Urang Commercial Ltd v Century Investments Ltd and Another
| Jurisdiction | England & Wales |
| Judge | Mr Justice Edwards-Stuart |
| Judgment Date | 17 June 2011 |
| Neutral Citation | [2011] EWHC 1561 (TCC) |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Docket Number | Case No: HT-11-166 & 167 |
| Date | 17 June 2011 |
[2011] EWHC 1561 (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 Edwards-Stuart
Case No: HT-11-166 & 167
Samuel Townend (instructed by CJ Hough & Co Solicitors) for the Claimant
Arfan Khan (instructed by DDO Solicitors) for the 1 st & 2 nd Defendants
Hearing dates: 7 th June 2011
Introduction
There are two applications before the court for summary judgment to enforce two decisions of an adjudicator, Mr Mark Pontin. They are made in two separate actions. Each case has been brought by the same claimant, Urang Commercial Limited ("Urang"), a building contractor. The defendant in each case is the owner or operator of hotels who employed Urang to carry out building conversion works to a hotel under a JCT standard form of building contract that contained a provision for adjudication.
In each case Urang claimed that it was owed money by the relevant defendant and it referred the dispute to adjudication. Mr Pontin was the adjudicator in each case and in two separate decisions, each dated 30 July 2010, he awarded a sum of money to Urang and directed that the defendant should be responsible for his fees.
The defendant in the first action, Century Investments Ltd ("Century"), was ordered to pay Urang £47,663.37 (net of VAT) and was ordered to bear the adjudicator's fee of £4,241.75, but on the basis that the adjudicator's fees were to be settled by Urang and were then to be repaid to Urang by Century on demand. The adjudicator's fees have not been paid by either party.
The defendant in the second action, Eclipse Hotels (Luton) Ltd ("Eclipse"), was ordered to pay Urang £22,720.35 (net of VAT) and was also ordered to bear the adjudicator's fees of £3,795.25 on the same basis. Again, those fees have not been paid by either party.
Century and Eclipse are represented by the same solicitors and appeared on these applications by the same counsel, Mr Arfan Khan (who did not appear before the adjudicator). The defence in each case was on the same lines, namely that the adjudicator had failed to make a ruling on the respective respondent's counterclaim in breach of natural justice and failed to take into account, also in breach of natural justice, the fact that the respondent had served a withholding notice.
Since the issues that are raised by each application are virtually the same, it is convenient to deal with the application for summary judgment against Century first.
The facts — the claim against Century
Century owns a number of hotels including a hotel at Brickfield Lane, Harlington, Heathrow ("the Hotel"). By a JCT Standard Form of Building Contract 2005 Edition, dated 13 February 2008, Urang agreed to carry out building conversion works at the Hotel for Century. Article 7 and Clause 9.2 of the Contract provide for adjudication of a dispute arising under the Contract in accordance with the Scheme (Part I of the Schedule to the Scheme for Construction Contracts (England and Wales) Regulations 1998). Paragraph 23(2) of the Scheme provides that the decision of an adjudicator shall be binding on the parties until the dispute is finally determined.
On 19 January 2009 the Quantity Surveyor under the contract issued Interim Valuation No 10 on behalf of the employer in the sum of £21,537. The valuation showed that the retention that had been retained was £12,675. By the terms of the contract the final date for payment of the sum certified in the valuation was to be 14 days from the date of the certificate, in other words 3 February 2009. Clause 4.13.4 of the Contract provided that the employer may give a written notice to the contractor not later than 5 days before the final date for payment specifying any amount that it proposed to withhold or deduct from the amount due.
In relation to Valuation No 10 the withholding notice had to be served by 28 January 2009. Century did not do this. But a couple of weeks later, on 10 February 2009, the quantity surveyor notified Urang by e-mail that the client would be making certain adjustments to the balance due in the current valuation. It said that the amount of the payment would be £10,062.51. In fact, for reasons that are not explained, Century paid £17,445.66 against Interim Valuation No 10, leaving £4,091.34 outstanding.
The work commenced and much of it was carried out, but by early June 2010 the parties were in dispute about the payment of the sum that had been certified under Valuation No 10 but not paid, namely £4,091.34, and in relation to various other claims by Urang, including claims for an extension of time and associated prolongation costs, for payment of the retention and interest.
By a notice of adjudication dated 14 June 2010 the disputes were referred to adjudication. Century served a Response on 5 July 2010 and Urang served a Reply on 12 July 2010. It seems that no points were taken by Century either before or during the course of the adjudication in relation to the jurisdiction of the adjudicator and this fact was specifically referred to by the adjudicator in his decision. However, in Century's Response it claimed that it was entitled to £19,890 in respect of remedial work to soil drainage, loss of revenue during repairs and liquidated and ascertained damages. It asserted also that there were other defects in the works although no further sums were claimed in respect of them.
The adjudicator awarded Urang the following sums:
| Item | Sum | Adjudicators award |
| Balance of sum certified in Valuation No 10 | £4,091.34 | £4,091.34 |
| Deduction of utilities not agreed | £1,433.86 | £1,433.86 |
| Alternative accommodation | £213.17 | £213.17 |
| Preliminaries due to prolongation | £63,180.00 | £29,250.00 |
| Release of retention | £12,675 | £12,675 |
| Total award | £47,663.37 |
The award of these sums is challenged by Century on the following grounds:
(1) The adjudicator failed to take into account an important part of the dispute referred to him, namely that Urang was not entitled to the sums claimed given the existence of the counterclaim. Accordingly the adjudicator acted contrary to the principles of natural justice.
(2) The adjudicator's ruling on the absence of a withholding notice was not a ruling on the merits of the counterclaim, but an erroneous and unfair ruling that the counterclaim did not fall within the adjudicator's remit owing to the absence of a withholding notice.
(3) Alternatively, the adjudicator failed to take into account the fact that Century had served a material withholding notice and thereby acted contrary to the principles of natural justice.
In relation to the counterclaim, the adjudicator dealt with this under the heading "Other Issues" in the following terms:
49. The Response sought payment of £19,890 for remedial work to soil drains, loss of revenue during repairs and liquidated and ascertained damages.
50. Such matters were presented as a counterclaim and are properly the subject of a Withholding Notice. Absent such a Notice I am unable to assess a value therefor in this adjudication.
Mr Khan submits that in approaching the question of the counterclaim in this way the adjudicator failed to deal with it. He submits that the counterclaim was properly put before the adjudicator and that he was accordingly obliged to consider it on the merits. His failure to do so, submits Mr Khan, was a breach of natural justice.
Mr Khan submitted also that Urang had failed to show that any sum was due under the contract and that this was a prerequisite to any recovery. He submitted that the facts alleged by way of counterclaim showed that the sum claimed was not, or at least arguably was not, a sum due under the contract.
Mr Samuel Townend, who appeared for Urang, accepted that in principle the counterclaim could be deployed as a defence to all the claims, save for the claim in respect of the balance due under Interim Valuation No 10. However, he submitted that the adjudicator did not fail to address the counterclaim but simply regarded it as a defence that was bound to fail in the absence of a withholding notice. If this was an error, then he submits that it was an error made by the adjudicator when addressing the right question, namely whether or not the counterclaim could be deployed as a defence to Urang's claims in the adjudication.
In relation to Mr Khan's second point, Mr Townend submitted that where a contract provided for interim valuations in which the sums certified as due had been assessed by an independent third party, the balance shown in the valuation was a "sum due" within the meaning of the contract.
The relevant law
It is now firmly established that an error of law or fact made by an adjudicator when deciding an issue referred to him is no defence to an application to enforce the award: see, for example, Bouygues (UK) Ltd v Dahl-Jensen (UK) Ltd [2000] BLR 522 (CA); Macob Civil Engineering Ltd v Morrison Construction Ltd [1999] BLR 93.
If, therefore, Mr Townend is right in his submission that, when deciding that he should not consider the counterclaim on its merits, the adjudicator was addressing an issue that was referred to him, albeit that he may have answered it in the wrong way, this affords Century no defence to the application for summary judgment.
Whether or not this submission is correct depends on an analysis of exactly what the adjudicator did. I will turn to that question later in this judgment.
In relation to the submission that Urang had failed to show that there was a sum due under the contract, Mr Khan relied on the decision of the Outer House of the...
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