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You are here: BAILII >> Databases >> England and Wales High Court (Technology and Construction Court) Decisions >> AWG Construction Services Ltd v Rockingham Motor Speedway Ltd [2004] EWHC 888 (TCC) (5 April 2004) URL: http://www.bailii.org/ew/cases/EWHC/TCC/2004/888.html Cite as: [2004] EWHC 888 (TCC) |
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QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
B e f o r e :
(Sitting as a Judge of the High Court)
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AWG CONSTRUCTION SERVICES LIMITED | ||
Claimant | ||
- and - | ||
ROCKINGHAM MOTOR SPEEDWAY LIMITED | ||
Defendant |
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Official Shorthand Writers and Tape Transcribers
Quality House, Quality Court, Chancery Lane, London WC2A 1HP
Tel: 020 7831 5627 Fax: 020 7831 7737
MR. R. TER HAAR Q.C. (instructed by Lovells) appeared on behalf of the Defendant.
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Crown Copyright ©
JUDGE TOULMIN CMG Q.C.:
(1) An order that the adjudicator's decision dated18th November 2003 be set aside on the grounds that the adjudicator had no jurisdiction to make any such decision; and/or
(2) An order that the adjudicator's decision dated
18th November 2003 be set aside because the adjudicator failed to act impartially and failed to comply with the principle of natural justice; and/or
(3) An order that the adjudicator's decision dated
18th November 2003 should not be enforced because there is credible evidence that if the decision is reversed in any subsequent proceedings the defendant will not be able to pay the sums awarded.
(1) Is the decision unenforceable on the grounds that what the adjudicator decided in his decision was something that was not referred to him for a decision and therefore his decision was made without jurisdiction?(2) Is the decision unenforceable because it was made in breach of the principles of natural justice and the principles of fairness and impartiality because:
(2.1) the adjudicator adopted or introduced new matters and new claims upon which he based his decision which the claimant did not have sufficient opportunity to consider and respond to;(2.2) the adjudicator allowed the defendant to introduce new matters and new claims upon which he based his decision after the adjudication had commenced and late on in the process which the claimant did not have sufficient opportunity to consider and respond to;
(2.3) the matters referred to the adjudicator by the defendant, whether a single dispute or multiple disputes, were not suitable for the adjudication procedure set out in the scheme and could not be and were not determined in accordance with the principles of natural justice or the principles of fairness and impartiality?
(3) If the court decides in the claimant's favour on issues (1) and/or (2) above:
(3.1) can and should the adjudicator's decision be separated so that those parts of the decision relating to the Rockingham Building and/or the Tunnels, and/or any other aspect of the decision which might be isolated from those parts of the adjudicator's decision which deal with "additional drainage" can be enforced; or(3.2) is the entire decision invalid?
(4) If the court decides in the defendant's favour on issues (1) and (2), is the decision or any part of it enforceable? Should the court order a stay of execution pending final determination of the matters referred to the adjudicator in the arbitration proceedings?
(5) If the court decides, in respect of issue (4), that a stay of execution should be ordered then what, if any, condition should be attached to such an order?
The facts.
AWG challenged the withholding.
"Please find enclosed on behalf of our client, Rockingham Motor Speedway Limited, a complete copy of the documents presenting the facts and sums claimed in the dispute between our client and your client."
"Notwithstanding the existence of the dispute and for the avoidance of any technical prevarication this is the claim in its final form which we propose to adjudication."
"3.1 A dispute between the parties has arisen in relation to the quality and fitness for the purpose of the works designed and constructed by AWG pursuant to the contract and the Addendum. RMSL claims the cost of remedying the defects and damages in respect of financial loss suffered as a result of AWG's breach of its contractual obligations to RMSL."
"(a) That the Oval was unfit for the purpose of staging high speed oval racing, or alternatively, that AWG was negligent in designing the Oval for the reasons set out in sections 3 and 4 of the Referral Notice and the expert report prepared by Mr. Tindall."(b) That AWG should pay Rockingham £2,844,000 or such other sum as the adjudicator thinks fit.
"(c) That Rockingham had suffered the financial loss set out in section 5 of the Referral Notice and the witness statement of Mr. Reed and that AWG should pay Rockingham £2,990,822.35 in respect of such financial loss, or such other sum as the adjudicator thinks fit.
"(d) If the adjudicator finds that AWG should pay less than £2,844,000 (the full cost of replacing the Oval) then in the alternative to (c) AWG should pay £7,880,822.35 as compensation for financial loss particularised in section 5 of the Referral Notice.
"(e) That AWG was negligent in designing the Rockingham Building under the terms of the Addendum to the contract and therefore caused the defects in the building and the tunnels as particularised in section 7 of the Referral Notice and in the report of Mr. Chisem.
"(f) AWG should pay Rockingham £2,833,380 in respect of remedial works for (e)."
"RMSL submits that AWG did not take the steps that were required of a reasonable and careful contractor in the circumstances and acted in breach of its contractual duty of care for the following reasons."
"(a) As most of the subsoil on site is clay (which is less permeable than other soil) the need for an effective subsoil drainage solution should have been obvious to AWG. In addition, drainage was drawn to AWG's attention in the Employers' Requirements and concerns as to the design chosen by AWG were expressed by RMSL during the course of the construction works."(b) At the very least, AWG should have been wary of adopting any solution that would reduce the subsoil drainability at all. It is obvious from the mechanics and processes involved in lime stabilisation adopted by AWG that subsoil stabilised in this manner will be much less permeable once it has undergone the stabilisation process. Investigations have shown that the stabilised layer underneath the oval is impermeable. AWG should not have chosen this method.
"(c) AWG should, at the very least, have been alerted to a risk of inadequate drainage and should have reconsidered the design decision. If AWG did not consider the potential impact on subsoil drainage of creating an almost impermeable layer underneath the oval in circumstances where the top pavement layers were designed to be permeable, AWG was clearly negligent.
"(d) AWG's negligence is brought out starkly by the fact that the use of a granular Type one sub-base is the standard method of construction of works comparable to the Oval (see the expert report of Peter Tindall at paragraph 3.9) ..."
"Improved subsoil drainability needs to be provided and the only way of achieving this is by rebuilding the Oval on a granular sub-base."
"14.1 There is in my mind little doubt that had the stabilised layer been permeable - as I note was specified in the contract - the excess water problem would not have materialised."14.2 Having considered all of the options I conclude that the reconstruction of the track (option 5) is the only solution which will allow water in the pavement to escape and thus finally to resolve the problem. The most reliable treatment is reconstruction to the original design including a granular sub-base instead of a stabilised one. This is also likely to be the quickest form of treatment."
"Our client also relies on the contents of paragraph 36 of the judgment of His Honour Judge Seymour Q.C. in Edmund Nuttall Limited v. R. G. Carter Limited."
"Whether at the time a notice of adjudication was given there was a dispute between the parties in relation to the matter sought to be referred must depend upon the facts and circumstances of the particular case, not least what the dispute is said to be about."
"AWG failed to comply with the standard expected of the ordinary contractor in designing the Oval (see paragraph 4.31 of the Referral Notice)."
"2.7 Adequate drainage of all layers in the pavement is necessary (as required by the Design Manual for Roads and Bridges) and is the only way to ensure that the track will function.""2.8 Exposing and dealing with the cause of the defect which is the absence of drainage in the lower part of the pavement is the solution. This requires heavy works."
"In these circumstances reconstruction of the track cannot be avoided. It is a necessity not a luxury.It is costly but it is the engineering solution that produces the right result."
Mr. Wood's jurisdiction. It alleged that Rockingham had substantially shifted its case by introducing new arguments and alleged facts that were not in the adjudication notice.
"You can only consider the alleged dispute that was referred to you. This is the package of arguments and facts contained in the referral notice and nothing else."
"RMSL alleges that AWG failed to heed Powerbetter's warning to ensure that adequate drainage was provided at all times prior to and after stabilisation and to ensure that adequate drainage (temporary or permanent) should be provided to ensure that working areas (and stabilised soils after completion of the process) will remain unaffected by the ingress or presence of rainwater or groundwater. RMSL is now arguing that AWG was not only negligent in choosing a soil-based sub-base but was also negligent in not ensuring adequate drainage of that sub-base during and after construction."
"RMSL complaint is not that AWG was negligent in how it constructed the lime stabilised base (for example in not ensuring adequate drainage during and after construction). The Referral Notice, Peter Tindall's expert's report and the first witness statement of Rod Wolter make it abundantly clear that the complaint is of using a lime stabilised sub-base as part of the design in the manner which AWG/Colas chose to adopt."
"The above passage of the referral notice alone should have enabled AWG to meet RMSL's case on negligence. RMSL is still waiting to hear from AWG what positive steps were taken (by AWG/Colas) to consider the impact of drainage for the oval by using a lime stabilised sub-base. This is a crucial question as regards determination by you (the adjudicator) of whether AWG were or were not negligent. RMSL is not in a position to know what steps were taken ..."
Mr. Wood was due to give his decision. With it they included a fourth statement from Mr. Tindall which consisted of a review which he described as being "of a back to basics perspective".
"A fundamental flaw to the design which has not been corrected by adding the extra wearing course. To correct this flaw it is necessary to expose the stabilised layer in order to provide drainage."
"No doubt both sides could find many articles and papers that suit their particular argument with varying degrees of conviction."
"Not by the layer itself as such but by the absence of drainage to the layer."
He does not go on to say how additional drainage would solve the problem.
I note that Clause 91 of the ICE form envisages that any further information after the original submission should be provided within four weeks of the submission, although the timetable allows for extensions of time.
"If you need more time please feel free to ring Nigel Robson on the above number ... during the weekend."
"I considered paragraph 3.10 of the Notice of Adjudication and the alternative matter in dispute set out therein. I also considered sections 3 and 4 of the Referral Notice referred to in the Notice of Adjudication and I was of the view that the matter before me was not limited to a single contention by the Referring Party that the cause of the water problem was the change in the Responding Party's design from a Type 1 sub-base to a stabilised soil sub-base but was of a wider remit such that the Responding Party had been negligent (generally) in the design of the Oval and specifically in respect of drainage considerations to the Oval track."
"42. I considered the evidence of the Parties regarding the appropriate standard of design of oval tracks. AndI considered the evidence (and differences between the parties) regarding the water draining (absorbing) qualities of a stabilised sub-base and that of a Type 1 sub-base.
"43. I decided that the Responding Party took no account in the Oval track design of the extent or consequence of the water entering the surface of the Oval track and stored therein, or the subsequent consequential flow/release of such water on to the surface under the natural effects of the build up of the water flows down the slope of the track, or the ability of the relatively dense surfacing materials to adequately cater for such transverse flows to the drainage system at the lower edge of the track under gravity.
"44. I decided that as a result of the omission of any consideration or implementation by the Responding Party in its Oval track design of the possibility and/or effects of water flowing on to the track, the Responding Party has failed to perform its design obligations with the requisite care and skill of a professional designer of such oval tracks. I decided that the Responding Party was in breach of its contractual duty of care owed to the Referring Party and that the Referring Party was entitled to reasonable damages flowing from this breach.
"45. I was not, however, satisfied that the change in the pavement construction design from a Type 1 sub-base material to a stabilised soil material was in itself causative of the problem of water flowing on to the surface of the track. I decided from the evidence that it was probable that, in the event that Type 1 sub-base material had been utilised, that the said problem may have remained to a similar extent.
"46. I was of the view that the replacement of the stabilised soil sub-base by Type 1 materials would not solve the problem of water remaining (or appearing) on the track and that a solution combined with additional drainage provision may be necessary. Whilst this was a matter for the Referring Party's design advisers,
I considered it relevant as it went to the reasonableness of the Referring Party's quantum claim in that it omitted any claim for additional drainage of the track."
On 22nd December 2003 Rockingham served its defence.
On 15th January 2004 AWG served its reply and defence to counterclaim. There were discussions as to what security Rockingham would provide in the event that the court decided that security was appropriate.
The Law
What is the nature of adjudication?
"Adjudication is a highly satisfactory process. It comes under the Rubric of 'pay now, argue later' which is a sensible way of dealing expeditiously and relatively inexpensively with disputes which might hold up important contracts." (Hansard HL Vol 571 Cols 989, 990)
"The timetable for adjudications is very tight (see s.108 of the Act) many would say unreasonably tight and likely to result in injustice. Parliament must be taken to be aware of this."
"Parliament has not abolished arbitration and litigation of construction disputes. It has merely [my emphasis] introduced an intervening stage in the dispute resolution process".
(1) A challenge to the jurisdiction of the adjudicator on the grounds that he was not the person nominated under the contract, or appointed in accordance with the agreed procedure. (See Amec Capital Projects v Whitefriars City Estates [2004] EWHC 393 (TCC) 27 February 2004.)(2) There was a real risk that the adjudicator was biased (see Glencott Development v. Barratt [2001] BLR 207).
(3) The adjudicator did not reach a decision which was responsive to the issues referred in the adjudication, or decided matters which were not referred (see Ballast plc v. The Burrell Company [2001] BLR 529).
(4) There was no dispute on which the adjudicator could reach a decision because a dispute can only arise when the subject matter of the dispute has been brought to the attention of the other party that party has had a proper opportunity to consider it and has modified or rejected the claim (see Fastrack Contractors v. Morrison [2000] BLR 168).
(5) Notwithstanding the relatively free hand that the adjudicator has in directing the procedure, the adjudicator acted unfairly in failing to give the parties an equal opportunity to present their case with the result that one party was prejudiced (see e.g. Discain Project Services v. Opek Prime Development Limited No 1 [2000] BLR 402). This problem can occur in the context of a party adding new claims or arguments to which the other party is not given an adequate opportunity to respond before the adjudicator reaches his decision.
What constitutes a dispute?
"What constitutes a dispute between the parties is not only a claim which has been rejected, if that is what the dispute is about, but the whole package of arguments advanced and facts relied upon by each side. No doubt, for the purposes of a reference to adjudication under the 1996 Act or equivalent contractual provision, a party can refine its arguments and abandon points not thought to be meritorious without altering fundamentally the nature of the dispute between them. However, what a party cannot do, in my judgment, is abandon wholesale facts previously relied upon, or arguments previously advanced and contend that because the claim remains the same as that made previously, the 'dispute' is the same ..."The whole concept underlying adjudication is that the parties to an adjudication should first themselves have attempted to solve their differences by open exchange of views, and if they are unable to do so, they should submit to a third party for decision, the facts and arguments which they have previously rehearsed among themselves. If the adjudication does not work in that way, there is the risk of premature and unnecessary adjudications in cases in which, if only one party had had a proper opportunity to consider the arguments of the other, accommodation might have been reached."
"Comprising the package of facts relied upon by each side in support of the respective positions of Nuttall and Carter, and the arguments which had been rehearsed."
"The proper scope of the inquiry as to whether at the time the notice of adjudication was given there was a dispute between the parties as to the matter sought to be referred must depend on the facts and circumstances of the particular case, not least what the dispute is said to be about."
"For there to be a dispute for the purpose of exercising the statutory right of adjudication it must be clear that a point has emerged, given the process of discussion or negotiation has ended, and there is something which needs to be decided."
"The Court of Appeal reminded us that the courts have generally construed widely the word 'dispute' and they declined in that case to construe the word more narrowly in the context of arbitration."
"The reasoning in Halki as to what constitutes a dispute in arbitration proceedings applies with equal effect in adjudication proceedings."
I answer the agreed issues as follows.
Is the decision enforceable on jurisdictional grounds?
Breach of natural justice.
"I do understand that adjudicators have great difficulty in operating the statutory scheme and I am not in any way detracting from the decision in Macob. It would be quite wrong for the parties to search around for breaches of the rules of natural justice. It is a question of fact and degree in each case."That scheme makes regard for the rules of natural justice more, rather than less, important. Because there is no appeal on fact or law from the adjudicator's decision it is all the more important that the manner in which he reaches his decision should be beyond reproach. At the same time, one has to recognise that the adjudicator is working under pressure of time and circumstance which makes it extremely difficult to comply with the rules of natural justice in the manner of a court or arbitrator. Repugnant as it may be to one's approach to judicial decision-making, I think that the system created by the HGCRA can only be made to work in practice if some breaches of the rules of natural justice, which have no demonstrable consequence, are disregarded."
"It is not enough for the defendant simply to raise the banner of breach of the rules of natural justice to defeat the application to enforce the decision of the adjudicator. The defendant must show that the plea has some force and relevance ..."
"This must mean that he must act in a way that will not lead an outsider to conclude that there might be any element of bias, i.e. that a party has not been treated fairly. In addition, impartiality implies fairness, although the application may be trammelled by the overall constraints of adjudication. Lack of impartiality carries with it overtones of actual or apparent bias when in reality the complaint may be characterised as lack of fairness."
"One important factor for the court to consider when permission to amend is sought close to the trial date is whether the amendment will put the parties on an unequal footing or place or add an excessive burden to the respondent's task of preparing for trial."
"AWG must take special steps to ensure that the design meets that purpose."
Severance.
"We think it would be better to appoint a single adjudicator who would have jurisdiction to determine all matters. For the avoidance of doubt, that remains our client's position."
"We also agree that there is sufficient connection between the matters set out in your client's Notices of Dissatisfaction that any disputes (the existence of which is not admitted) in these Notices could be referred to the same adjudicator."
Stay of any enforcement proceedings.
"So far as the question whether to grant a stay of execution is concerned, each case must depend on its own facts. I agree with Judge Lloyd Q.C. that it is for the applicant for any stay to put before the court credible material which, unless contradicted, demonstrates that the claimant is insolvent. However, in my judgment it is not necessary for the applicant to go further and put before the court evidence as to the present financial position of the claimant so that he does not need to shoulder the additional burden of predicting when any challenge to the correctness in fact of the determination of the adjudicator will be heard, or of putting before the court positive evidence as to what the financial position of the claimant will then be..."
"Where a judgment is given or an order made for the payment by any person of money and the court is satisfied on an application made at the time of judgment or order, or at any time thereafter by the judgment debtor or any other party liable to execution (a) that there are special circumstances which render it inexpedient to enforce the judgment or order; or (b) that the applicant is unable, from any cause, to pay the money ... the court may by order stay the execution of the judgment or order ... either absolutely or for such period and subject to such conditions as the court thinks fit."
I can indicate that I would not at first sight be inclined to order a stay in relation to that part of the adjudicator's award and that I am prepared to order payment by AWG to Rockingham of the sum of £54,328.73. The wider issues would have become relevant if I had been prepared to enforce the whole of the adjudicator's award.
Conclusion.
(1) An order that the adjudicator's decision dated18th November 2003 in relation to the Oval be set aside on the grounds that the adjudicator had no jurisdiction to make such a decision.
(2) An order that the adjudicator's decision dated
18th November 2003 in relation to the Oval track be set aside because the adjudicator failed to comply with the principles of natural justice.
(3) An order that the adjudicator's decision dated 18 November 2003 be enforced to the effect that Rockingham have summary judgment in the sum of £54,328.73 in relation to the adjudicator's decision relating to the building (grandstand) and the tunnels.
(Discussion on costs)