Vertase F.L.I. Ltd v Squibb Group Ltd
| Jurisdiction | England & Wales |
| Judge | Mr. Justice Edwards-Stuart |
| Judgment Date | 13 November 2012 |
| Neutral Citation | [2012] EWHC 3194 (TCC) |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Docket Number | Case No: HT-12-316 |
| Date | 13 November 2012 |
[2012] EWHC 3194 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Rolls Building, Fetter Lane
London, EC4A 1NL
The Honourable Mr. Justice Edwards-Stuart
Case No: HT-12-316
Alexandra Bodnar (instructed by TLT Solicitors) for the Claimant
Jessica Stephens (instructed by Freeth Cartwright) for the Defendant
Hearing date: 31 October 2012
Introduction
This is an application for summary judgment to enforce the second decision of an adjudicator dated 7 September 2012 ("Adjudication No 2"). The central question is what the adjudicator decided in a previous adjudication ("Adjudication No 1") and whether in Adjudication No 2 he was being asked to decide the same issue again.
The Decision in Adjudication No 1 was issued on 22 May 2012. The adjudicator decided that the Claimant ("Vertase") should pay the Defendant ("Squibb") £167,501, and he granted Squibb an extension of time to 9 March 2012. Vertase refused to pay and Squibb applied, successfully, to Coulson J for the decision to be enforced.
By the decision in Adjudication No 2 the adjudicator ordered Squibb to pay Vertase the sum of £184,813 and to pay the adjudicator's fees and expenses in the sum of £5,512.50. Squibb has paid or agreed to pay these sums less £105,000 awarded in respect of liquidated damages (and the court was given an undertaking to that effect). The question for the court is whether or not to enforce the decision in relation to the £105,000.
On the application Vertase was represented by Ms Alexandra Bodnar, instructed by TLT LLP, and Squibb was represented by Ms Jessica Stephens, instructed by Freeth Cartwright.
Background
By a sub-contract dated 20 September 2011 Vertase employed Squibb to provide plant, labour and temporary works resources for the removal of asbestos and the demolition of all existing structures at the former Leamington Foundry, Leamington Spa.
The sub-contract was a credit contract. Squibb was to pay Vertase the sum of £45,000 in return for its entitlement to retain, sell and keep the proceeds of sale in respect of materials taken from the site following demolition. The commencement date was 26 September 2011 and Squibb was to complete the work within a period of 18 weeks, that is by 27 January 2012. Liquidated damages were payable at the rate of £15,000 per week thereafter. The sub-contract incorporated the ICE Design and Construct Conditions with amendments, which provided that the ICE Adjudication Procedure (1977) " or any amendment or modification thereof being in force at the time of the said Notice" was to apply. This has given rise to an issue between the parties because Squibb asserts that the 2011 version of the ICE Adjudication Procedure was in force well before the issue of the notice of adjudication in Adjudication No 2 on 20 July 2012, and therefore is the procedure that governs Adjudication No 2.
The sub-contract works were not in fact completed until 27 April 2012. Squibb's case is that the delay in completion was caused by matters for which Vertase was responsible. In Adjudication No 1 it claimed a full extension of time and, in addition, sought payment of consequential loss and damage in excess of £550,000.
In its Response to the Referral Notice, Vertase contended that Squibb was entitled to an extension of time until 5 February 2012 but was entitled to nothing in respect of loss and expense. In addition, it claimed £180,000 in respect of liquidated damages.
In its claim for liquidated damages Vertase relied on the decision of Jackson J in Balfour Beatty Construction Ltd v Serco Ltd [2004] EWHC 3336. At [53] of his judgment, Jackson J said this:
"I derive two principles of law from the authorities, which are relevant for present purposes.
(1) Where it follows logically from an adjudicator's decision that the employer is entitled to recover a specific sum by way of liquidated and ascertained damages, then the employer may set off that sum against monies payable to the contractor pursuant to the adjudicator's decision, provided that the employer has given proper notice (insofar as required).
(2) Where the entitlement to liquidated and ascertained damages has not been determined either expressly or impliedly by the adjudicator's decision, then the question whether the employer is entitled to set off liquidated and ascertained damages against sums awarded by the adjudicator will depend upon the terms of the contract and the circumstances of the case."
It should be noted that Jackson J was not here indicating some new way of formulating a claim for liquidated damages, he was simply saying that where an entitlement to liquidated damages flowed logically from an adjudicator's decision relating to an extension of time the employer could set off the amount of those damages against the sum that would otherwise be payable to the contractor under the decision, provided that he had complied with any provisions relating to the giving of a notice to withhold the money.
Squibb took two points in response to Vertase's claim for liquidated damages (at paragraphs 222–224 of its Reply). First, it asserted that Vertase " must have actually incurred the liquidated damages, which it has failed to prove". Second, that Vertase had failed to provide an appropriate notice of its intention to withhold or deduct liquidated damages.
Which is the correct adjudication procedure?
It seems to me that the words of the contract are clear and so, since the 2011 Adjudication Procedure had come into force prior to the service of the notice of adjudication in Adjudication No 2, it is the 2011 Adjudication Procedure that applies to that adjudication.
Ms Stephens relied upon the following provisions of the 2011 Adjudication Procedure:
(a) Clause 5.2
"The Adjudicator shall determine the matters set out in the Notice of Adjudication, together with any other matters which the Parties and the Adjudicator agree should be within the scope of the adjudication. The Parties and the Adjudicator agree that any question regarding the jurisdiction of the Adjudicator shall be determined by the Adjudicator."
(b) Clause 6.6
"The Parties shall be entitled to the relief and remedies set out in the decision and to seek summary enforcement thereof, regardless of whether the dispute is to be referred to legal proceedings or arbitration. No issue decided by the Adjudicator may subsequently be laid before another adjudicator unless so agreed by the Parties."
(Ms Stephens's emphasis)
There was, in fact, an error in the wording of Clause 6.6 as quoted in Ms Stephens's skeleton argument. In her skeleton argument the word "another" in the final sentence had been replaced by "any" 1. The final sentence of Clause 6.7 of the 1997 Adjudication Procedure was in the following terms:
"The Parties shall be entitled to the relief and remedies set out in the decision and to seek summary enforcement thereof, regardless of whether the dispute is to be referred to legal proceedings or arbitration. No issue decided by an Adjudicator may subsequently be laid before another adjudicator unless so agreed by the Parties."
(My emphasis)
The only difference between the wording of these two clauses is the substitution of the word "the" for "an" in the final sentence. In the circumstances of this case that difference is irrelevant. However, the fact that the words "another adjudicator", not "any adjudicator", are used in both clauses is relevant. Since in this case the same adjudicator was appointed in both adjudications, the question of an issue being decided by another adjudicator has not arisen.
In relation to clause 5.2, Ms Stephens is correct to point out that the final sentence of clause 5.2 of the 2011 Adjudication Procedure does not appear in the earlier procedure. However, in my judgment nothing turns on this.
What the adjudicator said in Adjudication No 1
At paragraph 8.2.1 of the Decision, the adjudicator said this:
"What amount is Vertase entitled to in respect of liquidated damages?
Squibb assert that the general principle governing a defendant's right to rely on a cross-claim depends upon the timeous issue of a "withholding" notice, which in this case was not issued.
In their Response, Vertase claim that I have jurisdiction to consider a cross-claim in respect of liquidated damages, which they say they have a right to for the period between the completion date for Squibb's works and the date on which Squibb actually completed their works.
Both parties have quoted relevant cases. Vertase assert that the judgment in Balfour Beatty Construction Ltd v Serco Ltd (2004) gives them the right to include as a defence a contractual entitlement that follows logically from an Adjudicator's decision on extension of time.
Squibb, conversely, rely on the judgment in the case between Letchworth Roofing Company Ltd v Sterling Building Company Ltd (2009) in which it was decided that any such counterclaim must be dependent on the timeous issue of a withholding notice. Squibb assert that no such withholding notice was issued, and in consequence Vertase's counterclaim must fail.
I have investigated both cases, and find that, disregarding any decision I might make in respect of extension of time, Vertase did not issue any withholding notice compliant with either the contract or the Housing Grants, Construction and Regeneration Act 1996. This position is confused by the fact that Vertase cannot withhold from any payment due, as the contract does not provide for any payments to be made by them. Vertase could have issued a notice in respect of payment due in respect of liquididated damages that would have been compliant with the Housing Grants, Construction and...
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...dispute'; or The dispute has already been decided upon in another adjudication: Vertase F.L.I. Limited v Squibb Group Limited [2012] EWHC 3194 (TCC): This related to two adjudications on the same The contract provisions made it clear that the adjudicator's decision would be final until it w......