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You are here: BAILII >> Databases >> England and Wales High Court (Technology and Construction Court) Decisions >> VHE Construction plc v. RBSTB Trust Co Ltd [2000] EWHC Technology 181 (13th January, 2000) URL: https://www.bailii.org/ew/cases/EWHC/TCC/2000/181.html Cite as: [2000] EWHC 181 (TCC), [2000] BLR 187, [2000] EWHC Technology 181, 70 Con LR 51, (2000) 2 TCLR 278 |
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In the High Court
of Justice
Technology and Construction
Court
Before: His Honour Judge Hicks QC
Between
VHE
Construction
PLC
Claimant
- and -
RBSTB
Trust
Co
Limited
(as trustee
of the Mercury Property Fund)
Defendant
--------------------------------------------------------------
Case number: HT 99 241
Date of Judgment: 13 January 2000
Stephen Furst QC for the Claimant (Solicitors: Rowe & Maw)
Christopher Thomas QC and Jonathan Lee for the Defendant (Solicitors: Nabarro Nathanson)
Adjudication - Compliance
with adjudicator's decision
- Whether
compliance
SIZE=1> enforceable by
summary judgment despite assertion of set-off - Whether set-off raised before
date for payment under decision - Housing Grants,
Construction
and Regeneration
Act 1996, section 111.
The text of this judgment approved by His Honour Judge John Hicks QC is as follows:
JUDGMENT
Introduction
1. The Claimant, VHE
Construction
PLC
("
VHE"),
is the
contractor
under a
construction
contract
with the Defendant,
RBSTB
Trust
Co.
Limited ("
RBSTB"),
and applies for summary judgment for sums claimed by way of the enforcement
of the decisions of two adjudicators appointed under the Housing Grants,
Construction
and Regeneration Act 1996 ("the Act").
History
2. On 5 January 1999 RBSTB
as employer and
VHE
as
contractor
entered into a JCT standard form of building
contract
with
contractor's
design,
1981 edition as amended, for ground remediation works at Leamington Spa at a
contract
sum of £668,044, the dates of possession having been 23 November 1998
for section 1 and 26 October 1998 for section 2, and the dates for
completion
being 3 January 1999 and 31 January 1999 respectively.
3. The contract
contained
provisions for interim payments.
Clause 30.1.1 provided that interim payments should be made by
RBSTB
to
VHE
in accordance with (inter alia) clauses 30.1 to 30.4. By clause 30.1.2 the amount
due as an interim payment was to be the gross
valuation
as referred to (in this
instance) in clause 30.2A. Clause 30.2A
contained,
in its sub-clauses, a detailed
code
for the
computation
of the gross
valuation.
Clause 30.3.1 provided for
VHE
to make applications for interim payments. Clauses 30.3.3 to 30.3.6 read
as follows:
30.3.3 Not later than five days after receipt of an Application for Payment
[RBSTB]
shall [give] a written notice specifying the amount of payment proposed
to be made in respect of that Application, the basis on which such amount
is calculated and to what the amount relates and, subject to clause 30.3.4,
shall pay the amount proposed no later than the final date for payment.
30.3.4 Not later than five days before the final date for payment of an amount
due pursuant to clause 30.3.3 [RBSTB]
may give a written notice to [
VHE]
which
shall specify any amount proposed to be withheld and/or deducted from that
due amount, the grounds for such withholding and/or deduction and the amount
of withholding and/or deduction attributable to each ground.
30.3.5 Where [RBSTB]
does not give any written notice pursuant to clause
30.3.3 and/or to clause [
RBSTB]
shall pay [
VHE]
the amount stated in the Application
for Interim Payment.
30.3.6 The final date for payment of an amount due in an Interim Payment
shall be 14 days from the receipt by [RBSTB]
of [
VHE's]
Application for Interim
Payment or within 28 days from the date of receipt by [
RBSTB]
from [
VHE]
of
a
copy
of each Application for Interim Payment together with an appropriate
VAT
invoice .... , whichever is the later.
4. Practical completion
of both sections was certified as having
taken place on 28 May 1999.
5. On 10 June 1999 VHE
submitted application 4 for £883,317.49
plus £154,580.56
VAT,
a total of £1,037,898.05.
6. In relation to that application RBSTB
served no notice under
clause 30.3.3 or 30.3.4. and
VHE
submitted no
VAT
invoice within clause 30.3.6.
7. Clause 39A of the contract
provided for adjudication in
accordance with section 108 of the Act of any dispute or difference referred
by either party to such adjudication. Clause 39A
complied
with the requirements
of section 108 and therefore had effect to the exclusion of the statutory scheme
which applies under section 108(5) in default of any
compliant
contractual
scheme.
8. On 20 August 1999 VHE
served a notice of adjudication which,
as summarised in the adjudicator's decision, sought "full payment for all works,
variations
and loss and expense detailed and outstanding in application for
payment 4" and other sums. On 23 August Christopher Michael Linnett was appointed
to act as adjudicator, on 27 August
VHE
served a referral and on 10 September
RBSTB
served a response dated 9 September.
9. Mr Linnett issued his decision on 5 October 1999. He first
dealt with and rejected an argument by RBSTB
against liability which has not
featured in the issues before me, and as to which I need therefore say nothing.
He next addressed the issue whether
RBSTB
was entitled to withhold payment until
VHE
provided a
VAT
invoice and decided that it was. He
continued:
I accept that [RBSTB
is] currently under no obligation to pay the sum applied
for, but I believe it is incumbent upon me to decide what the position would
be if a
VAT
invoice is issued. I do that by deciding the third and fourth
issues.
10. The third issue was whether VHE
was automatically entitled
to the amount applied for or whether
RBSTB
was entitled to pay less by relying
on rights of abatement or a "proper" assessment under clauses 30.1. and 30.2A.
Mr Linnett, having taken leading
counsel's
advice on that and other questions,
decided in
conformity
with that advice that
RBSTB
was not entitled to abate
or challenge the amount applied for unless the requirements of clause 30.3.3
had been
complied
with (paragraph 31 of his decision), and found that as they
had not
VHE
would, subject to the decision on the fourth issue, be entitled
to the amount applied for within 28 days of the issue of a
VAT
invoice (paragraph
32).
11. The fourth issue was whether, despite the decision on the
third issue that clause 30.3.5 entitled VHE
to receive the sum applied for without
deduction, Mr Linnett
could,
as adjudicator, review and revise application 4
so as to reduce it to any lesser sum which he might determine to be the sum
referred to in clauses 30.1.2 and 30.2A. His decision, again in
conformity
with
leading
counsel's
advice, was that he must order payment in full but
could,
if the notice of referral were wide enough, review the application "and order
repayment" (his emphasis) once payment had been made. He wrote:
I accept that I must decide (or "order" to use Counsel's
words) that payment
is due and this is the effect of paragraph 32 above.
12. Mr Linnett went on to consider
whether the referral to
him was wide enough to empower him to review or revise the
value
of the application,
so as to amend it to any other sum, and decided that it was not.
13. Finally Mr Linnett considered
and rejected submissions
by
VHE
on certain minor issues which do not affect the questions before me.
14. On 7 October 1999 VHE's
VAT
invoice for the amount of application
4 was received by
RBSTB.
The period of 28 days from that date was due to expire
on 4 November 1999.
15. On 12 October 1999 Mr M.L. Standinger was appointed to
act as adjudicator in a second adjudication under clause 39A, initiated by RBSTB.
Its notice of referral of 13 October 1999 submitted that the adjudicator had
power to open up, review and revise application 4. In the adjudication it sought
the following remedies:
A revision of application 4 to determine, in accordance with clause 30.1.2 .... the properly calculated sum which ought to have been applied for ("the revised sum").
A peremptory decision that the sum payable under application 4 be reduced
to the revised sum, and/or that upon payment by [RBSTB]
in respect of application
4 of any sum greater than the revised sum then
VHE
shall immediately be liable
to, and shall, repay to [
RBSTB]
any difference between the sum paid and the
revised sum.
16. In the course
of the adjudication Mr Standinger obtained
RBSTB's
confirmation
of his understanding that it was seeking a decision "which
works in the following way", namely that he had power to open up, review and
revise application 4 and determine the proper sum which ought to have been applied
for in accordance with clause 30.1.2 and that (inferentially after having determined
such a sum) he had the power:
.... to order repayment of any sum in excess of that which ought properly to have been applied for even though in the meantime a greater sum may have accrued for payment by reason of a lack of challenge to the amount applied for.
17. As to the merits on a review, should it occur, RBSTB
contended
for a reduction of application 4 to £109,566.61, including
VAT,
on
various
grounds,
which did not include any claim to deduct liquidated damages for delay.
18. On 4 November 1999 the 28 days from VHE's
VAT
invoice expired.
There had not been any notice by
RBSTB
expressed to be given under clause 30.3.4.
RBSTB
did not pay.
19. On 9 November 1999 Mr Standinger issued his decision. He
decided that he had the powers summarised or set out in paragraph 16 above and
in exercise of them he determined that the properly calculated sum in accordance
with clause 30.1.2 was £254,831.83, including VAT,
("the revised sum") and decided:
peremptorily, that the sum payable under application 4 be reduced to the
revised sum, and/or that upon payment by [RBSTB]
in respect of application
4 of any sum greater than the revised sum then
VHE
shall immediately be liable
to, and shall, repay to [
RBSTB]
any difference between the sum paid and the
revised sum.
20. Clause 24 of the contract
dealt with damages for non-
completion.
Clause 24.1 provided for
RBSTB
to issue a notice if
VHE
failed to
complete
a
section of the works by the
completion
date, and such a notice had been given
on 25 February 1999. Clause 24.2.1, omitting irrelevant qualifications and
conditions,
read:
Subject to the issue of any notice under clause 24.1 [VHE]
shall, as [
RBSTB]
may require in writing .... pay or allow to [
RBSTB]
liquidated and ascertained
damages [at the appropriate rate] for the period between the
Completion
Date
of a Section and the date of practical
completion
of such Section and [
RBSTB]
may deduct the same from any monies due or to become due to [
VHE]
under this
Contract
.... or [
RBSTB]
may recover the same from [
VHE]
as a debt.
21. RBSTB
had not submitted any requirement in writing under
clause 24.2.1 at any stage so far recounted. On 11 November 1999 its project
managers wrote to
VHE
on its behalf "to advise you [
RBSTB
intends] to deduct
Liquidated and Ascertained Damages in accordance with the attached calculation".
The letter stated that the amount shown would be deducted from any monies due
or recovered as a debt. The calculation showed a total sum of £207,857.14. The
argument before me was
conducted
on the basis that that letter was in form a
sufficient requirement in writing for the purposes of clause 24.2.1, and I am
content
to adopt that basis.
22. On 19 November 1999 VHE's
solicitors wrote and delivered
to
RBSTB
a letter before action demanding payment of £254,831.83. On the same
date
RBSTB's
solicitors replied by fax that (as was the case) a telegraphic
transfer of £46,974.69 had been made by
RBSTB
that day. It was stated that that
took into account a deduction of £207,857.14 for liquidated damages as, arithmetically,
it does.
The claim
23. On 24 November 1999 VHE
issued in this
court
a claim expressed
to be for the enforcement of the decisions of both adjudicators, the claim being
for a sum of £207,857.14 and interest, including interest on the sum of £883,317.49
(that is, the full amount of application 4, net of
VAT)
from 4 November to 8
November inclusive.
24. The Particulars of Claim set out briefly the circumstances
and outcome of the two adjudications, the submission of the VAT
invoice and
the payment of £46,974.69. It is alleged, in particular, that the sum of £1,037,898.05
should have been paid by
RBSTB
to
VHE
on or before 4 November 1999.
25. An application by VHE
for summary judgment was issued on
24 November 1999 and heard on 10 December 1999. This is my reserved judgment
on that application.
The statutory provisions for adjudication
26. The points taken on each side on the application were numerous
and detailed, but before I turn to deal with them I find it helpful to consider
three matters of more general scope, each of which becomes relevant, and sometimes
important, at several stages in the argument.
27. The first concerns
the purposes and statutory intention
of section 108 of the Act, which establishes the right of a party to a
construction
contract
to refer a dispute arising under the
contract
for adjudication. For
that purpose, more particularly since I did not understand them to be seriously
challenged, I need do no more than say that I respectfully agree with and adopt
two passages from reported decisions in this
court.
28. The first is part of the judgment of Dyson J in Macob
Civil Engineering Ltd
v
Morrison
Construction
Ltd
[1999] BLR 92, at page
97:
The intention of Parliament in enacting the Act was plain. It was to introduce
a speedy mechanism for settling disputes in construction
contracts
on a provisional
basis, and requiring the decisions of adjudicators to be enforced pending
the final determination of disputes by arbitration, litigation or agreement
.... .
.... Parliament has not abolished arbitration and litigation of construction
disputes. It has merely introduced an intervening provisional stage in the
dispute resolution process. Crucially, it has made it clear that decisions
of adjudicators are binding and are to be
complied
with until the dispute
is finally resolved.
29. The second comes
from the judgment of His Honour Judge
Humphrey Lloyd QC in Outwing
Construction
Ltd
v
H Randell & Son
Ltd
[1999] BLR 156, at page 160:
The overall intention of Parliament is clear: disputes are to go to adjudication
and the decision of the adjudicator has to be complied
with, pending final
determination.
The statutory provisions for payment
30. The second general matter concerns
the purposes, statutory
intention and effect of sections 110 and 111 of the Act. Those sections are
part of a group dealing with payment under
construction
contracts.
31. Section 110(1)(b) provides that every construction
contract
shall provide for a final date for payment in relation to any sum which becomes
due, and that the parties are free to agree how long the period is to be between
the date on which a sum becomes due and the final date for payment. It is not,
as I understand it, in dispute that here clause 30.3.6 (paragraph 3 above)
complied
with that requirement, and I so find. It is to be noted that it is implicit
in this provision that (at least unless a nil period can be and is agreed) a
sum "becomes due" at an earlier date than the "final date for payment".
32. Section 110(2) reads as follows:
Every construction
contract
shall provide for the giving of notice by a party
not later than five days after the date on which a payment becomes due from
him under the
contract,
or would have become due if -
(a) the other party had carried out his obligations under the contract,
and
(b) no set-off or abatement was permitted by reference to any sum claimed
under one or more other contracts,
specifying the amount (if any) of the payment made or proposed to be made, and the basis on which the amount was calculated.
It is not, as I understand it, in dispute that here clause
30.3.3 (paragraph 3 above) complied
with that requirement, and I so find. It
follows that the receipt of an application for payment under clause 30.3.1 was
the date on which the relevant payment "became due or would have become due
[etc]", in the terminology of section 110.
33. I observe that section 110 operates by requiring there
to be certain contractual
provisions. There are default provisions which apply
if the
contract
itself does not
conform,
but if (as here) it does so the statute,
in an important sense, drops out of the picture. It is, however, necessary to
have the terms of section 110 in mind when
construing
section 111.
34. Section 111 provides as follows:
(1) A party to a construction
contract
may not withhold payment after the
final date for payment of a sum due under the
contract
unless he has given
an effective notice of intention to withhold payment.
The notice mentioned in section 110(2) may suffice as a notice of intention
to withhold payment if it complies
with the requirements of this section.
(2) To be effective such a notice must specify -
(a) the amount proposed to be withheld and the ground for withholding payment, or
(b) if there is more than one ground, each ground and the amount attributable to it, and must be given not later than the prescribed period before the final date for payment.
(3) The parties are free to agree what that prescribed period is to be.
In the absence of such agreement, the period shall be that provided by the
Scheme for Construction
Contracts.
(4) Where an effective notice of intention to withhold payment is given,
but on the matter being referred to adjudication it is decided that the whole
or part of the amount should be paid, the decision shall be construed
as requiring
payment not later than -
(a) seven days from the date of the decision, or
(b) the date which apart from the notice would have been the final date for payment, whichever is the later.
35. Unlike section 110, section 111 has direct application,
except in leaving it to the parties to specify the "prescribed period", so that
although clause 30.3.4 (paragraph 3 above) closely follows the terms of section
111(2) regard must still be had to the latter, reading "five days" for "the
prescribed period" by virtue
of section 111(3) and clause 30.3.4.
36. The first subject of dispute as to the effect of section
111 is whether section 111(1) excludes the right to deduct money in exercise
of a claim to set-off in the absence of an effective notice of intention to
withhold payment. Mr Thomas, for RBSTB,
submits that it does not. I am quite
clear, not only that it does, but that that is one of its principal purposes.
I was not taken to the reports or other preparatory material leading to the
introduction of this part of the Act, nor to anything said in Parliament, but
the see-saw of judicial decision, drafting fashion and editorial
commentary
in this area is familiar to anyone acquainted with
construction
law, and in
my judgment section 111 is directed to providing a definitive resolution of
the debate. The words "may not withhold payment" are in my
view
ample in width
to have the effect of excluding set-offs and there is no reason why they should
not mean what they say.
37. The other subject of possible dispute is the ambit of section
111(4). Clearly it requires there to have been an effective notice to withhold
payment. Mr Furst, for VHE,
submits that a further requirement is that the notice
must precede the referral and that the "matter" referred to adjudication must
include the effect of that notice and the
validity
of the grounds for withholding
payment which it asserts. It may be that that was not challenged by Mr Thomas,
but in case of any doubt on that score I record that in my judgment it is
correct.
The effect of the subsection is that, after there has been an effective notice
of intention to withhold and an adjudication, payment cannot be enforced earlier
than seven days from the date of the decision. There is no reason why that should
be so unless the adjudication relates to the notice. Moreover that is the natural
point of reference of the expression "the matter", with its definite article,
as a matter of
construction.
The effect of adjudication decisions
38. The third preparatory matter concerns
the effect and status
of adjudication decisions. It involves two questions. The first is as to the
construction
and effect of the decisions in this case, and in particular whether
they give rise, singly or together, to independent obligations for the payment
of money, distinct from the
contractual
obligations which were the subject of
the referrals. The second is not
confined
to the facts of this case and
concerns
the status of adjudication decisions which require the payment of money.
39. Mr Linnett's decision, of course,
did not create any immediate
obligation to pay money, because he accepted
RBSTB's
submission that it was
entitled to withhold payment until
VHE
provided a
VAT
invoice. He then, however,
in dealing with what he called the third issue, proceeded to decide in the plainest
and most unequivocal terms that
VHE
would be entitled to payment within 28 days
of the issue (strictly the receipt) of a
VAT
invoice (paragraph 10 above). In
dealing with the fourth issue he decided that he must "order" payment in full
and summarised his
conclusion
as being that he must decide, or order, that payment
was due (paragraph 11 above).
40. Mr Thomas submitted that that decision simply left the
contractual
provisions to operate so that, as I understand the argument, it
amounted to no more than a declaration as to the effect of the relevant
contractual
provisions in the events which had happened. It would follow, presumably, that
in order to obtain any payment under application 4
VHE
would have to begin an
ordinary action in
contract,
and that proceedings to secure
compliance
with
the decision would be
vacuous.
41. In support of that construction
Mr Thomas relied on paragraph
45 of the decision in which, dismissing a claim by
VHE
for interest, Mr Linnett
refers to having decided that "the final date for payment" has not occurred.
The inference which Mr Thomas sought to draw was, I take it, that in paragraph
32 Mr Linnett had simply been deciding when the "final date for payment" would,
on a certain hypothesis, arrive. But what Mr Linnett was doing in paragraph
45 was, in my
view,
to recapitulate in summary form his reason for rejecting
VHE's
claim to immediate payment, which was naturally based on the parties'
contractual
rights and duties and expressed in
contractual
terminology; he was
not purporting to explain the meaning or effect of the decision which he had
reached, which in the matter he was currently dealing with (the dismissal of
the interest claim) needed no explanation, and in the matters more material
to the issues before me had already been explained in the way described in paragraphs
10, 11 and 39 above.
42. The only other possible pointer to a purely declaratory
construction
of the decision is the
conditional
form of the passage quoted in
paragraph 9 above: " .... what the position would be if a
VAT
invoice
is issued" (my emphasis). Even if it is right to attach any significance to
that at all, however, which I doubt, it is heavily outweighed by the
contrary
indications summarised in paragraph 39 above.
43. Looking at the matter more broadly both the statutory purpose
of section 108 of the Act, as summarised in paragraphs 28 and 29 above, and
the implausibility of the notion that either the parties or the adjudicator
intend his decision to be vacuous,
suggest that only the clearest indications
to that effect in the decision should be permitted to
compel
such a
construction.
So far from that being the case here the evidence is predominantly, if not entirely,
the other way. I therefore
conclude
that the effect of Mr Linnett's decision
was to require
RBSTB
to pay the sum of £1,037,898.05 to
VHE
within 28 days after
receipt of the appropriate
VAT
invoice, that is to say, in the event, by 4 November
1999.
44. It might be argued that Mr Linnett could
and should have
allowed
RBSTB
the liberty, by analogy with clause 30.3.4, of serving a notice
of withholding or deduction not later than five days before the date for payment
under his decision. I do not know whether he was asked to, but the fact is that
he did not and that the clear and emphatic terms in which he gave his decisions
on the third and fourth of the issues before him exclude any such possibility.
Nor have I been invited to interfere, or
could
have been, in that respect; it
is quite clear that the
court
has no appellate jurisdiction over adjudicators,
even when demonstrably mistaken, as I am far from suggesting Mr Linnett was.
In that respect I reach my own
conclusion,
since the decision of Dyson J in
Bouygues UK
Ltd
v
Dahl-Jensen UK
Ltd
(unreported, 17 November 1999) was
not discussed in argument, but I note that in that case, where the point was
crucial, he took the same
view.
45. On 4 November 1999, therefore, RBSTB
was required by Mr
Linnett's decision, and not merely (if at all) by any other term of the
contract
than clause 39A, to pay £1,037,898.05 to
VHE.
46. It is clear that Mr Standinger's decision was not, in the
same sense, an independent requirement to pay money, and in so far as any of
Mr Thomas' arguments incorporate the tacit assumption that it was I reject them.
The relevant facts are set out in paragraphs 15, 16 and 19 above. There is simply
nothing in the notice of referral seeking such a remedy and nothing in the decision
capable of being construed
as such a requirement.
47. Mr Thomas' principal express submission was again that
this decision simply left the contractual
provisions to operate. It is true
that Mr Standinger was in one sense reviewing the
content,
and thereby arguably
altering the effect, of a
contractual
step, namely the submission by
VHE
of
application 4, as Mr Thomas emphasised in citing the references in the decision
to clause 30.1.2. Nevertheless once it has been decided, as it has in paragraph
45 above, that Mr Linnett's decision
constituted
an independent requirement
to pay money, this submission becomes even less sustainable in relation to Mr
Standinger's decision than to Mr Linnett's. The starting point for the referral
to Mr Standinger, and for any decision he might reach, was the obligation to
comply
with that requirement. In relation to the mode of recovery of the sum
due under application 4 the
contractual
machinery had already been superseded.
47. I therefore reject Mr Thomas' submission. That leaves open
two possible views
as to the effect of the decision, already inherent in the
dual way in which the notice of referral expressed the remedies sought, a duality
repeated in the formal statement of the decision. The first, founded on the
opening words ("the sum payable .... be reduced to the revised sum"), is that
the sum payable under Mr Linnett's decision was reduced from £1,037,898.05 to
£254,831.83. The second, by reference to the second part, is that the sum payable
under Mr Linnett's decision remained at £1,037,898.05, but that
VHE
could
not
enforce that decision without immediately becoming liable to repay £783,066.22.
48. In my judgment the second is the better view.
Mr Standinger
had no jurisdiction to set aside, revise or
vary
Mr Linnett's decision, was
never asked to do so, and was
conspicuously
careful to avoid any form of words
which might
convey
the
contrary
impression. The obligation under Mr Linnett's
decision therefore remained and remains. That
conclusion
must be clearly distinguished
from the practical reality that
VHE,
not having already enforced Mr Linnett's
decision, was now overwhelmingly likely to limit its demand and any proceedings,
as it did, to the net sum which it would have retained had payment and repayment
been made. Nor is it intended to prejudge the question what would have been
the outcome if
VHE
had sued for the enforcement of Mr Linnett's decision in
full and
RBSTB
had, without challenging that claim in any other way, simply
counterclaimed
for the enforcement of Mr Standinger's decision and relied upon
it by way of set-off.
49. There being therefore, under Mr Linnett's decision, whether technically modified by Mr Standinger's or not, a requirement to pay money, I turn to the second question posed in paragraph 38 above, namely the status of such a decision.
50. The effect of an adjudicator's decision is dealt with by
clause 39A.7 of the contract
in the following terms:
39A.7.1 The decision of the Adjudicator shall be binding on the Parties until the dispute or difference is finally determined by arbitration or legal proceedings or by an agreement in writing between the Parties made after the decision of the Adjudicator has been given.
39A.7.2 The Parties shall, without prejudice to their other rights under
the Contract,
comply
with the decisions of the Adjudicator; and the Employer
and the
Contractor
shall ensure that the decisions of the Adjudicator are
given effect.
39A.7.3 If either Party does not comply
with the decision of the Adjudicator
the other Party shall be entitled to take legal proceedings to secure such
compliance
pending any final determination of the referred dispute or difference
pursuant to clause 39A.7.1.
51. Clause 39A.7.1 is required by, and substantially follows
the terms of, section 108(3) of the Act. It is not, as I understand it, directly
concerned
with enforcement, but with the relationship between an adjudicator's
decision and subsequent arbitration or litigation of the same dispute. It does,
however, with the authority of the Act, lay the ground for enforcement by the
provision that until final determination of the dispute the decision is binding.
The Act does not itself make any provision for enforcement or require the
contract
to
contain
terms making such provision in any particular form.
52. Clause 39A.7.2 makes express a contractual
obligation on
the parties to
comply
with the decision which might, even in its absence, have
been implied from the agreement to refer disputes to adjudication or from clause
39A.7.1. The words "without prejudice ...." found a submission by
RBSTB
which
I shall
consider
later.
53. Clause 39A.7.3 is the enforcement provision. What it provides
for is legal proceedings "to secure such compliance",
that is to say the
compliance
contractually
required by 39A.7.2.
54. I conclude
that enforcement proceedings such as these are
proceedings to enforce a
contractual
obligation, namely the obligation to
comply
with the decision. The decision does not have the status of a judgment, not
is there any provision in the Act
corresponding
to section 66 of the Arbitration
Act 1996, under which, by leave of the
court,
judgment may be entered in terms
of an arbitral award, or the award may be enforced in the same manner as a judgment.
55. There is, however, a question whether the obligation to
"comply
with" a decision which requires the payment of a sum of money has any
greater effect than to make that sum a simple debt, for example by excluding
certain defences which
could
be raised in answer to an action on such a debt.
I do not believe that that question can usefully be addressed in the abstract,
but I shall return to it if it becomes necessary to do so in dealing with specific
submissions.
VHE's
case
56. VHE's
case is simply that in order to
comply
with the adjudicators'
decisions
RBSTB
was on 9 November 1999 obliged to pay to
VHE,
in addition to
anything due by way of interest, the capital sum of (at least) £254,831.83,
of which it has in fact paid only £46,974.69, leaving £207,857.14 due.
57. On the basis of my consideration
in paragraphs 39 to 48
above of the
construction
and effect of the decisions that must clearly be right,
unless there is some ground for a
contrary
conclusion
which I have not yet taken
into account. Mr Thomas advanced a number of grounds, and I therefore turn to
consider
them. I do so in the order in which they impinge upon my narrative
of the history and my more detailed examination of the adjudicators' decisions,
which departs in some respects from the order in which they appear in Mr Thomas'
skeleton argument.
RBSTB's
case
58. I have recorded in paragraphs 6 and 18 above that RBSTB
served no notice under clause 30.3.4 of the
contract.
That is not in dispute
so far as
concerns
any document appearing on its face to be such a notice, but
Mr Thomas submitted that certain other documents had the effect of being notices
for the purposes both of clause 30.3.4 and of section 111 of the Act.
59. The first document relied upon for that purpose was RBSTB's
response to
VHE's
referral to Mr Linnett, entitled "submissions and
contentions"
and dated 9 September 1999. In my
view
it is clear that that does not assist
RBSTB
on the present issue, for three reasons:
(a) In the first place, although I assume in RBSTB's
favour that a notice
under either clause 30.3.4 or section 111 need not be particularly formal
or bear any particular label, nevertheless it must recognisably answer to
the description in the clause or section, as the case may be. For that purpose
it must be addressed to the other party; clause 30.3.4 expressly so requires
and section 111 makes no sense without a similar implication. It must also
give notice of the giver's proposal (clause 30.3.4) or intention (section
111) to withhold or deduct a specific amount; both provisions expressly so
require. The submissions document meets neither requirement.
(b) Secondly the document itself, in paragraph 4.2, expressly states that
no clause 30.3.4 notice had been given, or could
be in the absence of a prior
clause 30.3.3 notice. That is wholly inconsistent with its being itself such
a notice.
(c) Thirdly Mr Linnett's decision on his third issue excludes the possibility.
60. It was also part of RBSTB's
case that there was an effective
notice more than five days before 4 November 1999,
constituted
by paragraphs
20 and 21 of its notice of referral in the second adjudication, dated 13 October
1999, and that 4 November was the "final date for payment" of application 4
under clause 30.3.6 of the
contract.
That
contention
also fails. In the first
place, for similar reasons to those given in paragraph 59(a) above, paragraphs
20 and 21 of the notice of referral are incapable of
constituting
an effective
notice within the terms of clause 30.3.4 or section 111, as indeed is the document
as a whole. The relevant words in paragraph 20 are "it is [
RBSTB's]
contention
that Application for payment 4 should be revised downwards", and paragraph 21
simply sets out the calculation thus
contended
for. Secondly, for the reasons
given in paragraphs 40 to 43 above, the effect of Mr Linnett's decision was
not to leave the
contractual
machinery to operate undisturbed but to impose
a fresh obligation to
comply
with his decision by paying the full sum within
28 days after receipt of a
VAT
invoice. Thirdly, for the reasons given in paragraph
44 above, that decision excluded the possibility of a subsequent effective clause
30.3.4 notice.
61. That brings me, in point of time, to Mr Standinger's decision
of 9 November 1999. The first submission in relation to that is that no sum
could
become payable under that decision until a
VAT
invoice (presumably for
£254,831.83) was issued by
VHE,
which has never happened. There is nothing in
that. In the first place it rests either upon the assumption that the decision
was one requiring the payment of money, which I have rejected in paragraph 46
above, or upon the
contention
that the
contractual
machinery for determining
a "final date for payment" was still in place, which I have rejected in paragraph
47 above, or (more likely) upon both. Secondly, although the
VAT
legislation
was not cited, I cannot believe that the only way of dealing with that aspect
of the situation was to issue a fresh
VAT
invoice, which
could
not in any event
be right without there being a credit note cancelling the original invoice.
It would, according to standard book-keeping practice, be at least equally appropriate
for the creditor to issue a credit note, or the debtor an invoice, for the difference.
The former would
correspond
with the first
view
of the decision canvassed in
paragraph 47 above, and the latter with the second. Neither would set a fresh
"final date for payment", even if that part of the
contractual
machinery were
still relevant.
RBSTB
clearly did not take this point seriously enough to see
it as any obstacle to their paying £46,974.69.
62. The next submission was that Mr Standinger's decision was
one within section 111(4), so that it "should be construed
as requiring payment
not later than .... seven days from the date of the decision", namely on 16
November 1999, which thereby became the "final date for payment", thus making
the liquidated damages notice of 11 November one given not later than five days
before that date and justifying the deduction of the liquidated damages claimed.
That also must be rejected. In the first place the decision was not one within
section 111(4). As stated in paragraph 37 above, that provision requires there
to have been an effective notice to withhold payment preceding the referral
and within the subject-matter of it. I have held that there had been no such
notice, and certainly no question as to the
validity
or effect of any such notice
was within the referral. Secondly this submission again rests upon the proposition
that the
contractual
machinery was still in operation, which I have repeatedly
rejected. For the reasons given in paragraphs 39 to 48 above the date for payment
was 4 November 1999, but even if it were 9 November the liquidated damages notice
of 11 November was out of time for the purposes of this submission.
63. Mr Furst submitted that there was a third answer to this
point, namely that even if the date for payment were 16 November 1999 and were
a "final date for payment" for the purposes of clause 30.3.4 and section 111,
a notice on 11 November would be too late, as not meeting the requirement of
being given "not later than five days before the final date for payment". He
expressly disclaimed, however, any contention
that "five days" here means "five
clear days". I agree that it does not, but in the absence of any such gloss
I find it plain that 11 November is five days, and therefore "not later than
five days" before 16 November. Had this point been material, therefore, which
in the event it is not, I would have held in favour of
RBSTB.
64. RBSTB's
next submission turned on the words "without prejudice
to their other rights under the
Contract"
in clause 39A.7.2 (paragraph 50 above).
Mr Thomas
contends,
as I understand it, that that entitles
RBSTB
to exercise
its right under clause 24.2.1 of the
contract
to "deduct the [liquidated damages
claimed] from any sum due .... to [
VHE]
under this
Contract"
(see paragraph
20 above), including the money due under the adjudication decisions. I agree
with Mr Furst that that involves reading "without prejudice to" as equivalent
to "subject to". There may be
contexts
in which that meaning is required, but
the more natural and usual one is "but leaving unaffected". Not only is that
more natural and usual; it is in my
view
compelled
in this instance by the
context
and by the purpose and intention of the statutory adjudication scheme, to which
the
contractual
provisions must
conform.
The intention of these words in clause
39A.7.2, like "until the dispute .... is finally determined" in 39A.7.1 and
"pending any final determination" in 39A.7.3 (paragraph 50 above) is to balance
the need for swift and unconditional
compliance
with the adjudication decision
on the one hand against the preservation of the parties' rights to
contend
for
and, if justified, obtain a different final determination by litigation, arbitration
or agreement.
RBSTB's
construction
would destroy that balance and also drive
a
coach
and horses through the requirements of section 111 by making it wholly
unnecessary to
comply
with them. I reject it.
65. Finally RBSTB
relies on a residual right to set off its
liquidated damages claim. I use the word "residual" because many of the submissions
already discussed were aimed (unsuccessfully, as I have held) at establishing,
directly or indirectly, a means by which that claim
could
be deducted, withheld
or set off by way of clause 30.3.4 of the
contract
or section 111 of the Act
or by some other route. In my
view
there is no such residual right, where these
adjudication decisions are
concerned.
In the first place the right under clause
24.2.1 is to deduct from monies due or to become due "under the
contract".
The
money in question here was not payable under the
contract,
in the sense
contemplated
by that clause, but by way of
compliance
(albeit
contractually
required) with
the adjudicators' decisions. More generally, for the reasons given in paragraphs
36 and 37 above section 111 now
constitutes
a
comprehensive
code
governing the
right to set off against payments
contractually
due.
RBSTB
has not
complied
with it. It would make a nonsense of the overall purpose of Part II of the Act,
to which sections 108 and 111 are central and in which they are closely associated,
not least by the terms of section 111(4), if payments required to
comply
with
adjudication decisions were more
vulnerable
to attack in this way than those
simply falling due under the ordinary
contractual
machinery. To return to the
question left unanswered in paragraph 55 above, therefore, I find these
compelling
reasons for
concluding
that in clause 39A.7.2 and 39A.7.3, at least on the facts
of this case, "
comply"
means "
comply,
without recourse to defences or cross-claims
not raised in the adjudication".
66. Before leaving the issue of set-off I should record that
VHE
disputes
RBSTB's
claim to liquidated damages on the facts and merits, but
that that circumstance was not advanced as a ground for rejecting it at this
stage and does not enter into my reasons for doing so; if the point turned on
that factual dispute alone
RBSTB
would plainly have a triable defence.
67. That concludes
my assessment of the grounds advanced by
RBSTB
for resisting
VHE's
claim, all of which I accordingly reject.
The Part 24 test
68. With the exception of paragraph 66 above I have hitherto
expressed my analysis of the parties' rights and obligations and my assessment
of the submissions advanced on each side in terms of a straightforward inquiry
into the true construction
and effect of the Act and the
contract.
I have done
so not least because those were the terms in which the application was argued
on both sides. I remind myself, however, that this is an application for summary
judgment under Part 24 of the Civil Procedure Rules, and that under the heading
"Grounds for summary judgment" Rule 24.2 reads, so far as relevant:
The court
may give summary judgment against a .... defendant on the whole
of a claim .... if -
(a) it considers
that -
(i) ....
(ii) that defendant has no real prospect of successfully defending the claim .... ; and
(b) there is no other reason why the case .... should be disposed of at a trial.
69. There is no suggestion that head (b) has any application here. Head (a)(ii) therefore sets out the test which, so far as I can see, I must apply. The question is how that is to be approached.
70. Where there are disputes of fact the Part 24 test, like
the Order 14 test before it, although perhaps with a slightly different emphasis,
plainly requires a very
different approach from that at a trial. In this case,
however, there are no such disputes relevant to the issues which I have to decide,
all of which turn on points of law, in particular the
construction
of documents.
What difference, if any, does that make?
71. In my view
help in answering that question can be derived
from two sources. In the first place Part 24 of the Civil Procedure Rules replaces
both Order 14 and Order 14A of the Rules of the Supreme
Court.
Order 14A provided
a means for the summary disposal of "any question of law or
construction
of
any document" which would be finally determinative of the proceedings or of
any claim or issue in them. Under Order 14A the
court
was simply to "determine"
any such question raised before it. I should, I think, approach the exercise
of my powers under Part 24 on the basis that it was not intended to exclude
the sort of jurisdiction previously exercised under Order 14A.
72. Secondly, in the exercise of the jurisdiction under Order
14, and even before the introduction of Order 14A, it was recognised that "Where
the court
is satisfied that there are no issues of fact between the parties,
it would be pointless to give leave to defend on the basis that there is a triable
issue of law, and this is so even if the issue of law is
complex
and highly
arguable" (Supreme
Court
Practice, 1999, paragraph 14/4/2, citing R.G.Carter
Ltd
v
Clarke [1990] 2 WLR 209).
73. I bear in mind that the terms of Rule 24.2 are different
from those of either Order 14 or Order 14A and must be construed
in the
context
of the changes of practice of which the Civil Procedure Rules are part, and
in particular in the light of the overriding objective set out in Rule 1.1,
but subject to that caution I believe that the
considerations
set out in paragraphs
71 and 72 above are of some relevance and assistance.
74. I also take into account that it would be a futile waste
of time and costs,
particularly in the light of the legislative purpose of section
108 of the Act, to order a trial at which, so far as I can see, precisely the
same arguments would be repeated as have been deployed before me.
75. Taking all those considerations
into account I have reviewed
the issues discussed in paragraphs 26 to 67 above in terms of the test required
by Rule 24.2 and
conclude
that
RBSTB
has no real prospect of successfully defending
the claim, and that I should therefore give summary judgment against it.