AT Stannard Ltd v Tobutt & Anor [2014] EWHC 3491 (TCC)

Case No HT-14-295[2014] EWHC 3491 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 24 th October 2014
Before
MR JUSTICE AKENHEAD
Between
A.T. STANNARD LIMITEDClaimantJAMES TOBUTT AND THOMAS TOBUTTDefendants
Crispin Winser (instructed by Helix Law Ltd) for ClaimantDavid Gibson-Lee (instructed by Grayfield Solicitors) for DefendantsHearing Hearing date: 17 October 2014
JUDGMENT Mr Justice Akenhead:
[85]The objective which underlies the Act and the statutory scheme requires the courts to respect and enforce the adjudicator's decision unless it is plain that the question which he has decided was not the question referred to him or the manner in which he has gone about his task is obviously unfair. It should be only in rare circumstances that the courts will interfere with the decision of an adjudicator. The courts should give no encouragement to the approach adopted by DML in the present case; which (contrary to DML's outline submissions, to which we have referred in paragraph 66 of this judgment) may, indeed, aptly be described as "simply scrabbling around to find some argument, however tenuous, to resist payment".[86]It is only too easy in a complex case for a party who is dissatisfied with the decision of an adjudicator to comb through the adjudicator's reasons and identify points upon which to present a challenge under the labels "excess of jurisdiction" or "breach of natural justice". It must be kept in mind that the majority of adjudicators are not chosen for their expertise as lawyers. Their skills are as likely (if not more likely) to lie in other disciplines. The task of the adjudicator is not to act as arbitrator or judge. The time constraints within which he is expected to operate are proof of that. The task of the adjudicator is to find an interim solution which meets the needs of the case. Parliament may be taken to have recognised that, in the absence of an interim solution, the contractor (or sub-contractor) or his sub-contractors will be driven into insolvency through a wrongful withholding of payments properly due. The statutory scheme provides a means of meeting the legitimate cash-flow requirements of contractors and their subcontractors. The need to have the "right" answer has been subordinated to the need to have an answer quickly. The scheme was not enacted in order to provide definitive answers to complex questions. Indeed, it may be open to doubt whether Parliament contemplated that disputes involving difficult questions of law would be referred to adjudication under the statutory scheme; or whether such disputes are suitable for adjudication under the scheme. We have every sympathy for an adjudicator faced with the need to reach a decision in a case like the present.[87]In short, in the overwhelming majority of cases, the proper course for the party who is unsuccessful in an adjudication under the scheme must be to pay the amount that he has been ordered to pay by the adjudicator. If he does not accept the adjudicator's decision as correct (whether on the facts or in law), he can take legal or arbitration proceedings in order to establish the true position. To seek to challenge the adjudicator's decision on the ground that he has exceeded his jurisdiction or breached the rules of natural justice (save in the plainest cases) is likely to lead to a substantial waste of time and expense – as, we suspect, the costs incurred in the present case will demonstrate only too clearly.” This of course does not mean that the Court will not fairly and justly review every challenge on its merits. 9. Mr Winser for Stannard relied on GPS Marine Contractors Ltd v Ringway Infrastructure Services Ltd [2010] EWHC 283 TCC. This was an adjudication enforcement case in which, although the losing party had raised general and some specific objections to the jurisdiction, it had not raised any objection at that time that the claim referred to adjudication had been compromised; it did however raise this ground on the enforcement. This was challenged by the party seeking to enforce the adjudicator’s decision on the grounds that the alleged compromise was too vague, there being no real prospect of success in that defence, that the adjudicator was asked to and did deal with the issue which was raised as a defence in the proceedings, his decision being therefore binding and that there was no reservation of the right to challenge the jurisdiction on this ground. Ramsey J said:
“36. Generally a party who wishes to do so can object to the jurisdiction of an adjudicator and may seek to do so either in general terms or by making a reservation on a specific matter. 37. The underlying issue is whether, taking account of the particular reservation, a party by participating in the adjudication has waived its right to object on grounds of jurisdiction. If the party does not raise any objection and participates in the adjudication then, even if there is a defect in the jurisdiction of the adjudicator, that party will create an ad-hoc jurisdiction for the adjudicator and lose the right to object to any decision on jurisdictional grounds. If a party raises only specific jurisdictional objections and those jurisdictional objections are found by the court to be unfounded then that party is precluded from raising other grounds which were available to it, if it then participates in the adjudication. That participation amounts to a waiver of the jurisdictional objection and confers ad-hoc jurisdiction. Obviously this assumes that, at the relevant time when the party participated in the Adjudication, the jurisdictional objection was available. Some jurisdictional objections, for instance as to the scope of the dispute, may only become apparent during the adjudication process or at the time of the decision.” 10. Discussion 11. Essentially, the Firm seeks to argue that, because there was in practice inferentially at least a novation whereby it was agreed by Stannard, the Firm and the Company that all the Firm’s obligations to and rights against Stannard were assumed by the Company, the adjudicator simply had no right or jurisdiction to deal with Stannard’s claims for retention. Mr Gibson-Lee argued that this was a threshold issue and not on analysis a jurisdictional challenge at all, citing Section 108 of the Housing Grants Construction and Regeneration Act 1996 (“HGCRA”): “(1) A party to a construction contract has the right to refer a dispute arising under the contract for adjudication under a procedure complying with this section.”
The argument was that, as, on his client’s argument, the parties to the construction contract had become Stannard and the Company, Stannard could no longer initiate adjudication at all. I disagree with his argument that this is not a jurisdictional challenge. There is acceptance (or at least no challenge) that there was a construction contract between Stannard and the Firm at least until February-March 2010 when the suggested novation took place and all the work to which the claim relates had purportedly been done before then. The Firm’s argument has to be, put simply but properly, that the adjudicator had no jurisdiction because there had been a novation. It is a jurisdictional argument and, if it was sensibly arguable, it both could and should have been raised in the adjudication. There is no doubt that the Firm not only did not raise any such jurisdictional challenge during the course of the adjudication but also it expressly and actively (if ineffectively) participated in the adjudication. Although, through Mr Scott, it sought the recusal of the adjudicator, he expressly wrote to the adjudicator saying that the Firm would participate. The participation was ineffectual but that was apparently due to logistic difficulties and, even up to the weekend before the Monday on which the decision was issued, the Firm was promising to submit a full Response. Earlier on 3 July 2014, Mr Scott had set out in summary what the Response was and, indeed, the adjudicator had regard to this in his decision. It is of course noteworthy that there is not one hint or suggestion in anything which Mr Scott wrote either to the adjudicator or to Stannard’s representatives that the Firm had in any way transferred its rights and obligations to the Company. It is clear that, following the reasoning of Mr Justice Ramsey in theGPS Marine Contractors case, the Firm, by participating in the adjudication without any reservation, has waived any right to raise as a jurisdictional (or indeed as some sort of threshold) challenge the current argument that by novation all rights and obligations of the Firm have been transferred to the Company. Mr Gibson-Lee did not seek to argue otherwise, if his threshold argument failed. (a). Neither witness statement of the two Tobutt brothers provides any evidence from which one could infer a novation. James Tobutt says simply and only that the Firm traded as a partnership “which in 2010 changed its status to that of a Limited Company”. That does not give rise to an inference that the Firm’s pre-existing obligations and liabilities were transferred to the Company or that it was some sort of novation with Stannard. Indeed, the whole tenor of that statement is a challenge on the merits to Stannard having any entitlement, with arguments being mounted that there was a "pay when paid" agreement (not recognised as enforceable by the HGCRA) and that there were defects in Stannard’s work which justified the non-payment of retention. (b). Mr Scott’s first witness statement says nothing about any transfer of obligations or liabilities from the Firm to the Company or about any novation. Indeed, he suggests if anything that the "pay when paid" arrangement was made between Stannard and the Tobutt brothers (which, if anything, points to the Firm being involved in such an arrangement). (c). Mr Scott’s second witness statement dated 14 October 2014 was admitted belatedly; there was no explanation why the Firm had held back this further statement until the date of the hearing which was 17 October 2014. All that this does is to state that the Company was incorporated on 8 February 2010 and that he wrote a letter to regular sub-contractors and suppliers including Stannard on 18 February 2010 which said: “Please note that with effect from March 1st 2010 JT Tarmac are closing for business to be replaced with JT Tarmac Ltd. All future dealings and outstanding matters will now be the responsibility of the new company. If there is information you require please contact the undersigned." If there is information you require please contact the undersigned." 15. I do not consider that it is possible to infer from this letter that Stannard, simply by receiving it, in some way inferentially agreed that all its rights to payment against the Firm were from then on to be considered to have been transferred to the Company so that it could never pursue the Firm for any outstanding payments. It is not uncommon for partners of a firm to incorporate their business into a company and it will often be the case that in practice the new company will assume in effect voluntarily the job of paying outstanding debts owed by the partnership. That sort of arrangement, which seems to be exactly the one being notified here, can not without more give rise to a novation, particularly one said to arise by inference. (d). Mr Gibson-Lee then put before the court several cheques from the Company to Stannard post-February 2010, which he said demonstrated inferentially that Stannard must be taken to have agreed that all its pre-February 2010 contractual rights had been novated from the Firm to the Company. He was unable to say whether these cheques related to work which had been carried out after this time. Accordingly, even these cheques, which were not even referred to in Mr Scott’s second witness statement, do not go to establish an effective or indeed any novation. (e). Mr Gibson-Lee also attempted to rely upon a letter dated 13 September 2013 from the Company to Stannard which refers to outstanding retention money and a meeting held between them that day. It refers to 7 Thames Water projects with retentions totalling more than was claimed in the current adjudication and enforcement proceedings. He indicated that this document was signed by both parties. This was simply the "pay when paid" arrangement which is said to have been reached. However, apart from the fact that it is unenforceable under the HGCRA, this does not give rise to any inference that there was a novation. (f). The Firm submitted a Defence supported by a statement of truth apparently signed by someone other than the Tobutt brothers. It effectively repeats what Mr Scott said in his second witness statement about all matters and undertakings relating to the dissolved partnership being transferred to the Company in March 2010. This does not add anything about novation. Indeed, if novation was to be relied upon, a properly pleaded case about novation should and could have been raised. As it stands, the pleading that there was a transfer of liabilities and obligations of the Firm does not provide a defence, because a transfer or assignment of obligations and liabilities can not be made in law, at least without novation. (g). Finally, Mr Gibson-Lee applied for an adjournment and yet further time to submit yet further evidence to support his client’s case that there had been a novation. I refused this application, not least because there was simply no, let alone any arguably good, explanation as to why any such further evidence had not been filed either in accordance with Mr Justice Edwards-Stuart’s directions order, at the time that the Firm’s initial evidence was filed (well over a month before the summary judgment hearing) or even at the time that Mr Scott’s second witness statement was prepared. The primary purpose of the procedures developed by the TCC for the prompt hearing of summary judgement applications for the enforcement of adjudicators’ decisions was to satisfy the policy of the HGCRA to provide prompt resolution of disputes arising in connection with construction contracts. Mr Gibson-Lee was unable to say what the further evidence would be other than in the most general sense. He was unable to say for instance that there had been any material discussions between Stannard and the Company representatives which would or might throw light on whether there was some sort of novation. (h). The suggestion that there was or might have been a novation is one which obviously never occurred to the Firm or Mr Scott apparently until a few days (at most) before the hearing of the summary judgment application. If anything, the Firm’s standpoint in the adjudication and indeed in its first series of witness statements was to the effect that there were defences of the Firm to Stannard’s claim for payment of retention. This undermines the extremely belated attempt to argue that there was some novation. 21. Decision It follows that there must be summary judgement in favour of Stannard against the Firm in the full amounts claimed and as decided by the adjudicator; that is £53,392.63 plus interest pursuant to the decision from 1 August 2014 until the date of judgment. I direct that payment should be made by 31 October 2014 which is 14 days from the date of the hearing at which I indicated in outline terms what my decision would be. It must follow that Stannard is entitled to its costs of an occasioned by the application which came to a total of £13,349.50. Mr Winser argued for indemnity costs on the basis that there simply was no real defence and that this should have been obvious to the Firm and its legal representatives. I do not consider that this is an appropriate case for indemnity costs; it is fair to say that the defence has been unsophisticated but there was just about an arguable point that there was a threshold as opposed to a jurisdictional basis of challenge. That said, Stannard’s costs are reasonably modest and would fall on a standard assessment to be reduced by no more than some £1,300 to reflect too much time been booked to the partner and for letters out and the fact that on a standard assessment by a costs judge no doubt there would otherwise be some minor adjustments. I therefore allow costs in favour of Stannard in the sum of £12,000.

Cited in 1 later judgment