OSC Building Services Ltd v Interior Dimensions Contracts Ltd [2009] EWHC 248 (TCC)
Introduction
[1]This is an application by the Claimant (“OSC”) for summary judgment under Part 24 on its claim to enforce an adjudication decision.[2]The Defendant (“IDC”) resists enforcement on two grounds. First, it says that the referral broadened the dispute in the notice of adjudication so that the adjudicator did not have jurisdiction to deal with the broadened dispute covering the valuation of OSC’s final account. Secondly, IDC Says that the adjudicator failed to decide the dispute which had been referred to him on OSC’s final account but instead decided the value of an interim payment application.Background
[3]IDC was the main contractor on a project known as the Leigh Medical Centre at Leigh-on-Sea in Essex. In July or August 2006 IDC engaged OSC to carry out various drainage and site access works. The scope of the work was originally limited but was subsequently increased, and OSC were also engaged to install a retaining wall and site mat and to reposition a sump tank. The contract did not contain adjudication provisions complying with s.108 of the Housing Grants Act and as a result under s.108 the provisions of the Scheme for Construction Contracts (“the Scheme”) applied in providing a right of adjudication.[4]The sub-contract works commenced on 11 August 2006 and were completed at the end of July 2007. In June 2007 OSC submitted application for payment number 10, which was referred to as a draft final account. On 5 September 2007, in advance of a meeting between the parties, IDC submitted comments on that document, and on 7 September 2007 sent a schedule of queries and information which it required. On 21 September 2007 OSC sent through further information.[5]There was a further exchange of correspondence on 6 November 2007, and this was followed by OSC submitting a revised final account breakdown on 8 January 2008. On 25 January 2008 IDC commented on this document, and this was then responded to by OSC’s letter of 13 May 2008, which attached another revised final account assessment. On 20 May 2008 IDC replied with a revised assessment of £283,202.05, which was stated to be subject to adjustment for costs in connection with remedial works to a Gatic Cover. No further sums were paid.[6]On 9 September 2008 OSC served a notice of adjudication. On 12 September 2008 the RICS nominated Mr. Derek Pye as the adjudicator. The adjudicator issued his decision on 22 October 2008, in which he ordered IDC to make payment to OSC. IDC wrote to OSC on 29 October 2008 stating that the decision was invalid and unenforceable for the following reasons:[7]They therefore sent a cheque in the sum of £10,641.01 to OSC. OSC issued a claim form on 4 December 2008 and directions were given leading to this hearing during the vacation.The Issues
[8]I now turn to consider the issues on this Part 24 application to decide whether IDC has no real prospect of successfully establishing that the adjudicator did not have jurisdiction, or that there is no other reason why the matter should not proceed to trial.Did the referral enlarge the dispute in the notice of adjudication?
[9]I note at the outset that this was not a matter which was raised by IDC in the adjudication. I shall consider the effect of this later. The notice of adjudication identified the dispute as follows:[10]It then continued by setting out the redress sought and included the following relief at paragraphs (a) to (c):[11]It can be seen that, at (b), OSC is seeking the difference between IDC’s assessment of the sum due and the amount which OSC considered had been paid in the sum of £260,000. OSC was then seeking, at paragraph (c), a further sum of £21,646.26, or such other sum as the adjudicator should decide, in addition to IDC’s assessment.[12]In the referral the redress sought is set out at paragraph 5 and includes at (a) to (c) similar redress, except for the adjustment of the sum in paragraph (c) to £24,401.26.[13]Mr. Winser, on behalf of IDC, submits that under the notice of adjudication the adjudicator only had jurisdiction to decide on non- payment against IDC’s certification but not to determine the value of OSC’s final account. Miss Garrett, on behalf of OSC, submits that when the whole of the notice of adjudication and referral are read in context with the relevant documents there was no expansion of the dispute in the referral.[14]I consider that Miss Garrett’s submissions on this matter are correct for the following reasons: (1). On my reading of the notice of adjudication and the referral the dispute being referred to adjudication was the question of what sum were due to OSC when the notice of adjudication was issued. Those documents have to be read in the context and against the background of the prior communications between the parties, which included the process of submissions, comments and assessments which had taken place by that time. (2). The sum due to OSC comprised two parts: the sum due on the basis of IDC’s assessment and an additional sum which OSC asserted was due. I consider that the reference to non- payment by IDC to OSC in respect of OSC’s final account, in paragraph 3 of the notice of adjudication, encompasses both those sums, which were further identified in paragraphs (b) and (c) of the notice and the referral. In the absence of a withholding notice any sums due fell to be paid. (3). I do not consider that the difference between the sums stated in paragraph (c) of the adjudication notice and those stated in paragraph (c) of the referral, can sensibly be said to expand the claim when the precise sum was left open by the words “ or such sum as the adjudicator may decide ”.[15]I, therefore, do not consider that there are real prospects of establishing that the adjudicator did not have jurisdiction because the scope of the adjudication was expanded in the referral.Can IDC now raise a jurisdictional argument?
[16]The question was also posed of whether, in any event, it was open to IDC to raise this particular jurisdiction issue now having not raised it during the course of the adjudication. Mr. Winser says that it is open for IDC to raise it and he refers me to the decision of His Honour Judge Seymour QC in Mecright Ltd v T.A. Morris Developments Ltd [2001] Adj.L.R. 06/22, in which His Honour Judge Seymour had to consider the provision in paragraph 8(1) of Part I of the Scheme. That provision deals with the question of whether more than one dispute can be referred to an adjudicator and provides as follows:[17]Judge Seymour had to consider what the words “ with the consent of all parties to those disputes ” meant, and he said this:[18]Mr. Winser therefore says that, in the absence of express consent for there to be an enlargement of the jurisdiction of the adjudicator, that jurisdiction would not be enlarged and in those circumstances he can still maintain a jurisdictional challenge.[19]Miss Garrett says that that is not correct, and she refers me to the decision of the Court of Appeal in Thomas-Fredric’s (Construction) Ltd v Keith Wilson [2004] BLR 23, in which the Court of Appeal reviewed the decision of Dyson J (as he then was) in The Project Consultancy Group v The Trustees of the Gray Trust [1999] BLR 377 and the decision of His Honour Judge Gilliland QC in Nordot Engineering Services v Siemens PLC (unreported 14 th April 2000).[20]In the Project Consultancy case Dyson J accepted that the principles enunciated by Devlin J in Westminster Chemicals & Produce Ltd v. Eicholz & Loeser [1954] 1 Lloyd’s Rep 99 at 105 to 106 were equally applicable to an adjudication. Devlin J said this:[21]In Nordot v SiemensJudge Gilliland QC said:
[22]It seems to me that little assistance is to be gained from the decision in the Mecright case, which was dealing with the express provisions of paragraph 8(1) of the Scheme. Where there is a provision for consent to be given it seems to me that, in principle, more formality is needed than otherwise.[23]On the basis of the decisions referred to in the Thomas-Frederic’s case , it seems to me that where a party submits to the jurisdiction of an adjudicator without raising any objection then the general principles apply as set out in the Westminster Chemicals case, and as applied by Dyson J. Those general principles say that there must be a protest against the adjudication continuing and a protest to the effect that the adjudicator does not have jurisdiction to deal with a particular dispute. If a party does not protest then, it seems to me, that party accepts the submission of that particular issue to the jurisdiction of the adjudicator.[24]In this case the position was not dealt with at all by IDC. They proceeded with the adjudication and they responded to the claims made both in the notice of adjudication and in the referral very fully. Indeed, on one occasion they raised a jurisdiction point, which it is accepted for the purpose of today is not relevant to the issues which I have to consider. In those circumstances, it seems to me that they did submit to the jurisdiction. But, as I have indicated, this is not necessary for my decision on this point and because I have not been referred to authority on this particular point, my view must be taken as provisional.[25]In relation to the second point, the adjudicator set out in his decision, at paragraphs 27 to 35, the process of submissions, comments and assessments of OSC’s final account. He noted at paragraph 35 that Driver Consult, on behalf of OSC, wrote a letter dated 13 August 2008 to IDC in which they advised that they were compiling a final account. In paragraphs 2 to 4 of the Rejoinder, although IDC did refer to a jurisdiction point, they did not deal with this particular aspect.[26]I now turn, therefore, to consider this matter. The sub contract in this case, which was originally limited to some £6,000 worth of work, was to be carried out in 14 days in August 2006. In those circumstances, it only provided for a final account after completion of the works but not expressly for interim payments. IDC submitted that this provision complied with the requirements of the 1996 Act, but the adjudicator held that it did not and that the Scheme provisions were applicable to interim applications and payment. He said, at paragraphs 50 and 51:[27]He also stated, by way of a clarification, at paragraph 115:[28]Mr. Winser submits that the adjudicator only had jurisdiction to decide the value of the final account and not to decide the value of an interim application. He relies on that passage from the adjudicator’s decision at paragraph 115 as showing that the adjudicator decided a matter which was outside his jurisdiction. He says that there is a fundamental difference between a final account claim and an interim application, and for an adjudicator to make a decision on an interim application when the dispute relates to the final account would be outside the adjudicator’s jurisdiction and would set a dangerous precedent.[29]Miss Garrett submits that the substantive dispute is not changed merely because the label ‘final account’ or ‘interim payment’ is applied to it. She says that the adjudicator decided the issues which were referred to him and dealt with in the notice of adjudication, the referral and the response. She accepts that the claim was referred to inaccurately as the final account, as it was a claim for payment on an interim application deriving from interim application 10.[30]I accept Mr. Winser’s submission that, in many contracts, there is an important difference between the process of interim applications and final accounting. However, in the present case I consider that I have to construe what was being referred to the adjudicator by the notice of adjudication and the referral and how the reference to OCS’s ‘final account’ was to be dealt with. In my judgment, this final account was, in fact, the last interim application, number 10, which became a draft final account. In the circumstances of this case, as set out in Driver Consults’ letter to IDC of 13 August 2008, there was then to be a final account, which Driver Consult was preparing. The phrasing both of the letter of 13 August 2008 and the reply of 16 August 2008, in my judgment, supports the fact that the application being considered was an interim application.[31]Also, I note that during the period after interim application number 10 had been submitted then, despite it being referred to as a draft final account, IDC did make further interim payments 11 and 12 which shows that the developing final account was being treated as an interim application. The draft final account was therefore not the final account itself which it was envisaged would be provided by Driver Consult at a later date.[32]In addition, the failure of the contract to provide a compliant mechanism for interim payment meant that the contract provided only for payment of a final account after completion In such circumstances, I consider that Miss Garrett is right in her interpretation of what OSC and IDC were doing in the period between June 2007 and May 2008 in the light of OSC’s entitlement to interim payments under the Scheme. It is, as Miss Garrett submits, the substance of what the parties were doing and not the label attached by them to those documents, that is of importance.[33]Therefore, in the particular circumstances of this case, I consider that the adjudicator did have jurisdiction to treat the application referred to in the notice as OSC’s final account as being an interim payment application, and to make a decision on that basis. This then leaves over the substance of the true final account dispute, to be dealt with at a later stage when it has been submitted, as envisaged by Driver Consult.Conclusion
[34]Accordingly, for those reasons, I find that neither of the grounds for resisting the enforcement of the adjudicator’s decision are made out, and that, on this Part 24 application, IDC has no real prospect of successfully establishing that the adjudicator did not have jurisdiction.[35]I shall now hear argument as to the sums due and any ancillary matters.
Cited in 5 later judgments