The Secretary of State for Defence v Turner Estate Solutions Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Ramsey |
| Judgment Date | 10 February 2014 |
| Neutral Citation | [2014] EWHC 244 (TCC) |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Docket Number | Case No: HT-13-319 |
| Date | 10 February 2014 |
[2014] EWHC 244 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
The Hon Mr Justice Ramsey
Case No: HT-13-319
Ms Sarah Hannaford QC, Ms Rachael O'HaganandMs Rose Grogan (instructed by the Treasury Solicitor) for the Claimant
Mr Richard Keen QC, Mr Garry BorlandandMr Martin Richardson (instructed by Pinsent Masons LLP) for the Defendant
Hearing dates: 17 December 2013
Introduction
In this Arbitration claim the Claimant seeks relief under s.68 of the Arbitration Act 1996 ("the Act") in relation to a second part award dated 29 July 2013 made by the arbitral tribunal ("the Tribunal"). The arbitration arises under a contract dated 31 March 2003 ("the Contract") under which the Claimant engaged the Defendant to carry out, amongst other things, the design and construction of a substantial regeneration project involving Core Works. The Contract was a bespoke contract based on a Maximum Price Target Cost ("MPTC").
The Contract contained provisions at Clause 10 dealing with the MPTC pricing provisions. At Clauses 10.12 and 10.13 the Contract included provisions for the assessment of the Final Price Payable to the Defendant for the provision of Core Works. Clause 11 of the Contract dealt with the Defendant's entitlement to and with the procedure for interim payments.
Changes were dealt with under Clause 13 which included a process by which the Claimant or the Defendant could propose Changes on a Change Proposal Form. The Defendant made a number of Change Proposals ("CPs") which were not approved by the Claimant. In addition under Clause 8 there was provision for the Defendant to give delay notices when the Defendant considered that certain matters, including a Change under Clause 13, had occurred which entitled it to an extension of time or additional cost. Clauses 8 and 13 allowed for the adjustment of the MPTC pricing provisions to deal with CPs and the consequences of Delay Notices.
It is common ground between the parties that when the Final Price Payable is determined under Clauses 10.12 and 10.13 that price cannot exceed the finally adjusted Maximum Price. However a dispute arose between the parties as to whether, in relation to interim payments, the Contract also provided that these payments should not exceed the adjusted Maximum Price.
Under the disputes resolution procedure there was a Dispute Review Board ("DRB"). The procedure provided for the DRB to decide on which of three options should be implemented to resolve the dispute if other means failed. Those options included Mediation, Expert Determination or Arbitration. There was also provision for an adjudication procedure in the event that one of the parties invoked its right to adjudicate pursuant to the Housing Grants, Construction and Regeneration Act 1996.
In the event of arbitration the dispute was to be finally settled by arbitration "administered by the DRB" under which the DRB should be the Tribunal.
Background
Disputes arose between the parties when, in July 2008, the aggregate of the interim payments was about to breach the Maximum Price as revised at that date. The Claimant took the view that the Maximum Price acted as a "cap" on interim payments but the Defendant disagreed.
On 30 April 2009 the Defendant commenced adjudication proceedings seeking payment in respect of nine unpaid interim payment requests relating to work undertaken by the Defendant in the period of July 2008 to February 2009.
On 2 June 2009 the adjudicator awarded the Defendant a substantial sum on the basis that the Maximum Price did not act as a cap on the interim payments.
On 21 June 2009 the Claimant issued the Defendant with a letter pursuant to step 1 of the disputes resolution procedure in order to seek to recover the moneys awarded to the Defendant by the adjudicator. In a document setting out Details of Dispute, as required by the disputes resolution procedure, the Claimant sought repayment of the sums overpaid and in the alternative claimed:
"…repayment of all costs not properly verified or incurred; costs which do not relate to the Core Works or to valid/approved and substantiated Changes or which exceed the sums due for such Changes; and the costs of alleged Changes or claims which have not been made in compliance with the provisions of the Contract."
In advance of a preliminary meeting on 1 February 2010 the Defendant wrote to the DRB concerning the scope of the dispute and said that it would wish to include in the scope, in addition to the matters raised by the Claimant, two further matters being a counterclaim for further sums by way of interim payment and also:
"our alternative defence that, should the MPTC mechanism be relevant to the calculation of interim payments (which is denied) then that mechanism ought to be adjusted to reflect the various matters notified throughout the course of the works, and the level of interim payments due determined accordingly."
In further elaboration the Defendant said that the MPTC ought to be increased to reflect the value of delays, additional costs and Changes and then said :
"The CP register alone currently extends to some 480 change proposals, each of which will require to be considered by the DRB in order to conclude a view on the full MPTC adjustment arising as a consequence of them."
On 1 February 2010 discussions took place between the parties leading to agreed draft directions which were formalised in directions from the Tribunal made on 10 March 2010. In order to prevent further adjudications taking place the Defendant undertook that, pending determination or earlier agreement of the issues in the Claimant's Details of Dispute and in the Defendant's letters of 28 January 2010, the Defendant would not seek to adjudicate claims for interim payments or " Change Proposals, extensions of time and/or increases in the Maximum Price Target Cost (MPTC)."
On 23 February 2010 the Claimant served Points of Claim stating that the arbitration concerned the Defendant's entitlement to interim payments pursuant to the Contract and raised the issue as to whether or not interim payments were limited by the MPTC provisions in the Contract and therefore could not exceed the Maximum Price.
The Claimant also pleaded a further or alternative case that the Defendant was not entitled to payment of all its costs as part of the interim payment procedure and, in so far as actual costs were relevant, it contended that they must be properly chargeable as Core Works or approved Changes. In paragraphs 37 to 41 the Claimant referred to CPs which had been accepted and those which had not been approved. At paragraph 41 the Claimant said it had not approved the remaining CPs and did not accept that the Defendant had an entitlement to increase the MPTC in relation to them.
In paragraph 42 to 44 of the Points of Claim the Claimant dealt with costs " properly incurred, reasonable and accurately verifiable" and said that in the light of the matters set out in paragraphs 37 to 41 it was the Claimant's case that:
"…the costs claimed by [the Defendant], which include the above CPs, have not been properly incurred and/or are not reasonable and that [the Defendant] is not entitled to any adjustment to the MPTC (except where expressly admitted above). In the circumstances, [the Defendant] is not entitled to interim payments which include the cost of such CPs."
In the relief claimed the Claimant sought a " decision and declaration that [the Defendant's] entitlement to interim payments is limited by the MPTC pricing provisions and cannot exceed the Maximum Price". It also sought reimbursement of money paid pursuant to the adjudication decision and further money overpaid as a result of " costs which do not relate to the Core Works or to valid/approved and substantiated Changes or which exceed the sums due for such Changes; and the costs of alleged Changes or claims which have not been made in compliance with the provisions of the Contract…."
The Defendant served a Defence and Counterclaim on 16 July 2010. In paragraph 5(1) it pleaded that the Contract did not provide that interim payments could not exceed the Maximum Price. In paragraph 13 the Defendant pleaded that pursuant to Clauses 8 and/or 13 of the Contract, the Maximum Price should have been increased by a further sum as set out in Schedules 1, 3 and 7 to that document. In paragraph 14 it said that, if contrary to its primary case, " the interim payments are to be capped at the Maximum Price, then [the Defendant] avers that the Maximum Price, properly adjusted should be increased as set out at paragraph 13 above. On that basis the interim payments should be continuing and are not in excess of the Maximum Price if properly adjusted."
In paragraph 47 the Defendant pleaded that the Maximum Price should have been increased as particularised at schedules 1, 3 and 7 to that pleading and that the relevant figure included the proper valuation of Changes carried out at the Claimant's request, even if not formally approved. Finally it was pleaded that, in breach of Clause 13, the Claimant had failed to agree an adjustment to the Maximum Price. In paragraph 49(3) it was pleaded that the Defendants sought the following relief: " A decision and declaration that the Target Price and Maximum Price are adjusted to" the figure pleaded in paragraph 13 and Schedules 1, 3 and 7 of the Defence and Counterclaim.
On 23 December 2010 the Claimant served a Reply and Defence to Counterclaim.
On 31 January 2011, following directions at a procedural hearing on 24 January 2011, the Defendant made an...
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Table of cases
...and Local Government v Welwyn Hatield BC [2011] UKSC 15 III.18.08 Secretary of State for Defence v Turner Estate Solutions Ltd [2014] EWHC 244 (TCC) III.25.165, III.25.246 Secretary of State for Defence v Turner Estate Solutions Ltd [2015] EWHC 1150 (TCC) I.3.164, I.3.187, II.6.12, II.7.28,......
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Arbitration
...so as to prescribe the procedure to be applied in the arbitration: see Secretary of State for Defence v Turner Estate Solutions Ltd [2014] EWHC 244 (TCC) at [93], per Ramsey J. 2060 ARBITRATION any evidence. 626 An arbitrator may therefore, for example, conduct a site view to gain a better ......