AT stannard Ltd v Tobutt (TCC - 28.10.2014)
It was not the case that there had been no effective threshold referral to adjudication on the grounds that there had been inferentially or possibly expressly a novation between the contractor, the firm and the company incorporated by its partners
28 October, 2014
AT STANNARD LTD v TOBUTT
Technology and Construction Court
24th October 2014
Two brothers traded as a firm until they incorporated their business into a limited company in 2010. The firm engaged the contractor to carry out works from 2007 to 2009. From about May 2009 (i) The firm acted for about a year in anticipation that it would change its status to operate as a limited company, albeit that the company was not incorporated until February 2010 and (ii) The contractor was therefore retained by the firm on behalf of the company (yet to be formed). A dispute arose in respect of retention money in respect of the contract between it and the firm for works carried out up to May 2009. The contractor began an adjudication. Whilst the firm did not submit a response at any time during the adjudication, its consultant wrote to the adjudicator on separate occasions (i) confirming that the firm would be participating in the adjudication and (ii) setting out what he described as the firm’s "initial response" to the claim. At no stage did the consultant or the firm indicate to the adjudicator or to the contractor that any issue was being taken in relation to jurisdiction, let alone in relation to any purported novation. The adjudicator awarded the contractor the full amount of the retention. The contractor issued enforcement proceedings.
Akenhead J rejected the firm’s contention that there had been inferentially or possibly expressly a novation between the contractor, the firm and the company.
The firm was wrong to submit that it was not raising a jurisdictional challenge and that the contention that there was a novation was a threshold issue which should be determined by the court because it accepted (or at least did not dispute) that (i) There was a construction contract between it and the contractor until the time when the suggested novation allegedly took place; and (ii) All the work to which the contractor’s claim related had purportedly been done before then. It was clear thatthe firm by participating in the adjudication without any reservation waived any right to raise as a jurisdictional (or indeed as some sort of threshold) challenge its argument on enforcement that all its rights and obligations had been transferred to the company by novation. Even if, notwithstanding the above, it in some way remained open to the firm to raise the novation contention to try to prevent enforcement of the decision, no effective evidential basis for such a contention had been raised.