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England and Wales High Court (Technology and Construction Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Technology and Construction Court) Decisions >> Vision Homes Ltd v Lancsville Construction Ltd  EWHC 2042 (TCC) (04 August 2009)
Cite as:  CILL 2750, 126 Con LR 95,  BLR 525,  EWHC 2042 (TCC)
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QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Strand, London, WC2A 2LL
B e f o r e :
| VISION HOMES LTD
|- and -
|LANCSVILLE CONSTRUCTION LTD
Martin Bowdery QC & Stuart V Kennedy (instructed by Merriman White Solicitors) for the Defendant
Hearing dates: 20th July 2009
Crown Copyright ©
MR JUSTICE CHRISTOPHER CLARKE :
"..we are not looking for compensation or to get caught in contractual negotiations..."
"LCL says: This Agreement substantially altered and drastically reduced the scope of Works. It altered the nature of the possession of the site and/or sections or parts thereafter and the issue of Practical Completion, LADS and the issuing of non-completion notices. The 'Notice of Adjudication' then particularises the effects of LCL position and continues: This project has an original contract value of £7.9 million. The contract indicates the amended document JCT 2005 Design and Build set of rules signed under seal and dated 05 October 2007. The subsequent July 2008 Agreement reduced the contract value by approximately £3 million down to £4.9 million. One of the effects of this agreement is an intention not to deduct Liquidated & Ascertained Damages. Further, or alternatively partial possession was taken with the effect of proportionate reduction of LADS. Further, the Agreement fundamentally altered the contractual matrix. Vision became in full control of the site, it was doing the majority of the Works and had CDM implications. Further, various practical completion status arose. The right to insist on performance of the contract in respect of time was lost and became at large. LCL effectively became a Vision subcontractor. Alternatively says LCL the Agreement had the effect of LCL taking partial possession of the whole site. Alternatively the effect of the Agreement is that it provides "yet another series of dates".
Adjudications Nos 1 and 2
14th May 2009
Adjudication No 3: LCL's first Notice of Intention to Refer
"6. It is Lancsville's intention to try to agree a nomination for adjudicator and if not apply to the President of the RICS in accordance with the provisions of the Contract for the appointment of an adjudicator for the resolution of the dispute or difference, the terms of which are set out below.
8. The dispute or difference between the parties arises out of or in connection with the aforesaid written construction contract in respect of the Works at Paradise Dock, Lea Bridge Rd, London.
9. The Employer has in breach of contract decided to levy LADs in respect of purported late completion. The Adjudicator is requested to investigate all the issue of the agreement and/or the change to the Employer's Requirements and the Change instruction issued by Vision Homes whereby LCL's scope of work was substantially altered and drastically reduced. This agreement then altered the nature of the possession of the site and/or sections or parts thereafter and the whole issue of practical completion, LADs, time and the issuing of non-completion notices. However the Adjudicator is not given jurisdiction to investigate and make any decision as to Lancsville's application for an extension of time."
LCL included in this notice a "Statement of Relief" sought which read as follows:
A: In respect of blocks 1 to 5 Vision Homes amended the Employer's Requirements, by agreement with LCL, and removed from their scope of works the obligations to complete the external envelope including cladding, windows and doors or such other elements as the Adjudicator in his discretion shall decide.
B: The Employer's Requirements were fundamentally changed in respect of Block 5 whereby Vision Homes and LCL carried out the construction Work jointly.
C: Vision Homes issued a Change instruction under clause 3.9 of the Contract to alter the Employer's Requirements.
D: Due to Vision Homes changing the Employer's Requirements and then undertaking either by themselves or through sub contractors all the External envelope work then, for the purposes of possession and/or Practical completion the situation was:
Practical completion of blocks 1 and 4 took place on a date not later than the 21st July 2008.
Phased partial possession by Vision Homes took place under clause 2.30 of the Contract of blocks 2, 3 and 5 in accordance with Mr Naude's letter of the 4th August 2008 reference AD/cc/2410/2 save for the stairwells of blocks 2 and 3.
Practical completion of block 2 took place on a date not later than 27th February 2009 and block 3 on a date not later than 6th March 2009. Block 5 was practically complete on a date not later than 27th March 2009.
Partial possession of section 6, save for the basement car park took place on or about the 21st July when Vision Homes commenced work on the external envelope of blocks 1 and 4 and practical completion as at 26th March still had not been achieved.
Or such other arrangement or arrangements and date or dates as to practical completion and/or part possession of the various parts or parts, section or sections as the Adjudicator in his discretion shall decide.
E: When the Employer's Requirements were amended by Vision Homes their failure to thereafter amend the Sectional Completion dates as set out in the Particulars to the Contract thereby caused time to become at large.
F: When the Employer's Requirements were amended by Vision Homes their failure to amend the amounts entered into the Sectional Completion Supplement in respect of LADS had the effect that in respect of blocks 1 to 5 they became a penalty because they were no longer a genuine pre estimate of their loss if there was late completion as the amounts entered therein failed to recognize the revised scope of works.
G: The e-mail of Mr D, Freeman of Vision Homes on the 10th of July at 0810hrs to Mr Sherry is such that Vision Homes thereafter agreed not to seek financial compensation in respect of delays for completion of the Works or the reduction in LCL's scope.
H: The notice of non compliance of the 21st November is invalid as it refers to a scope of works for which LCL was not responsible.
I: The notice of non completion of the 28th November is invalid as it refers to a scope of works for which the LCL was not responsible".
Adjudication No 4: Vision's Notice of Intention to Refer
4a. The dispute referred to Adjudication concerns the Referring Party's [i.e. Vision's] entitlement to Liquidated and Ascertained Damages in accordance with clause 2.29 of the Contract…..
h. On 1 May 2009 [Vision] wrote to [LCL] requesting payment of FIVE HUNDRED AND NINE THOUSAND POUNDS STERLING (£509,254.00) in respect of LADs within 7 days……
i. On 8 May 2009 [LCL] wrote to [Vision] requesting an extension of the payment deadline until Wednesday 13 May 2009…..
j. On 14 May 2009 [LCL's] legal representative stated that the Respondent did not intend to pay LADs……
k. A dispute accordingly exists which is capable of reference to Adjudication.
5a. [Vision] will request that the Adjudicator orders [LCL] to pay [Vision] the sum of FIVE HUNDRED AND NINE THOUSAND POUNDS STERLING (£509,254.00), or such other sum as the Adjudicator considers appropriate, within 7 days of the date of the Adjudicator's decision being delivered to the parties, or within such other period as the Adjudicator shall deem appropriate."
LCL's modified Notice of Intention to Refer
LCL's Referral Notice
"Thank you for the email. Just to clarify, our letter amounted to a jurisdictional challenge on the basis that the Referring Party's Adjudication Notice did not set out a dispute. We should be grateful if you could give an indication as to when you will make a determination on the jurisdictional point. In order to avoid unnecessary legal costs, it would be helpful if you gave such a ruling prior to the deadline for submission of our Response Document".
"Adjudication was introduced in order to save parties large legal bills. We are concerned that if we are required to produce a Response before a resolution of this very straightforward jurisdictional matter quite the opposite will occur, i.e. this will result in considerable wasted costs for no good reason.
We appreciate that you are very busy. However, if you do not have the available time to consider the jurisdictional point would it be possible for us to postpone the date for service of our Response so that the jurisdictional challenge can be heard first?"
Mr Bingham replied the same day:
"Thank you for your e-mail earlier today. I immediately looked at this challenge and could not see the force of Vision's position. I will look at it again once your Response is served. Rest assured I will resign (and do resign) from appointments"
"The Respondent reserves its position in relation to the Adjudicator's jurisdiction. Nothing in this Response should be taken as an acceptance of the Adjudicator's jurisdiction. Further submissions are made in this regard at paragraph 5 and in Appendix 1."
"87. It is the Respondent's position that the following agreement was reached:
a. The metsec and external insulated render
would be removed from the Referring Party's
scope of Works;
b. £564,561.98 and £275,451.00 would be deducted
from the Contract Sum in respect of these omissions; and
c. It was later agreed that the external envelope
would be omitted from the Referring Party's scope of Works. As no agreement was reached in relation to the valuation of the external envelope Works, the Change would be valued in accordance with clauses 5.4 to 5.7 of the Contract.
It is denied that the above omissions from the Employer's Requirements meant that the existing provisions regarding completion could [not] still apply. It is denied that the Change amended any provisions of the Contract."
"For TB meeting assistance please:
Whether the Agreements of July/August 08:
Reduced/omitted £3 million of work (para. 41 Referral)
Para. 82 Response
Para. 19 Response 1st para.
Dean Freeman's letter "lost weeks/compensation"
Removed EOT machinery
Put time at large
Left contract behind
PC/deemed pc for 1 & 4 21st July 08
Partial possession block 6 21st July 08
PC Block 2 27th Feb 09
PC Block 3 6th March 09
PC Block 5 ??
Effect either way
The 2nd June meeting
Vision's evidence - Mr Sergeant
Ms Doran's notes
"I don't think the contract is unworkable."
It is not clear from the note whether this was a general remark or related to some specific aspect.
"1. The Agreement(s) to Omit Works
The Adjudicator was concerned primarily about whether the EOT mechanism in the contract can be said to have "broken down". (This can be said to happen if the parties start to treat delay on the project in such a way that the EOT mechanism can no longer work). He raised the possibility that Dean Freeman's email of 10 July 08 could have led to this (see below). The Adjudicator was therefore interested in understanding the value of the omitted works and how it had been omitted. MW advised that both parties had agreed to omit the works and this was done in accordance with the variations mechanism in the Contract. There is no reason why the variations mechanism cannot operate with relation to omitted works – i.e. it can be used to omit a substantial sum provided that the contractor agrees. The Adjudicator wanted to debate the possible interpretation that the Contract had been varied when the work was omitted rather than the omitted work being deleted via the variations mechanism. (This may seem like a technical legal distinction – The adjudicator may think this is important because he should then be deciding that the variation to the contract meant that the EOT mechanism broke down).
2. Dean Freeman's email of 10 July 08
The Adjudicator had not yet looked at Dean Freeman's statement, as he wanted to form an objective view on the meaning of Dean's email. MW advised that the reference to "compensation" related to the additional cost of appointing an alternative sub-contractor, it was not a waiver of LADs. The Adjudicator was not convinced that there was not some agreement relating to time in this email – reference was made to "clawing back the programme", and if so, what did that agreement do to other contractual machinery, such as LAD's? Either way, the Adjudicator thought Dean's email was crucial. MW explained that an alternative interpretation would be LCL would not be responsible for any delay caused by appointing an alternative subcontractor. MW could not see how that caused the contract machinery to break down. KA argued that if the reference was to "compensation" did relate only to the cost of the works, Vision had not conducted themselves in such a manner as to support this – reference to Notional Final Account."
LCL's evidence – Mr Wallace
"22. The meeting commenced with Mr Bingham giving each side ample
opportunity to state their position and then he moved to the agenda. M s Doran, who had been dealing with the matter, was accompanied by Mr Sergeant who in fact led for Vision Homes. When the issue of the effect of the removal of 40% of the contract value was broached Vision's initial position was that it was not£3m but only £2m and they persisted in that assertion and that whatever it was it did not really make that much difference to the management of the Works. There were then many other matters discussed as to practical completion, partial possession defects and the suchlike.
23. The meeting moved to a consideration of the arrangements following the de-scope and how that impacted on all the administrative issues under the Contract for example, but not limited to, such matters as practical completion, partial possession extensions of time, the prolongation loss and expense, Principal Contractor and the suchlike. Mr Bingham floated the idea that this change was so fundamental that might it not be that the effect of what the Parties had actually done was to "leave the contract behind" and operate on an ad hoc basis because it was a bit of a mess. Maxwell Winward, being represented by an experienced solicitor Mr Sergeant rather than Ms Doran, raised no objection to this issue on jurisdictional, or any other, grounds but, rather more, enthusiastically entered into the debate albeit arguing that it was not their conclusion that this had happened. His view was that the large omission of work and the substantially altered working arrangements could be dealt within the contract framework, but he failed to acknowledge the substantial problems which this brought about, some of which Mr Bingham highlighted.
24. When Mr Bingham asked my opinion I accepted that there were
substantial difficulties in clinging to the contractual framework because it was clear, on any analysis, the parties had, by their actions, abandoned many if not all of the procedures thereunder such as:-
(a) the giving and taking of notices,
(b) Vision had commenced final account negotiations at the end of November 2008 far earlier than envisaged under the Contract),
(c) Mr Freeman had agreed to abandon the LAD provisions,
(d) there was no agreement about Principal Contractor role and the health and safety implications and also other "contractual" issues which might arise under the contract.
No doubt there were many other examples which were relevant not least of course the arrangements evidenced by Mr Freeman's letter of the 11th of December. All of these factors then made it very difficult to square the conduct of the parties with the continued operation of the JCT contract. My conclusion was that it was certainly an explanation and a logical one at that."
"Bingham Suggesting the amendments constituted a varied contract as opposed to a change under clause 5.1.
TB looking very carefully at what DF meant by no compensation, and how this impacts on whole EOT mechanism.
TB trying to almost reconstruct contract basically says real mess.
Not looking at Determination/Repudiation etc.
TB trying to see if the contract works."
"The removal of 40% of the contract value and changes to plot five, and the failure by both parties to comply with contractual notices and the suchlike leave the contract in tatters. This the wisdom of both parties agreeing the accommodation to get the scheme built and to avoid years of litigation and waste more time getting lawyers in re-drafting the Contract before proceeding."
"The Adjudicator forms the view that the parties dumped the Rule book last year. Usefully though LCL was kept on to do what it could in its crippled condition. True, the parties are willing to say that this Agreement is some form of Variation under the contract rules, which permit variations. But the obligations between LCL and Vision became completely different. It is making no sense to try to read the JCT Rule book given the major surgery to the original contract. It is the worst of all notions when the tribunal becomes tempted to manipulate clauses to somehow fit a wholly different set of events. It is also tempting to say the parties gave little or no thought to re-assembling their contract at the time of the new deal. That's wrong. They plainly gave real thought. Dean Freeman [of LCL] did not want to end up in contractual antics. He did a good deal.
The effect of the Agreement is that LCL and Vision dumped the JCT. The remaining Works was to be done 'as & when' using as best they can guidance from rates and prices in the original deal. The events completely left behind the EOT machinery, out went the LAD's. No one really knows what EOT might be due at July 2008, nor how to re-fix completion dates. Gone too is all the sophisticated machinery of partial possession, part LAD's. Vision can't claim LAD's. LCL can't claim loss and expense. Vision is to simply pay LCL a fair rate for the jobs done and LCL can come and go to site as reasonably required by Vision. At a glance it appears a mess. It is not. It is an extremely sensible arrangement given Vision thought LCL was in its death throws. Vision benefited from whatever work LCL did eventually do. So does LCL provided Vision pays up for that work.
The effects of the 'Agreement'
(1) The dates for completion of Sections (per JCT) fall away
(2) LCL is on a 'beck and call' arrangement
(3) Vision is to pay a fair price for the Works done.
(4) The 'Section' sums fall away.
(5) The dates for possession fall away.
(6) The LAD rates, arrangements and EOT are unworkable.
(7) LCL is to work with any other company on the site doing work as
required by Vision, as might a subcontractor working alongside other subcontractors.
(8) LCL is to carry out the Works indicated by Vision from time-to-
Time as reasonably required and to a reasonable price.
(9) The definition 'Completion Dates' as explained in JCT do not
(10) The following JCT clauses (inter alia) are unworkable: 2.3; 2.4;
2.5; 2.6 as amended; 2.23; 2.24; 2.25; 2.26; 2.27; 2.28; 2.29; 2.30; 2.31; 2.34; 2.35 and 2.36
(11) It is impossible to declare that 'Practical Completion' takes
(a) He granted declarations A, B, C and G claimed by LCL;
(b) In respect of declaration D, he held that no mechanism for Practical Completion or partial possession existed and/or survived the Agreement. Instead, Mr. Bingham declared that "LCL is working to the reasonable beck and call of Vision";
(c) He did not grant declaration E in the terms sought. Instead he declared that "Time became at large for the reasons given";
(d) He did not grant declaration F in the terms sought. Instead he declared that "The EOT clause and LAD provisions fell away for the reasons given";
(e) He did not grant declarations H and I in the terms sought. Instead he declared that "Notices of non-completion are ineffective for the reasons given".
After the Decision
"In acknowledging that I cannot bind the Parties on jurisdiction, either my own or Mr Bingham's, I must confirm my present view based on the information available that given Mr Bingham's decision and my view on the arguments, cases presented etc the decision given by Mr Bingham does appear to relate to the same or substantially the same dispute as the one referred to me.
On the question of Mr Bingham's decision being invalid, I consider it would be inappropriate for me to advise the Parties of my view given the nature of that question and the information available.
I am of the opinion then that if I ultimately conclude that the decision of Mr Bingham concerns a dispute the same or substantially the same as the dispute in this Referral, I should resign."
Adjudication No 5
The adjudicator's decision
Want of jurisdiction - Timing
" Notice of Intention to seek Adjudication
1. - (1) Any party to a construction contract (the "referring party") may give written notice (the "notice of adjudication") of his intention to refer any dispute arising under the contract, to adjudication.
(2) The notice of adjudication shall be given to every other party to the contract.
(3) The notice of adjudication shall set out briefly -
(a) the nature and a brief description of the dispute and of the parties involved,
(b) details of where and when the dispute has arisen,
(c) the nature of the redress which is sought, and
(d) the names and addresses of the parties to the contract (including, where appropriate, the addresses which the parties have specified for the giving of notices).
2. - (1) Following the giving of a notice of adjudication and subject to any agreement between the parties to the dispute as to who shall act as adjudicator -
(a) the referring party shall request the person (if any) specified in the contract to act as adjudicator, or
(b) if no person is named in the contract or the person named has already indicated that he is unwilling or unable to act, and the contract provides for a specified nominating body to select a person, the referring party shall request the nominating body named in the contract to select a person to act as adjudicator…"
(2) A person requested to act as adjudicator in accordance with the provisions of paragraph (1) shall indicate whether or not he is willing to act within two days of receiving the request.
3. The request referred to in paragraphs 2, 5 and 6 shall be accompanied by a copy of the notice of adjudication.
"9 Mr. Lee submitted that those provisions had been complied with. Mr. Pratt indicated on 12th September that he was unwilling or unable to act. Thus the condition contained in paragraph 2(b) was fulfilled. On a literal reading of the provisions, that submission cannot be gainsaid. But it seems to me not to be in accordance with the general intendment of the provisions. What is intended, in my judgment, is that the notice of adjudication comes first. Then the referring party is to request the person specified in the contract to act as adjudicator, unless he has already indicated to the parties that he is unwilling or unable to act. The request must doubtless be in writing since it must be accompanied by a copy of the notice of adjudication. The person specified must indicate within two days whether or not he is willing to act. If he indicates that he is not, then provided that that indication is made to all parties the referring party may proceed under paragraph 6(1) (b) to request the nominating body to select a person to act as adjudicator. What happened here is that no request at all was made under paragraph 2(a). The procedure was bypassed. And it is in my judgment implicit in paragraph 2(b), as it is explicit in paragraph 6, that the unwillingness or inability of the specified person to act should be indicated to all parties.
10 If Mr. Lee's construction of the scheme were correct, it would be open to an intending claimant who did not want the specified person to act as the adjudicator to ascertain, without the knowledge of the other party, when the specified person would not be available, and to serve the notice of adjudication [Semble the request to act] at that time. By the time the notice of adjudication was served, the adjudicator might have become free to act. Yet he would not be appointed. The other party would suffer prejudice in that he would be deprived of having the adjudication carried out by the person of his (and the other party's) first choice. The same could apply in the absence of any ulterior motive on the part of the claimant.
11 I conclude that the provisions of the scheme relating to the appointment of the adjudicator were not complied with. Mr. Dennys submitted, and I accept, that non-compliance with those provisions deprives the adjudicator of jurisdiction unless the defendant has submitted to the adjudicator's jurisdiction in the full sense of having agreed not only that the adjudicator should rule on the issue of jurisdiction but also that it would be bound by that ruling (see the words of Simon Brown L.J., as he then was, in Thomas-Fredric (Construction) Limited v. Keith Wilson  EWCA Civ 1494, 21st October 2003). However, Mr. Lee submitted that non-compliance with the provisions of the scheme did not affect the validity of the appointment because, on the evidence, Mr. Pratt would in any event have declined to act as adjudicator and a nomination through the Chartered Institute of Arbitrators would have been made. Thus the defendant had suffered no prejudice."
Want of jurisdiction – departure from what agreed
"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 only be in rare circumstances that the courts will interfere with the decision of an adjudicator….."
"145. It seems to me that it is clear from the Act that it is for the party who refers the dispute to adjudication to define the issues which are referred. In the absence of agreement between the parties to vary the terms on which the dispute is referred, the adjudicator has no jurisdiction to vary the basis on which the reference has been made.
146…..If the existing referral does not enable him to deal with the dispute in the way in which he wishes, he is powerless to alter the terms of the referral in the absence of the agreement of both parties. So long as the dispute remains before him, he must decide only the issues referred to him."
I respectfully agree.
Definition of the issues
"to investigate all the issue of the agreement and/or the change to the Employer's Requirements and the Change instruction issued by Vision Homes whereby LCL's scope of work was substantially altered and drastically reduced. This agreement then altered the nature of the possession of the site and/or sections or parts thereafter and the whole issue of practical completion, LADs, time and the issuing of non-completion notices."
Inconsistency with the agreement of the parties
"43. I conclude that the parties had agreed the position as to the contractual relationship between them, namely that their agreement was based on the LOI. The contractual relationship was not in issue. Accordingly, the adjudicator did not have jurisdiction to decide the matters he dealt with at paragraphs 6.2.2 and 6.2.3 of his decision."
i. that LCL was submitting that the LADs, if potentially claimable, had, in the light of the de-scoping, become a penalty: see para 26 above;
ii. that LCL was saying that the agreement amounted to a waiver of future LADs: see para 26 and para 2 of Ms Doran's note to Vision at para 31 above;
iii. that the adjudicator had indicated that what had been agreed as the way forward may have had the effect of removing the EOT machinery and the LADs, put time at large and left the contract behind: see the agenda at para 25 above;
iv. that he had also said that the tribunal might have to be engaged in constructing a contract out of what had happened: see para 29 above;
v. that the adjudicator had indicated that he was concerned with whether the EOT mechanism and other contractual machinery such as the LAD provisions could still operate: see Ms Doran's note to Vision, para 1.
"An adjudicator must 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."
The Scheme makes no provision for the resignation of an adjudicator where the dispute that he is to decide has previously been referred to adjudication but no decision has been taken in that adjudication.