Shaw v Massey Foundations & Pilings Ltd
| Jurisdiction | England & Wales |
| Judge | His Honour Judge Stephen Davies |
| Judgment Date | 06 January 2010 |
| Neutral Citation | [2010] EWHC 9 (Ch) |
| Court | Chancery Division |
| Docket Number | Appeal No M9X00087 |
| Date | 06 January 2010 |
[2010] EWHC 9 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
MANCHESTER DISTRICT REGISTRY
Manchester Civil Justice Centre,
1 Bridge Street West,
Manchester, M60 9DJ
Before His Honour Judge Stephen Davies
Sitting as a Judge of the High Court
Appeal No M9X00087
Mrs Gabrielle Shaw (in person) for the Appellants
Mr Richard Bradley (instructed by CE Law, Solicitors, Birkenhead) for the Respondent
Date of hearing: 10 December 2009
His Honour Judge Stephen Davies:
Introduction
This is an appeal from a decision of District Judge Smith made on 30 June 2009, in which he refused to set aside statutory demands served by the respondent upon the appellants relating to a sum which an adjudicator appointed under the Housing Grants Construction and Regeneration Act 1996 ( HGCRA) had awarded to them and the subject of a judgment in enforcement proceedings in the Technology and Construction Court (TCC). Although the District Judge refused permission to appeal, the appellants subsequently successfully obtained permission to appeal on 25 September 2009 on one ground, which was that:
'The District Judge was wrong in law on the facts as he found them when he decided that although he was bound by the decision in George Parke v. The Fenton Gretton Partnership (which was a case admitted by the District Judge as being 'on all fours' with the present case) he would nevertheless exercise his discretion in the Respondent's favour.'
In summary, what the appellants say is that although the District Judge, as they say rightly, decided that they were entitled in law to assert a genuine and substantial cross-claim which equalled or exceeded the amount claimed in the statutory demands, he erred in exercising his discretion not to set aside the statutory demands on the basis that because they could afford to pay that amount there was no risk of them being made bankrupt and thus being unable to pursue arbitration proceedings to have the adjudicator's decision set aside.
The appellants were also given permission to rely on further evidence on appeal, namely the first arbitral award of Mr Anthony Bingham published on 31 July 2009.
On 16 October 2009 the respondent filed a respondent's notice contending that
'1. A statutory demand should not be set aside on the grounds of a counter-claim, set-off or cross demand equalling or exceeding the amount of the debt specified in the statutory demand where the debt or debts in the statutory demand are based upon a judgement enforcing an adjudication award and bankruptcy proceedings are not being used in order to stifle a genuine counterclaim, set-off or cross demand.
2. The Appeal Court is not bound by the decision in George Parke v. The Fenton Gretton Partnership.'
It will be apparent to those familiar with the scheme for construction adjudications established by Part II HGCRA that the cross-appeal raises the question as to whether or not a party to a relevant construction contract who has obtained an adjudicator's decision in his favour and also obtained a judgement in the TCC enforcing that decision is entitled to pursue the losing party to insolvency even where the losing party has a substantial cross-claim against the sum awarded by the adjudicator. The respondent says that the losing party should not be entitled to rely on such cross-claim; the appellants say that they should.
It is convenient to begin by setting out the relevant facts as they were put before the District Judge and as to which there was little or no substantial dispute so far as the hearing below and this appeal are concerned.
Relevant facts
The appellants are the owners of a property known as East Lodge, Great Moreton Hall, Cheshire; the respondent is a building company. By a written contract dated 27 April 2007 made in the form of the Minor Works Contract issued by the Architects and Surveyors Institute, August 1990 edition, the respondent agreed to carry out building works to the East Lodge for a contract price of £168,253. The 'Adviser' appointed under the form of contract was a Mr Carter, the Architect instructed by the appellants. So far as the conditions of contract are concerned, I need refer only to clause 6, which provided for interim payments and a final ('single') payment upon 'proper completion of the work and defects and when the contractor's account is approved and certified by the Adviser', and clause 10, which provided for disputes to be put to the Adviser in writing for his decision and if not resolved by that decision referred to arbitration. There was no contractual provision for adjudication, not surprisingly since the standard form used pre-dated the HGCRA.
Works were undertaken and the appellants made interim payments of £102,421. However by early 2008 the works were over running, the appellants were dissatisfied with progress and with the quality of some of the works, and interim certificates issued by the Adviser had not been honoured. In February 2008 the respondent left site in disputed circumstances, each party contending that the other had repudiated the contract and that they had accepted the other's repudiation. The respondent submitted its final account valuation, which was disputed by the appellants.
On 27 August 2008 the respondent served a Notice of Adjudication on the appellants. Having referred to the contract, it stated:
'On 11 February 2008 the Referring Party accepted your repudiation of the contract.
On 23 June 2008 the Referring Party submitted as its claim for damages arising from the Responding Party's breach of contract its assessment of the value of the works it had completed at the date of your repudiation of the contract in the sum of £189,134.69 and indicating that it was due a further payment of £86,730.24.
You have failed to respond to the Referring Party's assessment of the value of the works it has completed and have not made any payment in respect of the same. In the circumstances a dispute exists between the Referring Party and you as to the sums to be paid in respect of the work the Referring Party has undertaken at your instruction.
The Referring Party seeks an award of damages for your breach of contract and an adjudicator will be asked to determine what further sums if any are to be paid as damages to the Referring Party in respect of the works it carried out at the property and will be asked to make an award that:
1. That the Responding Party pay the Referring Party damages of £86,713.24 or such sum as the adjudicator shall decide being the unpaid value of the works, pleaded by the Referring Party at the date of the Responding Party's breach of contract.
2. …'
I have set out the Notice of Adjudication at some length because its precise terms are relevant to a question canvassed during the course of the appeal in the light of the subsequent first arbitral award, namely the nature of the dispute referred to adjudication,
The appellants, upon advice, decided not to participate in the adjudication on the ground, subsequently held to be erroneous, that the adjudicator had no jurisdiction because the contract fell within the exception in section 106 HGCRA relating to construction contracts with residential occupiers. It appears that they were not advised to participate in the adjudication and thus to respond to the claim on the merits without prejudice to that jurisdictional objection, which undoubtedly would have been a course open to them. The adjudicator proceeded to decide the dispute and, by his decision dated 25 September 2008, decided that the respondent's employment under the contract had been wrongly determined and that it was entitled to payment of damages in the sum of £80,954.55.
On 29 September 2008 Mr Wilson, the construction consultant then advising the appellants, wrote to the respondent's solicitors enclosing his evaluation of the respondent's claim. This was a 25 page document which set out in some detail Mr Wilson's evaluation of the value of the works, taking into account matters such as architect's instructions, other additional works, works the subject of provisional sums, the cost of completing incomplete works, and the cost of rectifying defective works. In summary, it valued the works at £113,619.45 which, having regard to payments already made, left a balance of £11,199.47 to pay. No payment was made by the appellants, not even the balance accepted due.
On 10 October 2008 the respondent brought proceedings in the Liverpool County Court, TCC list, to enforce the adjudicator's decision. The appellants sought to resist enforcement on the ground that the adjudicator had no jurisdiction, but that argument was rejected by the TCC Judge in Liverpool and again by Coulson J on appeal.
In the meantime, on 13 January 2009 the respondent issued and served statutory demands upon the appellants, claiming that they owed it the amount decided by the adjudicator they should pay, together with costs and judgment interest. A day earlier, on 12 January 2009, Mr Wilson on behalf of the appellants served notice of arbitration on the respondent, claiming 'repayment of the sums due or paid in excess of the proper evaluation of the works as a result of the adjudicator's decision'. An arbitrator was appointed but the respondent took the point that the notice was premature because the appellants had not first submitted the dispute to the Adviser for his decision, as was required by the contract, and the arbitrator agreed. It appears that the appellants then sought to refer the dispute to the Adviser for his decision, but without success.
The appellants also applied to set aside the statutory demands, but this process was delayed due to various procedural mishaps which it is not necessary for me to detail...
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