ROK Building Ltd v Celtic Composting Systems Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Akenhead |
| Judgment Date | 22 January 2010 |
| Neutral Citation | [2009] EWHC 2664 (TCC),[2010] EWHC 66 (TCC) |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Docket Number | Case No: HT-09-506,Case No: HT-09–389 |
| Date | 22 January 2010 |
[2009] EWHC 2664 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
The Honourable Mr Justice Akenhead
Case No: HT-09–389
Patrick Clarke (instructed by Ashfords LLP) for the Claimant
Michael Murray, company secretary in person for the Defendant
Hearing date: 22 October 2009
Mr Justice Akenhead:
Introduction
This is an application to enforce an adjudicator's decision and involves an issue as to whether the decision required the defendant to pay or was simply declaratory. There is no issue that the adjudicator's decision is anything other than valid.
The contract
Celtic Composting Systems Ltd (“Celtic”) was a main contractor employed by Devon County Council to carry out civil engineering works at Deep Moor, Great Torrington, Devon. Celtic employed Rok Building Ltd (“Rok”) as a subcontractor to provide and in-vessel composting facility. This sub-contract (the “Sub-Contract”) came into effect in about March 2008, albeit that the formal contract was not entered into until later that year. The sub contract incorporated the NEC3 form of engineering and construction contract (Option B June 2005 with amendments June 2006 but as amended by the parties).
The language of the NEC3 form is mostly framed in the present tense so that superficially at least there is little patently mandatory language. The relevant payment clauses are as follows:
“50.1 The Project Manager assesses the amount due at the assessment date…
50.2 The amount due is
• the Price for Work done to Date
• plus other amounts to be paid to the Contractor
• less amounts to be paid by or retained from the Contractor…
50.4 In assessing the amount due, the Project Manager considers any application for payment the Contractor has submitted on or before the assessment date. The Project Manager gives the Contractor details of how the amount due has been assessed.
50.5 The Project Manager corrects any wrongly assessed amount due in a later payment certificate.
51.1 The Project Manager certifies a payment on or before the date on which a payment becomes due.
51.2 Each certified payment is made on or before the final date for payment. If a certified payment is late, or if the payment is late because the Project Manager does not issue a certificate which he should issue, interest is paid on the late payment. Interest is assessed from the date by which the late payment should have been made until the date when the late payment is made, and is included in the first assessment after the late payment is made.
51.3 If an amount due is corrected in a later certificate either
• by the Project Manager in relation to a mistake or a compensation event or
• following a decision of the Adjudicator or the tribunal
interest on the correcting amount is paid. Interest is assessed from the date when the incorrect amount was certified until the date when the correcting amount is certified and is included in the assessment which includes the correcting amount.
51.4 Interest is calculated on a daily basis at the interest rate and is commenced annually.”
Clause 56 provided that the date on which payment became due was 21 days after the date on which the Contractor's statement was received and the final date for payment was 7 days after the date on which the payment became due. If the Employer intended to withhold payment after the final date of payment of the sum due, it had to notify the Contractor not later than one day before the final date for payment. As the Clause itself makes clear, these requirements were there to satisfy Sections 109 and 110 of the Housing Grants, Construction and Regeneration Act 1996 (“ HGCRA”). There is nothing in the contractual documentation as provided to the Court by either party which suggests that Rok's entitlement to payment was dependent upon what Celtic was entitled to from Devon County Council.
Provision was also made elsewhere for what are called “Compensation Events” which, subject to various notice requirements, entitled the contractor to extension of time and financial compensation when certain such events occurred.
Option W2 to this form of contract provided for disputes arising under or in connection with the contract to be referred to adjudication. The procedures were set up to enable adjudication to take place in accordance with the HGCRA. Clause W2.4 (11) provides:
“The Adjudicator's decision is binding on the Parties unless and until revised by the tribunal and is enforceable as a matter of contractual obligation between the Parties and not as an arbitral award. The adjudicator's decision is final and binding if neither Party has notified the other within the time is required by this contract that he is dissatisfied with a matter decided by the Adjudicator and intends to refer the matter to the tribunal.”
Reference to the “tribunal” is to the tribunal for final dispute resolution, arbitration in this case. The adjudication was to be in accordance with the CIC Model Adjudication Procedure 4 th Edition which provided by Clauses 4 and 5 as follows:
“4. The Adjudicator's decision shall be binding until the dispute is finally determined by … arbitration… or by agreement.
5. The Parties shall implement the Adjudicator's decision without delay whether or not the dispute is to be referred to… arbitration”
The facts
The Sub-Contract Completion Date, subject to any entitlement to extension of time, was 1 December 2008. There were delays, the responsibility for which remains in issue between the parties. There remains an issue between the parties as to whether Rok has actually completed the works; it follows from this that Celtic is of the view that Rok is liable to it for liquidated damages for delay for most of the delay period. One of the events in which was said by Rok to have delayed progress was flooding which occurred in July and August 2008; Rok claimed that this was a Compensation Event and that, it having been delayed by 19 weeks in consequence, it was entitled to an extension of time. This was disputed by Celtic.
In December 2008, Rok submitted a claim for time and money in relation to this flooding incident: 19 weeks extension of time and financial entitlement of £877,339.52. In its application for payment No 13 dated 27 April 2009, Rok claimed £782,875.92 for this Compensation Event. If payment was due, it was due by 25 May 2009 which would have been the final date of payment. Certificate No 13 issued by the Project Manager on 8 May 2009 allowed nothing for this claim and no extension of time was recognised. Although that Certificate identified a negative balance of some £70,000 (that is, no net sum due), nothing seems to turn on that. On 18 June 2009, Certificate No 14 was issued which showed a balance due to the Claimant, after allowing for retention, and amounts previously certified £72,420.38.
On 26 June 2009, Rok served a Notice of Adjudication in relation to the dispute about the flooding incident, followed by its Referral to Adjudication on 3 July 2009. Mr Liam Holder was appointed as adjudicator. It was accepted that he had full jurisdiction to deal with the flooding dispute. Written evidence and argument was exchanged between early July and 31 August 2009.
The Adjudicator issued his decision, within an agreed extended time, on 7 September 2009. In essence, he decided that the flooding was a Compensation Event but that only 29 working days (5.8 calendar weeks) delay had occurred. He decided that the Completion Date, which had already been extended beforehand to 26 January 2009, should be extended to 6 March 2009. In his Decision at Paragraph 12, he decided as follows:
“12.3 That Rok shall be paid in the additional sum of £204,465.14 plus VAT in relation to interim payment application 13 in respect of the compensation event arising from the flooding on the site…
12.5 That Celtic shall pay interest on the sum awarded in the sum of £1470.47 and which continues to accrue at a daily rate of £14.00 from and including 8 September 2009, until judgement or sooner payment.”
12.6 That Rok shall pay 25% of my costs and expenses in the sum of £5371.88 plus VAT; that Celtic shall pay 75% of my costs and expenses in the sum of £16,115.63 plus VAT…”
Celtic did not pay to Rok either of these sums, taking the point that the decision was not, in a directive sense, requiring payment specifically to be made within a set time or at all. I will return later in this judgement to what the decision does require.
Before the Adjudicator's decision was issued Certificate No 15 was issued on 21 August 2009; it showed, after allowing for retention, delay damages and amounts previously certified, a negative balance in the sum of £66,160.43. No sum was due on that certificate and indeed that Celtic would argue that Rok should have paid the negative balance back to Celtic.
To reflect the Adjudicator's decision, Celtic issued on 17 September 2009 a pro-forma document entitled Compensation Event No. 72 which related to the flooding and provided for an adjustment to the Contract Sum of £204,465.14, being the sum allowed by the Adjudicator.
Following the issue of these proceedings on 25 September 2009, on 7 October 2009, Rok submitted to Celtic its Valuation No 16. On 15 October 2009, Celtic issued its Certificate No 16, which showed a net sum due to Rok of £121,830.68. However, this was reached after deducting retention (£75,348.30) and “Delay Damages” (£133,000) and allowing for the previously certified sum under Certificate No 15. However, Celtic has only paid £64,020.79 because, it argues, that, allowing for VAT, it is entitled to a credit for the negative balance owing to it from Rok on Certificate No...
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