4MA LTD v NASH

4MA LTD v NASH

The adjudicator’s award to the contractor should be enforced summarily despite the adjudication being contractual by reason of the home owners being residential occupiers and their court proceedings in which they were making claims which they contended constituted a defence to the contractor’s claim
 

4MA LTD v NASH

Technology and Construction Court

Martin Bowdery QC sitting as a Deputy High Court Judge

9 April 2019

 

The adjudicator’s award to the contractor should be enforced summarily despite the adjudication being contractual by reason of the home owners being residential occupiers and their court proceedings in which they were making claims which they contended constituted a defence to the contractor’s claim

 

The contract for the carrying out of extensive works at the home owners’ property contained an adjudication clause and incorporated the adjudication provisions of the Scheme for Construction Contracts. Without that adjudication clause, there could have been no adjudication because the home owners were residential occupiers within the meaning of section 106 of the Construction Act. A dispute arose in relation to the contractor’s final account which it referred to adjudication. The home owners declined to serve a response or participate in the adjudication. The adjudicator proceeded with the adjudication and by his reasoned decision awarded a specified sum to the contractor. The contractor began these enforcement proceedings and applied for summary judgment in respect of that sum. The home owners by the time of the summary judgment hearing had issued Part 7 proceedings against the contractor and the contract administrator.

 

Martin Bowdery QC in enforcing the adjudicator’s decision by way of summary judgment stated that the incorporation by the parties of the Scheme for Construction Contracts to govern their contractual adjudication included the incorporation of the Parliamentary intention behind the Scheme of adjudication being intended to provide a speedy mechanism to resolve disputes on an interim basis. It is well-established that the existence of another claim, whether by way of litigation or further adjudication, does not amount to a reason to refuse to order summary judgment or to order a stay In the light of the policy “Pay now, argue later” policy of the Scheme and of the temporary finality of adjudicators’ decisions. On the proper construction of section 49(2) of the Senior Courts Act relied on by the home owners and despite it providing that courts are to give effect to all equitable defences and counterclaims (i) The home owners’ cross-claim based on Part 7 proceedings did not give rise to an equitable set-off and therefore a defence to the claim because that section is expressly stated to be subject to the provisions of any other Act (ii) That must, in the context of these proceedings, be a reference to the Construction Act (iii) The intended purpose of section 108 of that Act is plain, namely and put bluntly “pay now, argue later” and (iv) The contract should be construed so as to give effect to the intention of Parliament and not construed so as to defeat the intention of Parliament.

 

THE FULL TEXT OF THE JUDGMENT OF MARTIN BOWDERY QC

 

Introduction

 

  1. This is the Claimant’s application for summary judgment with regard to claims to enforce an Adjudicator’s decision in the sum of some £54,436.86 plus VAT of £10,887.77 and interest in the sum of £4,126.13.

 

  1. By a contract dated on or around 9th August 2015, the Claimant was contracted by the Defendants to design, construct and complete a two-storey extension and basement works at 11 Graham Terrace, London, SW1. A dispute arose between the parties regarding the Defendants’ failure to pay the balance of the Claimant’s Final Account. Further details of the dispute are set out in the Notice of Adjudication:

 

”The Dispute

 

4.1  4M submitted its final account valuation to the Nashes on 4 August 2018 which including the further amount to be paid of £212,902.81 plus VAT. For the avoidance of doubt, that sum remains 4M’s view of its correct entitlement in relation to the Project.

 

4.2  It should be noted, as a primary point, that 4M’s position remains that it is entitled to the full amounts sought as detailed above. It reserves the right to pursue those monies in due course.

 

4.3  However, it is 4M’s position that it is entitled to further payment in any event on proper assessment of the Nashes’ own valuation of the amounts due. In relation to this, the following correspondence from the Nashes’ Employer’s Agent is important:

 

4.3.1  By letter dated 21 April 2017, the Nashes purported to terminate 4M’s employment by reference to various clauses. It is 4M’s position that such termination was wrongfully executed and/or invalid. The relief sought in this Adjudication is without prejudice to that position. That letter confirmed that a final account would be provided confirming the amounts due either to or from 4M. A copy of the letter is attached to the Referral Notice.

 

4.3.2  On 17 July 2017, the Mashes confirmed to Walker Morris (on behalf of 4M) that the final account was completed (amongst other things). A copy of that letter is attached to the Referral Notice.

 

4.3.3  The Nashes enclosed their final account valuation (the Nashes’ Final Account) with the above letter. The Nashes’ Final Account is attached to the Referral Notice.

 

4.4  The above correspondence demonstrates that the Nashes believe the exercise referred to at clauses 8.7.4 of the Contract has concluded so that a payment is due (and now overdue) under clause 8.7.5. Alternatively, the exercise demonstrates that monies are owing by reference to clause 8.8 of the Contract.

 

4.5  The valuation of the Nashes’ Final Account in the sum of -£13,570.00 incorporated liquidated damages (LADs) of £86,000.00 for alleged delay of completion of the works.

 

4.6  A number of the relevant delays to completion of the works are as a result of the Nashes’ acts and/or omissions. Under the Contract, 4M is not entitled to an extension of time where it is prevented from completing on time for reasons that are the fault of the Nashes. As referred to in the Referral Notice (and as can easily be seen by brief review of the Contract between the parties), the Relevant Event referring to the acts and/or omissions of the Nashes has been deleted.

 

4.7  It is trite law (as demonstrated by recent case law) that if a delay event occurs that is the employer’s fault and the contract does not make provision for that delay, the original completion date falls away and time is put “at large”.

 

4.8  Here, 4M is required to complete the contract works within a reasonable time and the Nashes can have no entitlement to deduct LADs in respect of the relevant delay. The liquidated damages mechanism can no longer apply where there is effectively no relevant event by reference to which 4M could seek entitlement to an extension of time. This entails that there is no means by which to calculate a revised completion date and, without a completion date, the liquidated damages mechanism fails and/or can no longer be used to calculate alleged damages as it is time dependent.

 

4.9  In the context of all the above, and on the Nashes own valuation, it is 4M’s position that the liquidated damages deduction must fall away and 4M is entitled to further payment in the sum of £72,429.86 plus VAT plus interest. The detail of its position in this regard is set out more fully in the Referral Notice.”

 

  1. Clause 9.2 of the Contract provided that:

 

”9.2  If a dispute or difference arises under this Contract which either Party wishes to refer to adjudication, the Scheme shall apply, subject to the following:

 

9.2.1  for the purposes of the Scheme the adjudicator shall be the person (if any) and the nominating body shall be that stated in the Contract Particulars;

 

9.2.1  where the dispute or difference is or includes a dispute or difference relating to clause 3.15 and as to whether an instruction issues thereunder is reasonable in all the circumstances:

 

1- the Adjudicator to decide such dispute or difference shall (where practicable) be an individual with appropriate expertise and experience in the specialist area or discipline relevant to the instruction or issue in dispute

 

2- if the Adjudicator does not have the appropriate expertise and experience, the Adjudicator shall appoint an independent expert with such expertise and experience to advise the report in writing on whether or not the instruction under clause 3.15 is reasonable in cdl the circumstances.”

  

  1. The Claimant sought, amongst other matters, declarations that:

 

”12.1.1  The Nashes are to pay 4M the sum of £72,429.86 plus VAT in respect of full amount of the Final Account or such other sum as the Adjudicator shall find is due;

 

12.1.2  In addition and/or in the alternative, a declaration that the Nashes have no right to deduct amounts from the Final Account and/or any final assessment and/or payment under the Contract in respect of liquidated damages and/or costs associated with delay;

 

12.1.3  Interest is payable to 4M on the above amount at the contractual rate of 5.5% or at such other rate as the Adjudicator sees fit from 17 July 2017 being the date on which the Nashes issued their statement of account to the date of the Adjudicator’s decision or for such period as the Adjudicator may otherwise determine”

 

  1. Christopher Randall (”the Adjudicator”) was appointed by the Royal Institute of Chartered Surveyors on 29th December 2018. As appears from Mr Randall’s decision, Mr and Mrs Nash did not provide any response to the Referral Notice. What Mr and Mrs Nash did was send a letter from their solicitors to the Adjudicator dated 18th January 2019 which stated:

 

”Dear Sir,

 

Referring Party: 4MA Limited

 

Responding Party/Our Client Mr and Mrs Nash

 

We write to confirm that our client does not intend to submit a Response to the Referral Notice.

 

Whilst the issues in dispute regards the adjudication have been limited to determination of the Responding Party’s claim for liquidated damages, the same is intrinsically linked to the Referring Party’s asserted claims for loss of time and expense and extension of time. One cannot be determined without consideration to the other and the matter is therefore significantly complex.

 

The Referring Party’s Notice of Adjudication was served directly upon the Responding Party notwithstanding that Ellis Jones Solicitors had been retained to act on their behalf, of which the Referring Party’s representative was entirely aware. The same was served upon the Responding Party direct on 27 December 2018 (within the Christmas holiday period) notwithstanding that the Responding Party’s representative was on leave until 02 January 2019 (with the firm’s office being closed for the majority of that period). The Referring Party’s representative was on notice of the Responding Party’s representative’s leave from the office during that period. A 7 day extension was agreed as a result of the circumstances surrounding service of the Adjudication Notice.”

 

  1. I just interject here: I do not think that serving the Referral Notice during the Christmas holiday period is either clever or funny and is a practice which I thought had ended many, many years ago. It is certainly not a practice which should be encouraged or endorsed by this Court. However, the letter went on to say:

 

”Based on { 1}  the volume of papers provided (of which supporting evidence consisted of 198 pages of contemporaneous email correspondence which had not previously been disclosed) and (2) the Responding Party’s reliance on the Contract Administrator to comment on factual circumstances arid provide supporting evidence, the Responding Party requested a further extension of 6 days. In addition, the Responding Party sought an extension of the timetable generally in respect of both parties’ time to provide their further submissions and consequently the Adjudicator’s decision. In the absence of the Referring Party’s consent, said, extension was not permitted. The Responding Party therefore reserves its right to challenge enforcement of the Adjudicator’s decision.

 

In addition to the above referred claims, the Referring Party has been put on notice of the Responding Party’s claims for (1) defective works undertaken at the property and (2) delay arising as a result of the Referring Party’s conduct. Subject to the completion of various reports as the extent of the defective works, the Referring Party considers matters are most appropriately dealt with by the Court, in circumstances where the Responding Party engaged a contractor (4M) and contract administrator (Elcock Associates Limited) in relation to the works undertaken to their property, it is intended that both parties are to be joined in proceedings (which would of course not be possible within the scope of adjudication).

 

Yours faithfully”

 

  1. The Claimant responded to the Defendants’ solicitors’ letter dated 18th January 2019 by a letter to the Adjudicator dated 21st January 2019 stating:

 

”We note that the Responding Party does not intend to issue a Response in relation to these proceedings. In that context, we invite you issue a decision on the basis of the narrative and evidence provided in the Notice of Adjudication and Referral. Further, we ask you to draw adverse inferences in light of the lack of any response (as relevant).”

 

  1. The Adjudicator wrote to the Parties on the 23rd January 2019 stating:

 

”3.4  I wrote to the parties on 23 January 2019:

 

I acknowledge receipt of your email and confirm that I will publish my decision, based on the evidence before me, on or before 7 February 2019.”

  

  1. The Adjudicator gave a reasoned decision dated the 2nd February 2019 stating, amongst other matters:

 

”8.0  4M Group’s case regarding the claim that Mr and Mrs Nash pay 4M Group the sum of £72,429.86 plus VAT in respect of the Final Account or such other sum as the adjudicator shall decide.

 

8.1  4M Group submitted their final account valuation to Mr and Mrs Nash on 4 August 2018 which included a further amount to be paid of £212,902.81 plus VAT. For the avoidance of doubt, that sum remains 4M Group’s view of its correct entitlement in relation to the project. 4M Group reserves the right to pursue that sum in due course and these proceedings are conducted without prejudice to that position.

 

8.2  By their letter dated 21 April 2017 Mr and Mrs Nash purported to terminate 4M Group’s employment by reference to various clauses. It is 4M Group’s position that the termination was wrongfully executed and its rights in respect of that position are reserved.

 

8.3  Mr and Mrs Nash confirmed that a final account would be provided confirming the amounts due to or from 4M Group.

 

8.4  Mr and Mrs Nash published the Final Account pursuant to clause 8.7.4 of the Contract, showing the sum due from 4M Group to Mr and Mrs Nash of £13,570, after the deduction of £86,000 LADs.

 

8.5  LADs were deducted due to delays to the completion of the Works for which 4M Group are allegedly liable.

 

8.6  A number of relevant delay events to completion of the works are as a result of Mr and Mrs Nash’s acts and/or omissions. Under the Contract 4M Group is not entitled to an extension of time where it is prevented from completing on time for reasons that are the fault of Mr and Mrs Nash. The relevant event clause referring to acts and/or omissions of Mr and Mrs Nash (2.20.6) has been deleted.

 

8.7  It is trite law, as demonstrated by recent case law, that if a delay event occurs that is the Employer’s fault and the contract does not make provision for that delay, the original completion date falls away and time is put “at large”. Accordingly, 4M Group is required to complete the contract works within a reasonable time and Mr and Mrs Nash can have no entitlement to deduct LADs in respect of the relevant delays.

 

Multiplex Constructions (UK) Ltd v Honeywell Control Systems Ltd [2007] EWHC 447 (TCC)

 

47  …The essence of the prevention principle is that the promise cannot insist upon the performance of an obligation which he has prevented the promisor from performing.

 

48  …In the field of construction law. One consequence of the prevention principle is that the employer cannot hold the contractor to a specified completion date, if the employer has by act or omission prevented the contractor from completing by that date. Instead time becomes at large and the obligation to complete by the specified date replaced by an implied obligation to complete within a reasonable time.

 

8.8  Similar precedents:

 

Holme v Guppy (1838) 150 ER 1195

 

Trollope & Colls Ltd v North West Metropolitan Regional Health Board [1973] 1 WLR 601

 

Peak Construction (Liverpool) Ltd v McKinney Foundations Ltd (1970) 69 LGR 1, 1BLR 114, 215 EG 1259

 

9.0  Reasoning regarding the claim that Mr and Mrs Nash pay 4M Group the sum of £72,429,86 plus VAT in respect of the Final Account, or such other sum as the adjudicator shall decide.

 

9.1  Mr and Mrs Nash have offered no defence. I accept 4M Group’s case that Mr and Mrs Nash are not entitled to deduct LADs. However, the calculation of the sum due is incorrect. It was simply arrived at by deducting the alleged over payment from the refund of the LADs deducted.

 

Refund LADS

 

 

86,000.00

 

 

Deduct alleged over payment

 

 

13,570.14

 

 

Amount claimed

 

 

£ 72.429.86

 

 

 

 

9.2  The correct calculation is:

Net amount due

 

 

564,532.40

 

 

Previous payments

 

 

510.093.54

 

 

 

 

£ 54,438.86

 

 

LADs

 

 

(86,000.00)

 

 

Alleged over payment

 

 

£ 31,561.14

 

 

 

 

9.3  It is agreed by 4M Group that the sum claimed be reduced from £72,429.86 to £54,438.86.

 

9.4  I hereby decide that Mr and Mrs Nash must pay the amount of the Final Account without the deduction of LADs.

 

9.5  4M Group are required to complete the Works within a reasonable time. It follows that in the event that they fail to achieve this requirement, Mr and Mrs Nash could have a claim for general damages. Accordingly, I have omitted the following part of the declaration sought by 4M Group in – ”or costs associated with delay”.

 

  1. The Adjudicator then set out his Decision and stated:

 

”11.0  Decision:

 

11.1  Mr and Mrs P Nash will pay 4MA Limited t/a 4M Group the sum of £54,438.86 (fifty four thousand, four hundred and thirty eight pounds and eighty six pence) plus VAT in respect of the full amount of the Final Account, within seven days of the date of this Decision.

 

11.2  I hereby declare that Mr and Mrs P Nash have no right to deduct amounts from the Final Account and/or any final assessment and/or payment under the Contract in respect of Liquidated and Ascertained Damages.

 

11.3  Mr and Mrs P Nash will pay 4MA Limited t/a 4M Group £4,040 (four thousand and forty pounds) interest within seven days of the date of this Decision and at a daily rate of £7.83 (seven pounds eighty three pence) thereafter.”

 

The Law

 

  1. The law, as I understand it, is well-established. The Courts have stated again and again the correct way to enforce an adjudicator’s decision is by way of summary judgment, see Bouygues (UK) Ltd v. Dahl-Jensen (UK) Ltd [2001] 1 All E.R. (Comm) 1041. The test for summary judgment, again, is well-known and it is set out under CPR 24.2:

 

”Grounds for summary judgment

 

”24.2  The court may give summary judgment against a claimant or defendant on the whole of a claim or on a particular issue if –

 

(a)  it considers that –

 

(i)  that claimant has no real prospect of succeeding on the claim or issue; or

 

(ii)  that defendant has no real prospect of successfully defending the claim or issue; and

 

(b)  there is no other compelling reason why the case or issue should be disposed of at a trial.””

 

  1. Lord Justice Chadwick in Carillion Construction Ltd v. Devonport Royal Dockyard Ltd [2006] BLR 15, (2005) at para. 85 of that Judgment said it was only in rare circumstances that the Court would interfere with the decision of an Adjudicator. Further, at para. 87 he stated that :

 

”… in the overwhelming majority of cases, the proper course for the party who is unsuccessful in an adjudication under the scheme must be to pay the amount that he has been ordered to pay by the adjudicator.”

 

  1. The issue in this case is whether the facts and circumstances of this case are one of the rare circumstances Lord Justice Chadwick referred to, albeit without identifying, those rare circumstances where the Court could refuse to enforce an Adjudicator’s decision. The issues raised by the defendants are ingenious but, I find, ultimately hopeless. To do them justice, I will set out the defendant’s written submissions on this point in some detail.

 

”The Law & Discussion

 

  1. The proposition which underlies the Claimant’s position in relation to this application, set out in Mr Radcliffe’s second statement, that the Housing Grants, Construction and Regeneration Act 1996 was intended by Parliament to introduce a speedy mechanism for settling disputes on a provisional interim basis and that accordingly save in limited circumstances the decisions of Adjudicators are to be enforced pending final determination is broadly accepted as being the effect of Section 108 of the Act and paragraph 23.2 of part 1 of the Scheme for Construction Contracts (England and Wales) Regulations 1998 (exhibited to Mr Radcliffe’s second statement).

 

  1. However, Section 108 of the 1996 Act and therefore the statutory imperative on which the Claimant relies which is referred to in a number of the authorities (for instance Bouygues (UK) Ltd v Dahl-Jensen (UK) Limited [2000 WL 1084433 at 29) do not apply in this case.

 

  1. Section 106 of the 1996 Act provides:

 

(1)  This Part does not apply –

 

(a)  to a construction contract with a residential occupier (see below)…

 

(2)  A construction contract with a residential occupier means a construction contract which principally relates to operations on a dwelling which one of the parties to the contract occupies, or intends to occupy as his residence.”

 

  1. Graham Terrace, the property which was the subject of this contract, was intended to be and now is occupied by the Defendants as their residence and it is clear that what Parliament intended in relation to the speedy and provisional resolution of disputes between construction industry professionals it expressly excluded in relation to residential occupiers. See in this context Akenhead J in Westshield Limited v Whitehouse [2013] 3576 EWHC (TCC) at paragraph 31:

 

”Essentially Mr Vickers’ primary argument for Westshield was that the decision was binding and should be enforced with reliance being placed on Section 108 of the Housing Grants, Construction and Regeneration Act 1996. That however is undermined by the fact that the adjudication clause in this case was not a statutorily imposed one because the contract related to a residential development for the Whitehouses (see Section 106 of the 1996 Act).”

 

  1. The position is analogous in this case with the result that much of the dicta in the authorities relied upon by the Claimant is of no assistance to it. What the Claimant is left with is a contractual agreement that disputes are to be referred to adjudication and that the adjudication is to be conducted under the Scheme for Construction Contracts (England and Wales) Regulations 1998. That agreement between the parties does not, however, as the Claimant appears to suggest, mean that the adjudication is subject to the provisions of the 1996 Act or that the adjudication is elevated to a determination under Section 108 of the 1996 Act (as in Bouygues and the other authorities). The parties cannot it is submitted make an adjudication which is expressly excluded from the statute somehow subject to it.

 

  1. In those circumstances the application for summary judgment falls to be determined under CPR Part 24 on ordinary principles (in other words without the statutory imperative given by the 1996 Act and the particular rules applicable to adjudications conducted under that Act). The Claimant has therefore to show that the Defendants have no real prospect of successfully defending the claim and there is no other compelling reason why the case should be disposed of at trial. The test of a real prospect of success will be familiar to the court and requires the Defendants to demonstrate some chance of success or a more than fanciful prospect of succeeding (see for reference the commentary to Part 24 in The White Book).

 

  1. It is accepted that paragraph 23(2) of the Scheme provides that the decision of the adjudicator is binding and to be complied with. However, given that the adjudication is not statutorily imposed (by reason of Section 106 of the 1996 Act and per Akenhead J in Westshield), paragraph 23(2) amounts to no more than part of the contractual agreement between the parties and therefore gives the Claimant no more than a common law right in contract to enforce its terms.

 

  1. Section 49(2) of the Senior Courts Act 1981 provides:

 

(1)  Subject to the provisions of this or any other Act, every court exercising jurisdiction in England and Wales in any civil cause or matter shall continue to administer law and equity on the basis that, wherever there is any conflict or variance between the rules of equity and the rules of the common law with reference to the same matter, the rules of equity shall prevail.

 

(2)  Every such court shall give the same effect as hitherto-

 

(a)  to all equitable estates, titles, rights, reliefs, defences and counterclaims, and to all equitable duties and liabilities; and

 

(b)  subject thereto, to all legal claims and demands and all estates, titles, rights, duties, obligations and liabilities existing by the common law or by any custom or created by any statute,

 

and, subject to the provisions of this or any other Act, shall so exercise its jurisdiction in every cause or matter before it as to secure that, as far as possible, all matters in dispute between the parties are completely and finally determined, and all multiplicity of legal proceedings with respect to any of these matters is avoided.

 

(3)  Nothing in this Act shall affect the power of the Court of Appeal or the High Court to stay any proceedings before it, where it thinks for to do so, either of its own motion or on the application of any person, whether or not a party to the proceedings.

 

  1. The Defendants’ claim against the Claimant is as set out in the Particulars of Claim exhibited to Lauren Day’s witness statement and has now or will shortly be issued in substantially the same form. That witness statement summarises the broad headings of the claim and gives indicative figures for the claims that clearly exceed the sum claimed in these proceedings.

 

  1. It will be apparent that the claim arises from the same contract as that upon which the Claimant relies and relates to work for which the Claimant is claiming payment. In those circumstances it fulfils the requirement for an equitable set off namely that it is a cross claim which arises out of the same transaction or is so closely connected with the claim that it would be manifestly unjust to allow enforcement without taking into account the cross claim; see Beck Interiors Limited v Classic Decorative Finishing Limited [2012] EWHC (TCC) 1956.

 

  1. It is worth noting that this was a case in which the particular statutory rules relating to enforcement of adjudicator’s decisions did apply but Coulson J left open at least the possibility that nonetheless in the right circumstances a defence of equitable set-off might suffice, a possibility which can also be derived from the judgment of Buxton LJ in Bouygues at 35 (albeit that the additional factor in that case was that one of the parties was in liquidation).

 

  1. However, this was not a determination under Section 108 of the 1996 Act and it is submitted the Defendants’ cross claim is clearly not fanciful. It is at least in part already supported by reports from professionals appointed to examine the defective works complained of and it is evident that the disputes between the parties as to the quality of the construction have been ongoing since before the contract was terminated. Indeed, the Claimant has not sought to suggest that the cross claim is fanciful. Nor has it advanced any case to the effect that it is entitled to summary judgment for any reason other than the rules relating to enforcement of adjudicator’s decisions to which the 1996 Act applies.

 

  1. Section 49(2) of the Senior Courts Act 1981 cited above enjoins the court where a conflict between common law rights and equitable rights arises, to exercise its jurisdiction to ensure equity prevails. The Defendants have a cross claim against the Claimant which if made out gives rise to an equitable set off against the sum claimed (and therefore a defence to the claim) and it is submitted that equity requires the court to take account of that claim when addressing the Claimant’s application for summary judgment.

 

  1. Accordingly it is submitted that the court should dismiss the Claimant’s application for summary judgment and stay these proceedings pending the outcome of the Defendants’ claim.”

  

  1. I agree with the Claimant that the only arguable basis on which the Defendants can resist immediate enforcement of the Adjudicator’s decision is the claim that the Defendants intend to issue a Part 7 claim against the Claimant. It was unclear from Lauren Day’s Witness Statement whether it is asserted that this is a basis for a stay, a reason to refuse summary judgments, or both. No Part 7 Proceedings had been issued at the date of the Skeletons being exchanged, but as I understand it, Part 7 proceedings have now been issued but not yet served.

 

  1. The relief sought in the Part 7 Proceedings against the Claimant and the Defendants’ consultants, Elcock Associates Limited, is as follows:

 

”Against 4M

 

(1)  Not less than £109,812.72 In respect of costs to be incurred remedying the defective works (paragraphs 10 to 14 above),

 

(2)  £55,749.17 in respect of costs already incurred by them in remedying the defective works (paragraph 15 above} ,

 

(3)  Damages for delay (paragraph 16).

 

Against Elcock

 

(1)  The sums not recovered from 4M in respect of the defective works as claimed at paragraph 19 above,

 

(2)  £68,000 in respect of the loss of opportunity to claim liquidated damages for delay alternatively general damages together with the costs of the adjudication amounting to £8,642 (paragraphs 21 to 25 above),

 

(3)  £51,285.84 in respect of the Party Wall Awards (paragraphs 26 to 29 above).

 

(4)  [The sum awarded to 4M by the adjudication of June 2017 being £65,291 (including VAT),] together with interest and costs amounting to £5,055.25 (paragraph 32 above).”

 

  1. I have looked at the Particulars of Claim with some care and I have read the Witness Statements in some detail. Although this case may be on the cusp of the jurisdiction of Central London County Court, I think it is in the interest of parties for this claim to remain in the Rolls Building because it does exceed the £250.000 threshold. I think it is likely to be resolved more economically and more expeditiously if it stays here than if it was to be transferred to Central London County Court but that is my indication. Whether that is a view shared by the Judge at the first CMC is a matter for the Judge at the first CMC.

 

  1. However, I have concluded that on the basis of the authorities it is well-established, if not trite law, that existing Part 7 Proceedings provide no basis on which to refuse summary judgment to enforce an Adjudicator’s decision or to order a stay for the following reasons:-

 

(1)  If one starts with the Contract, Clause 9.2 of the Contract provides that any adjudication must be conducted in accordance with the scheme.

 

(2)  If one looks at the scheme, paragraph 23.2 of the scheme states:

 

”The decision of the adjudicator shall be binding on the parties and they shall comply with it until the dispute is finally determined by legal proceedings, by arbitration (if the contract provides for arbitration or the parties otherwise agree to arbitration) or by agreement between the parties.”

 

(3)  If one looks at the policy and intention of adjudication, starting with the Parliamentary intention behind the scheme is well-known. It is intended to provide a speedy mechanism to resolve disputes on an interim basis, often summarised as “Pay now. argue later”;

 

(4)  If one looks at contractual adjudication, in RWE NPower v Alstom Power [2009] Claim No. 9BS90329, His Honour Judge Havelock-Allan QC concluded at para.88:

 

”In my judgment an officious (nowadays referred to as an “informed”) bystander would conclude that, by choosing to incorporate the provisions of the Scheme rather than their own bespoke provisions for adjudication, the parties intended to import into the contract the parliamentary intention underlying the Scheme.”

 

  1. It is said that because this is a residential owner and Section 106 excludes residential owners from the statutory scheme, the contractual scheme should be interpreted differently. I see no reason for distinguishing the contractual from the statutory scheme, particularly in circumstances where this was a major building project and the contract sum was for some £750,000 and the residential owners had the help, guidance and assistance of a contract administrator from the beginning to the end of this Project. Therefore, I agree with the conclusion of Mr Havelock-Allan QC in paragraph 89 of his Judgment:

 

”The express choice of the Scheme, rather than any other set of adjudication provisions brings with it the purpose underlying it and the interpretation it has received in its statutory context.”

  

  1. In the light of the policy, “Pay now, argue later” or in light of the temporary finality of the Adjudicators decisions, it is well-established that the existence of another claim whether by way of litigation or further adjudication does not amount to a reason to refuse to order summary judgment or to order a stay.

 

  1. Finally, it has been suggested that in the absence of common law, a defence of set off applies to claims under a building contract (absent clear words to the contrary) in the same way it applies to other contractual terms. See Modern Engineering v. Gilbert Ash [1974] AC 689 [1974] AC 689 718 per Lord Diplock who stated:

 

”My Lords, I accept the importance of “cash flow” in the building industry. In the vivid phrase of Lord Denning M.R.: “It is the very lifeblood of the enterprise” (71 L.G.R. 162, 167). But so it is of all commercial enterprises engaged in the business of selling goods or undertaking work or labour; and so it was in the first half of the 19th century when this common law remedy for breach of warranty was “established” and in 1893 when its application to contracts for sale of goods received statutory recognition in the Sale of Goods Act. “Cash flow” is the lifeblood of the village grocer too, though he may not need so large a transfusion from his customers as the shipbuilder in Mondel v. Steel or the sub-contractor in the instant appeal. It is also the lifeblood of the contractor whose own cash flow has been reduced by the expense to which he has been put by the sub-contractor’s breaches of contract. It is not to be supposed that so elementary an economic proposition as the need for cash flow in business enterprises escaped the attention of judges throughout the 130 years which had elapsed between Mondel v. Steel and Dawnays’ case in 1971, or of the legislature itself when it passed the Sale of Goods Act in 1893.

 

So when one is concerned with a building contract one starts with the presumption that each party is to be entitled to all those remedies for its breach as would arise by operation of law, including the remedy of setting up a breach of warranty in diminution of extinction of the price of material supplied or work executed under the contract. To rebut that presumption one must be able to find in the contract clear unequivocal words in which the parties have expressed their agreement that this remedy shall not be available in respect of breaches of that particular contract.”

  

  1. I was then referred to Section 49(2) of the Supreme Court Act 1981 which provides:

 

”(2)  Every such court shall give the same effect as hitherto –

 

(a)  to all equitable estates, titles, rights, reliefs, defences and counterclaims, and to all equitable duties and liabilities; and

 

(b)  subject thereto, to all legal claims and demands and all estates, titles, rights, duties, obligations and liabilities existing by the common law or by any custom or created by any statute,

 

and, subject to the provisions of this or any other Act, shall so exercise its jurisdiction in every cause or matter before it as to secure that, as far as possible, all matters in dispute between the parties are completely and finally determined, and all multiplicity of legal proceedings with respect to any of those matters is avoided.”

 

  1. Section 49(2) of the Supreme Court Act is subject to the provisions of this and any other Act and that includes the Housing Grants Act of 1996. If it is said that the equitable setoff should be retained in respect of the Housing Grants Act in circumstances where a residential occupier is made subject to the provisions of that Act by way of a contractual adjudication, I think that that would drive a coach and horses through the Housing Grants Act because the same argument would apply to any contractual adjudication. I do not consider Section 49(2) assists the Defendants. It cannot and does not defeat the clear Parliamentary intention and policy behind that Act.

 

  1. Therefore, I have reached the conclusion that the Defendants’ submissions that existence of the anticipated and now threatened Part 7 claim amounts to a reason to refuse summary judgment or to a stay are simply wrong and contrary to authority and is contrary to the policy behind the Act. It would also undermine the temporary finality of the Adjudicator’s decisions.

 

  1. In the circumstances, on the proper construction of Section 49(2) of the Senior Courts Act:

 

- The Defendants’ cross-claim based upon is Part 7 Proceedings does not give rise to an equitable set-off and, therefore, a defence to the claim because that Section of the Act is expressly stated to be subject to the provisions of any other Act;

 

- That must, in the context of these proceedings, be a reference to the Housing Grants Act 1996 as amended;

 

- The intended purpose of Section 108 of that Act is plain. Put bluntly “pay now, argue later”;

 

- The Contract should be construed so as to give effect to the intention of Parliament and not construed so as to defeat the intention of Parliament.

 

  1. I have been referred to some twelve authorities and to do justice to the industry and ingenuity of Counsel, I will refer to some of them.

 

  1. In MJ Gleeson Group Plc v. Devonshire Green Holding Limited [2004] TCC01504 , his Honour Judge Gilliland QC, sitting in the TCC in Salford, held that payment ordered by the Adjudicator could not be withheld on the basis of a claim which accrued after commencement of adjudication. At paragraph 20 Judge Gilliland said this:

 

”(20)  Now, in the present case, when one looks at clause 39A.7, although the language is not precisely the same, the contractual purpose, it seems to me, is clearly the same as that which was referred to by Longmore LJ. The decision of the adjudicator is binding on the parties under clause 39A.7.1 until determined by arbitration or legal proceedings. The parties are to comply with the decision of the adjudicator and both parties shall ensure that the decision of the adjudicator is given effect to, and if either party does not comply then the other party shall be entitled to take legal proceedings to secure such compliance. That scheme, it seems to me, necessarily indicates that the decision of the adjudicator is to be given effect to and the idea that the decision of the adjudicator can be defeated by a withholding notice in respect of events which occurred subsequent to the commencement of the adjudication seems to me to be entirely inconsistent with the statutory purpose of providing a quick and effective remedy on an interim basis. An adjudicator’s decision is meant to be enforced and complied with without, it seems to me, subtle arguments and detailed arguments as to other provisions of the contract.”

  

  1. In David McLean Contractors Ltd v. Albany Building Ltd [2005] TCC101/05, Salford District Registry, 10th November, Judge Gilliland, sitting at TCC in Salford. However, the Defendant could not set off its claim for damages for delay against payment ordered by the Adjudicator. At paragraph 28, Judge Gilliland said this:

 

”28.  So what one has, is an adjudicator’s decision ordering payment of monies, that is the 1.33 million. I will return in a moment to the claim in relation to the other two items : the two later certificates 22 and 23. So far as the adjudicator’s decision is concerned, one has simply an adjudicator’s award which, in my judgment, was clearly given within his jurisdiction. He may have been right, or he may have been wrong in relation the validity of the original section 24.1 notices but that is not a point which is for me to deal with today. That can be challenged in subsequent proceedings, if necessary. Having given the decision, the question then is: can the defendant refuse payment based on a cross-claim that it is going to be entitled to liquidated damages if it succeeds in the claim which it has put forward? In my view, the answer to this is no.”

  

  1. I have also been referred to the decision of Jackson J in Interserve Industrial Services Ltd v. Cleveland Bridge UK Ltd [2006] EWHC 741 (TCC) at paragraph 4 where he states that:

 

”Neither the subcontract in this case nor s. 111 of the 1996 Act, can be construed as excluding rights of set off which did not exist when the rights the subject of the adjudicator’s decision crystallised. Mr Hargreaves points out that in cases such as the present, a notice under s. 111 cannot be served. Mr Hargreaves further submits that his interpretation would make good sense if adjudications are confined in length to the period envisaged by Parliament in s. 108 of the 1996 Act. The present case is exceptional in that adjudication two lasted for a period of twenty-one weeks.”

  

  1. As Jackson J, as he then was, said at paragraph 43:

 

”I am afraid that I am not persuaded by any of these submissions, forcefully though they were put. Where the parties to a construction contract engage in successive adjudications, each focused upon the parties’ current rights and remedies, in my view the correct approach is as follows. At the end of each adjudication, absent special circumstances, the losing party must comply with the adjudicator’s decision. He cannot withhold payment on the ground of his anticipated recovery in a future adjudication based upon different issues. I reach this conclusion both from the express terms of the Act, and also from the line of authority referred to earlier in this judgment.”

 

  1. On the facts of this case, I do not think there are any special circumstances, rare or otherwise, justifying a departure from the normal approach to this kind of application. It may be said that when someone is ambushed over the Christmas period and has insufficient time to respond to a Referral Notice, that may be special circumstances, but I do not think that was a point which has been pursued by Mr and Mrs Nash and I think if it had been pursued, it would have been a bad point They had sufficient time and they chose not to actually exercise the equitable set-offs which were available to them in this adjudication but decided to keep their powder dry and make those claims in litigation which has just been commenced. As Jackson J put it at paragraph 46 of his Judgment:

 

”46.  The matter may be tested in this way. Interserve now asserts a claim to well over £3 million which will be advanced in adjudication number four. If Mr Hargreaves’ contention is right, the existence of that claim could be relied upon as a reason for Interserve to withhold payment of the sum which will fall due in respect of adjudication number three on 17 February. If Mr Hargreaves’ argument is correct, it would have a bizarre consequence in cases such as the present, where there is a series of consecutive adjudications between the same parties. The result might be that no adjudicator’s decision is implemented; each award simply takes its place in the running balance between the parties. Such an outcome is plainly contrary to the policy of the 1996 Act.

 

  1. Let me now draw the threads together. For the reasons set out above, Cleveland is not entitled to set off against the award in adjudication two, either its anticipated recovery or its actual recovery in adjudication three. My answer to the question posed in part 4 of this judgment is no.”

 

  1. In these circumstances, the Adjudicator’s decision should be enforced by the Court and the Defendants are not entitled to a stay to that judgment.

 

  1. I, therefore, give judgment in the sum of £65,326.63, interest in the sum of £4,501.97 to 9th May and thereafter at a daily rate of £7.83.