Case No: HT-10-246

Neutral Citation Number: [2010] EWHC 2106 (TCC)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

TECHNOLOGY AND CONSTRUCTION COURT

 

Royal Courts of Justice

Strand, London, WC2A 2LL

 

Date: 10 th August 2010

 

Before :

 

MR JUSTICE AKENHEAD

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Between :

 

 

AEDIFICE PARTNERSHIP LIMITED

Claimant

 

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MR ASHWIN SHAH

Defendant

 

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Jon Miller of Prettys for the Claimant

Stephen Whitaker (instructed by Brindley Twist Tafft and James) for the Defendant

 

Hearing dates: 6 August 2010

 

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JUDGMENT

Mr Justice Akenhead:

  1. This is an adjudication enforcement claim where there are issues between the parties as to whether there was a contract at all between them and if so whether all the terms were recorded in writing. Thus, the Defendant challenges the enforcement on the basis that the adjudicator had no jurisdiction. That is met by an assertion that the Defendant agreed to give the adjudicator jurisdiction to decide the contractual issues. The case raises an issue of some importance as to the extent to which and how reservations as to jurisdiction can and should be made by a respondent to an adjudication.

The Facts

  1. This part of the judgement is based on the documentation and witness statements put before the court and should not be taken as making final findings of fact in any later hearing or proceedings.

  2. Mr Shah, the Defendant, is the main shareholder and director of a company, Seighford Hall Nursing Home Ltd (“the Company”) which was incorporated in 1997 and which became the owner of Seighford Nursing Home, Seighford, Staffordshire. The Company and Mr Shah wanted to develop the nursing home and to that end one or other of them had retained an architect, Mr Dudhia, to prepare plans and secure planning consents. By about 2005-6, planning consents had been obtained. Mr Martin, a director of Aedifice Partnership Ltd (“Aedifice”), which carried on business as surveyors and property consultants, was introduced to Mr Shah and they first met on 31 July 2006. Mr Martin e-mailed Mr Shah on 2 August 2006, relevant extracts of which are as follows:

“It was good to see the Hall on Monday. I am confident we can make this work. I had a conversation with the Architect yesterday and he is putting together some more information for me so we can set up a budget plan.

…We basically act as client’s agent…we [act] more as Project Managers as you can see we input into all levels not just the basic traditional QS role of cost and contract…

As far as fees are concerned acting as Clients Agent/Contract Administrator from commencement to completion we charge 1.5% of the construction cost and usually act also as Planning Supervisor for which we charge 0.5% as above all subject to VAT. We expect there to be a competent Architect, Engineer and other specialist on the design front in place. We can guide them in terms of care home requirements but we do not expect to design for them.

All the guidance and development advice along with working with the funders etc is all included in the fee…

As I understand it you need the bank funding in place in order to fund the project and our fees [sic] we will therefore refrain from invoicing you until such time as some bank funding is available (hopefully to far in the future[sic]). Please note however we are not working at risk…”

  1. It seems that Mr Martin met Mr Dudhia on 17 August 2006 and joined him at a meeting on 14 September 2006 to meet local planning officers. Mr Martin appears to have had some contact with the bank, RBS, in early September 2006 in connection with funding; Mr Shah was copied in on the e-mails which suggests that Aedifice was about to start programming work for the Seighford Hall project. Aedifice says that it sent to Mr Shah a letter dated 20 September 2006 in the following terms:

Care Home Development Project Coordination/Client’s Agent-Seighford Hall Site, Staffordshire

Further to our discussions regarding care home development and our role, I set out below a broad outline of our role and fee proposal.

Our fee for project coordination from commencement to completion is 1.5% of the construction contract value which is fixed once a tender price is agreed with the contractor. This becomes a fixed lump sum and does not vary. This figure includes all our expenses, but excludes VAT.

Our project coordination/client’s Agent services include the following:-

1. Pre-purchase feasibility on sites and advice at this stage…

10. Preparation of the contract documents…

The above is a general outline of our services in both pre-and post-contract stages…

I hope this provides you with an outline of our services and fees. These general proposals apply to any major nursing home construction or refurbishment project and if you have any further queries regarding this please do not hesitate to contact me.”

Mr Shah says that he never received this letter. Mr Martin has said that he received an e-mail from Mr Shah accepting the contents of this letter but can not produce that e-mail because, he says, it was only on his laptop which has since been stolen. Mr Shah says that no such e-mail was sent.

  1. Thereafter, Aedifice provided a number of services in connection with the project which included visits to the site, liaison with the architect, seeking to secure funding and meetings with Mr Shah. The services included the collation of construction contract documentation including a specification which described the "Employer (Client)" as the Company and Aedifice as the "Employer’s Agent". Mr Martin was involved in securing tenders for the work in the second half of 2007, the lowest of which put forward a price of £5,660,000 in October 2007. Aedifice also prepared a "Financial Tender Review" in December 2007, amended on 17 January 2008 and recommended acceptance of the tender of Thermabuild Construction Ltd. Aedifice’s work also included putting together a budget cost for the development and seeking to secure funding; Mr Shah was at least to some extent involved in the funding discussions and communications with RBS, which was prepared in principle to provide a £6 million facility. Mr Martin was also involved in discussions with at least one organisation in connection with a possible lease of the new care at Seighford Hall.

  2. Matters however did not come to fruition. It is not wholly clear why Mr Shah and the Company did not proceed although it may be that the impending recession played a part. By April 2008, Mr Martin was reporting to Mr Shah that RBS was “struggling to hold the terms of the deal due to the credit squeeze”; the date for acceptance of the tenders had expired and the lease proposal was unlikely to be taken forward. Mr Martin in his e-mail of 7 April 2008 was talking about having to bill for fees "if we are unable to proceed with the bank loan arrangement within the next couple of weeks". On 31 July 2008, he e-mailed Mr Shah indicating that over £60,000’s worth of fees were due, plus VAT. On 6 November 2008, Aedifice submitted its bill in the sum of £73,155.50, inclusive of VAT. There is no reference in the invoice or accompanying letter as such to the disputed letter of 20 September 2006 but there is reference to "our 2006 fee agreement as agreed with yourselves". Mr Shah’s response on 12 November 2008 was to say that the invoice should be addressed to the Company and not to him personally and that the invoice was not yet due to be raised. Mr Martin’s response on 13 November 2008 was that the invoice had been due to be paid for some considerable time and that the fee agreement was made with him personally; it was said that Aedifice had “no fee agreement with” the Company.

  3. Correspondence, mostly by e-mail, continued with solicitors being involved in 2009. Two main issues appear to have featured in this exchange, first whether there was any contract personally with Mr Shah and secondly whether any fees were due before bank funding was actually in place.

The Adjudication

  1. Aedifice served a “Notice of Intention to Refer Matters to Adjudication” dated 23 March 2010 on Mr Shah in relation to non-payment of sums due; this related to the invoice referred to above. Upon its application, the RIBA appointed Mr E J Mowzer, a Chartered Surveyor, as adjudicator, by letter dated 26 March 2010; on the same day he acknowledged receipt of the nomination and sent to the parties details of his terms. By letter dated the 29 March 2010, received on 30 March 2010, Aedifice served its Referral on Mr Shah and the adjudicator. Mr Shah responded to the adjudicator by letter dated 31 March 2010, copied to Aedifice’s claims consultant, in the following terms:

“For the avoidance of any doubt, I do not accept the terms of reference or the standard scale of charges and terms of engagement annexed to your letter dated 26th March 2010.

Please note, that I Ashwin Shah, have no dealings at all with Aedifice Partnership (“APL”) whether in a personal capacity all on behalf of any corporate entity and had no liability to this company…

I note that your letter asks APL to forward to you the necessary contractual documentation. I am not aware of any such documentation.

With no disrespect to you, in all of the circumstances, I submit that you have no jurisdiction to deal with this matter and I decline to take any further part in this matter. If APL believes that I am in any way personally indebted to it, it has the option of court proceedings.”

  1. The Adjudicator wrote in a letter of 1 April 2010 that, based on the documents delivered with the Referral, there was evidence of dealings between Mr Shah and Aedifice and said that, unless he was persuaded that he lacked jurisdiction (which he was not), then he would continue with the reference.

  2. On 12 April 2010, Mr Shah’s solicitors served the Response to the Referral, material parts of which are as follows:

“2…(1) on 15 in August 1997… that Company was incorporated…(2) …On 12 May 1998 the Company was registered as proprietor of [Seighford Hall]…

3… (5) …After the site visit [of 31 July 2006] Mr Martin sent Ashwin Shah an e-mail [2 August 2006]…

5… (1) Neither Ashwin Shah nor the Company received a letter dated 20 September 2006… (3) The assertion that "this letter was accepted directly by e-mail" is denied…

7. It is further denied that the letter of 20 September 2006 is an accurate memorandum of the terms of an oral contract.

(1) …the letter is not an accurate memorandum in writing of what was agreed as it omitted an important term namely the event triggering remuneration…

9… (1) It is denied that the contracting party was Ashwin Shah (as opposed to the Company).

10. Accordingly, (a) it is denied that there is any contract between Aedifice and Ashwin Shah (b) it is denied that the letter is an accurate memorandum of the terms of the contract because it misstates an important term, namely the identity of one of the contracting parties…

31… Ashwin Shah invites the Adjudicator to decline jurisdiction, shortly stated for the following reasons:

  1. The issues of whether there was a contract, if so in what terms and between which parties are all live issues which should not be determined on and Adjudication. Disclosure of documents and cross-examination of witnesses would be necessary.

  2. There is a serious dispute whether s. 107 is complied with (i.e. whether the agreement was made or evidenced in writing). There are several elements to this issue. See Paragraphs 5, 7 and 10 (b) above. This dispute is not suitable for determination by the Adjudication procedures; disclosure of documents and cross-examination of witnesses would be necessary. Unless, contrary to these submissions, the Adjudicator is sure that there was a contract made in writing or evidenced in writing complying with s.107 there is no jurisdiction to adjudicate.

31. If the adjudicator does determine that he has jurisdiction he is respectfully requested to give full reasons for that decision and to rejecting the Respondent Party’s submissions….

36. If the Adjudicator does accept jurisdiction the questions in Paragraph 107 are agreed as questions.”

Aedifice served a Reply to which Mr Shah’s solicitors served a Further Response, which apart from making a few specific points concluded by referring back to and repeating the Response.

  1. The adjudicator issued his decision dated 27 April 2010. Ultimately he decided that Aedifice was entitled to £39,620 plus VAT, interest of £5261.15 continuing at the rate of £9.23 per day and £100 as compensation under the Late Payment of Commercial Debts (Interest) Act 1998, and that Mr Shah should pay his fees of £3858.41. In relation to jurisdiction, he summarised the various exchanges of correspondence which he had had in March and April 2010 with the parties about jurisdiction. In Paragraph 6 of the Decision he deals with the jurisdictional points raised by Mr Shah over 14 sub-paragraphs. Whilst he reviews, intelligently, various contemporaneous documents, albeit he mistakenly says that the Company was not formed until 2 August 2007 (he was out by a decade), he then says this:

“6.13 Whilst I do not have the power to determine my own jurisdiction, I am required to consider whether it is more likely than not that I have jurisdiction and if so proceed with the reference. In this instance I am of the view that there is a contract between the parties as contended by Aedifice. That Contract is a "construction contract" in the context of section 104 of the Act and it follows that any dispute may be referred to adjudication.

6.14 I therefore consider it more likely than not that I do have jurisdiction to deal with the dispute referred."

It is noteworthy that in his Conclusion in Paragraph 9 he does not include as part of his Decision or indeed Conclusion anything by way of declaration or otherwise about him having jurisdiction.

  1. The Decision was not honoured by Mr Shah whose solicitors made the point that the adjudicator had no jurisdiction.

These Proceedings

  1. Aedifice issued proceedings on 8 July 2010 and directions were given to hear its summary judgement application to enforce the adjudicator’s decision; that application was supported by a witness statement from Mr Martin and dated 28 June 2010 which does not go into any detail about the jurisdictional issue other than to say that Aedifice “contracted with [Mr Shah] under a bespoke contract to provide various services…”. Mr Shah has submitted a detailed witness statement dated 26 July 2010 which contains a lengthy exhibit which includes correspondence, e-mail traffic and other documentation passing between the parties. In essence he says that there was no contract as alleged, that is, based on the letter of 20 September 2006, which he says he never received, let alone replied to. He says that any agreement would have been with the Company and would have been clearly based upon payment only being due when "finance was in place". No further evidence has been filed, although Aedifice had been permitted to respond to Mr Shah’s statement.

  2. Essentially, Aedifice argues that, because Mr Shah continued to take part in the adjudication without any or any further reservation on jurisdictional grounds, he accepted jurisdiction. It highlights the fact that in Paragraph 32 of the Response he even asked the adjudicator to give reasons for his decision. It argues that a clear and full reservation as to jurisdiction should have been made and was not. Mr Shah argues that he did effectively challenge and reserve his position on jurisdiction and that in any event the adjudicator did not actually decide his jurisdiction but merely enquired into it, albeit forming a view based on a balance of probabilities such that he felt justified in proceeding. It is accepted by both parties that, on the evidence put before me, I can not resolve the factual issues between the parties as to whether there was a contract between these parties, if so, what its terms were and whether such terms were all evidenced in writing.

The Law

  1. So far as jurisdictional objections that have been or could be taken during the adjudication, one will need to ascertain whether the parties have expressly agreed to give the adjudicator jurisdiction to resolve those objections or, even if they have not as such done so, whether the objecting party has effectively reserved or waived its position on jurisdiction. For instance in Pilon Ltd v Breyer Group Ltd [2010] EWHC 837 (TCC), Mr Justice Coulson said:

12. The law on this topic is clear. Jurisdictional issues often arise during the course of an adjudication, and it is usually sensible for the parties to ask the adjudicator to investigate the issue and state his conclusion. But, unless the parties have also agreed to be bound by the result of the adjudicator's investigation into his own jurisdiction, his ruling on that issue will not be determinative, and the challenger can defeat any subsequent enforcement proceedings by showing a respectable case that the adjudicator had reached an erroneous conclusion as to jurisdiction: see, in particular, paragraph 10 of the judgment of May LJ in Pegram Shopfitters Limited v Tally Weijl (Uk) Limited[2003] EWCA Civ 1750.

13.Accordingly, there needs to be either an express agreement between the parties that the adjudicator's decision on jurisdiction is to be binding or, at the very least, an implied agreement to the same effect, which may arise where the objecting party fails to reserve its position, or there has been a unilateral waiver of any jurisdictional objection. In both JW Hughes Building Contractors Limited v GB Metal Work Limited [2003] EWHC 2421 (TCC) and Nordot Engineering Limited v Siemens Plc [2001] CILL 1778, the court found an ad hoc agreement between the parties that they would be bound by the adjudicator's decision as to jurisdiction, but such cases are rare. Generally speaking, as Dyson LJ put it in Amec Projects Limited v Whitefriars City Estates Limited [2004] EWCA Civ 1418, "the 'decision' of an adjudicator as to his jurisdiction is of no legal effect and cannot affect the rights of the parties…."”

  1. In Thomas-Fredric’s (Construction) Ltd v Keith Wilson [2003] EWCA Civ 1494, Simon Brown LJ (as he then was) said:

33. The position can I think be summarised in the following two propositions. (1) If a defendant to a Part 24(2) application has submitted to the adjudicator's jurisdiction in the full sense of having agreed not only that the adjudicator should rule on the issue of jurisdiction but also that he would then be bound by that ruling, then he is liable to enforcement in the short term, even if the adjudicator was plainly wrong on the issue. (2) Even if the defendant has not submitted to the adjudicator's jurisdiction in that sense, then he is still liable to a Part 24(2) summary judgment upon the award if the adjudicator's ruling on the jurisdictional issue was plainly right.”

  1. There is obviously no great difficulty about an express agreement made by both parties with their eyes open that the adjudicator should have jurisdiction to produce a binding decision that he has jurisdiction to resolve the particular dispute referred to adjudication. It is with the implied agreement or waiver or abandonment of a jurisdictional objection that parties and indeed adjudicators get into murkier waters. There is no doubt that, when one party raises a jurisdictional objection, good or bad, adjudicators, like arbitrators, are entitled to enquire into their own jurisdiction. In practice in adjudication, that will usually involve considering the Referral, witness statements and other documents available to the adjudicator at the time that he is making that enquiry. Even if no objection is made, an adjudicator who believed that he had no jurisdiction could raise the issue with the parties and, unless persuaded otherwise or the parties agreed to give him jurisdiction, he could stand down.

  2. There have been a number of observations in various cases about what is needed for a party making a jurisdictional objection during the course of the adjudication effectively to do so. In Project Consultancy Group v Trustees of the Gray Trust (1999) 65 Con LR 146, Mr Justice Dyson had to deal with an allegation that there had been an ad hoc agreement to refer jurisdictional issue to the adjudicator. He said dealing with the particular facts:

“In my view, the defendants’ solicitor's letter of 9 March 1999 stated in the clearest terms that the defendants protested the adjudicator’s jurisdiction, and that they would not recognise and comply with any decision to award money to the claimant. The letter also made it clear that, if the adjudication proceeded, they reserved their rights to participate, but without prejudice to their contention that there was no jurisdiction. I do not consider that there can be any reasonable doubt as to the meaning of that letter. The only real question is whether, by participating in the adjudication process, the defendants waived the jurisdiction point, and agreed to submit to abide by the decision of the adjudicator on that issue. The only material relied on by Ms Rawley [Counsel] is the content of the defendants’ response…But, in their response, the defendants continued to assert that the adjudicator had no jurisdiction…It is a matter of fact whether a parties submit to the jurisdiction of the third person…”

  1. In Euro Construction Scaffolding Ltd v SLLB Construction Ltd [2008] EWHC 3160 (TCC), the judge said:

So far as jurisdiction challenge to an adjudicator is concerned, it is necessary for the party objecting to the adjudicator' jurisdiction to make a clear and full reservation”

The report of that case goes on to review whether an adequate reservation was made and considers, amongst other things, whether the adjudicator proceeded on the basis that there had been a reservation about jurisdiction. In that case, there had been an effective reservation but in the event the jurisdictional challenge was not a good one.

  1. In CJP Builders Ltd v William Verry Ltd [2008] EWHC 2025 (TCC), the following was said at Paragraph 72:

Various cases such as Thomas Frederic's (Construction) Limited v Keith Wilson[2004] BLR 23 and The Project Consultancy Group v The Trustees of the Grey Trust [1999] BLR 377 make it clear that if there is to be an objection to jurisdiction of the arbitrator generally there should be a clear reservation of the objecting party's stance on jurisdiction. Such a reservation will usually be done effectively by clear words but it could also be done by unequivocal conduct.”

  1. I can draw these various strands together:

(a) An express agreement to give an adjudicator jurisdiction to decide on a binding way whether he has jurisdiction will fall into the normal category of any agreement; it simply has to be shown that there was an express agreement.

(b) For there to be an implied agreement giving the adjudicator such jurisdiction, one needs to look at everything material that was done and said to determine whether one can say with conviction that the parties must be taken to have agreed that the adjudicator had such jurisdiction. It will have to be clear that some objection is being taken in relation to the adjudicator’s jurisdiction because otherwise one could not imply that the adjudicator was being asked to decide a non-existent jurisdictional issue which neither party had mentioned.

(c) One principal way of determining that there was no such implied agreement is if at any material stage shortly before or, mainly, during the adjudication a clear reservation was made by the party objecting to the jurisdiction of the adjudicator.

(d) A clear reservation can, and usually will, be made by words expressed by or on behalf of the objecting party. Words such as “I fully reserve my position about your jurisdiction” or “I am only participating in the adjudication under protest” will usually suffice to make an effective reservation; these forms of words whilst desirable are not absolutely essential. One can however look at every relevant thing said and done during the course of the adjudication to see whether by words and conduct what was clearly intended was a reservation as to the jurisdiction of the adjudicator. It will be a matter of interpretation of what was said and done to determine whether an effective reservation was made. A legitimate question to ask is: was it or should it have been clear to all concerned that a reservation on jurisdiction was being made?

(e) A waiver can be said to arise where a party, who knows or should have known of grounds for a jurisdictional objection, participates in the adjudication without any reservation of any sort; its conduct will be such as to demonstrate that its non-objection on jurisdictional grounds and its active participation was intended to be and was relied upon by the other party (and indeed the adjudicator) in proceeding with the adjudication. It would be difficult to say that there was a waiver if the grounds for objection on a jurisdictional basis were not known of or capable of being discovered by that party.

Discussion

  1. There undoubtedly were and indeed remain issues between these parties as to whether there was even a contract between Aedifice and Mr Shah as opposed to the Company, if so on what terms and whether all terms were evidenced in writing. Indeed, but for the fact that it is conceded, I would have had to find on the evidence before the Court that these raised triable issues which could not be resolved on a summary application.

  2. It is also undoubtedly the case that Mr Shah raised a jurisdictional objection at the very least on the basis of the contract not being with him, in his letter to the adjudicator dated 31 March 2010. I am satisfied that this was a clear reservation by him on the grounds of there being no jurisdiction by reason of the contract not being with him. The question then arises: did he do anything thereafter by which he abandoned that reservation?

  3. At least by the time that he served his Response in the adjudication, he was represented by solicitors; however, that fact does not mean that one interprets the words used in anything other than an objective way. Even if a respondent to an adjudication is unrepresented, one approaches the jurisdiction reservation issue on an objective basis; if that respondent uses non-legal or idiosyncratic language, the Court just has to do the best that it can to interpret what is said.

  4. The Response needs to be looked at in the context that Mr Shah had already reserved his position on jurisdiction albeit that previously he had said that he would not participate in the adjudication and was then going on to participate. There is in the Response a detailed explanation why it is that there was said to be no contract between Mr Shah and Aedifice, that there was no letter dated 20 September 2006 sent to him and that there must have been terms which were agreed orally particularly to do with when and if payment would be made to Aedifice (see for instance Paragraphs 5, 7, 9 and 10 set out above). Paragraph 31 makes matters clear that he invites the adjudicator to “decline jurisdiction” for two reasons, the first being that there was no contract and that the terms were not all agreed and secondly that Section 107 of the Housing Grants Construction and Regeneration Act 1996 was not engaged as not all the contract terms, if there was a contract between the parties, were in writing. In this latter context, it was said that there was no jurisdiction to adjudicate, unless the adjudicator could be sure that there was a contract in writing.

  5. Aedifice rely upon the following paragraphs in the Response as inviting to the adjudicator to rule on and decide his own jurisdiction. However, one needs to interpret the Response as a whole and in context. Mr Shah had reserved his position on jurisdiction on 31 March 2010. Paragraph 31 makes it clear that he is inviting the adjudicator to decline jurisdiction; although politely put, Mr Shah is asserting there that the adjudicator does not have jurisdiction. All that he is saying in Paragraph 32 is that he asks for reasons if the adjudicator does consider that he does have jurisdiction; similarly Paragraph 36 is consistent with participation by Mr Shah subject to his reservation (“If the Adjudicator does accept jurisdiction the questions in Paragraph 107 are agreed as questions”). By incorporating the Response in his Further Response, Mr Shah continued to maintain his jurisdictional objection.

  6. It is of some real relevance that the adjudicator did not actually decide as such the jurisdictional issue. In the Decision, he proceeds expressly on the basis that he does not have jurisdiction to decide that he has jurisdiction. All that he does in Paragraph 6 of his Decision is to inquire into his jurisdiction to satisfy himself that he probably does have jurisdiction; that is a legitimate exercise for him to have performed; if he had formed the view that probably he did not have jurisdiction, I assume that he would simply have declined to issue a decision and told the parties accordingly. In Paragraph 9 of the Decision, his “Conclusion”, he specifically lists what his “Decision” is and all that is dealt with there is the financial result; the fact that the adjudicator did not include even in a declaratory way his view that he probably had jurisdiction lends strong support to the view that he was not deciding the issue as such but merely indicating his thought process based on what he knew as part of his enquiry into his jurisdiction.

Decision

  1. It follows from the above that the adjudicator was not given jurisdiction to decide his own jurisdiction and that there was no implied, let alone express, agreement that he should have such jurisdiction. There was in any event an adequate reservation by Mr Shah in relation to jurisdiction which was effectively maintained throughout the adjudication.

  2. Given the view that I have formed, the parties have agreed, properly, that Aedifice’s Claim should be dismissed as the only issue was whether the adjudicator was given jurisdiction to decide his jurisdiction. It remains open to Aedifice to institute court proceedings against Mr Shah or the Company on a contractual or quantum meruit basis.

Having heard argument, I have decided that, as Mr Shah has “won” this case, Aedifice should pay his costs which I have summarily assessed at £5000.