Squibb Group Ltd v Vertase F.L.I Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Coulson |
| Judgment Date | 10 July 2012 |
| Neutral Citation | [2012] EWHC 1958 (TCC) |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Docket Number | Case No: HT-12-184 |
| Date | 10 July 2012 |
[2012] EWHC 1958 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Coulson
Case No: HT-12-184
Ms Olivia Chaffin-Laird (instructed by Enyo Law) for the Claimant
Ms Alexandra Bodnar (instructed by TLT LLP) for the Defendant
Hearing date: 10 th July 2012
INTRODUCTION
This is an application for summary judgment pursuant to CPR Part 24. It seeks to enforce an adjudicator's decision dated 22 May 2012, in favour of the claimant Squibb, in the sum of £167,531.05. The claim is resisted by the defendant, Vertase, on the grounds that they were entitled to serve and rely on a witholding notice served after the completion of the adjudication on 1 June 2012, and subsequently amended and re-served on 8 June. The application gives rise to a number of interesting issues concerning the interplay between adjudication, set-off and withholding notices.
THE SUB-CONTRACT
By a sub-contract dated 20 September 2011, Vertase engaged Squibb to undertake the asbestos removal and demolition of existing structures at a site in Leamington Spa. It was a credit sub-contract, to the extent that Squibb paid Vertase £45,000 plus VAT upfront for the site materials following demolition. Squibb were then paid by Vertase for the work done on a monthly basis. The 18 week sub-contract period started on 26 September 2011 and it was agreed that the works were therefore due to finish on 27 January 2012.
There were express terms of the sub-contract as follows:
"9.1 The Sub-Contractor shall commence the work on the date stated herein:
26 th September 2011.
9.2 The Sub-Contractor shall complete the Works on or before the date stated herein or in the period stated herein:
Period of 18 consecutive weeks maximum duration, to include demolition and asbestos removal and clearance of all materials from site.
10. Rates and Payment Terms
10.1 Valuations are to be submitted for the attention of the Contractor's Commercial Director (Jonathan Ridgeway) 5 working days before month end. This Sub-Contractor is let on a credit basis, therefore the Contractor will invoice the Sub-Contractor for credit detailed in 10.2.
Payment shall be the gross value of work properly carried out, and certified for payment, less the amount retained as retention, as stated in the appendix to these conditions, less the amount of any agreed discounts less total amounts previously certified in respect of the Sub-Contract Works. Any amounts retained shall be processed for payment after receipt of the Making Good Defects Certificate.
Retention: 0%
Discount: 0%
10.2 Payment Period: 30 days after receipt of invoice from the Contractor to the Sub-Contractor; invoices to be submitted week one, five and nine of the contract. Each invoice will be for £15,000+VAT.
10.3 Liquidated and ascertained damages are applicable under this Sub-Contract and will be levied against the Sub-Contractor at £15,000 per week after the completion date in sections 9.1 and 9.2.
10.3 The Contractor reserves the right to deduct from any payments certified as due to the Sub-Contractor and/or otherwise recover the amount if [of] any bona fide contra accounts and/or claims which he, the Contractor, may have against the Sub-Contractor in connection with breach of this or any other contract, or by any tortuous act or by any breach of statutory duty…
12.2 The Main Conditions of Contract are the ICE Conditions of Contract Design and Construct, 2 nd Edition with amendments. The Sub-Contractor is deemed to have full knowledge of the provisions of the Main Contract – a copy of such terms and conditions is available for inspection. These shall be deemed to be incorporated herein, provided always that if these differ from those embodied in this contract these conditions shall apply and be enforced accordingly. Any conditions contained in the Sub-Contractor's quotations shall be excluded."
There were no specific sub-contract terms setting out the final date for payment of the sums due pursuant to the monthly valuations, and no specific terms dealing with when withholding notices were to be served. However, by operation of clause 12.2 of the sub-contract, the ICE main contract conditions then operated to fill those gaps. In this way, clause 60(2) of the main contract meant that Vertase had 28 days to pay Squibb from the date of the valuation in clause 10.1 of the sub-contract, and clause 60(10) stipulated that a withholding notice had to be served in writing not less than 1 day before the final date for payment. In this case, therefore, that would be 27 days after the date of the monthly valuation.
THE ADJUDICATION
The sub-contract works were not completed on 27 January. It is agreed that they were not in fact completed until 27 April 2012. A dispute arose between the parties as to the responsibility for that delay. Squibb issued an adjudication claim for an extension of time and loss and damage consequential upon the delay. Vertase took jurisdictional points and, in the alternative, maintained that the vast majority of the delay was in fact the responsibility of Squibb themselves. I should note at the outset that those jurisdictional points were abandoned on the service of Vertase's witness statement in these proceedings. Unlike the submissions put forward on their behalf by Ms Bodnar today, it seems to me that Vertase's jurisdictional points were wholly without merit.
It is unnecessary to set out large quotations from the adjudicator's lengthy decision, which ran to a total of 33 pages. It is sufficient to note that, amongst other things, the adjudicator decided that:
6.1 The main contract terms, incorporated into the sub-contract by clause 12.2, allowed Squibb to claim an extension of time and additional loss and expense (see sections 8.1.2, 8.1.3 and 8.1.4 of the adjudicator's decision);
6.2 Squibb were entitled to an extension of time of 6 weeks, down to 9 March 2012 (section 9.2.1). Some other matters were found to be their own responsibility (see section 8.1.7 by way of example);
6.3 Squibb were entitled to £167,531.05 by way of additional costs due to the 6 week delay (section 8.4). That sum was to be paid within 14 days of the date of the adjudicator's decision (section 9.2.2);
6.4 There was no withholding notice from Vertase in respect of any cross-claim for liquidated damages (Section 8.2.1);
6.5 In consequence of this, "Vertase have no entitlement to take liquidated damages from any amount that I might decide is due to be paid to Squibb" (last sentence of section 8.2.1). The decision later reiterated: "Squibb shall not be required to pay Vertase the sum of £180,000 or any other amount in respect of liquidated damages." (section 9.3.3);
6.6 Squibb had no entitlement to interest on the £167,531.05 because "until or unless any payment becomes overdue from Vertase to Squibb, no interest can be applicable. Squibb have not, as Vertase point out, claimed that interest is payable. At the present time I find that no payment had become due to which interest could be applied".
One contention which arose during these proceedings concerned whether or not Squibb's claim under the sub-contract for loss due to delay had ever been made prior to the adjudication. There was a suggestion that it had not been previously made, which was why the adjudicator did not find that the sum was due forthwith or that interest was payable upon it. I consider that this reads too much into the adjudicator's decision. As a matter of fact, it appears that a claim for loss and additional costs had been made prior to the commencement of the adjudication, which is the logical assumption (because otherwise it would have been said that no crystallised dispute had arisen in respect of such a claim before the adjudication started). Furthermore, the adjudicator ordered the sum due to Squibb to be paid within 14 days, not the 28 days identified in the contract. He made no award of interest, because interest had not been claimed.
Following the adjudicator's decision, the sum of £167,531.05 has not been paid. Instead, on 1 June 2012, Vertase purported to serve a withholding notice in the sum of £290,025.72. That included the sum of £13,412.05 said to be an arithmetical error made by the adjudicator in his decision. The adjudicator has since pointed out that there was no such error. Vertase have quite properly abided by that indication, so, a week later, on 8 June, they served a revised withholding notice in the lower sum of £276,613.67. That is broadly divided into two parts: a claim for liquidated damages of £105,000 for the un-extended period of the sub-contract (from 9 March to 7 April 2012); and £171,000 odd by way an assortment of other items, many of which, so it is said, Squibb failed to carry out and for which Vertase say they are now entitled to a credit.
THE RELEVANT PRINCIPLES OF LAW
The Starting Point
It is trite law that the system of construction adjudication introduced by the Housing Grants (Construction and Regeneration) Act 1996 requires the courts to respect and enforce the adjudicator's decision. As Chadwick LJ said in Carillion Construction Ltd v Devonport Royal Dockyard Ltd [2006] BLR 15:
"The statutory scheme provides a means of meeting the legitimate cash flow requirements of contractors and their sub-contractors. The need to have the 'right' answer has been subordinated to the need to have an answer quickly. The scheme was not enacted in order to provide definitive answers to complex questions".
Set-Off Generally
Attempts by the unsuccessful party in adjudication to set-off and rely on cross-claims (particularly, but not exclusively, for delay), notice of which was not given until after the...
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