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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Harding (t/a M J Harding Contractors) v Paice & Anor [2015] EWCA Civ 1231 (01 December 2015) URL: https://www.bailii.org/ew/cases/EWCA/Civ/2015/1231.html Cite as: [2016] 1 WLR 4068, [2016] CP Rep 10, [2015] 2 CLC 1003, [2016] 2 All ER 819, [2016] BLR 85, [2015] EWCA Civ 1231, 163 Con LR 299, [2016] WLR 4068, [2016] 2 All ER (Comm) 656 |
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![]() ![]() ![]() ![]() ![]() ![]() ![]() | ||
CIVIL
DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE,
QUEEN'S BENCH DIVISION
THE HONOURABLE MR
JUSTICE
EDWARDS-STUART
HT-14-371
![]() Strand, ![]() |
||
![]() |
B e f o r e :
JUSTICE
JACKSON
LADY
JUSTICE
RAFFERTY
and
LADY JUSTICE
GLOSTER
____________________
![]() ![]() ![]() ![]() (TRADING AS ![]() ![]() ![]() ![]() ![]() ![]() ![]() | Appellant |
|
and |
||
(1) GARY GEORGE LESLIE ![]() (2) ![]() |
Respondents |
____________________
Judgment
of
WordWave International Limited
Trading as DTI
165 Fleet Street, London EC4A 2DY
Tel No: 020 7404 1400, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Mr
Adrian Williamson QC and
Mr
Gideon Scott Holland (instructed by Davies & Davies Associates Ltd) for the Appellant
Mr
David Sears QC and
Mr
Charles Pimlott (instructed by Silver Shemmings Llp) for the Respondents/Defendants
Hearing date: Wednesday 18th November 2015
____________________
VERSION
OF
JUDGMENT
Crown Copyright ©
Part 1. Introduction | Paragraphs 2 to 15 |
Part 2. The facts | Paragraphs 16 to 34 |
Part 3. The present proceedings | Paragraphs 35 to 41 |
Part 4. The appeal to the Court of Appeal | Paragraphs 42 to 47 |
Part 5. The construction of paragraph 9 (2) of Part I of the Scheme | Paragraphs 48 to 61 |
Part 6. The scope and effect of ![]() ![]() |
Paragraphs 62 to 74 |
Part 7. Executive summary and conclusion | Paragraphs 75 to 79 |
"Right to refer disputes to adjudication.
(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.
For this purpose "dispute" includes any difference.
(2) The contract shall include provision in writing so as to—
(a) enable a party to give notice at any time of his intention to refer a dispute to adjudication;
(b) provide a timetable with the object of securing the appointment of the adjudicator and referral of the dispute to him within 7 days of such notice;
(c) require the adjudicator to reach a decision within 28 days of referral or such longer period as is agreed by the parties after the dispute has been referred;
(d) allow the adjudicator to extend the period of 28 days by up to 14 days, with the consent of the party by whom the dispute was referred;
(e) impose a duty on the adjudicator to act impartially; and
(f) enable the adjudicator totake
the initiative in ascertaining the facts and the law.
(3) The contract shall provide in writing that the decision of the adjudicator is binding until the dispute is finally determined by legal proceedings, by arbitration (if the contract provides for arbitration or the parties otherwise agree to arbitration) or by agreement.
The partiesmay
agree to accept the decision of the adjudicator as finally determining the dispute.
….
(5) If the contract does not comply with the requirements of subsections (1) to (4), the adjudication provisions of the Scheme for Construction Contracts apply."
"Payment notices: contractual requirements
(1) A construction contract shall, in relation to every payment provided for by the contract—
(a) require the payer or a specified person to give a notice complying with subsection (2) to the payee not later than five days after the payment due date, or
(b) require the payee to give a notice complying with subsection (3) to the payer or a specified person not later than five days after the payment due date.
(2) A notice complies with this subsection if it specifies—
(a) in a case where the notice is given by the payer—
(i) the sum that the payer considers to be or to have been due at the payment due date in respect of the payment, and
(ii) the basis on which that sum is calculated;
(b) in a case where the notice is given by a specified person—
(i) the sum that the payer or the specified person considers to be or to have been due at the payment due date in respect of the payment, and
(ii) the basis on which that sum is calculated.
(3) A notice complies with this subsection if it specifies—
(a) the sum that the payee considers to be or to have been due at the payment due date in respect of the payment, and
(b) the basis on which that sum is calculated."
"Requirement to pay notified sum
(1) Subject as follows, where a payment is provided for by a construction contract, the payermust
pay the notified sum (to the extent not already paid) on or before the final date for payment.
(2) For the purposes of this section, the "notified sum" in relation to any payment provided for by a construction contractmeans—
(a) in a case where a notice complying with section 110A(2) has been given pursuant to and in accordance with a requirement of the contract, the amount specified in that notice;
(b) in a case where a notice complying with section 110A(3) has been given pursuant to and in accordance with a requirement of the contract, the amount specified in that notice;
(c) in a case where a notice complying with section 110A(3) has been given pursuant to and in accordance with section 110B(2), the amount specified in that notice.
(3) The payer or a specified personmay
in accordance with this section give to the payee a notice of the payer's intention to pay less than the notified sum.
(4) A notice under subsection (3)must
specify—
(a) the sum that the payer considers to be due on the date the notice is served, and
(b) the basis on which that sum is calculated.
It is immaterial for the purposes of this subsection that the sum referred to in paragraph (a) or (b)may
be zero.
(5) A notice under subsection (3)—
(a)must
be given not later than the prescribed period before the final date for payment, and
(b) in a case referred to in subsection (2)(b) or (c),may
not be given before the notice by reference to which the notified sum is determined.
(6) Where a notice is given under subsection (3), subsection (1) applies only in respect of the sum specified pursuant to subsection (4)(a).
(7) In subsection (5), "prescribed period"means—
(a) such period as the partiesmay
agree, or
(b) in the absence of such agreement, the period provided by the Scheme for Construction Contracts."
"9 – (1) An adjudicatormay
resign at any time on giving notice in writing to the parties to the dispute.
(2) An adjudicatormust
resign where the dispute is the same or substantially the same as one which has previously been referred to adjudication and a decision has been
taken
in that adjudication."
"Payment notice
9.—(1) Where the parties to a construction contract fail, in relation to a payment provided for by the contract, to provide for the issue of a payment notice pursuant to section 110A(1) of the Act, the provisions of this paragraph apply.
(2) The payermust,
not later than five days after the payment due date, give a notice to the payee complying with sub-paragraph (3).
(3) A notice complies with this sub-paragraph if it specifies the sum that the payer considers to be due or to have been due at the payment due date and the basis on which that sum is calculated.
(4) For the purposes of this paragraph, it is immaterial that the sum referred to in subparagraph (3)may
be zero.
(5) A payment provided for by the contract includes any payment of the kindmentioned
in paragraph 2, 5, 6, or 7 above.
Notice of intention to pay less than the notified sum
10. Where, in relation to a notice of intention to pay less than the notified summentioned
in section 111(3) of the Act, the parties fail to agree the prescribed period
mentioned
in section 111(5), that notice
must
be given not later than seven days before the final date for payment determined either in accordance with the construction contract, or where no such provision is
made
in the contract, in accordance with paragraph 8 above."
"Termination byContractor
![]()
8.9 Default by Employer
.1 If the Employer:
.1 does not pay by the final date for payment the amount due to theContractor
in accordance with clause 4.11 and/or any
VAT
properly chargeable on that amount; or
.2 interferes with or obstructs the issue of any certificate due under the Contract; or
.3 fails to comply with clause 7.1; or
.4 fails to comply with clause 3.18,
theContractor
![]()
may
give to the Employer a notice specifying the default or defaults (the 'specified default or defaults').
.2 If before practical completion of the Works the carrying out of the whole or substantially the whole of the uncompleted Works is suspended for a continuous period of the length stated in the Contract Particulars by reason of:
.1 Architect/Contract Administrator's instructions under clause 2.13, 3.11 or 3.12; and/or
.2 any impediment, prevention or default, whether by act or omission, by the Employer, the Architect/Contract Administrator, the Quantity Surveyor or any of the Employer's Persons
(but in either case excluding such instructions as are referred to in clause 8.11.1.2), then, unless in either case that is caused by the negligence or default of theContractor
or of any of the
Contractor's
Persons, the
Contractor
![]()
may
give to the Employer a notice specifying the event or events (the 'specified suspension event or events').
.3 If a specified default or a specified suspension event continues for 14 days from the receipt of notice under clause 8.9.1 or 8.9.2, theContractor
![]()
may
on, or within 21 days from, the expiry of that 14 day period by a further notice to the Employer terminate the
Contractor's
employment under this Contract.
…
Consequences of Termination under clauses 8.9 to 8.12, etc.
8.12 If theContractor's
employment is terminated under any of clauses 8.9 to 8.11, under clause 6.11.2.2 or under paragraph C.4.4 of Schedule 1:
.1 no further sums shall become due to theContractor
otherwise than in accordance with this clause 8.12;
.2 theContractor
shall with all reasonable dispatch remove or procure the removal from the site of any temporary buildings, plant, tools and equipment belonging to the
Contractor
and
Contractor's
Persons and, subject to the provisions of clause 8.12.5, all goods and
materials
(including Site
Materials);
![]()
.3 where theContractor's
employment is terminated under clause 8.9 or 8.10, the
Contractor
shall as soon as reasonably practicable prepare and submit an account or, where terminated under clause 8.11 or 6.11.2.2 or under paragraph C.4.4 of Schedule 1, the
Contractor
shall at the Employer's option either prepare and submit that account or, not later than 2
months
after the date of termination, provide the Employer with all documents necessary for the Employer to do so, which the Employer shall do with reasonable dispatch (and in any event within 3
months
of receipt of such documents). The account shall set out the amounts referred to in clauses 8.12.3.1 to 8.12.3.4 and, if applicable, clause 8.12.3.5, namely:
.1 the totalvalue
of work properly executed at the date of termination of the
Contractor's
employment, ascertained in accordance with these Conditions as if the employment had not been terminated, together with any other amounts due to the
Contractor
under these Conditions;
.2 any sums ascertained in respect of direct loss and/or expense under clause 4.17 (whether ascertained before or after the date of termination);
.3 the reasonable cost of removal under clause 8.12.2;
.4 the cost ofmaterials
or goods (including Site
Materials)
properly ordered for the Works for which the
Contractor
then has paid or is legally bound to pay;
.5 any direct loss and/or damage caused to theContractor
by the termination;
.4 the account shall include the amount, if any, referred to in clause 8.12.3.5 only where theContractor's
employment is terminated either:
.1 under clause 8.9 or 8.10; or
.2 under clause 8.11.1.3, if the loss or damage to the Works occasioned by any of the Specified Perils was caused by the negligence or default of the Employer or of any of the Employer's Persons;
.5 aftertaking
into account amounts previously paid to the
Contractor
under this Contract, the Employer shall pay to the
Contractor
(or
vice
![]()
versa)
the amount properly due in respect of the account within 28 days of its submission to the other Party, without deduction of any retention. Payment by the Employer for any such
materials
and goods as are referred to in clause 8.12.3.4 shall be subject to such
materials
and goods thereupon becoming the Employer's property"
…
"Adjudication
9.2 If a dispute or difference arises under this Contract which either Party wishes to refer to adjudication, the Scheme shall apply, subject to the following:
.1 for the purposes of the Scheme the Adjudicator shall be the person (if any) and the nominating body shall be that stated in the Contract Particulars; …"
The nominating body in this case was the Royal Institution of Chartered Surveyors.
i) A decision that PS, having failed to serve any effective Pay Less notice, were obliged to pay £397,912 to Harding
pursuant to section 111 (1) of the 1996 Act; alternatively
ii) A decision that £397,912 was the sum properly due to Harding
under clause 8.12 of the contract conditions.
i) The employer's termination of the contract was invalid.
ii) The contractor
effectively terminated the contract on the grounds of lack of instructions.
iii) PS's Pay Less notice was invalid because it did not specify the basis of the employer's contentions.
iv) Accordingly under section 111 of the 1996 Act PS were required to pay £397,912 to Harding.
v)
In those circumstances it was not necessary to decide whether or not £397,912 represented a correct
valuation
of the works in accordance with clause 8.12 of the contract conditions.
"i. That theValue
of the Contract Works (as per Priced Document: Contract Sum Analysis) is the sum of £340,032,60 or such other sum as the Adjudicator shall decide;
ii. That thevalue
of
Variations
and/or loss and/or expense and/or damages is in the sum of -£5,473,01 or such other sum as the Adjudicator shall decide;
iii. That thevalue
of loss of profit is in the sum of £ NIL or such other sum as the Adjudicator shall decide;
iv. That thevalue
of abatement and/or set off for defective works is in the sum of £45,400.00 or such other sum as the Adjudicator shall decide;
v.
As to the amount due from
Harding
to us or from us to
Harding
as applicable;…"
i) The adjudicator decided that PS were obliged to pay the sum shown on the face of the contractor's
account because they had failed to serve a compliant Pay Less notice.
ii) As a result of the adjudicator's decision PS were obliged to pay that sum over to Harding,
which they had duly done.
iii) The failure to serve a compliant Pay Less notice could not deprive PS for ever of the right to challenge the contractor's
account.
iv) PS were entitled to have determined either by adjudication or litigation the question of what sum was properly due in respect of Harding's
account.
v)
Accordingly PS were entitled to proceed with the fourth adjudication.
i) The judge
erred in his construction of paragraph 9 (2) of Part I of the Scheme.
ii) The judge
erred in his analysis of the scope and effect of
Mr
Linnett's decision in the third adjudication.
"31. Section 108(3) of the 1996 Act and paragraph 23 of the Scheme provide for the temporary binding finality of an adjudicator's decision.More
than one adjudication is permissible, provided a second adjudicator is not asked to decide again that which the first adjudicator has already decided. Indeed paragraph 9(2) of the Scheme obliges an adjudicator to resign where the dispute is the same or substantially the same as one which has previously been referred to adjudication and a decision has been
taken
in that adjudication.
32. So the question in each case is, what did the first adjudicator decide? The first source of the answer to that question will be the actual decision of the first adjudicator. In the present appeal,Mr
Holt did not even
take
us to the first adjudicator's decision, although he was invited
more
than once by the court to do so. He was conscious, no doubt, that it would show, as it does, that the decision was limited to the grounds for extension of time in the two letters.
33. The scope of an adjudicator's decision will, of course, normally be defined by the scope of the dispute that was referred for adjudication. This is the plain expectation to be derived from section 108 of the 1996 Act and paragraphs 9(2) and 23 of the Scheme. That is also the plain expectation of paragraph 9(4) of the Scheme, which refers to a dispute whichvaries
significantly from the dispute referred to the adjudicator in the referral notice and which for that reason he is not competent to decide. There
may
of course be some flexibility, in that the scope of a dispute referred for adjudication
might
by agreement be
varied
in the course of the adjudication."
"Whether dispute A is substantially the same as dispute B is a question of fact and degree. If thecontractor
identifies the same Relevant Event in successive applications for extensions of time, but gives different particulars of its expected effects, the differences
may
or
may
not be sufficient to lead to the conclusion that the two disputes are not substantially the same. All the
more
so if the particulars of expected effects are the same, but the evidence by which the
contractor
seeks to prove them is different."
"CONCLUSION
Accordingly, the dispute hereby referred and whatMJH
seeks is:
159.1. pursuant to, amongst others, paragraphs 20 to 26 above [these paragraphs rely upon section 111 of the 1996 Act and the lack of avalid
Pay Less notice], a Decision that the Employer
must
and shall immediately pay
MJH
the sum of £397,912.48 being the outstanding sum under the Contract since 6 September 2014 or such other sum as the Adjudicator shall decide;
159.2 in the alternative, without prejudice toMJH's
primary position which is expressly reserved, a Decision that after
taking
into account amounts actually and physically previously paid to
MJH
under the Contract the amount properly due to
MJH
in respect of the account and that shall be paid by the Employer to
MJH
on or before 6 September 2014, without deduction of any retention, (or any other sum for that
matter),
shall be the sum of £397,912.48 in accordance with
MJH's
Cl.8.12 Account (which forms Exhibit A attached hereto) or such other sum as the Adjudicator shall decide."
"185. For the avoidance of doubt, I stress that I have not decided on themerits
of
Harding's
![]()
valuation
and have not decided that £397,912.48 represents a correct
valuation
of the works. The parties
made
submissions in this adjudication about the proper
valuation
but these did not fall to be considered by
me
because of the rule relating to a notified sum becoming automatically due in the absence of a
valid
pay-less notice."
"What Lidlmight
have done, after
Mr
Bergin's decision, was to have sought a declaration from an adjudicator as to what is quite clearly in dispute which is the true
value
of the final account."
"SheriffTaylor's
analysis, once articulated, is obviously right. And it has a series of advantages:
(a) Itmakes
irrelevant the problem with the narrow construction – namely that Parliament was setting up a complex and fuzzy line between sums due on the one hand and counterclaims on the other – a line somewhere to be drawn between set-off, claims for breach of contract which do no
more
than reduce the sum due and claims which go further, abatement and so on.
(b) It provides a fair solution, preserving the builder's cash flow but not preventing the client who has not issued a withholding notice from raising the disputed items in adjudication or even legal proceedings.
(c) It requires the client who is going to withhold to be specific in his notice about howmuch
he is withholding and why, thus limiting the amount of withholding to specific points. And these
must
be raised early.
(d) It does not preclude the client who has paid from subsequently showing he has overpaid. If he has overpaid on an interim certificate thematter
can be put right in subsequent certificates. Otherwise he can raise the
matter
by way of adjudication or if necessary arbitration or legal proceedings."
"18. I held [in ISGv
Seevic] that if an employer fails to serve the relevant notices under this form of contract it
must
be deemed to have agreed the
valuation
stated in the relevant interim application, right or wrong. Accordingly, the adjudicator
must
be
taken
to have decided the question of the
value
of the work carried out by the
contractor
for the purposes of the interim application in question.
19. However, Imade
it clear that this agreement as to the amount stated in a particular interim application (and hence as to the
value
of the work on the relevant
valuation
date) could not constitute any agreement as to the
value
of the work at some other date (see paragraph 31).
20. Thismeans
that the employer cannot bring a second adjudication to determine the
value
of the work at the
valuation
date of the interim application in question. But it does not
mean
any
more.
There is nothing to prevent the employer challenging the
value
of the work on the next application, even if he is contending for a figure that is lower than the (unchallenged) amount stated in the previous application. If this was not
made
clear by
my
![]()
judgment,
then it should have been, and it is certainly
made
clear by the decision of the Court of Appeal in Rupert
Morgan
Building Services (LLC) Ltd
v
![]()
Jervis
[2004] 1 WLR 1867, in particular the passage from paragraph 14 that is set out in paragraph 30 below.
My
![]()
judgment
in ISG
v
Seevic was not intended to go behind that."
Lady Justice
Rafferty:
Lady Justice Gloster: