A&V Building Solutions Ltd v J&B Hopkins Ltd [2024] EWHC 2295 (TCC) Mr Roger ter Haar KC (6 September 2024)

The claimant, A&V, was engaged under a subcontract by J&BH to carry out plumbing works at a university campus. In its referral to adjudication, A&V alleged that J&BH was in breach of the subcontract. That claim failed. In the subsequent court action, A&V succeeded on a claim for measured work and loss of profit of just over £100,000 before any allowance for the fees of two adjudicators in two references which it had had to pay and a claim for loss of interest, which claims were now to be decided.

A&V having been successful before the court in overturning the adjudicators’ decisions sought to recover the fees they had paid and sought to restore its claim for interest.

In regard to the claim for reimbursement of the adjudicators’ fees, J&BH opposed the claim, citing Castle Inns (Stirling) Ltd v Clark Contracts Ltd[1] ("Castle Inns") in which Lord Drummond Young found “there are sound practical reasons for holding that an adjudicator's decision on liability for his fee and expenses cannot be reopened in any proceedings before the court.”

Those ‘sound reasons’ were, in summary:

“(1) There was no contractual mechanism that would allow a reconsideration of the adjudicator's decision in respect of his fees;

(2) Whilst the contractual scheme permits an indirect challenge to the adjudicator's decision on any dispute submitted to him by means of court proceedings or arbitration, that mechanism only relates to a dispute or difference. It does not apply to the adjudicator's decision on his fee and expenses, as that part of his decision does not involve a 'dispute' in the contractual sense;

(3) Because the adjudicator's decision on liability for his fee and expenses is essentially ancillary in nature, there is no commercial necessity that it should be capable of reconsideration;

(4) There is a practical difficulty of reconsidering the adjudicator's decision in such a matter.”

Castle Inns was followed by Edwards-Stuart J. in Halsbury Homes Ltd v Adam Architecture Ltd [2]albeit with a different outcome. Also in TSG Building Services plc v South Anglia Housing Ltd[3] Akenhead J reached a conclusion which was consistent with the decision of Lord Drummond Young in Castle Inns.

Finally, J&BH relied on paragraph 10.25 of Coulson on Construction Adjudication[4] which read: “In addition, an adjudicator's decision as to liability to pay fees is final and is not subject to challenge in subsequent arbitration/litigation.”

On this issue, the court concluded that all the authority in the TCC and in Scotland supported J&BH's position, but the Judge added: “It seemed to me when considering this matter on the papers that there may be arguments to suggest that Castle Inns should be reconsidered. However, upon reflection, I have decided that this is not the case to do so.”

Therefore, on the question of adjudicators’ fees the court followed the view that the adjudicator’s decision as to liability for their fees and expenses was final and could not be overturned or finally determined by the court.

For the sake of completeness, it should be added that A&V had recovered one half of one set of adjudicator’s fees, but this was on the basis that they had paid J&BH’s share.

The claim for interest was much more involved and depended on the facts, the terms of the subcontract and the possible application of the Late Payments Act and is not further considered in this summary.

[1] [2005] Scot CS CSOH 178, [2006] SCLR 663 

[2]  [2016] EWHC 1422 (TCC); [2016] BLR 419.

[3] [2013] EWHC 1151 (TCC); [2013] BLR 484

[4] Oxford University Press

Complete Ceiling and Partitioning Systems Ltd v DE1 Ltd [2024] EWHC 2800 (TCC) HHJ Sarah Watson (6 November 2024)

The claimant subcontractor sought to enforce an adjudicator’s award in its favour - a total of £117,000. The defendant contractor did not dispute the award nor the claimant’s right to summary judgment, but applied for a stay of execution on the basis that the claimant’s accounts clearly showed it to be insolvent, and therefore unlikely to be able to repay the judgment sum if, as the defendant contended, the final determination of the dispute showed there was nothing due to the claimant.

Evidence filed by the claimant in the enforcement proceedings showed that although it appeared to be insolvent, certain loans were to be regarded as long-term financial support. Thus, it was solvent and would remain so. The defendant accepted that evidence and was now willing to pay the award and interest, but argued that it should not have to pay the claimant’s costs of the proceedings (that is both the claimant’s application to enforce the award and the eefendant’s application for a stay).

The Judge agreed that the authorities showed there was no general obligation upon the claimant to disclose confidential information to satisfy the defendant as to its solvency. However, she considered that, faced with the latest financial information available -  the statutory accounts (which clearly showed the claimant was insolvent) - the Defendant’s pre-action request for any information that the claimant might wish to rely on to explain why it would be able to repay the award should it be ordered to do so, was a reasonable request. Given the claimant's apparent insolvency, the defendant reasonably expected that it could succeed on an application for a stay. In its request, it referred the claimant to the relevant authorities in support of its position. It invited the claimant to provide information as to why that was wrong. The defendant was not on a fishing expedition trying to establish whether an apparently solvent company might or might not be unable to repay the award in due course.

The Judge held that the claimant's conduct, in refusing to provide the information when requested but instead insisting that it need do so only after it had incurred the costs of its enforcement application and after the defendant had incurred the costs of its application for a stay and court time had been taken up in listing the applications for hearing, was contrary to the principles of the Overriding Objective and the way the TCC expects parties to conduct litigation. Previous cases on the issue were distinguishable on the facts.

The defendant did not seek its own costs. The claimant was not entitled to its costs. The proper order was no order as to costs.

ATG Services (Scotland) Ltd v Ogilvie Construction Ltd [2024] CSOH CA93/24, Lord Sandison (4 October 2024)

The adjudicator awarded the pursuer just over £1 million by a decision of 26 June 2024. The defender alleged the decision was tainted by breaches of natural justice.

The defender was a construction company and main contractor who engaged the pursuer as subcontractor for groundworks for a housing and care facility in Dalkeith. A dispute arose concerning an interim payment application. The adjudicator found that the payment application was valid, there was no valid Payment Notice from the defender and no valid Pay Less Notice. He awarded the pursuer the sum applied for (£1.081 million).

The defender argued that the payment application was sent to a different address than had been agreed and this invalidated it. The pursuer argued the parties had adopted a course of conduct which treated applications served other than in accordance with the contract as nonetheless valid.  It relied on a witness statement and the judgment in the case of Jawaby Property Investment Ltd v. Interiors Group Limited[1]. After considering all of the submissions received, the adjudicator asked the parties which law governed the contract. They both told him Scots law.

Before the court the defender argued that the pursuer had founded its case on English law and evidence to support an English law proposition. It had not argued Scots law applied or founded on Scots law principles of waiver or personal bar. Had it done so, the defender would have submitted that English law did not apply.  The adjudicator had accepted the pursuer’s position, evidently applying English law and relying on the case of Jawaby.

His Lordship noted the importance of cash flow and the “pay now, argue later” mantra underlined by the judgment of Lord Briggs and that the purpose of the Scheme for Construction Contracts Regulations (for Scotland) was to promote speedy, robust decisions. The defender said the adjudicator had not gone off on a frolic of his own. His Lordship disagreed. The adjudicator was asked to apply Jawaby. He might have been wrong to do so, but that was irrelevant. There was no failure to address the question of the validity of the payment application and the issue whether the parties had allowed for service other than in accordance with the contract. The defender had not put forward a positive case that Scots law led to a different result than in Jawaby. The adjudicator had considered the material before. The defender’s argument that the pursuer had not set out a case founded on Scots law did not give rise to an inference that the adjudicator had omitted altogether to take account of the defender’s submissions. There was no need to deal with every argument. Reliance on Jawaby indicated that the adjudicator was unpersuaded that the defender’s argument barred him from reaching the decision he made.

As to the defender’s second objection, His Lordship was in no doubt that a reasonable reader of the decision would be aware of its basis; the reasons given amply exceeded the degree of explanation required.

The defence was without merit. The adjudicator was satisfied that the course of conduct was made out, in line with the findings in Jawaby. That was a decision on legal principle. Even if the adjudicator had treated Jawaby as binding, that was a decision he was entitled to reach. No injustice was done. The adjudicator was well aware that Scots law applied. The ‘squall got up by the defender’ about a real or imagined distinction between English and Scots law was an immaterial distraction.

[1] [2016] EWHC 557

Workman Properties Ltd v Adi Building & Refurbishment Ltd [2024] EWHC 2627 (TCC) HHJ Stephen Davies Sitting as a High Court Judge (21 October 2024)

In a long and careful judgment, the court considered and reiterated the circumstances in which Part 8 proceedings were suitable for the summary determination of an application for declaratory relief.

The court noted that the parties had not fully engaged with guidance given in previous cases and with the TCC Guide as to the suitability and full or modified use of Part 8 proceedings. Both parties had served evidence which did not identify or seek to identify the factual issues which the Defendant claimed made Part 8 unsuitable for determining what was an issue of interpretation of written contract documents.

The court proceeded to remind practitioners that not every application for declaratory relief in relation to an issue decided by an adjudicator would justify the abbreviated procedure adopted for the enforcement of adjudication awards. In particular, the court noted that this was not a case of a pre-emptive response to an adjudication enforcement since the adjudication award, in which the contractual issue had been decided, was itself merely declaratory in nature, albeit that it founded a second adjudication in which a payment had been ordered (and had been made) by the claimant to the defendant.

The issue of contractual interpretation in this case arose out of a JCT Design and Build Contract 2016 with substantial employer-led amendments to the Employer’s Requirements, Articles and Conditions. The court decided upon consideration of the evidence and submissions, there were no disputed factual issues relevant to the interpretation of the contract and no need of a full Part 7 process at which all the legal and factual issues would be addressed at the same time. There was utility in deciding the contractual interpretation issue as the contract was still in being, the works not completed and there was a dispute over liability for defects. The court was satisfied that it was appropriate to determine the contractual interpretation point within the Part 8 application. The court determined the contractual issue holding that under this amended contract, the defendant was responsible for satisfying itself that the existing design was sufficient in all respects and for completing and carrying out the entire design, without qualification. There was no warranty as to completeness. It was not entitled to treat the necessary further design development as a change, nor entitled to any extension of time or additional payment for the further design it had to carry out. The court granted modified declarations accordingly.

Comment

The same result will not follow from the unamended use of the 2016 JCT Form of Design and Build.

Malin Industrial Concrete Floors Ltd (In Administration) v VolkerFitzpatrick Ltd [2024] EWHC 2890 (TCC) District Judge Baldwin (22 October 2024)

The claimant subcontractor had been employed by the defendant contractor for flooring works at Doncaster. Following its administration, it went to adjudication claiming the final part of the retention under the subcontract. In the adjudication, the defendant ‘trailed a counterclaim’ for the cost of repairing defects in the flooring which it alleged were due to the claimant’s poor workmanship. However it asked the adjudicator not to adjudicate upon the counterclaim but put it forward as showing that the retention was not due. The claimant on the other hand said the adjudicator should adjudicate upon it. The adjudicator found that the counterclaim was not supported by any evidence, that the net position was that the retention was due and ordered the defendant to pay the same with interest. 

The claimant sought to enforce the award by application under Part 7 CPR (Civil Procedure Rules). The defendant resisted enforcement initially on two grounds: (i) lack of jurisdiction/breach of natural justice; and (ii) that it had a substantial cross-claim and as the claimant was insolvent and had offered insufficient security for the repayment of the cross-claim and its costs.

The claimant abandoned the first ground and the matter proceeded on the second ground.

After considering the award, the parties’ submissions and the law, the District Judge held as follows.

1. The ‘pay now, argue later’ principle could be trumped by insolvency law.
2. There had been no final determination of all claims and cross-claims to demonstrate that a net sum was due to the claimant, so that the exception referred to by Lord Briggs in Bresco[1] did not apply.
3. There was just about sufficient substance in the cross-claim for it to be considered in the context of insolvency.
4. The adjudicator had not already determined the cross-claim. There was no crystallisation of insolvency set-off.
5. It could be inferred from the evidence that the claimant was sufficiently insolvent for there to be a risk that payment would deprive the defendant of the security of its cross-claim and there was no offer of security.
6. The evidence in support of the cross-claim fell short of showing that the claimant was the responsible party. However the cross-claim was not a fanciful one.
7. The judge determined that summary judgment be granted, but stayed pending further order, with permission to the claimant to apply to lift the stay unless satisfied by the defendant within 3 months, that there was a prima facie evidenced case supportive of a sufficient degree of liability on the part of the claimant, giving rise to a cross-claim with the potential to extinguish the amount awarded by the decision.

[1]  Bresco Electrical Services Ltd (in liquidation) v Michael J Lonsdale (Electrical) Ltd [2020] UKSC 25,