Working Environments Ltd v Greencoat Construction Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Akenhead |
| Judgment Date | 24 April 2012 |
| Neutral Citation | [2012] EWHC 1039 (TCC) |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Docket Number | Case No: HT-12-91 |
| Date | 24 April 2012 |
[2012] EWHC 1039 (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 Akenhead
Case No: HT-12-91
Mark Raeside QC (instructed by Prettys) for the Claimant
Fionnuala McCredie (instructed by Freeth Cartwright LLP) for the Defendant
Hearing date: 17 April 2012
This case raises issues about adjudication enforcement, crystallisation of disputes and the severability of parts of an adjudicator's decision.
The Background Facts
The Defendant, Greencoat Construction Ltd ("Greencoat") was a main contractor employed to carry out substantial fitting out works at existing office accommodation at 130, Shaftesbury Avenue, London W1. By a sub-contract made in April 2011, Greencoat engaged Working Environments Ltd ("WE") to carry out the mechanical services installation for this project. The sub-contract incorporated the JCT SBCSub/A 2005 Standard Building Sub-Contract Agreement Revision 2 2009 terms. It is common ground that there was an adjudication clause which incorporated the statutory Scheme. Provision was made for WE to apply for payment on the second to last Friday of each month and for Greencoat to issue a payment certificate within one week thereafter; the final date for payment was to be 45 days after receipt of an invoice by WE.
On 24 November 2011, WE submitted to Greencoat its Interim Application No.10 in which it claimed the following gross sums:
Breakdowns of the first two figures were provided. Allowing for previous payments, a total sum of £488,153.45 was claimed.
| Work Done | £1,504,539.95 |
| Variations | £337,193.78 |
| Cumulative Total | £1,841,733.73 |
| Less 3% retention | £55,252.01 |
| Net Total | £1,786,481.72 |
Greencoat issued its tenth "Payment Certificate and Notice of Withholding Payment" in response to this Application on 2 December 2011. It certified as follows:
There were enclosed breakdowns of how these various sums were made up or calculated. £16,686.36 was said to be due for payment. In respect of the "items being withheld", the breakdown was headed "Notification of items being withheld from this Valuation", and it was summarised on the third page as follows:
| Work Done | £1,475,128.12 |
| Variations | (£52,030.01) |
| Cumulative Total | £1,423,098.11 |
| Less items being withheld | (67,412.93) |
| Sub-total | £1,355,685.18 |
| Less 3% retention | £40,670.56 |
| Net Total | £1,315,014.63 |
| "Liquidated Damages | tbc |
| Replace fire protection | £13,123.00 |
| Removal of plasterboard | £4,001.73 |
| Attendance by Modus at crane Lift | £1,845.00 |
| Damage to Ceiling installation | £12,500.00 |
| Additional Greencoat Administration/TSM Time£16,712.70 |
|
| Weekend Supervision | £1,500.00 |
| Builderswork/Fire Protection Return Visits | £5,000.00 |
| Defective Works – Grilles | £10,730.50 |
| Defective Works—Condenser Water Tank | £2,000.00 |
| [Total] | £67,412.93" |
Under the sub-contract, payment was due, it is accepted, by 14 January 2012. However on 8 December 2011, WE's claims consultants, Knowles, wrote to Greencoat referring to this latter document saying that there was an undervaluation for work completed, "an attempt to make set off from our clients account for wrong and unsubstantiated charges by Greencoat" and that "there is now a clear dispute between the parties as to the value and set off sum due"; a notice of adjudication would follow.
The Adjudication
The Notice of Adjudication was issued on 14 December 2011 and drafted by Knowles. It refers to the sub-contract, Application No.10 and continues, sometimes with imperfect English:
"3. The Respondent has failed to value the properly executed works including variations and has found a lesser sum due of £16,686.36 in their summary of account dated 2 December 2011.
4. Further, variations properly completed are to the value of £318,362.90 whereas the Respondent has valued these at £-52.030.01…The account is thereby undervalued by £370,392.91 and paid short. This sum is due for payment at application No.10 on 14 January 2011 and interest will accrue on the underpayment from that date.
5. By their summary of account dated 2 December 2011 the Respondent also seeks to set off. The Referring Party avers that the sums [sic] £67,412.93 alleged by the Respondent to be owed to them by the Referring Party is[sic] not owed or payable in part or in whole and as such the Respondent has no right to set these monies off at interim application No. 10 or at all.
6. The Referring Party further avers that it is for the Respondent to show that their set off is lawful and they have an established right on the money claimed and taken. Further that in making such set off the burden of proof is on the Respondent as to liability of the Referring Party to pay and the sum which is to be paid.
7. The Referring Party aver [sic] that a right to set off either at common law, in equity or under the contract is not merely a matter of giving notice; the substantive sums must be payable or owed to the Respondent under the contract or at common law before any right to set off arises to which an effective notice can be given. The Referring Party avers that the Respondent has no such right and disputes both liability and quantum of the sums set off against application…No 10…
The nature and a brief description of the dispute
The dispute is over:
• Application No.10 and summary of account 2 December 2011 including:
• undervaluation of variations completed by £370,392.91
• Abatement of the contract sum work completed by £32,702.32
• Set off by the Respondent of £67,412.93
• The law of set off
Details of where and when the dispute has arisen
9. The dispute arose by the Respondent underpaying and deducting sums as set-off from interim payments application No. 10
Redress sought by the Referring Party
The Referring Party requests that the adjudicator:
A. Give a declaration that in the Respondent's summary of account dated 2 December 2011, the contract works properly completed are undervalued in the sum £32,702.32 or such sum as the adjudicator finds;
B. Give a declaration that in the Respondent's summary of account dated 2 December 2011 variations properly completed are undervalued in the sum of £370,392.91 or such sum as the Adjudicator finds;
C. Give a declaration that in the Respondent's summary of account dated 2 December 2011 they have wrongfully made a set off in the sum of £67,412.93 or such sums as the Adjudicator finds;
D. Decide that the Referring Party is to be paid:
the additional sum of £32,702.32 for undervalued contract work properly completed
the additional sum of £370,392.91 for variations properly completed or such sum as the Adjudicator decide
E. decide that the Respondent repay the sum wrongfully set off in the sum of £67,412.93 or such sum as the Adjudicator decide
F. Decide that the Respondent is to pay the sums decided by the Adjudicator within 3 days of his decision.
G. Decide or otherwise direct that the Respondent pays the Adjudicator's fees and costs in the undertaking of this Adjudication…"
Mr Tony Bingham was appointed as the adjudicator and on 20 December 2011 Greencoat's solicitors wrote to Knowles stating that the adjudicator effectively had no jurisdiction. This was put forward on the basis that no or no material dispute had crystallised because the date for payment had not yet accrued, and because relief for payment was sought which the adjudicator could not award because the obligation to pay had not arisen. They wrote in similar terms but in more detail to the adjudicator on 22 December 2011; they additionally argued that no dispute can have crystallised on 2 December 2011 because WE had not communicated a dissatisfaction with the Certificate by that date and because Greencoat had been deprived of a reasonable opportunity to review and respond to a claim. The adjudicator replied by e-mail dated 22 December 2011 effectively rejecting the jurisdictional challenge saying "I also doubt that the fact that payment is not yet due is a good point".
The Notice of Referral was served on 21 December 2011 which largely reiterated, with some expansion, the Notice of Adjudication and attached two witness statements together with various files. WE asserted that in the 2 December 2011 certificate Greencoat had without any justification reduced sums previously paid for variations and wrongly reduced the sum for measured works. The burden, it asserted, was on Greencoat to establish any entitlement to set off the and argued that under Section 111 of the Housing Grants, Construction and Regeneration Act 1996 notice given on 2 December 2011 was not compliant as it lacked sufficient detail. The relief claimed at Paragraphs A to F in the Notice of Adjudication was repeated verbatim.
On 28 December 2011, Knowles wrote to the adjudicator (with copy to Greencoat's solicitors) referring to the jurisdictional challenge contained in the letter dated 22 December 2011 and accepted that there was "a small though valid point made regarding the relief sought in the Notice of Referral at 'F'"; they withdrew that head of claim. The adjudicator responded on the same day saying that he had "edited out item f".
On 5 January 2012, Greencoat served its Response to the Referral and attached, amongst others, were what was called "Tab 2 The Withholding Notice (as defined below)" and "Tab 6 Substantiation in support of the Certificate (as defined below)". The jurisdictional challenges were maintained. At...
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