KDIS GROUNDWORKS v RURAL DEVELOPMENTS (SURREY) LTD
KDIS GROUNDWORKS v RURAL DEVELOPMENTS (SURREY) LTD
Technology and Construction Court
2 May 2017
The defendant’s application seeking to adjourn the hearing of the application by the claimant for summary judgment to enforce the adjudication decision in its favour on the ground of the unavailability of a director of the defendant company because of his illness and confinement to hospital should be refused
The basis on which the adjournment was sought was that the director had been admitted to hospital to undergo surgery for a chronic back injury. Therefore he would be unavailable for several weeks and would be unable to attend and represent the company.
O’Farell J in rejecting the defendant’s application and in enforcing the adjudicator’s decision stated that she had in mind the guidance set out in CPR 3.1.3 in relation to late applications for adjournments. In all cases the court must have regard to the overriding objective. The court will always give careful consideration to an application to adjourn a hearing based on ill-health but as against that, the court has to balance the need for cases to be dealt with in a speedy, efficient and proportionate way.
It was clear from the letter attached to the director’s application that this was a planned admission to hospital for a procedure to treat a chronic back problem, ie, it was not an emergency and it was something of which the director had had almost a month’s notice. There is no reason why he could not have arranged for someone else to represent the company, either another director or alternative legal representation. It does not explain why the application to adjourn was made so late. If the application had been made at the time that the court issued its directions or very shortly thereafter, it might well have been possible to make alternative arrangements for this matter to be listed at a time to suit both parties. The director was not a sole director and was not a litigant in person and therefore it was incumbent on him to make arrangements for his company to be properly represented at such hearings. Any adjournment would not be a short adjournment since the director would not be available for a number of weeks after this date and it does not seem that that is appropriate where an application has been made in good faith for summary judgment. It was not necessary for the director to attend in person since he had put in a defence to the application and had produced a witness statement and it would not be necessary for him to attend to give any evidence. There was in any event no realistic prospect of any defence.
THE FULL TEXT OF THE JUDGMENT OF O’FARRELL J
- This is an application by the claimant, KDIS, against the defendant, Rural Developments (Surrey) Limited (”Rural”) to enforce an adjudication decision dated 13 February 2017 under which Rural was directed to pay KDIS £46,566.36 in respect of a final account dispute between the parties.
- The dispute between the parties arose out of a subcontract between KDIS and Rural under which Rural engaged KDIS to undertake groundworks, including the excavation, earthworks, foundations, floor slab, drainage and external works at a site known as Cowdown Farm in Micheldever, Hampshire. The subcontract didn’t contain any express adjudication provisions and therefore in accordance with section 108 of the Housing Grants Construction and Regeneration Act 1996 as amended by the 2009 Act, the statutory adjudication scheme became applicable. The works were carried out from about June 2014 but by September 2014, the relationship between the parties had deteriorated and Rural requested KDIS to leave the site. By that time, Rural had made interim payments to KDIS in respect of the works totalling £102,232.57.
- A dispute subsequently arose between the parties as to the value of the final account. On 10 January 2017, KDIS commenced adjudication proceedings by the issue of a notice of intention to refer the dispute to adjudication. On 12 January 2017, KDIS requested the appointment of an adjudicator by the RICS. On 16 January 2017, Mr Nigel Harding was appointed as adjudicator and accepted his appointment. The parties thereafter exchanged submissions. On 13 February 2017, the adjudicator issued his decision in which he found that the proper value of the final account was £118,283.40 plus VAT. Taking into account KDIS’s entitlement to recover damages, he directed that Rural should make payment to KDIS in the total sum of £46,566.36 plus interest. It is that adjudication decision which KDIS seeks to enforce today by way of summary judgment pursuant to CPR Part 24.
- On Friday, 28 April, that is last Friday, the court received an application from the defendant, Rural, seeking to adjourn this hearing on the grounds of the unavailability of Mr Derek King, a director of the defendant company. The basis on which the adjournment was sought was that Mr King had been admitted to hospital to undergo surgery for a chronic back injury. Therefore he would be unavailable both today and for several weeks hereafter and would be unable to attend and represent the company.
- The terms of his letter to the court, which is dated 25 April 2017 but received by this court on 28 April, is as follows:
”I have been under medical treatment for the last year and will be undergoing surgery on Friday, 28th/Saturday 29th April for a chronic back injury. I will be unable to attend court on May 2nd and for several weeks thereafter and accordingly make application to the court for the hearing to be adjourned. I enclose a copy of medical certificate/letter confirming my medical condition.”
- The letter that was attached to Mr King’s application is from the Nuffield Heath Group, Brighton Hospital. The letter is dated 4 April 2017 and confirms Mr King’s admission to hospital. The admission date is 28 April 2017 at 12.30. It does not give details of the procedure to which Mr King would be subject. It refers to a pre-admission assessment which took place on Tuesday, 18 April 2017. Therefore, it confirms the date of Mr King’s admission to hospital for a planned procedure but gives no details as to Mr King’s condition or likely condition following the procedure.
- The application for an adjournment was opposed by the claimant on the grounds that the application was for summary judgment, there was no realistic prospect of success and Mr King, although a director of the company, was not the only director and of course the company could be represented by proper legal representation. As an application for summary judgment does not require in most cases the giving of oral evidence, it was not essential for Mr King to attend.
- I have in mind the guidance set out in CPR 3.1.3 in relation to late applications for adjournments. In all cases the court must have regard to the overriding objective. The court will always give careful consideration to an application to adjourn a hearing based on ill-health, but as against that, the court has to balance the need for cases to be dealt with in a speedy, efficient and proportionate way. It also needs to take into account the needs of other court users; an adjournment affects the dates and speed with which other matters can be listed and the claimant has prepared for this hearing on the assumption that it is going to go ahead today.
- The court will also take into account whether or not there is adequate evidence for the ground on which the adjournment is sought, namely the medical condition of the individual and have regard to the overriding merits of the case.
- This court refused the application for an adjournment for the following reasons. First of all, it is clear, from the letter that is attached to Mr King’s application, that this was a planned admission to hospital for a procedure to treat a chronic back problem, ie, it was not an emergency and it was something of which Mr King has had almost a month’s notice. There is no reason why he could not have arranged for someone else to represent the company, either another director or alternative legal representation. It does not explain why the application to adjourn was made so late. If the application had been made at the time that the court issued its directions or very shortly thereafter, it might well have been possible to make alternative arrangements for this matter to be listed at a time to suit both parties.
- Secondly, Mr King is not a sole director. He is not a litigant in person and, therefore, it is incumbent on him to make arrangements for his company to be properly represented at such hearings. Thirdly, any adjournment would not be a short adjournment, as Mr King has made clear in his application. He would not be available for a number of weeks after this date and it does not seem to this court that that is appropriate where an application has been made in good faith for summary judgment.
- Fourthly it is not necessary for Mr King to attend in person. He has put in a defence to the application. He has produced a witness statement and it would not be necessary for him to attend to give any evidence. Finally, having read all of the material, there is no realistic prospect of any defence and, therefore, although this court would have considered any renewed application to adjourn this morning as part of the hearing of the Part 24 application, as no-one from the defendant company has turned up and as no realistic defence has been disclosed on the documents, the application has been refused.
- Turning then to the substantive claim, despite the fact that there is no-one from the defendant company representing its interests, it does not follow that the court will automatically grant an application for summary judgment. It is incumbent on a claimant seeking summary judgment to establish on the balance of probabilities that there is no real prospect of defending the claim. It is therefore necessary to consider the grounds on which the defendant has sought on paper to oppose the application.
- First of all, it is submitted that there is no, or no formal contract and therefore there was no jurisdiction on the part of the adjudicator to consider the dispute and issue a binding and enforceable decision. Secondly, it is submitted that there was a breach of the rules of natural justice because of the short timeframe within which the adjudicator required Rural to provide its submissions and in which the adjudication was determined. Thirdly, it submitted that the adjudicator made errors in admitting various evidence on behalf of the claimant in the adjudication and in preferring the evidence of the claimant, KDIS, in the adjudication.
- Turning to the issue of the formation of the contract, as has been properly submitted by Mr Finn on behalf of the claimant, under the terms of the 1996 Act it is necessary for there to be a construction contract, that is a contract between the parties in relation to construction operations. However, it is not necessary for that contract to be in writing. My attention has been drawn to the case of Rob Purton v Kilker Projects Limited  EWHC 2624 in which Stuart-Smith J summarised the general principles to be applied where there is a challenge to the formation of a contract on an application for summary judgment in the context of adjudication.
- The relevant principles are well-known and I refer to paragraphs 5 to 7 in the Kilker case and in particular at paragraph 5 where Stuart-Smith J referred to the case of RTS Flexible Systems Ltd v Mokerei Aolis Muller GmbH  UKSC 14, and also the case of Percy Trentham Ltd v Archital Luxfer Ltd  63 BLR 44 . If a transaction is performed on both sides, it will often make it unrealistic to argue that there was no intention to create legal relations, even where there is no easy interpretation of formal offers and acceptance. In particular, where there is performance of a transaction, it will frequently be possible to hold that the contract was impliedly and retrospectively agreed so as to cover such performance.
- Bearing in mind those principles, I turn to the evidence in this case in respect of the formation of a contract. It is common ground that prior to the ejection of KDIS from site, they carried out a substantial amount of work. It is common ground that the sum of £102,232.57 was paid by Rural in respect of those works.
- Turning to the correspondence that might be said to evidence the formation of a contract, the starting point is an email from Rural to KDIS on 10 June 2014 in which KDIS was invited to provide prices for the groundworks to be carried out. There was then a request for interim works to be carried out with a request for KDIS to provide costs for such works for a short period of time, indicated as being two weeks worth of work.
- On 26 June 2014, KDIS provided the rates which would be applicable to any works to be carried out. On 27 June 2014, Rural sent an email to KDIS purporting to confirm an order for a limited amount of work up to £10,000. However, on the same date, KDIS responded indicating that the value of work that had already been completed already exceeded the proposed limit of £10,000. On 30 June 2014, Rural confirmed that KDIS should continue with the other works as per the rates listed in an earlier email, thereby indicating that the initial cap of £10,000 was no longer applicable.
- As at that stage, ie, by the end of June 2014, on the basis of the documents before the court, there was an agreement as to the general scope of the work that should be carried out, albeit that it was on the basis that further instructions would be issued from time to time. There was an agreement as to the rates that would be applicable to such works. Therefore there was sufficient certainty so as to constitute a contract between the parties that would be enforceable.
- Reliance is placed by the claimant on subsequent conduct of the parties, some of which I find would be ambiguous as to the existence of a contract. There was reference to agreed rates and to various works to be carried out and contractual obligations, but at the same time, there was no reference to a specific set of terms that had been agreed. However, it is of probative value that on 10 December 2014, KDIS submitted its final account based on the rates and prices that had previously been agreed. In response to that, Rural issued its alternative valuation of the final account by letter dated 29 January 2015, in which it stated in the second paragraph:
”You may be aware that the KDIS subcontract was terminated by mutual consent for a number of reasons.”
It went on to identify a number of criticisms that Rural had in respect of KDIS’s works. On the following page Rural also stated:
”It is agreed that £102,232.57 has been paid and that figure breaks down as follows as per the Rural summary of 2 September 2014.”
It then went on to identify why the sums that were currently being claimed by KDIS were not payable. The letter finished by the following statement:
”We trust that the foregoing provides you with a better understanding of KDIS’s position relative to their terminated subcontract.”
- In the subsequent adjudication that followed, I should note that in the response, Rural did identify a jurisdictional point in relation to the contract by stating:
”It should also be noted that no contract was entered into and the works were instructed on an ad hoc basis.”
- The difficulty with that is that it is contrary to the other substantive submissions made by Rural to the adjudicator in which reliance was placed on both the applicable rates and prices that had bee agreed and in support reliance was also placed on the obligations of KDIS under a contract. I accept the submission of Mr Finn that Rural cannot have it both ways; either there was a contract under which KDIS was required to carry out its works in a particular manner, or there was no contract. In any event, I am satisfied on the documents that have been put before the court, that there was indeed a certain and enforceable contract as between the parties that was terminated by consent by September 2014.
- There can be no real dispute but that such contract for groundworks fell fairly and squarely into the meaning of “construction operations” as defined by section 105 of the 1996 Act. Therefore, this was a construction contract to which the Act applied. It was not in dispute but that the contract between the parties did not include an adjudication agreement and therefore in the absence of such agreement, pursuant to section 108 of the Act, the statutory scheme applied. As the adjudicator was appointed and carried out the adjudication in relation to the scheme, there can be no justifiable opposition to this application on the basis of jurisdiction.
- Turning then to the second ground of opposition, that is that there was a breach of the rules of natural justice by reference to the swift timescale of the adjudication, the background to this can be summarised fairly shortly.
- On 16 January 2017, the notice of referral was issued. On 17 January 2017 the adjudicator acknowledged receipt of the referral and gave directions for service of any response by Rural. On 24 January 2017, Rural provided its response by letter as directed by the adjudicator. On 30 January 2017, the reply was served by KDIS. On 5 February 2017, Rural provided a rejoinder by, in effect, inserting responsive notes to the reply previously served by KDIS. This was a swift adjudication with relatively tight timescales for the parties to provide their submissions.
- The applicable legal authority on this is the case of Macob Civil Engineering Ltd v Morrison Construction Ltd  BLR 93. Adjudication decisions are intended to be dealt with swiftly and Parliament must have intended that there would be an element of rough justice in the pursuit of a speedy and economic resolution of disputes. In Edenbooth Ltd v Cre8 Developments Ltd  EWHC 570, Coulson J stated at paragraph 17:
”It is an inherent feature of adjudication that the Adjudicator is obliged to produce his decision quickly. That means he has to put pressure on the parties to ensure that they provide the necessary information to him just as promptly. Adjudication does not work if the parties take too long to provide information to the Adjudicator. The corollary of that is that parties often feel under pressure to do things more quickly than they would like. However, as I have said, that is simply an inevitable consequence of the adjudication process.”
- In this case, the final account had been sent to Rural as early as 10 December 2014, ie, over two years prior to the adjudication. Rural had responded to that by their letter dated 29 January 2015, ie, two years prior to the adjudication. That is a very significant factor, it seems to me, in considering whether or not the defendant had a proper opportunity to consider and respond to the evidence relied on by KDIS.
- There was a very minor change to the figures between the initial submission of the final account in 2014 and the referral document submitted in January 2017, but it was a sum of about £200 which did not make any significant different to the case that the adjudicator was required to adjudicate on.
- The timetable was tight, as many adjudication timetables are. There was nothing unusual in this. It was a short issue that the adjudicator had to determine, namely the proper valuation of works that had been carried out. Both parties had an adequate opportunity to respond to each other’s case and I am satisfied that there was no breach of the rules of natural justice in this case.
- The third ground relied on by the defendant is that the adjudicator wrongly admitted evidence, namely a marked-up drawing, and effectively reached the wrong decision in preferring the valuation evidence of KDIS. The law on this is very clear. If the adjudicator has asked himself or herself the right question, it does not matter for the purposes of enforcement that the adjudicator might have got the answer wrong; Macob v Morrison  BLR 93, Bouygues Ltd v Dahl-Jensen (UK) Ltd  BLR 522, and Carrilion Construction Ltd v Devonport Royal Dockyard Ltd  BLR 15.
- To that, two exceptions have been identified by Coulson J in the case of Hutton Construction Ltd v Wilson Properties (London) Ltd  EWHC 517 at paragraphs 4 and 5. The first is where an error made by the adjudicator has been admitted by both sides, and indeed sometimes by the adjudicator. In those circumstances, even on an application for summary judgment, the court will take the sensible course of making the appropriate correction.
- The second exception is where there is a short point of constructional principle that a defendant wishes to rely upon that would, in effect, defeat an application for summary judgment because it would reverse the adjudicator’s decision. If that can be dealt with shortly, by way of Part 8 proceedings, again the court will take the sensible decision to deal with that at the same time as dealing with the application for summary judgment.
- Those exceptions do not arise in this case. What the defendant is seeking to do is to re-open the merits of the decision in the adjudication and to substitute its own valuation for the valuation of the claimant, which was accepted by the adjudicator. I reject that ground as a ground of opposition to the application for summary judgment.
- Therefore, I accept that in this case there is no realistic prospect of the defendant resisting the claim and therefore it is appropriate for summary judgment to be entered in favour of the claimant.