc
Defendant

Ms Karen Gough (instructed by Fenwick Elliott) for the Claimant

Mr James Bowling (instructed by Speechly Bircham) for the Defendant

Hearing date: 30 th March 2010

The Honourable Mr Justice Coulson
I. INTRODUCTION
1

Since January 2009, the Claimant ("Pilon"), a specialist refurbishment contractor, has been the subject of a Company Voluntary Arrangement ("CVA"). Before that, they had carried out extensive work for the Defendant ("Breyer") on a number of different projects, including what was known as the Ealing Project. This work was divided into two separate batches, batches 1–25 and batches 26–62. In the summer of 2008, disputes arose between the parties and Pilon left the Ealing site in October 2008. On 8th September 2009, nine months after the CVA, they issued an interim application for payment in respect of batches 26–62. This application was not paid, and the dispute went to adjudication. The adjudicator awarded Pilon £206,617.74, together with VAT and interest. Those sums have not been paid by Breyer, and are now the subject of this disputed enforcement application.

2. THE ISSUES
2

A variety of matters were raised by the parties in the witness statements and the skeleton arguments. At the outset of the hearing, I identified a total of five principal issues. They were:

2.1. Issue 1: Was the adjudicator's decision as to jurisdiction binding on the parties? I deal with this in Section 4 below.

2.2. Issue 2: Did the adjudicator take an erroneously restrictive view of his own jurisdiction and, if so, what are the consequences? I deal with this in Section 5 below.

2.3. Issue 3: Were Breyer entitled to raise a defence or cross-claim based upon an alleged overpayment on batches 1–25? I deal with this in Section 6 below.

2.4. Issue 4: To the extent that it is relevant, is the adjudicator's decision severable? I deal with this in Section 7 below.

2.5. Issue 5: If Pilon are entitled to judgment, should there be a stay of execution pursuant to RSC Order 47? I deal with this in Section 8 below.

3

Before coming on to deal with those individual issues, I set out briefly the chronology and the material documents in the adjudication.

3. THE ADJUDICATION
4

As already noted, Pilon left the Ealing site in October 2008. The CVA took effect in January 2009. It was not until nine months later, in September 2009, that Pilon made an application for interim payment in respect of batches 26–62. The application was in the net sum of £337,000.67. It was not paid and Pilon referred the dispute to adjudication.

5

The adjudication notice, served on 19 th November 2009, made plain that it was limited to the interim application in respect of batches 26–62. Moreover, it was Pilon's primary case in the adjudication that they were entitled to that sum without any deduction whatsoever, because Breyer had failed to serve either a payment or a withholding notice.

6

It was Breyer's case that, pursuant to the terms of the contract, they were not obliged to serve such notices. In addition, beyond the disputes about valuation, Breyer's principal defence was to the effect that they were entitled to set off the sum of £147,774 which, they claimed, constituted an earlier over-payment to Pilon in relation to batches 1–25.

7

The adjudicator was Mr Mark Entwhistle. His decision was dated 5 th February 2010. It ran to 240 paragraphs and 45 pages. It also included some appendices. In short, he concluded that:

7.1. Pilon was not automatically entitled to the sum which they had applied for in September 2009. The interim application was challenged by Breyer, and the absence of payment notices and/or withholding notices did not mean that the detailed valuation exercise could be bypassed.

7.2. He did not have the jurisdiction to consider Breyer's argument in relation to the alleged over-payment on batches 1–25 because, he said, the notice of adjudication made plain that the dispute was limited to batches 26–62. He therefore did not consider that overpayment defence at all.

7.3. Having performed the detailed valuation exercise, the adjudicator identified the sum of £207,617.74, plus VAT, as due from Breyer to Pilon.

8

On the jurisdictional issue (namely, whether or not he could even consider the alleged overpayment on batches 1–25) the adjudicator said this:

"86. It is trite to state that my jurisdiction in this matter is governed by a number of factors. These include the terms of the parties' contract and the details of the Notice of Intention and the Referral. I am, thus, constrained by the matters referred to me and to stray outside those matters would constitute dereliction of my jurisdiction.

87. The Referral is, as it must be for validity, consistent with the Notice of Intention served on 19 th 2009. The redress sought in the Referral (later revised in the Reply) is for payment of the sum of £337,000.67, which sum is derived from a gross payment entitlement said to be £1,712,665.83.

88. The extent of my jurisdiction is limited by the matters referred by Pilon. Those matters are, as it seems to me, the matters that led to the gross valuation of £1,712,665.83.

89. Put another way, my jurisdiction does not extend to any matter that arises outside of the determination of that particular gross figure and the sums that make it up, since Pilon who, as the referring party, has deliberately formulated its Notice and Referral to limit my jurisdiction."

Subsequently, at paragraphs 101–103 of his decision, the adjudicator expressly rejected Breyer's case that he was obliged to consider their defence based upon over-payment on batches 1–25, and he referred to both Cantillon v Urvasco [2008] BLR 250 and Quartzelec Limited v Honeywell Control Systems Limited [2009] BLR 328. I deal with those authorities in greater detail below.

9

As to the necessity for a valuation, and his conclusion that the absence of payment notices and/or withholding notices did not automatically entitle Pilon to the sum applied for, the adjudicator said this:

"65. I find that the failure of Breyer to issue a notice of payment pursuant to the September 2009 application did not mean that the full sum applied for was due to be paid. I further find that the absence of a withholding notice issued under clause 7(i) of the contract similarly did not mean that Pilon was entitled to be paid the full sum applied for.

66. The parties are disagreed about the need for a withholding notice to be served before Breyer can make deductions from monies due to Pilon, or before any reduction in value, by way of abatement, could occur.

67. I am not persuaded that this issue is of particular relevance to the matters I have to decide.

68. Firstly, no monies were either certified or notified to Pilon as being due. As such there was no entitlement to payment from which monies might have been sought to be withheld.

69. Secondly, the contract terms themselves provide the means by which Breyer might seek to make claims or deductions from Pilon's account….

75. I further consider that the wording of the clause [clause 8(b)] entitled Breyer to deduct the costs incurred from sums otherwise due to Pilon and in such circumstances no withholding notice would be required as the deduction would be being made pursuant to this term of the contract, rendering it a valuation matter."

10

Following the provision of the adjudicator's decision, on 16 th February 2010, Breyer's solicitors wrote to Pilon's solicitors, referring to the adjudicator's failure even to consider the defence based upon the over-payment on batches 1–25, and saying that "in refusing to consider this defence that was open to Breyer, the adjudicator committed a breach of natural justice. We therefore write to inform you that the adjudicator's decision is not binding on our client and it will not be paying the sums directed by him in his decision."

4. WAS THE ADJUDICATOR'S DECISION ON HIS OWN JURISDCTION BINDING ON THE PARTIES?
11

On behalf of Pilon, Ms Gough contended that the adjudicator's decision, to the effect that he did not have the jurisdiction to consider the alleged overpayment on batches 1–25, was temporarily binding on the parties. She submitted that the parties had debated the question of jurisdiction before the adjudicator, and he had reached a decision on it, so that, whether he was right or wrong, that decision was at least temporarily binding on the parties and therefore the court. Thus, she argued, the jurisdiction point now taken by Breyer was simply not open to them on this application for summary judgment.

12

I am unable to accept that submission. The law on this topic is clear. Jurisdictional issues often arise during the course of an adjudication, and it is usually sensible for the parties to ask the adjudicator to investigate the issue and state his conclusion. But, unless the parties have also agreed to be bound by the result of the adjudicator's investigation into his own jurisdiction, his ruling on that issue will not be determinative, and the challenger can defeat any subsequent enforcement proceedings by showing a respectable case that the adjudicator had reached an erroneous conclusion as to jurisdiction: see, in particular, paragraph 10 of the judgment of May LJ in Pegram Shopfitters Limited v Tally Weijl (Uk) Limited [2003] EWCA Civ 1750.

13

Accordingly, there needs to be either an express agreement between the parties that the adjudicator's decision on jurisdiction is to be binding or, at the very least, an implied agreement to the same effect, which may arise where the objecting party fails to reserve its position, or there has been a unilateral waiver...

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2 firm's commentaries
  • Adjudication: Jurisdiction and Severability
    • United Kingdom
    • Mondaq United Kingdom
    • 19 August 2010
    ...set -off defence; and that the deliberate decision amounted to a breach of natural justice. Pilon Limited v Breyer Group plc [2010] EWHC 837 (TCC) The employer engaged a contractor to carry out refurbishment work on a redevelopment project in Ealing. The work was divided into two separate s......
  • Case Law Update - Issue 6 (2010)
    • United Kingdom
    • Mondaq United Kingdom
    • 22 December 2010
    ...where exception partly applied. Adjudicator's Finding on Jurisdiction Not Binding Pilon Ltd v Breyer Group plc [2010] BLR 452 and [2010] 130 Con LR 90 The adjudicator held that he had no jurisdiction to hear a set-off defence which derived from batches 1-25 of the project when the dispute r......

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