Neutral Citation Number: [2010] EWHC 1976 (TCC)

Case No: HT-10-213

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

TECHNOLOGY AND CONSTRUCTION COURT

 

Royal Courts of Justice

Strand, London, WC2A 2LL

 

Date: 30th July 2010

 

Before :

 

MR JUSTICE AKENHEAD

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Between :

 

 

NICKLEBY FM LIMITED

Claimant

 

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SOMERFIELD STORES LIMITED

Defendant

 

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Allen Dyer (instructed by Keystone Law) for the Claimant

Robin Neill (instructed by Somerfield Stores Ltd Legal Department) for the Defendant

 

Hearing date: 16, 29 July 2010

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JUDGMENT

Mr Justice Akenhead:

 

  1. The Claimant brings these proceedings to enforce an adjudicator's decision dated 5 June 2010. The jurisdiction of the adjudicator was challenged although he expressed in a non-binding manner the view that he had jurisdiction. The same jurisdictional challenge is maintained by the Defendant in these proceedings; the Defendant also argues that the Claimant is attempting to assert a new basis for the adjudicator’s jurisdiction which was never advanced by it before the adjudicator and is materially different from the basis on which it argued before the adjudicator that he had jurisdiction. It is said that the Claimant should not be permitted to advance this "new basis" which is in any event factually disputed.

The Facts and the Contract

  1. Somerfield Stores Ltd (“Somerfield”), the Defendant, owned a large number of supermarkets around the country. By an agreement dated 1 May 2006 (“the Contract”), Somerfield engaged Nickleby FM Ltd (“Nickleby”) to provide management services in connection with maintenance at many of its supermarkets around the country. The Contract was to run for three years.

  2. Material provisions of the contract were:

          1. Clause 1.1 (Definitions)

“ “Management Fee” means the fee payable by Somerfield to the Contractor in each Budget Year in respect of the provision of the Services, comprising the Operating Costs, the Central Services Contribution and the Margin, as more particularly set out in Schedule 1

“Operating Costs” means the agreed costs and expenses incurred by the Contractor in employing the personnel and providing the resources and materials wholly and reasonably required for the performance of the Services as set out in Schedule 1…”

(b) Clause 2.6 required Nickleby to adopt the "most efficient, economic and effective working practices, processes and technology possible within the budgetary limits" and to use all reasonable endeavours to procure the various maintenance services materials and parts "at the best value for money available on the open market".

(c) Clauses 5, 6, 7 and 8 described what was required of Nickleby in terms of providing Preventative and Reactive Maintenance as well as Minor and Capital Works. Clause 12 required the Contractor to employ an adequate number of persons of sufficient experience and ability and skill to perform supervise and administer the Services that were to be provided.

(d) Clause 15 made provision for the Management Fee to be paid to Nickleby by Somerfield. The Contractor was entitled to be paid by way of 12 equal instalments each year every month “per Budget Year”. There was no express provision for the Management Fee to be adjusted downwards although there was provision for it to be increased under Clause 15.4 for "unforeseen incidental costs and expenses" and under Clause 15.6 for "any amounts due to the Contractor resulting from the implementation of a Cost Savings Initiative in accordance with and subject to the terms of Schedule 5”.

(e) Clause 16 required Somerfield to reimburse to Nickleby "all capital and revenue expenditure…wholly and reasonably incurred by the Contractor in the provision of the Services" subject to certain qualifications.

(f) Clause 24

“24.1 This Agreement will commence on the Commencement Date, and…shall continue in force for a period of three years whereupon (save where the parties expressly agree otherwise) this Agreement will automatically terminate without the need to either part[y] to serve notice. The parties may agree in writing at any time to extend the duration of this Agreement by an additional period of 12 months (or such other period as may be agreed), such right to extend may be exercised on more than one occasion for as long as this Agreement remains in force.

24.2 Notwithstanding Clause 24.1, Somerfield may terminate all or any part of this Agreement by giving to the Contractor not less than 14 weeks’ notice in writing at any time. Somerfield shall be entitled to pay the Contractor in lieu of some or all of its entitlement to notice pursuant to this Clause 24.2 a sum equal to the Management Fees to which it would have been entitled during the unexpired part of the notice period.”

(g) The Disputes Clause provided ultimately for dispute resolution in the courts. There was no express procedure or requirement for adjudication.

(h) The Management Fee was set out in Schedule 1 and it was identified as £469,000 and £38,000 per annum plus VAT in respect of Operating Costs and Central Services Contribution plus 8% margin on the total combined Operating Costs and Central Services Contribution.

(i) Schedule 5 set out the provision for the "Shared Gain Scheme" which provided encouragement to the parties to make effective proposals for savings on both revenue and capital expenditure. If the savings were achieved, Nickleby was entitled to 20% and 15% respectively for savings which were the result of its initiative or Somerfield’s initiative. This arrangement was referred to by the parties as "Gain Share”.

  1. The Contract proceeded over the next three years and involved expenditure by Somerfield of many millions of pounds each year. In about April 2009 the Cooperative Group took over Somerfield. Around and before this time, thought was given by Somerfield and Nickleby to extending the Contract beyond 30 April 2009 which was when it was due to expire. There is no issue that by one means or another it was extended by over a year and in practice from 1 May 2009 to May 2010 the relationship continued and Nickleby provided maintenance services.

  2. Discussions had started in January or February 2009 about the terms upon which any extension to the Contract should proceed. For instance, Somerfield proposed by letter dated at 3 February 2009 that the extension should be on terms that it was subject to termination on 14 weeks notice and that the Management Fee should be renegotiated to reflect amongst other things a reduction in staffing levels. That was rejected on 9 February 2009 by Nickleby in an e-mail.

  3. A meeting took place on 17 March 2009 attended by, amongst others, Mr Smale of Nickleby and Mr Flanagan and Mr Wilson of Somerfield and at least a measure of agreement appears to have been reached. By an e-mail dated 17 March 2009, Mr Flanagan confirmed a number of points which seemed to confirm agreement that there would be an extension to the Contract (“Contract extension letter to be sent out ASAP”) and at least that existing entitlements to Gain Share would be paid as soon as possible. It is at least possible that entitlements to Gain Share during the period of extension were not as such agreed at this precise stage. However on 14 April 2009 Mr Smale e-mailed to Mr Wilson in the following terms:

“Have cogitated, deliberated, etc. and here are my thoughts:

  1. Have no problem about relinquishing gain-share going forward.

  2. I understand you are not looking to claw back gain share from past initiatives.

  3. We have some work in progress that would fall under gain-share which I would be reluctant to surrender since most of the analysis and preparatory work has been done. This is to do with reducing the cost of the property maintenance contracts. I understand Somerfield was targeting a gross price reduction of £800k. If we achieved that we would have been entitled to £160k. Therefore, if it is acceptable to you, I propose we would cap any outstanding liability at £160k by way of compromise…”

There may well have followed some oral discussions between the parties.

  1. On 1 May 2009, Mr Smale e-mailed Mr Flanagan in the following terms:

“…have been really tied up. On reflection and after discussion with my colleagues, we are willing to forego gainshare monies as of 1st May. Obviously this wouldn't apply to existing gain share monies, just future ones.

Hope that wraps things up…”

Mr Wilson’s response a few minutes later was:

“Thanks for this response. Just to be absolutely clear.

  1. The potential claim for £160k raised in your e-mail of 14/4 is now removed.

  2. Any current outstanding gain share claims for completed agreed projects are subject to final ratification of amount due.

  3. No further gainshare from 1.5 .09…”

Mr Smale’s response a few minutes afterwards was simple:

“You’ve got it!”

These last three emails were not produced in the adjudication but were made available in these court enforcement proceedings.

  1. On 5 June 2009, Mr New of Somerfield sent to Mr Smale a draft letter dated March 2009 to be signed by the parties; this letter primarily related to the extension to the Contract and to the fact that it was terminable on at least 14 weeks’ notice in writing. There was nothing about the change to the Gain Share arrangements. On 4 July 2009, Mr Smale wrote to Mr New in the following terms:

“Herewith signed copy of extension letter. Have struck a line through everything that is not to do with the extension of time. Happy to discuss any other issues and push them through the Contract Change Procedure if we and you agree, which is how they should be treated under the terms of the contract…”

The signed extension letter simply and only confirmed that the Contract term was to be extended unless and until terminated by Somerfield giving not less than 14 weeks’ notice in writing.

  1. Following some exchanges, Mr New wrote to Mr Smale on 11 August 2009, enclosing another version of the letter with a "Miscellaneous" paragraph heading which stated:

“Notwithstanding Clause 3 and Schedule 3 of the Agreement, both parties agree to effect the changes detailed in this letter (and only those changes) outside of the change control procedure and detailed in the Agreement. Consequently both parties waive their respective rights and obligations set out in clause three and Schedule 3 of the Agreement and agree that the changes detailed in this letter shall have full contract effect from the date of this letter.”

There were attached a Change Request Form and Contract Change Note which effectively recorded that from 1 May 2009 the Contractor would be entitled to nothing with regard to Gain Share (as evidenced by the three e-mails of 1 May 2009).

  1. This latest version of the letter was not challenged as such at the time but it was not signed or returned. In fact, I was told initially during the hearing by Nickleby’s Counsel that no claims or payments were made by or to Nickleby respectively in respect of Gain Share after 1 May 2009; that observation was not as such challenged during the hearing of 16 July 2010.

  2. On 30 November 2009, Somerfield gave notice of termination to take effect on 30 May 2010. The letter purported to record an agreement that the Management Fee for the period from 27 January 2010 until 30 May 2009 was to be in total £175,000. Nickleby accepted the validity of the termination notice but denied that there had been any agreement about the Management Fee. There were considerations arising in relation to the TUPE transfer of employees from Nickleby to either Somerfield or the Cooperative Group. Somerfield's concern at least in part was there, if and to the extent that were TUPE transfers before 30 May 2009, it might be paying too much in respect of the Management Fee. It seems that no agreement was reached between the parties in this context. Somerfield paid so far as the Management Fee was concerned what it believed was fair and proper whilst Nickleby protested that it was entitled under the Contract to the full Management Fee.

The Adjudication

  1. Nickleby served its Adjudication Notice on 30 April 2010. The dispute related to two invoices each relating to instalments of the Management Fee for April and May which were said to be due in February and March 2010 respectively. Nickleby summarised Somerfield's contentions that it was entitled to deduct amounts from the Management Fee for a number of alleged reasons including the fact that various former employees at Nickleby had had their employment transferred under the TUPE Regulations. Paragraph 4 asserted:

“The Maintenance Agreement has been in force from 1 May 2006 until now. It was extended in 2009. It is due to terminate on 30 May 2010 following notice given by Somerfield on the 30 November 2009…”

  1. Paragraph 4 was repeated in Paragraph 2 of the Referral Notice which followed a few days later. The Referral Notice was accompanied by two statements of Mr Smale and another statement. These statements did not directly address the extension of the Contract save that Mr Smale did say in his first statement at Paragraph 65 simply that Nickleby and Somerfield "agreed that the Maintenance Agreement would be extended on a rolling-fourteen week notice period”. Nothing was said about the Gain Share.

  2. In its Response to the Referral notice dated 19 May 2010, Somerfield raised a jurisdictional point. Although it positively asserted that on 17 April 2009 Somerfield sent a letter to Nickleby offering to extend the Agreement on the same terms subject to Somerfield's right to terminate on 14 weeks’ notice and that "this was accepted by [Nickleby] by their conduct by invoicing [Somerfield] and accepting the Fee due in respect of May, June and July 2009, and/or by performing the Services in that period”, it argued that it believed that Nickleby was arguing that the original Contract "continued in force in its unamended form". Although it was not Somerfield's case that there was no extension, it argued that, if there was no agreement on the terms on which it was extended, the Contract had ceased to exist since May 2009 and there was no agreement under the 1996 Act. It asserted that the Gain Share arrangement had been revised so that Somerfield "was entitled to all future savings gains". The Response goes into substantial detail as to why under the Contract the Management Fee for April and May 2010 should be reduced to reflect the various defences and assertions which it was putting forward.

  3. Nickleby served its Reply on 22 May 2010 arguing that the jurisdictional point was simply a bad one. It did not deny that there was a revision to the agreement about the Gain Share but effectively said that there was agreement as to the terms on which the Contract had been extended. Mr Smale, in a further witness statement of the same date, said that he did not agree to accept the Change Request form attached to the e-mail of 11 August 2009.

  4. On 25 May 2010 Somerfield served a Rejoinder. At Paragraph 4, it argued as follows:

“In their Reply, [Nickleby] say that they never received [Somerfield’s] offer to extend the Agreement prior to 30 April 2010, and certainly did not accept any such offer prior to 30 April 2010…Somerfield cannot find any e-mail sending the proposed offer to extend the Agreement in May or April 2009, and must accept [Nickleby's] case that no such e-mail (or offer) was in fact sent. Therefore, it must follow that the original Agreement had come to an end by 2 May 2009 at the latest.”

It is clear that Somerfield had overlooked the three e-mails dated 1 May 2009 referred to above. Thus, the jurisdictional argument was maintained on the basis either that there was no concluded agreement to extend the Contract or one that was evidenced in writing for the purposes of the Housing Grants Construction and Regeneration Act 1996 (“HGCRA”).

  1. The Adjudicator, having ascertained that he had not been given by both parties jurisdiction to decide his own jurisdiction, wrote to the parties on 31 May 2010 to the effect that he had formed "the non-binding conclusion that I do have jurisdiction to make a Decision in this adjudication." He said that he would deal with his reasons for reaching this conclusion in his Decision.

  2. This Decision is dated 5 June 2010. On the substantive issues relating to the recoverability of the last two instalments of the Management Fee, he decided that Somerfield should pay the outstanding balances on the two invoices in question, £89,995.44 and £91,909.50 plus VAT together with interest and that Somerfield should also pay his fees and expenses of £10,000 plus VAT. He set out in Paragraphs 41 to 116 why he had drawn the "non-binding conclusion" that he had jurisdiction. Much of this is simply a summary of what is asserted in the Response, the Reply and the Rejoinder. Essentially, it was his view that there was an offer to extend the existing agreement on the basis of termination by 14 weeks’ notice from Somerfield which was accepted by conduct.

These Proceedings

  1. Somerfield having not paid the sums which the Adjudicator had decided were due from it, Nickleby issued proceedings on 16 June 2010 seeking to enforce the decision. Paragraph 3 of the Particulars of Claim pleads:

“In March and/or April 2009 the parties agreed in writing to extend the term of the agreement so that it would continue in force unless and until terminated by the Defendant giving the Claimant not less than 14 weeks’ notice of termination in writing. Further or alternatively by their conduct after April 2009 in continuing to provide and to receive the services the parties agreed to extend the agreement in accordance with the Defendant’s offer made in March 2009, namely subject to the term as to 14 weeks notice of termination set out above.”

Nickleby’s application for summary judgement was supported by a statement of Mr Smale which confirmed that the Contract "was extended by agreements between the parties in March 2009 and that that agreement was made or recorded in writing.”

  1. Somerfield sought Further Information in a Request dated 25 June 2010 asking for the precise date on which the binding agreement to extend the Contract was entered into. The answer was a meeting on the 17 March 2009 confirmed in writing by the e-mail of 23 March 2009 from Mr Flanagan, the March 2009 extension letter received by Nickleby on 5 June 2009 and an amended extension letter signed by Mr Smale and sent on 4 July 2009. The same answer was given in relation to other requests about what happened in March and April 2009.

  2. Somerfield through its Counsel argue that Nickleby argued initially in its Notice and Referral that the Contract had continued in effect since 1 May 2006 and made no reference to agreement on 17 March 2009 and that Nickleby in its Reply put forward a case that an offer had been made on 17 March 2009 for the Contract to be extended but it was to be terminable by Somerfield on 14 weeks’ notice. It goes on to argue that there is a new case alleged in the Particulars of Claim to the effect that there was an oral agreement reached on 17 March 2009 and that its evidence in the court proceedings is that no such agreement was reached. It says that Nickleby has four fundamental problems because (1) the Court is being invited to ignore the election made by Nickleby during the adjudication to advance a wholly different case in order to secure a decision in its favour, (2) there is sufficient doubt about the veracity of the new case as to offend the basic principles of CPR Part 24, (3) the documents relied upon do no more than indicate the existence of an intention to agree and (4) the Notice and Referral in asserting that the Contract had been in force from 1 May 2006 invited the Adjudicator to base his jurisdiction on that agreement rather than the radically new case.

  3. What is extraordinary about the matters in issue before the Court is that both parties expressly accepted in front of me that there was no doubt that there was an agreement between the parties whereby the Contract was extended on terms that it was terminable by Somerfield upon at least 14 weeks’ notice and that the Gain Share arrangement was altered so that as from 1 May 2009 Nickleby should be entitled to no return on any of the savings achieved pursuant to that arrangement. The three e-mails of 1 May 2009, disclosed by Somerfield only in the court proceedings, are properly accepted as recording in writing the revision to the agreement about the Gain Share. It is said by Somerfield that it was only before the Court at the hearing that Nickleby accepted the fact that there was agreement about the Gain Share.

  4. After the main hearing on 16 July 2010, Somerfield served a further witness statement which provided evidence which is not challenged that after May 2009 Nickleby submitted claims for Gain Share relating to the extension period. It argues that there was a material misrepresentation to the court at the main hearing by Nickleby to the effect that there were no such claims; no blame is attributed to Counsel or to Nickleby’s solicitors. It is said that this goes to support Somerfield’s arguments that Nickleby instigated the adjudication on a false basis and confirms that Somerfield's jurisdiction objection is one of real substance. I heard Counsel for both parties on this point at a second short hearing on 29 July 2010.

The Law

  1. It is well established that, provided that the adjudicator answers and addresses the dispute which has been referred to him or her, the decision is not impugnable on the grounds that it is wrong in fact or in law (see for instance Bouygues (UK) Ltd v Dahl-Jensen (UK) Ltd [2000] EWCA Civ 507).

  2. The law as to what the writing requirements are for construction contracts for the purposes of the HGCRA has been largely set down by the Court of Appeal in RJT Consulting Engineers Ltd v DM Engineering (Northern Ireland) Ltd [2002] EWCA Civ 270. in which the majority (Ward and Robert Walker LJJ) said was that all of the terms of the agreement must be in or evidenced in writing. Lord Justice Ward said at Paragraph 19:

"On the point of construction of section 107 [of the HGCRA], what has to be evidenced in writing is, literally, the agreement, which means all of it, not part of it."

Unsurprisingly, this approach has been adopted by judges at first instance. Mr Justice Jackson (as he then was), for instance, in Trustees of the Stratfield Saye Estate v AHL Construction Ltd [2004] EWHC (TCC) 3286 said at Paragraph 47:

"The principle of law which I derive from the majority judgements in RJT is this: an agreement is only evidenced in writing for the purpose of s. 107, subsections (2), (3) and (4), if all the express terms of that agreement are recorded in writing. It is not sufficient to show that all terms material to the issues under adjudication have been recorded in writing."

  1. There is no issue in this case that the Contract was a construction contract for the purposes of the HGCRA (subject to a possible issue as to whether all the terms were in or evidenced in writing) or that, because no provision was made in the Contract for adjudication, the statutory Scheme for Construction Contracts is applicable.

  2. Much reliance is placed by Somerfield on the decision of HH J Havery QC in Redworth Construction Ltd v Brookdale Healthcare Ltd [2006] EWHC 1994 (TCC). The defendant had objected to the adjudicator’s jurisdiction on the grounds that no JCT contract was entered into and that the principal terms of contract were never effectively reduced to writing. The claimant in its referral notice had only relied on a single document "the April 2003 document" which purportedly had the JCT terms incorporated by reference coupled with an oral agreement made on 21 November 2003. The adjudicator made a non-binding decision that the JCT Contract in question applied. The judge decided after a hearing with witnesses that the contract was not subject to the JCT terms. However, the claimant also relied in the court proceedings on a December 2003 document as evidencing the contract. The learned judge at say that this at Paragraphs 38 to 41:

“38. Before the adjudicator, Brookdale called into question the adjudicator's jurisdiction on the ground that there was no contract between the parties, or no contract in writing that complied with section 107 of the Act. In a non-binding decision, the adjudicator decided that he did have jurisdiction. Redworth's referral notice relied on a single document, the April 2003 document, with the JCT terms incorporated by reference, coupled with the oral agreement made on 21st November 2003. At no point did Redworth rely on the 8th December 2003 document. Mr. Blunt submitted that it chose not to rely on that document, or may have done so, because the sectional completion dates shown in that document might have been damaging to Redworth's case. Be that as it may, I do not think that Redworth can now go beyond the matters it then relied on in the adjudication in order to support the adjudicator's decision that he had jurisdiction. It may be that in this case reliance on the December 2003 document would not have affected, or adversely affected, Redworth's substantive case before the adjudicator. But in these proceedings I cannot consider the merits of the adjudicator's substantive decision. In those circumstances, it is not appropriate (and in some circumstances it might be impossible) for the court to guess what decision the adjudicator would have reached if a different argument had been presented to him.

39. The principle on which I rely in reaching the conclusion that Redworth cannot for present purposes go beyond the matters it relied on in the adjudication is the principle of election. Redworth cannot blow hot and cold, or approbate and reprobate its earlier argument. The proposition supported by many of the cases is that a party who has taken some benefit under an instrument such as a will or an order of the court cannot disavow that instrument so as to obtain a further benefit. Waiver of tort is another example of the principle. Here, Redworth is not seeking to disavow the adjudicator's decision: quite the contrary. It is its submissions that it is seeking to disavow. But the principle is widely expressed by Evershed M.R., with whom Singleton and Jenkins L.JJ. agreed, in Banque des Marchands de Moscou (Koupetschesky) v. Kindersley [1951] 1 Ch.112, 119, as follows:

The phrases "approbating and reprobating" or "blowing hot and blowing cold" are expressive and useful, but if they are used to signify a valid answer to a claim or allegation they must be defined.....From the authorities cited to us it seems to me to be clear that these phrases must be taken to express, first, that the party in question is to be treated as having made an election from which he cannot resile, and, second, that he will not be regarded, at least in a case such as the present, as having so elected unless he has taken a benefit under or arising out of the course of conduct which he has first pursued and with which his present action is inconsistent.

40. It is true that the question underlying that case was a traditional question, namely whether a party who had proved for a debt in the winding-up of a company could defend a claim against it by impugning the validity of the winding-up proceedings. The question before the Court of Appeal was whether the rule against blowing hot and cold applied where the defendant had received no benefit from the winding-up, its proof of the debt having been rejected. Nevertheless, the principle as expressed by Evershed M.R. was not limited to traditional cases.

41. Here, Redworth elected to put their argument in a particular way in order to obtain a benefit, namely, the decision of an adjudicator in their favour, both as to his jurisdiction and substantively. Redworth has in consequence obtained both those benefits. In my judgment, that is so regardless of whether the same benefits could have been obtained by other arguments at any rate where, as here, it is not clear that such benefits could have been so obtained. In my judgment, it would not be just to allow Redworth to resile from that election.”

  1. I find myself in some disagreement. The Banque des Marchands case was to do with two sets of court proceedings and is readily comprehensible in that context. However, an adjudicator, who reaches what is expressed and accepted by him and the parties as a non-binding decision, has only enquired into his jurisdiction as he was entitled to do and it is primarily in the court that a binding decision can be given as to jurisdiction. I can not see that principles of election apply in these circumstances. Of course, if a respondent to an adjudication does not challenge the jurisdiction of the adjudicator during the adjudication when it knows of the grounds of challenge, it will generally be deemed to have waived or abandoned any rights to challenge the jurisdiction on those grounds. That however is not in strict terms election. Whether the Redworth decision was rightly decided or not on this point, one needs to examine in any event with care whether a materially different case on jurisdiction is being mounted in the court proceedings compared with that raised before the adjudicator. It must also be relevant to consider whether at least in a clear case the adjudicator with the correct and full information before him would have reached the same conclusion that he did. It will also be relevant to consider whether the adjudicator in fact and in reality actually did have jurisdiction. If he or she did have jurisdiction to decide the dispute referred to adjudication, and if he or she with the full information available would have inevitably concluded that there was jurisdiction, I can not see why the adjudication decision should not be enforced in those circumstances.

Discussion

  1. Both parties before the Court accepted that there was an agreed extension of the Contract and that the parties had agreed the new arrangements with regard to Gain Share. I am fully satisfied that the three e-mails of 1 May 2009 wholly and effectively evidence the agreement reached on that date in relation to Gain Share. Similarly, it is clear that there was agreement between the parties to extend the Contract beyond 30 April 2009, terminable on at least 14 weeks’ notice by Somerfield, and that it was also evidenced in writing, partly by Mr Flanagan’s e-mail of 23 March 2009, Mr New’s e-mail of 5 June 2009 and attached letter dated March 2009, Mr Smale’s e-mail dated 4 July 2009 and attached letter dated March 2009 and Mr New’s e-mail dated 11 August 2009 and the attached letter and other attachments.

  2. The next question to consider is whether in any material way Nickleby is advancing a case on jurisdiction in these proceedings which is materially or prejudicially different from that which it advanced in the adjudication. It needs to be borne in mind in the adjudication that there was no real issue about Gain Share; Nickleby did not advance a positive case that the Gain Share arrangement had or had not been revised. At the very least, the adjudicator was not provided with the three e-mails which would inevitably have led to the view, accepted by both parties properly before the Court, that the change to the Gain Share arrangements was sufficiently evidenced in writing for the purposes of the HGCRA. One also needs to bear in mind that both parties in the adjudication appeared in their various pleading type documents to accept that the Contract was extended. Somerfield expressly pleaded in their Response that "in March/April the parties agreed to extend the Agreement on terms that [Somerfield] was at liberty to terminate the extended Agreement on giving at least 14 weeks notice."

  3. It follows from all this that as a matter of fact and law the adjudicator did actually have jurisdiction at the time when he was appointed. There was a written construction contract, which was the Contract, which had been extended by mutual agreement, which agreement had been evidenced in writing in all material respects. The adjudicator’s non-binding decision on jurisdiction was based on an offer having been made at the meeting of 17 March 2009, the conduct of the parties thereafter in effect proceeding on the basis that the Contract was to be extended and the confirmatory nature of the later exchanges and draft letters that the Contract was being extended.

  4. It is true that in its Particulars of Claim Nickleby put its case on there being an actual oral agreement on 17 March 2009 albeit confirmed by later written communications and in the alternative on there being an offer made on 17 March 2009 accepted by conduct. It is right to say that the actual oral agreement basis is different from the basis put forward in adjudication. I do not have to base my decision in any way on whether or not there was such an actual oral agreement; indeed, I would not be in a position to decide on a summary application whether an actual oral agreement was reached on 17 March 2009. It is therefore unnecessary to allow Nickleby to approbate and reprobate. Certain it is that the alternative case, offer accepted by conduct, is one that is readily comprehensible and was put before the adjudicator and represented the basis upon which the adjudicator decided.

  5. In my judgement, Somerfield’s position is completely unrealistic in circumstances in which it must, and I understand does, accept that there was a construction contract in writing and that the agreement to extend it and to amend the Gain Share arrangements is evidenced in writing. The reality is that the adjudicator, whether he knew of all the relevant information or not, did have jurisdiction. The primary information relating to the amendment to the Gain Share arrangement which, by oversight of both parties, was not placed before him, namely the three e-mails would inevitably have led him to the view that not only the Gain Share arrangements were varied by agreement but also that the variation was evidenced in writing. There is simply no reason, and no good reason, to believe that the adjudicator would have reached any non-binding decision other than that he had jurisdiction if he had the information about the Gain Share which the parties, through oversight, had withheld from him.

  6. The Court is constrained to consider jurisdictional challenges carefully. In Carillion Construction Ltd v Devonport Royal Dockyard Ltd [2006] BLR 15, the Court of Appeal (Sir Anthony Clark MR and Lords Justice Chadwick and Moore-Bick) stated the following:

"85. The objective which underlies the Act and the statutory scheme requires the courts to respect and enforce the Adjudicator's decision unless it is plain that the question which he has decided was not the question referred to him or the manner in which he has gone about his task is obviously unfair. It should be only in rare circumstances that the courts will interfere with the decision of an adjudicator. The courts should give no encouragement to the approach adopted by DML in the present case; which (contrary to DML's outline submissions…) may, indeed aptly be described as "simply scrabbling around to find some argument, however tenuous, to resist payment".

86. It is only too easy in a complex case for a party who is dissatisfied with the decision of an Adjudicator to comb through the Adjudicator's reasons and identify points upon which to present a challenge under the label of 'excess of jurisdiction' or 'breach of natural justice'. It must be kept in mind that the majority of Adjudicators are not chosen for their expertise as lawyers. Their skills are as likely (if not more likely) to lie in other disciplines. The task of the Adjudicator is not to act as arbitrator or judge. The time constraints within which he is expected to operate are proof of that. The task of the Adjudicator is to find an interim solution which meets the needs of the case. Parliament may be taken to recognise that, in the absence of an interim solution, the contractor (or sub-contractor) or his sub-contractors will be driven into insolvency through a wrongful withholding of payments properly due. The statutory scheme provides a means of meeting the legitimate cash-flow requirements of contractors and their sub-contractors. The need to have the 'right' answer has been subordinated to the need to have an answer quickly. The Scheme was not enacted in order to provide definitive answers to complex questions. Indeed, it may be open to doubt whether Parliament contemplated that disputes involving difficult questions of law would be referred to adjudication under the statutory scheme; or whether such disputes are suitable for adjudication under the Scheme. We have every sympathy for an adjudicator faced with the need to reach a decision in the case like the present.

87. In short, in the overwhelming majority of cases, the proper course to 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. If he does not accept the adjudicator's decision is correct (whether on the facts or in law), he can take legal or arbitration proceedings in order to establish the true position. To seek to challenge the Adjudicator's decision on the ground that he has exceeded his jurisdiction or breached the rules of natural justice (save in the plainest cases) is likely to lead to a substantial waste of time and expense – as, we suspect, the costs incurred in the present case will demonstrate only too clearly."

  1. I have formed the view that Somerfield’s position is simply unrealistic although I do not consider that it has been put forward in bad faith. The Redworth approach, if applicable at all in general, is not applicable here because it is unnecessary to decide that Nickleby’s case that there was an oral agreement on 17 March 2009 is correct; it is unnecessary to do so because there can be no real doubt that the adjudicator did have jurisdiction, that the Contract was extended and amended by agreement and that such agreement was evidenced in writing. To the extent that conduct amounts to acceptance of a previous contractual offer, the conduct as such does not have to be in writing in the same way that an oral acceptance of a written offer would not undermine the conclusion that the construction contract in question was only evidenced in writing because all the terms would still be evidenced by the written offer. The evidence in writing for the purposes of the HGCRA does not have to be contemporaneous.

  2. It also seems to be the case that Somerfield’s position on jurisdiction involved "much ado about nothing". Nickleby had asserted that the Contract had been extended; Somerfield’s response was that it had been extended. The jurisdictional hiatus, if that is what it was, was created by Somerfield inferring that Nickleby was alleging that the Contract had been extended on exactly the same terms as before. That is not what Nickleby was expressly alleging and I doubt that that is what they were inferring. It was only in the Rejoinder that Somerfield apparently withdrew its primary position that the Contract had been extended in March or April 2009 by agreement and began to assert that the Contract had lapsed by effluxion of time.

  3. The whole position has come full circle again because it is now clear and accepted by both parties that the Contract was extended and amended by agreement and that the agreement was sufficiently evidenced in writing for the purposes of the HGCRA.

  4. As to the impact of the misrepresentation by Nickleby to the Court that no claims for Gain Share were made after and in respect of the period of extension to the Contract, I do not consider that there is any material impact. I accept Nickleby’s Counsel’s explanation and apology that there was no deliberate intention to mislead the court and that the misrepresentation simply happened by mistake of Counsel himself. If the amendments about Gain Share were evidenced in writing, as they were, it is clear that agreement was actually reached and any claims for Gain Share which related to the period after the end of April 2009 would be bound to fail. Indeed, and for the avoidance of doubt, Nickleby has indicated that it is willing to accede to a declaration to that effect. In any event, it was not Nickleby that raised any real issue about Gain Share in the adjudication. One can hardly blame the adjudicator, Nickleby or indeed Somerfield for not putting before the adjudicator the three e-mails of 1 May 2009 in circumstances in which the parties both appear, honestly, to have overlooked them.

  5. I do not consider that it can be said, even in the light of what has been put before the Court, that Nickleby instigated the adjudication on a false basis as suggested by Somerfield. It instigated the adjudication to recover outstanding management fees and merely as background made it clear that the Contract has been extended by agreement, which as everyone agrees was true; even Somerfield accepted and accepts that. All that has happened in reality is that both parties have belatedly realised that some key e-mails recording specific agreement about the Gain Share amendments had been overlooked and have, wholly properly, put them before the Court. The other documents evidencing the agreement about extending the Contract were put before the adjudicator. Both parties expressly accept that the extension of the Contract and the Gain Share amendments were agreed and that such agreements were recorded in writing; it follows therefore that they do and must accept that the adjudicator actually had jurisdiction. I do not consider that he was materially misled and consider that, even if he was, there can be no doubt that, properly informed, he would have concluded, properly, that he definitely had jurisdiction.

  6. I am therefore of the view that there is no effective jurisdictional challenge to the adjudicator’s decision and that there is no question of election or approbation or reprobation in this case. I should add for the sake of completeness that Somerfield also ran an argument that the Adjudicator had failed to address a key defence of Somerfield in relation to the substantive dispute but that argument was withdrawn by Somerfield’s Counsel at the end of the hearing.

Decision

There will therefore be judgement for Nickleby in the sum of £231,222.89 inclusive of VAT. If the parties can not agree on interest, I will decide that in writing together with any other issues such as costs. The parties are agreed in principle that the losing party, in this case Somerfield, should bear the costs which should be on a standard basis. As indicated above, it seems to be appropriate that there should be a declaration in relation to Gain Share which reflects the agreement recorded in the three e-mails of 1 May 2009. Again, if the parties cannot agree on the wording, they should make representations to me in writing and I will finally resolve the wording of any such declaration.