Victory House General Partner Ltd v RGB P&C Ltd
| Jurisdiction | England & Wales |
| Judge | Miss Joanna Smith |
| Judgment Date | 26 January 2018 |
| Neutral Citation | [2018] EWHC 102 (TCC) |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Docket Number | Case No: HT-2017-000345 |
| Date | 26 January 2018 |
[2018] EWHC 102 (TCC)
Miss Joanna Smith QC sitting as a Deputy
Case No: HT-2017-000345
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justin Mort QC (instructed by Cannings Connolly) for the Claimant
Mr Nicholas Collings (instructed by Child & Child) for the Defendant
Hearing date: 19 January 2018
Introduction
This claim arises out of the development and conversion of an existing office building into an 87 bedroom hotel at Victory House, Leicester Square, London (“ the Hotel”).
The hearing came before me as a Part 8 Claim made by Victory House General Partner Limited (“ VH”), the employer under a building contract made in about October 2015 (“ the Contract”) pursuant to which VH engaged RGB P&C Limited (“ RGB”) as contractor to design and construct the Hotel.
By way of an Additional Claim and an application for summary judgment dated 5 January 2018, RGB seeks to enforce an adjudicator's decision dated 7 November 2017 (“ the Decision”) made against VH upholding RGB's entitlement to payment under the Contract pursuant to RGB's interim payment application 30 (“ Application 30”) of 11 July 2017.
The Part 8 Claim seeks a declaration that the Decision was invalid for breach of natural justice, together with declarations which relate directly to the substance of the Decision.
At the outset of the hearing, I explored with counsel the extent to which Part 8 was the correct procedure for pursuit of the substantive claim and, after hearing submissions on the point, I gave a short judgment in which I rejected VH's case that the substantive claim was suitable for determination under the Part 8 procedure, relying in particular on the judgment of Jefford J in Merit Holdings Limited v Michael J Lonsdale Limited [2017] EWHC 2450 (TCC).
In my judgment, the matters raised on the Part 8 Claim, which include matters of disputed fact, are not suitable for resolution under the Part 8 procedure which is only to be used where the claimant seeks the Court's decision on a question which is unlikely to involve a substantial dispute of fact. It is not an answer to this point to suggest, as Mr Mort QC did on behalf of VH, that issues could be resolved in the Part 8 proceedings on the basis of assumed facts, but that in the event of the decision being unfavourable to his client, he would then be in a position to challenge any disputed matters of fact at a later time in further substantive proceedings. In my judgment this would be an entirely unsatisfactory way to proceed. Not only is it unlikely to be consistent with the Overriding Objective, but it also risks prejudice to one or other of the parties in the presentation of their case. I concur with Jefford J's judgment in Merit Holdings Limited v Michael J Lonsdale Limited [2017] EWHC 2450 (TCC) at paragraph 22 that it is likely to lead to the court arriving at ill-formulated and ill-informed decisions. In the event of a subsequent challenge to such a decision, there will be no saving of costs and resources and no advantage in permitting determination of the issues to be expedited.
Accordingly, the declarations sought in the Part 8 claim, with the exception of the declaration that the Decision was invalid for breach of natural justice which will be addressed in the context of RGB's claim for summary judgment, need to be dealt with under the Part 7 Procedure which will enable the parties' respective positions on the disputed issues to be fully and properly explored. I shall invite the parties' submissions on directions for the pursuit of the claim under Part 7 in due course.
My decision on the Part 8 Claim left the issue of enforcement to be determined on RGB's application for summary judgment.
Background to the Summary Judgment Application
The Contract was a building contract within the meaning of part II of the Housing Grants Construction and Regeneration Act 1996 as amended. It provided for stage payments. Under its terms RGB was obliged to procure a transformer or substation from the relevant statutory undertaker. Only once the transformer was installed and commissioned could the electrical and mechanical services in the Hotel be completed and commissioned.
The project suffered from delays and in about early 2017 the parties fell into disagreement as to RGB's entitlement to payment. However, on or about 13 March 2017, the parties entered into a Memorandum of Understanding (“ the MOU”), executed as a deed, consisting of two pages. The recitals to the MOU, which are of importance to this Judgment for reasons which appear later, read as follows:
“(A) Under the Contract the Employer engaged the Contractor to carry out the Works at Victory House, Leicester Square, London.
(B) The Contract sum is £6,670,000.00. The Employer has paid the Contractor £8,183,875.20. The Contractor has indicated a Final Account submission of circa 9.8m. The project has been beset with delays and has been challenging for all parties.
(C) The Contractor is seeking additional funds to that referred to in (B) above to pay for materials and subcontractors.
(D) The Employer is wary of making further payments until the transformer is installed and operational so that meaningful progress can be made to completion.
(E) The principal for the Employer's Advisers, Mr Asif Aziz, and the principal for the Contractor, Mr Jeff Britnell, are friends and would like to agree a non-confrontational approach to overcome the current issues.
(F) This Memorandum of Understanding seeks to remove commercial matters from the “critical path” and focus everyone on delivery of the project.”
The MOU provided for three stage payments as follows:
“To enable delivery of the attached program the Parties agree to the following stage payments:
(1) Immediate payment 13/03/17 to enable placing/paymentof all outstanding variations and sub-contractor accounts: £200,000
(2) 10 th–17 th April or when power on is certified: £200,000
(3) 17 th May or / on receipt of all T&C certificates in preparation for PC: £200,000”
The first two payments were made by VH (it says, pursuant to the provisions of the MOU) and it is common ground that the transformer was installed and operational by no later than 24 June 2017, albeit this was after the date envisaged by the MOU. In July 2017, RGB sought to operate the payment mechanism under the Contract by issuing Application 30 in the sum of £682,802.88 plus VAT. VH refused to pay this sum, contending that its obligation to make payments under the Contract was now governed by the MOU. By a notice of intention dated 15 August 2017, RGB referred this dispute to adjudication.
It was RGB's case in its Referral Notice that it was entitled to payment in respect of Application 30, that VH had served a late Payment Notice on 26 July 2017 and had not served a Pay-Less Notice. RGB expressly refuted the suggestion that the payment provisions of the Contract had been superseded by the MOU and it contended that as a matter of law, the MOU was not legally binding and had plainly not been intended by the parties to be legally binding.
On 18 August 2017 the Royal Institute of Chartered Surveyors nominated Mr Franco Mastrandres to act as adjudicator (“ the Adjudicator”).
By its Adjudication Response dated 5 September 2017, VH denied RGB's entitlement to the sums claimed and asserted that the entire claim referred to adjudication was misconceived. In particular, VH said (i) that the MOU, which as I have said was entered into as a deed, was a binding and effective agreement which superseded the payment provisions of the Contract; (ii) that pursuant to the terms of the MOU, RGB was not entitled to any further payment until “ receipt of all T&C certificates in preparation for PC” and that in the absence of these certificates no sum was due; and (iii) by way of alternative, that if the original payment regime under the Contract remained effective, it had served a valid Pay-Less Notice on 31 July 2017 or alternatively on 11 August 2017. The Adjudication Response includes detailed submissions as to the legal effect of the MOU having been entered into as a deed and as to the proper construction of the terms of the MOU.
RGB served a Reply to VH's Adjudication Response on 11 September 2017, identifying the key issues for the Adjudicator as: (i) Does the MOU replace the payment provisions in the Contract to prevent payment of Application 30 made by RGB and (ii) Has VH issued any valid and effective Payment Notice and/or Pay-Less Notice that allows it not to pay the amount set out in Application 30. RGB asserted that it was “ crystal clear that the Parties did not intend for the [MOU] to replace the provisions in the [Contract]”, that this was clear from the face of the MOU and that in any event “ the intention of the parties was that the final third payment of £200,000 [under the MOU] was to be made no later than 17 May 2017”. This had not happened and in the circumstances RGB maintained that it had every right to submit Application 30. RGB made detailed submissions as to the proper interpretation of the MOU.
By a Rejoinder dated 18 September 2017, VH sought to respond to RGB's Reply. It focussed on what it described as a volte face by RGB from its original position that the MOU was not legally binding to a new position that whilst the MOU was legally binding the parties did not intend it to replace the provisions of the Contract. VH said “ This on its face is an extraordinary proposition because RGB appears to contend that it is entitled to the sums agreed to be paid by VH under the [MOU] in addition to being paid sums calculated and paid pursuant to the terms of the Contract”. VH...
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