S G South Ltd v Swan Yard (Cirencester) Ltd [2010] EWHC 376 (TCC)

Case No HT - 10 - 33[2010] EWHC 376 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 26/02/2010
Before
THE HON MR JUSTICE COULSON
Between
S G SOUTH LTDClaimantSWAN YARD (CIRENCESTER) LTDDefendant
Mr Thomas Lazur (instructed by BPE Solicitors LLP) for ClaimantMr John Virgo (instructed by J P Fletcher & Co) for DefendantHearing Hearing date: 25 th February 2010
Judgment

Introduction

[1]The claimant contractor, S G South Ltd (“South”), seeks by way of summary judgment to enforce an adjudicator’s award dated 22.7.09. The original sum awarded was £98,117.37. However, for reasons which are explored below, South concede that two elements of the decision, totalling £27,667.23, should not be the subject of the application. Accordingly, they seek to enforce a reduced sum of £70,450.14 plus VAT, together with interest and costs.[2]In a letter dated 28th August 2009, following the adjudicator’s decision, the solicitors acting for the defendant employer, Swan Yard (Cirencester) Ltd (“Swan Yard”), made plain that they did not dispute the award on the grounds of jurisdiction. They also stated that they did not allege any breach of natural justice. Notwithstanding those concessions, from which they have never attempted to resile, Swan Yard sought to resist the enforcement of the decision.[3]At the end of the hearing yesterday, 25th February 2010, I gave judgment in favour of South in the reduced sum sought of £70,450.14 plus VAT. I gave a brief outline explaining why I had reached that conclusion, and said that I would provide a written judgment setting out my reasons as soon as possible.[4]I deal first with the applicable principles of law on enforcement, before going on to consider a stand-alone point about the basis of the adjudicator’s jurisdiction. Thereafter I address briefly the irrelevant issues that were canvassed in the papers, the concession made by South, and the three further items which, on Swan Yard’s case, should not form part of any judgment on enforcement.

Applicable Principles of Law

[5]The principles governing this kind of enforcement application are well-known: (a). Adjudication is a process which requires the courts to respect and enforce the adjudicator’s decision unless it is plain that the question he has decided was not the question referred to him, or the manner in which he has gone about his task is obviously unfair: see paragraph 85 of the judgment of Chadwick LJ in Carillion Construction Ltd v Devonport Royal Dockyard Ltd [2005] EWCA Civ 1358; (b). An adjudicator has the jurisdiction to make a mistake, as long as he asks himself a question or questions which have actually been referred to him for decision, and seeks to answer such question or questions: see Bouyges (UK) Ltd v Dahl-Jensen (UK) Ltd[2000] BLR 522 and Shimizu Europe Ltd v Automajor Ltd [2002] BLR 113. As Chadwick LJ said in Carillion, the process was such that the need to have the ‘right’ answer has been subordinated to the need to have an answer quickly.

The Adjudicator’s Jurisdiction

[6]At the outset of the hearing yesterday, I raised a preliminary matter with the parties concerning the adjudicator’s jurisdiction. Although it was ultimately of no effect, it is necessary for me to address it in this short judgment.[7]The adjudicator was Mr S K Rudd of Construction Claims Consultants Ltd. When he was appointed as adjudicator to resolve the dispute between South and Swan Yard, he noticed that there was no written contract and, although Swan Yard had not taken any point as to his jurisdiction, Mr Rudd properly decided to carry out his own investigation into the issue. On the face of it, his conclusion was surprising. He decided that there was no written contract between the parties and that, in his words, “a contract arose either by oral agreement or by conduct or by a combination of oral agreement or conduct”. But, despite this, he went on to conclude that he had the necessary jurisdiction to act as adjudicator.[8]On the face of it, his conclusion was erroneous. Section 107 of the Housing Grants Construction and Regeneration Act 1996 (“the 1996 Act”) requires the construction contract to be in writing and, in Consulting Engineers Ltd v D M Engineering (DI) Ltd [2002] BLR 217, the Court of Appeal made plain that “what has to be evidenced in writing is, literally, the agreement, which means all of it, not part of it.” Thus, in the absence of a written contract, an obvious jurisdictional challenge was open to Swan Yard.[9]However, Swan Yard have never complained about any lack of jurisdiction on the part of the adjudicator. They did not do so during or at the conclusion of the adjudication. On the contrary, all of their submissions were based on their assumption or acceptance that the adjudicator did have the necessary jurisdiction and that they were happy for him to decide this dispute. The letter to which I have already referred of 28th August 2009 also expressly disavowed any objection on jurisdictional grounds.[10]When these proceedings commenced, the particulars of claim was careful not to allege a concluded contract in writing; instead, paragraph 3 of the particulars of claim accepted that a contract was never executed and instead alleged that the parties had proceeded on the basis that the terms of the JCT Management Contract formed the basis of any agreement between the parties. The formal documents provided by Swan Yard in these proceedings have not sought to take issue with that averment.[11]Section 107(5) of the 1996 Act is in the following terms:
“An exchange of written submissions in adjudication proceedings, or in arbitral or legal proceedings in which the existence of an agreement otherwise than in writing is alleged by one party against another party and not denied by the other party in his response constitutes as between those parties an agreement in writing to the effect alleged.”
Although the language of this sub-section is a little opaque, it appears designed to prevent a responding party, who has accepted the adjudicator’s jurisdiction notwithstanding the absence of a clear contract in writing, from going back on his concession. Thus, in Ale Heavy Lift v MSD Darlington Ltd [2006] EWHC 2080 (TCC), His Honour Judge Toulmin CMG QC held that it was not open to the defendant to argue on enforcement that the adjudicator had no jurisdiction, because of the exchange of written submissions in the adjudication which, he said, amounted to ‘an agreement in writing to the effect alleged’. The judge was plainly influenced by the fact that, as here, no jurisdictional challenge had been made to the adjudicator at the time of the adjudication.[12]It seems to me clear in the present case that the exchanges in the adjudication, and/or the exchanges in these proceedings, have amounted to an exchange of written submissions in which the existence of an agreement otherwise than in writing has been alleged by South and not denied by Swan Yard. In those circumstances, I find that the adjudicator had the necessary jurisdiction and this court is entitled to enforce his decision.

Irrelevant Matters

[13]Before going on to consider the concession made by South and the points of objection raised by Swan Yard, it is important to identify two matters, raised throughout the papers in this case by Swan Yard, which are wholly irrelevant to these proceedings.[14]South have already been successful in one set of adjudication proceedings relating to this project: see S G South Ltd v King’s Head (Cirencester) LLP and Another [2009] EWHC 2645 (TCC). In those proceedings, the defendants sought, unsuccessfully, to resist the enforcement of an adjudicator’s decision on the grounds that those parts of the decision relating to South’s entitlement to interim payment, which the defendants continued to oppose, would be resolved when the Final Account was agreed by the parties. Because of the close links between the two contracts, the defendants in that action were represented by the same legal team as appeared for Swan Yard in this case.[15]Despite the failure of that defence in those proceedings, Swan Yard attempted to raise the same issue again here. They have commenced separate proceedings in the Bristol District Registry in which the quantum of the Final Account is to be determined. As a result, they sought to adjourn this enforcement hearing on the basis that the Final Account proceedings in Bristol ought to be the natural forum for the resolution of all the disputes between the parties. I made it plain that this was inappropriate in circumstances where there has already been an adjudicator’s decision, which decision is temporarily binding, and which has not been honoured. The fact that there are ongoing arbitration or legal proceedings to deal with the underlying issues is nothing to the point: see Harlow & Milner Ltd v Linda Teesdale [2006] EWHC 1708 (TCC); [2006] BLR 359.[16]Secondly, throughout the documents produced by Swan Yard in these enforcement proceedings, they have repeatedly complained about mistakes made by the adjudicator when assessing the parties’ respective cases on the disputed items and in calculating the sums that he considered to be due to South. I shall examine some of those matters in greater detail below: in my view, these criticisms of the adjudicator cannot be sustained. But it is more important to note that, even if the alleged mistakes could have been made out, that would not permit Swan Yard to resist enforcement. As noted in the authorities (paragraph 5b) above), provided that the adjudicator has asked himself the right question then, if he makes a mistake in arriving at his answer, he has the jurisdiction to make that mistake and it cannot be relied on to resist enforcement.

South’s Concessions

[17]Another feature of Swan Yard’s conduct has been their policy of making direct payments to the works contractors employed by South. Such payments were not in accordance with the contract mechanism envisaged by the JCT Management Form and they have created wholly unnecessary confusion and muddle. Employers should never make payments direct to works contractors unless it is with the express written permission of the management contractor. All of the problems noted below have arisen out of Swan Yard’s direct payments.[18]As I have said, the total amount of the adjudicator’s decision was £98,117.37. That included a sum of £12,667.23 due in relation to work carried out by Farmington Stone, and a sum of £15,000 due in respect of work carried out by Gulley Electrical. During the course of the adjudication, there was a dispute as to whether direct payments had been made to these works contractors, and the adjudicator concluded that Swan Yard had not demonstrated that such payments had been made.[19]In the course of preparing for this hearing, South have made enquiries of their works contractors as to any direct payments received. In consequence, South are satisfied that the two payments referred to above, to Farmington Stone and Gulley Electrical respectively, have now been made by Swan Yard. Accordingly, they accept that they should not seek judgment for the total amount of £27,667.23.[20]To the extent that the parties have operated on the basis of the JCT Management Contract, I note that Clause 9A.7.1 provides that an adjudicator’s decision shall be binding until the dispute is finally determined by arbitration or by legal proceedings “or by an agreement in writing between the parties made after the decision of the adjudicator has been given”. In relation to the £27,667.23, the documents produced for the hearing constitute such an agreement. Accordingly, I find that the parties have agreed that, up to the sum of £27,667.23, adjudicator’s decision of 22.7.09 should not be enforced.

The Disputed Items

[21]There are three further elements of the decision in respect of which Swan Yard contend that, although there is no similar concession by South, there should have been such a concession and that, in some way, the adjudicator’s decision should not be enforced in relation to those three items either. I consider that these points are simply not arguable. My reasons are detailed below. a). Woodward Projects[22]The adjudicator found that the sum of £10,000 was due in respect of Woodward Project’s work. In the adjudication, Swan Yard argued that they had made payment of this sum direct to the works contractor. No concession was (or is now) made by South as to any such direct payment. The adjudicator concluded that no direct payment had been evidenced. There is therefore no basis on which this element of the decision could be resisted.[23]During his submissions, Mr Virgo argued that the documents before the adjudicator comprised an agreement as to the payment of the £10,000 in accordance with Clause 9A.7.1. However, it seems to me that that argument is hopeless for two reasons. First, the documents show that the £10,000 was disputed, not agreed. And secondly, Clause 9A.7.1 only applies to agreements made after the decision of the adjudicator has been given. The alleged agreement relied on by Swan Yard was the one canvassed before the adjudicator and which he expressly rejected. Thus there can be no basis for challenging this aspect of his decision. b). Preliminaries[24]The adjudicator awarded South £35,575 by way of preliminaries. He did this on the basis of a very detailed analysis of all of the evidence relating to preliminaries, in which he arrived at his own calculation of the appropriate figure. Paragraphs 16.3.1-16.3.10 of his decision contained full reasons for the sum awarded.[25]Swan Yard submit that the adjudicator erred in arriving at that figure by misreading some of the evidence. I do not accept that the adjudicator made any sort of error; indeed, on the basis of the papers before me, it is not an exaggeration to say that the adjudicator appears to have been the only person involved in the adjudication with any grasp of the applicable figures. But even if I am wrong about that and he did make a mistake, it was a mistake which he was quite entitled to make, and it cannot now be used to defeat the claim for summary judgment. c). Demolition Works[26]The final dispute concerns the demolition works, in the sum of £19,457. Again the argument is that the adjudicator misread some of the documents provided to him; again, that argument is hopeless for the reasons that I have already canvassed.[27]In relation to this item, Mr Virgo also advanced the argument that it would be wrong to give judgment in favour of South for £19,457 when their Final Account claim for demolition works, to be determined in the Bristol District Registry, was for a net sum of just £8,800 odd. He argued that, because South were now admitting that they were not entitled to £19,457 by way of their own Final Account claim, then the court should not enter judgment for that sum by way of enforcement.[28]On analysis, that argument could not be sustained on the facts. South’s claim in their Final Account is for the gross figure of £29,000 odd. The amount of the net sum due to South in relation to demolition works is, at least in part, the product of the disputed direct payments made by Swan Yard to the works contractors. Swan Yard’s contention that the net sum claimed in the Final Account is only £8,800 odd assumes that their case as to direct payments is correct.[29]However, that is not an assumption that the court can make. South dispute it. I also note that, at paragraph 16.3.10.1 of his decision, the adjudicator set out in detail the issue as to the direct payments in respect of demolition works and made plain that Swan Yard had simply failed to demonstrate that they had made the direct payments which, even now, they continue to allege. His conclusion remains temporarily binding until the Final Account is considered in detail in the litigation in the Bristol District Registry. Thus, it cannot be said that the adjudicator’s decision was somehow inconsistent with South’s Final Account claim or that there is any cogent reason not to enforce this aspect of the decision of 22.7.09.

Conclusions

[30]For the reasons set out above, I have concluded that the sum due to South on enforcement is £70,450.14 plus VAT. This is the amount of the adjudicator’s decision, less the total of £27,667.23 in respect of Farmington Stone and Gulley Electrical. There is no basis for any further deduction from the sums awarded by the adjudicator.[31]At one point in his submissions, Mr Virgo argued, in the alternative, that if judgment was given in favour of South, there should be a stay of execution. However, on analysis, this did not add anything to the submissions that I have already analysed. Swan Yard did not say that South’s financial position was such that a stay was justified. Instead the argument was that there were special circumstances to warrant a stay, because the Final Account claims were going to be considered in the Bristol litigation. As I have already explained, the mere fact that there is ongoing litigation in which the disputes will be finally resolved cannot prevent the making of an enforceable final judgment on an application such as this.[32]The adjudicator also found that the sum of £901.87 was due by way of interest. That sum should also be added to the judgment sum. He also found an ongoing rate of interest due to South of £14.78 per day. I have concluded that South are entitled to interest at that rate from 22nd July 2009 (the date of the decision) to 29th October 2009.[33]As noted, on 29th October 2009, Akenhead J handed down judgment in the related enforcement proceedings. I can see no reason, and Mr Lazur was not able to identify one, that justified the decision by South not to commence parallel proceedings against Swan Yard at the same time. This enforcement application could and should have been dealt with by Akenhead J in October. Accordingly, the interest claim cannot extend beyond 29th October 2009. That gives rise to a total figure of £1,463.22.[34]As to costs, Swan Yard must pay South’s costs of these proceedings. The fact that South made a concession is nothing to the point, given that Swan Yard continued (wrongly) to resist the application in full.[35]As to the sums claimed by way of costs, I am in no doubt that those sums were excessive on both sides. Swan Yard’s costs were £21,000; South’s costs were £18,000. That was out of all proportion to the issues. On South’s part, all that was necessary was a claim form to go with a copy of the adjudicator’s decision. The claimed total of over 40 hours work done on documents, and in excess of 10 hours attendance on South themselves, was simply not justified. Accordingly, for the reasons explained during the parties’ oral submissions, I have summarily assessed South’s costs in the total sum of £10,250.

Cited in 1 later judgment