Tsg Building Services Plc v South Anglia Housing Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Akenhead |
| Judgment Date | 08 May 2013 |
| Neutral Citation | [2013] EWHC 1151 (TCC) |
| Docket Number | Case Nos: HT-13-85 and HT-13-87 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 08 May 2013 |
[2013] EWHC 1151 (TCC)
Mr Justice Akenhead
Case Nos: HT-13-85 and HT-13-87
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Andrew Fenn (instructed by Hogan Lovells) for the Claimant in HT-13-85
Marc Lixenberg (instructed by Trowers & Hamlins) for the Defendant in HT-13-85
Hearing date: 17 April 2013
These two sets of proceedings, the first (HT-13-85) for the enforcement of an adjudicator's decision and the second (HT-13-85) a Part 8 Claim for declarations relating to the meaning of the underlying contract between the parties raise, respectively, jurisdictional issues in adjudication relating to whether more than one dispute was referred to the adjudicator and the scope and applicability of good faith and reasonableness in a termination for convenience clause in the contract between the parties.
South Anglia Housing Ltd ("South Anglia") is a Housing Association company which at the time was responsible for some 5,500 individual properties. TSG Building Services PLC ("TSG"), as the name suggests, was a contracting company which provided building and maintenance services, particularly in relation to Housing Associations and the like.
TSG and South Anglia entered into a contract ("the Contract") for the provision by TSG of a gas servicing and associated works programme relating to South Anglia's housing stock. This contract was based on the ACA Standard Form of Contract for Term Partnering (TPC 2005 amended 2008) and it commenced and came into effect on 1 July 2009. By a bespoke addition to Clause 13.1, it was agreed that the term of the contract was to be "an initial period of four…years extendable at the Client's sole option to a further period of one…year…".
Whilst I will return to the Contract later in this judgment, there are two terms of key importance to the matters in issue between the parties:
"1.1 The Partnering Team members shall work together and individually in the spirit of trust, fairness and mutual co-operation for the benefit of the Term Programme, within the scope of their agreed roles, expertise and responsibilities as stated in the Partnering Documents, and all their respective obligations under the Partnering Contract shall be construed within the scope of such roles, expertise and responsibilities, and in all matters governed by the Partnering Contract they shall act reasonably and without delay. [There was added as a bespoke term that the "roles, expertise and responsibilities of the Client and the Service Provider are further described in the Term Brief and the Term Proposals and the Service Provider shall be paid in accordance with the Partnering Terms and the Price Framework"].
"13.3 If stated in the Term Partnering Agreement that this clause 13.3 applies, the Client may terminate the appointment of all other Partnering Team members, and any other Partnering Team member stated in the Term Partnering Agreement may terminate its own appointment, at any time during the Term or as otherwise stated by the period(s) of notice to all other Partnering Team members stated in the Term Partnering Agreement. [A bespoke term confirmed that Clause 13.3 was to apply and identified that any "Partnering Team member may serve notice on the others, provided that at least three… months' notice is given.]"
There has been no real suggestion in the evidence that over the next 13 months TSG performed their work badly or incompetently. However it is clear that TSG became disappointed or disillusioned in relation to the amount of payment. It wrote to South Anglia on 20 July 2010 that remedial and maintenance works carried out by its predecessor had been poorly undertaken, that South Anglia was awarding additional installation works to other contractors, that there was interference, that there were unrealistic requests being made of TSG and that certificates and payments were not being issued or made promptly. It proposed that as from the second year of the Contract pricing should go onto an "Open-book" basis or a realistic rate per property. This letter was not replied to and, consequently, on 5 August 2010 TSG wrote again to South Anglia giving notice of the existence of a dispute reflecting the issues previously raised.
South Anglia eventually responded on 23 August 2010 broadly suggesting that TSG took the risk when it tendered and denying that there was any breach of contract on the part of South Anglia. However it did accept that it was prepared to move to the Open-book approach which should apply for the second year. By a separate letter on the same date, it wrote as follows:
"…Pursuant to clause 13.3 of the Agreement, South Anglia hereby gives TSG three months notice of its intention to terminate TSG's Appointment under the Agreement. In accordance with Clause 1.10 of the Agreement, the three month notice period is effective from the date of delivery of this letter to you. This letter is delivered to you by fax, as provided by clause 1.10, on 23 rd of August 2010 and as such TSG's Appointment will terminate on 24 th November 2010."
Notwithstanding a number of requests and even a gentle hint from the Court, South Anglia has never explained openly why it terminated, although an internal e-mail of 25 August 2010 suggests that Mr Richardson (Assistant Director of Property Services) made the decision "based on current issues, communication, compliancy and risk for South Anglia going forward", this e-mail being attached without any relevant comment to South Anglia's Counsel's written submissions. I cannot make any factual assumptions as to why the termination occurred, although TSG believed that the termination was financially motivated as it suggested at a meeting on 7 September 2010.
On 12 October 2010, TSG expressed disappointment about the termination and sought payment in consequence of the termination under four heads: under recovery of overheads and profit as a result of the termination, under-recovery of contract set-up and termination costs, additional costs of maintenance to properties incurred in Year 1 and under-recovery of overheads and profit on additional repair work instructed by South Anglia to others. Interest was also claimed, the claim at this stage totalling £900,682.94.
By letter dated 18 October 2010 South Anglia responded denying that TSG had any entitlement to compensation consequential upon the termination. TSG provided greater detail about their four heads of claim which in its latest iteration totalled £1,013,125.20. South Anglia responded on 15 November 2010 explaining that they did not accept that TSG was entitled to any additional sums. Correspondence continued sporadically thereafter with little appearing to happen although it is clear that there were meetings called to attempt to resolve the issues between the parties. Although not all the correspondence has been provided, it does appear that a fully detailed cost submission was attached to a letter dated 21 March 2011 from TSG to South Anglia.
On 18 November 2011, TSG referred a first dispute to adjudication, relating to whether TSG was entitled to payment on the open book basis in relation to the period from 1 July 2010 and the termination date; the claim was for some £238,000 and the adjudicator in that matter, Mr Nigel Davies, issued his decision on 5 January 2012 deciding that TSG was entitled to some £61,000 plus interest. This was paid and was not otherwise challenged.
On 15 October 2012 TSG wrote to South Anglia sending a "Position Statement" and urging a settlement, failing which the matter would be referred either to mediation or adjudication. The Position Statement is a 30 page document which seeks to support the previous four heads of claim, albeit that by this stage with slight accounting adjustments the total claim excluding interest had gone up to £1,190,971.56. The sum was broken down as follows: additional costs of maintenance to properties incurred in Year 1 (£548,086.73), under-recovery of overheads and profit on additional repair work instructed by South Anglia to others (£63,462.30), under-recovery of overheads and profit as a result of the termination (£552,948.73) and under-recovery of contract set-up and termination costs (£36,473.80).
No satisfactory response having been received, TSG served on South Anglia a Notice of Adjudication dated 23 January 2013. This Notice referred to the following "issues":
" . the additional costs which TSG has incurred during Year 1 as a result of poor maintenance, servicing or installation works undertaken by other parties (£548,086.73)
. the revenue TSG has lost as a result of [South Anglia] awarding contract works to other contractors (£67,235.47)
. the costs which have resulted from [South Anglia's] termination of the Agreement (£586,502.68)"
The latter figure was an amalgam of under recovery of overheads and profit, contract set-up and termination costs. The "redress" sought included decisions that TSG was entitled to payment of each of the sums claimed plus adjudicator's fees.
This was followed, after the appointment of the adjudicator, by a detailed Referral Notice on 30 January 20South Anglia's solicitors wrote to the adjudicator on 5 February 2013 taking three jurisdictional points of which only one is pursued, namely that the Referral Notice was referring "three distinct disputes" when the relevant Scheme only permitted a single dispute to be referred to adjudication at any one time. The three disputes were in effect the three "issues" referred to in the Notice of Adjudication, albeit expanded upon in the Referral Notice. The adjudicator nonetheless considered that he did have jurisdiction and proceeded with...
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