Claim No 9LV 22750lTC No 12/09
And TC No 11/09
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
LIVERPOOL DISTRICT REGISTRY
TECHNOLOGY AND CONSTRUCTION COURT (LIVERPOOL)
BETWEEN (TC 12/09)
SPEYMILL CONTRACTS LIMITED
Claimant
- and –
ERIC BASKIND
Defendant
AND BETWEEN (TC 1 1/09)
ERIC BASKIND
Claimant
- and –
SPEYMILL CONTRACTS LIMITED
Defendant
Mr Walker (instructed by Sloan Plumb Wood) for Speymill Contracts Limited
Mr Wood (instructed by CoIemans-ctts LLP) for Eric Baskind
Hearing dates: 22,23,24, and 25 June and 22 July 2009
JUDGMENT
INTRODUCTION
1. These applications arise from a dispute about building work carried out by the Claimant "Speymill" at Mr Baskind's property at Raby House in Neston. The property was previously a country house hotel but was bought by Mr Baskind with a view to making it his home. For that purpose he engaged professional help including, as architects, the J S Design Partnership ("JSD"); and, as Quantity Surveyors, Summerfield Robb Clarke Limited ("SRC"). A scheme for the conversion was prepared and in March 2005 tenders were invited. Speymill's tender was chosen and work began in August 2005. Practical completion was certified in June 2006. In December 2008 Speymill made a reference to adjudication based in part on unpaid interim certificates numbered 12. 13, 14 and 15 issued by JSD during 2006. On the 14 th April 2009 the adjudicator, Mr Vinden, decided that Mr Baskind should pay Speymill the sum of £427,737.17 plus a further £15,465.95 in respect of his fees.
2. In proceedings commenced on the 14 th April 2009 (TCC 11/09) (the same date as Mr Vinden's decision) Mr Baskind claimed various declarations and damages from Speymill. On 5/5/09 Speymill issued separate proceedings to enforce the adjudicator's award (TCC12l09) and applications (a) for summary judgment in that action and (b) to stay Mr Baskind's claim to arbitration. It is those applications that fall to be considered now. In addition Mr Baskind makes an application to stay enforcement of any summary judgment.
THE FACTS
3. The tender document was prepared by SRC and is dated 24/3/05. It contains at clause 2.1 the words:
"The Employer does not bind himself to accept the tender and shall not be responsible for any costs incurred in the preparation of any tender."
Section A10 contains details of the project; section A11 contains details of the tender contract and documents; section A20 contains details of the proposed contract. It reads:
"the form of the contract will be the .JCT Standard form of Building Contract Private Without Quantities 1998 Edition incorporating Amendments 1, 2, 3, 4 and 5, all as adapted by the JCT Contractor's Designed Portion Supplement 1998 Edition revised July 2002".
4. Allowances for various options under the contract were then specified including:
"Articles 7A and 7B and clauses 41B and 41C. Dispute or difference - settlement of disputes: The words "clause 41 applies" will not be deleted".
A date for completion was specified to be 30 th October 2005: a liquidated damages clause of £2,000 per week and a retention percentage of 5% were proposed; and in relation to adjudication it was suggested that the nomination of an adjudicator should be through the Royal Institution of Chartered Surveyors.
5. The tender document was sent out by SRC to Speymill on 29Lh March 2005. There followed during April a number of letters from SRC to Speymill clarifying and amplifying the tender document.
6. On the 91h May 2005 Speymill submitted their tender to SRC. The Form of tender contained the following:
"We having read the conditions of contract set out in the Tender Document dated the 24 th March 2005 delivered to us and having examined the documents referred to therein do hereby offer to execute and complete in accordance with the Conditions of Contract the whole of the works described within the contract period of 20 weeks for the sum of (£ 840,957.53). . ..
This tender remains open for consideration for 90 days from the date fixed for the submission or lodgement of tenders"
7. Following submission of the tender there was further negotiation between SRC and Speymill about the price and scope of works including a meeting with potential contractors on the 131h June 2005. Following that meeting Mr Baskind decided to proceed with Speymill.
8. A letter of intent was prepared by SRC. A draft was sent to Speymill on the 131h July 2005 for their consideration and comments. A reply was received the same day effectively accepting the contents of the draft letter. The letter was then formally sent on the 14 th July 2005. It is an important letter. It reads
"Following your tender submission dated the 9 th May 2005 and subsequent submissions, we are happy to confirm that it is the intent of Eric Baskind (The Employer) to enter into a contract with Speymill Contracts Ltd (The Contractor) to carry out the construction and completion of the Works at the above property. The Works include the complete design of mechanical and electrical services installations, beam and block floors and new roof trusses.
The contract sum will be in the adjusted tender amount of 1884,954.74 (exclusive of VAT) and as detailed on the attached Summary of Contract Sum.
The form of contract shall be the JCT Standard form of Building Contract Private Without Quantities 1998 Edition incorporating Amendments 1, 2, 3, 4 and 5, all as adapted by the JCT Contractor's Designed Portion Supplement 1998 Edition revised July 2002"
There are then listed the documents forming the basis of the contract sum. The Ietter continues:
"Terms and Conditions specified in the foregoing documentation will apply to the works instructed by this letter.
The proposed start date is 8 th August 2005 with completion being 18 weeks later on 9 th December 2005.
The Employer will not be liable for any loss of profit loss of expectation or other consequential losses and you will make no claim whatsoever in the event the Employer does not enter into Contract with you. In this event the Works shall be valued in accordance with the Contract Conditions, Schedule of Works/ Rates or, where not possible, on the basis of a fair and reasonable valuation.
In the event that the Employer enters into a Contract with you for carrying out the Works (the Contract) this letter shall be superseded by the Contract. Any payments under this letter shall be treated as payments on account under the Contract and the Contract shall retrospectively govern everything done by you or on your behalf under this letter.
In the event that the aforementioned Contract is not entered into, we may upon giving you reasonable written notice, require you to cease any further work. In this event, you will be paid the reasonable costs which you have incurred in relation to the above mentioned works, recognising your obligation to mitigate such costs as far as possible. We would request your written acknowledgment and agreement to the contents of this letter of intent"
Accompanying the letter was a summary of the contract sum setting out the adjustments of the original tender and the proposed costs.
9. There is no dispute that Speymill commenced work in August 2005. Discussions between the parties continued. It is clear from documents produced by Mr Baskind during the hearing that there were differences between the parties. The nature and effect OF these ongoing discussions is a matter to which I shall have to return.
10. By letter dated 7 th November 2005, SRC sent a copy of contract documents to Speymill for signature. The list of enclosures in the letter was somewhat different to those in the letter of intent. The letter went on:
"The Standard Form of Contract has been amended and pages incorporated to account for the use of the Contractor's Designed Portion Supplement as follows: . . ."
There then followed 4 numbered listed alterations. The letter concluded:
"can you please sign and initial where required and return the entire set of documentation to ourselves .... for forward transmission to Eric Baskind."
11. On the 17 th November Speymill wrote back to SRC stating that they had only received part of the documents for signature but continued:
"We would normally expect 2 copies of all documentation for signature by ourselves and would then expect to receive back from you, once completed by the Eric Baskind, one complete set for our reference. On this basis, we would request that the completion/execution of the contract by Eric Baskind is carried out during an imminent site meeting so that we can take one complete set away with us."
For reasons of which I am not aware that did not take place.
12. On the 1 st December 2005 Speymill returned the documents which had been forwarded by SRC signed by Mr King and Mr Parsons on behalf of Speymill. SRC apparently then sent the contract documents to Mr Baskind who, it is common ground, never signed them.
13. On a number of occasions Speymill chased a copy of a contract which had been signed by Mr Baskind. On 13 th January 2006 an email was sent from Speymill to SRC:
"We have not yet had our copy of the signed Contract back.. . . . .is there a problem?"
I have not seen any reply to that request.
14. A year later, on 31 st January 2007, Speymill wrote to SRC again asking if the documents had been signed by the employer and whether they, SRC, were in possession of a signed copy. The response was that he had not signed them. Further Mr Baskind's evidence is that at a meeting on the 8 th March 2008 with Mr Latham of Speymill, Mr Latham again asked him if he had signed the contract to which he replied that he had not and did not intend to.
15. During the works JSD issued a total of 15 payment certificates between 31 st August 2005 and 10 th October 2006 to a total value of 1753,490.44. Mr Baskind made payments against those certificates up until 12 th April 2006 in the total sum of £652,786.20. After that he made no further payments. In particular no payments were made against interim certificates numbered 12, 13, 14 or 15. Further, JSD granted extensions of time under the contract and issued a certificate of practical completion on 271h June 2006.
16. It is against that factual background that the arguments have been developed before me.
SUMMARY JUDGMENT
17. The claim for summary judgment is based on the terms of the contract between the parties. Clause 41A.7 of the JCT contract reads:
"41A.7.1 The decision of the Adjudicator shall be binding on the Parties until the dispute or difference is finally determined by arbitration or legal proceedings or by an agreement in writing made between the Parties made after the decision of the Adjudicator has been given.
41.7.2 The Parties shall without prejudice to their other rights under this Contract comply with the decision of the Adjudicator; and the Employer and the Contractor shall ensure that the decision of the Adjudicator is given effect."
41.7.3 If either Party does not comply with the decision of the Adjudicator the other party shall be entitled to take legal proceedings to secure such compliance pending any Final determination of the referred dispute or difference pursuant to clause 41A.7.1."
18. A number of arguments are raised by Mr Baskind in an attempt to defeat the claim. The first is that the adjudication provisions of the JCT contract were not incorporated into the agreement between the parties. As to this Speymill raise a preliminary objection that Mr Baskind has waived his right to take that point. I shall deal with that preliminary objection first.
Waiver
19. Speymill claim that Mr Baskind has waived any right to take a point as to the adjudicator's jurisdiction as it was not taken during the adjudication itself. Mr Baskind says that he reserved his position at the adjudication and in any event he cannot be prevented from raising the matter now.
20. It is common ground that the specific point was not taken at the adjudication. In paragraph 3 of his witness statement signed on the 16 th December 2008 for the adjudication Mr Baskind did set out his concerns that he had not personally agreed to or been advised about an adjudication clause. However, his response to the notice of referral did not raise the point and his solicitors' letter dated December 2008 accepted Mr Vinden as the adjudicator "in accordance with the ...p arties' contract as appropriate."
21. In a subsequent letter dated 11 th December 2008 Mr Baskind's solicitors wrote to Speymill's solicitors:
"We expressly set out that our client contends that:
i . these adjudication provisions do not bind him
ii. there is no identifiable basis upon which this adjudication is able to proceed at all.. . .
For the avoidance of doubt if the adjudication proceeds our client reserves his right to participate but strictly without prejudice to his contention that there is no jurisdiction. If our client participates in the adjudication process this is not to be taken, nor is it in any way construed to be a waiver of his rights on jurisdiction. The position on jurisdiction is put shortly at this stage and will be developed, if necessary, in due course.. ..."
The solicitors then set out a number of bases of challenge none of which suggest that the JCT contract was not incorporated into the parties' agreement.
22. On the same day they wrote to Mr Vinden a shorter letter in these terms:
"For the avoidance of doubt . . . .. our client fully reserves his position as to the issues raised by the Referring Party including on the issue of jurisdiction"
23. In his Response to the Referral notice at paragraphs 23 and 24 Mr Baskind effectively only reserved certain issues: Paragraph 23 reads:
"Without prejudice to these propositions in so far as Speymill does proceed the Baskind reserves his rights generally and in particular reserves his position and his right notwithstanding these present submissions to appear to present his case in the purported adjudication." (my underlining)
He then specifically adopts "the fourth of the options addressed in Fastrack Contractors Limited v Morrison Construction Limited [2000] BLR 168 and paragraph 31." In other parts of his submission, however, he clearly relied on the fact of and terms of the JCT contract in support of his contentions.
24. In the light of the above it is therefore not surprising that Mr Vinden concluded that there was no issue on this point (see paragraphs 3.1 and 3.3 of his decision).
25. The specific point was first raised on the 13 th March 2009 in a letter from Mr Baskin's solicitors to Speymill's solicitors and the on 14 th April 2009 in a letter from Mr Baskind's solicitors to Mr Vinden which acknowledged that
"this point is additional to the points on jurisdiction on which you have already given your non binding views.".
26. As to the law, Speymill relies on Carillon v Royal Devonport (2006) BLR 15. In my judgment Carillon is distinguishable from the present case. In that case the employer sought to refer to the adjudicator a specific point concerning interest in respect of which he would not have otherwise had jurisdiction. The contractor did not object and was held to have "acquiesced in that referral". However, the point did not go to the underlying jurisdiction of the adjudicator and the basis of appointment as in this case.
27. I was also referred to the decision of His Honour Judge Havelock-Allan QC (sitting as a Judge of the High Court) Bothma (t/a Dab Builders) v Mayhaven Healthcare Ltd 120061 EWHC 2601 (QB) where a similar but wider reservation was held to be sufficient to permit a point not taken before the adjudicator to be taken in enforcement proceedings.
28. Mr Baskind has referred to a number of authorities concerning waiver and estoppel which I have considered but do not propose to rehearse in this judgment. Having considered the authorities and the facts of this case I am not persuaded that he has waived his right to take this point now. The issue is fundamental to the jurisdiction of the adjudicator. In my judgment there would need to be strong and cogent evidence of an informed decision or election by Mr Baskind to waive the point in order to deprive him of the right to take it now. There is nothing in the evidence to suggest any positive indication from Mr Baskind that he was aware of the point but had chosen to waive it. Although the reservation of his position was not as clear or as specific as it might have been, in my judgment it would not be fair or just to deprive him of the opportunity to raise the argument at this stage. It is relevant that the very same argument is pursued by him in any event in relation to the arbitration clause sought to be enforced by Speymill.
29. However, I find it surprising that the point was not taken before the adjudicator and was only first raised by Mr Baskind after he had participated in the adjudication for over some 3 months. It seems to me to be unlikely, if he or his advisers believed that he was not bound by the JCT contract, that the point would not have been raised specifically within the adjudication or at the time notice of intention to refer was given. What happened instead was that the appointment of the adjudicator was accepted; and one of the specific arguments raised in the response to the referral notice (namely that clause 41A of the contract was unfair under the Unfair Terms in Consumer Contracts Regulations 1999) presupposed the existence of the clause. All these matters I will return to below.
The contract dispute: were the JCT terms incorporated?
30. The central issue is whether the JCT terms were incorporated into the contract. If they were, then subject to arguments about unfairness the parties were bound by both the adjudication clause and arbitration clauses.
31. Speymill's pleaded case is that the contract is evidenced by SRC's letter of the 7 th November and Speymill's reply dated lSL December 2005. However, the primary case submitted at the hearing was that contract was concluded by 14 th July 2005 as evidenced by the letter of intent. It is submitted that by then all the necessary terms of the contract had been agreed between the parties. In the further alternative Speymill argue at the very least that the return of the letter on the 1 st December 2005 constituted an offer by them to contract on those same terms which was accepted by Mr Baskind by his conduct in conducting himself in accordance with the JCT terms.
32. Mr Baskind's primary case is that there came into existence a simple contract on the 141h July 2005 which did not incorporate the JCT terms: thereafter although the parties conducted themselves as if they were bound by the JCT terms, in reality the formation of a contract which included those terms was conditional upon them being specifically agreed by him (rather than SRC) and executed, in the sense of being signed by, him. Those things never happened and therefore the JCT terms were never incorporated in to the agreement. In the alternative he argues that there was in fact no contract created between the parties as there was never any agreement as to its terms.
The law
33. Both parties have referred me to the judgment of Ramsey J in Haden Young Limited v Laing O'Rourke Midlands Limited [2008] EWHC 1016 (TCC). In paragraphs 68 to 74 he sets out the approach of the courts where no contract has been signed:
''In such cases the courts have had to analyse what passes between the parties to see whether. Objectively, they have come to an agreement on all essential terms"
He then cites passages from the judgment of Lloyd W in Pagnan S.P.A. v Feed Products Limited [1987] 2 Lloyd's Rep 601 and of Steyn LJ in G Percv Trentham Ltd v. Archital Luxfer [1993] 1 Lloyd's Rep 25 before citing with approval a summary of the position in Keating; on Construction Contracts (8 th Edition)
"It is sometimes difficult to determine whether a concluded contract has come into existence when there have been lengthy negotiations between the parties but no formal contract has ever been signed. It is suggested that a useful approach is to ask whether the following can be answered in the affirmative:
(a) in the relevant period of negotiation, did the parties intend to contract?
(b) at the time when they are alleged to have contracted, had they agreed with sufficient certainty upon the terms which they then regarded as being required in order that a contract should come into existence?
(C) did those terms include all the terms which even though the parties did not realise it, were in fact essential to be agreed if the contract was to be legally enforceable and commercially workable?
(d) was there a sufficient indication of acceptance by the offeree of the offer as then made complying with any stipulation in the offer itself as to the manner of acceptance?
On such an approach the court's task is to review what the parties said and did and from that material to infer whether the parties' objective intentions as expressed to each other were to enter into a mutually binding contract."
34. Both parties have also referred me to the Court of Appeal decision in Bryen & Langley Ltd v Boston [2005] EWCA Civ 973. The facts of that case are very similar to the present. There was an invitation to tender which provided for a JCT form of contract including provisions for reference to an adjudicator and to arbitration. The invitation to tender was followed by negotiations between the parties as to price and scope of works which resulted in a tender being submitted which was accepted There was then a letter of intent sent by the employer to the contractor indicating an intention to proceed on the basis of the preceding negotiations. Unlike in this case the employer did not signify formal agreement to the letter of intent. After commencement of works the employer's agent sent to the contractor formal documents for signature. These were signed by the contractor but not by the employer. In the meantime certificates for payment were issued and paid and extensions of time were granted.
35. On the basis of those facts His Honour Judge Richard Seymour QC at first instance held that the parties were not bound by the JCT terms. That decision was reversed by the Court of Appeal. Rimer J said at paragraph 36 "The mere fact that two parties propose that their agreement should be contained in a formal contract to be drawn and signed in the future does not preclude the conclusion that they have already informally contractually committed themselves on exactly the same terms. Of course, if they negotiate on a "subject to contract" basis such a conclusion will be precluded. But otherwise it will not, or at least may not."
36. Rimer J made reference to the decision in Harvey Shopfitters v ADI (2003) EWCA Civ 1757 (a case relied upon by Speymill as being factually similar) and then said at paragraph 38:
"The decision in Harvey is an example of a case in which the court found that the creation of the further, formal contract was not a condition of the bargain the parties had finally concluded. It was no more than an expression of their desire as to manner in which the transaction upon which they had agreed should go through. In my judgment, the same conclusion can and should be drawn as to the parties' intentions in the present case. The commercial reality was that, by 12 June 2001, they had agreed all the terms, including the terms of the JCT Form, and when B & L started work on the property in June they were doing so on those terms. In my judgment, the judge was in error in his conclusion that the contract the parties concluded in June 2001 did not incorporate the JCT Form. I prefer the view that it did."
37. Mr Baskind has referred me to a number of authorities which are examples of cases where it has been held, in a variety of factual circumstances, that where the parties envisaged a formal contract then in the absence of a formal contract being executed there was no agreement. Mr Wood accepted that they are illustrations of the principle and each case has to be decided on its own facts. Therefore, whilst I have considered all these cases I do not propose to analyse them in this judgment. It seems to me that in each case the court was analysing the facts before it on the basis of the same short principal enunciated by Ramsey J in the Haden Young case above.
38. Speymill submits that the letter of intent was the culmination of a detailed tender process. AI1 terms had apparently been agreed by 13'~ July 2005 when the draft letter of intent was sent by SRC to Speymill and agreed by them. There were no live issues reserved by either party. The price, the nature and scope of the works and the contract terms applicable had been agreed in so far as was necessary to form a contract between the parties. It is accepted by Speymill that the letter of intent anticipates the entering into of a formal contract at a later stage but it is argued that that did not mean that the parties had not agreed to the contract at that stage. This was an agreement intended to bind the parties pending the entering into of the formal contract. It was on the same terms as the intended formal contract. However, it expressly envisaged a situation whereby the parties might not complete the formal contract and it made provision for that eventuality. In particular it gave Mr Baskind (the employer) an additional right "by giving you (the contractor) reasonable written notice to require you to cease any further work". He would not have had this right had the formal contract had been signed.
39. As to the terms of this contract, Speymill relies on the sentence "Terms and conditions specified in the foregoing documentation will apply to the works instructed by this letter" and submits that the letter was clearly intended to apply to any works envisaged by it (namely the "Alterations and Refurbishment to Raby House") whenever they started. Those terms referred to in the letter included the JCT terms.
40. Mr Baskind's case, as Mr Wood puts it, is "multi-dimensional". Several arguments are raised but he relies principally on the fact that the tender documents and in particular the letter of intent clearly envisage a formal contract being entered into by the parties. Particular reliance is placed on the two paragraphs in the letter of intent which commence "In the event that the Employer enters into a Contract ...." And then "In the event that the aforementioned Contract is not entered into.. ." It is submitted that it is clear from those words that the employer (Mr Baskind) was to enter "the Contract", being the JCT form of contract, at some future stage but not through the letter of intent itself. It is submitted that the coming into force of "the Contract" containing the JCT terms was conditional upon Mr Baskind's execution by signature of a formal contract. The argument is summarised in paragraph 21 of Mr Wood's skeleton argument:
"The correct analysis in this case is that it was a pre-condition of the material JCT contract coming into being, and the parties accepted this requirement, that it had to be approved and signed/executed by both parties."
41. Having considered the parties respective submissions I prefer Speymill's analysis of the position. I am quite satisfied that an agreement had been reached between the parties by the 14'~ July and that the JCT terms were incorporated into it. It is clear in my judgment that the parties intended to contract. There was agreement as to price, nature and scope of works and relevant terms as evidenced by the letter of intent a draft of which was created by SRC and accepted by Speymill. Those terms were all that were necessary to create a binding agreement. The letter was not expressed to be "subject to contract" nor in my judgment could it be said that the parties intended it to be. All of the questions posed in the extract from Keating (above) are in my judgment answered in the affirmative.
42. This was clearly a letter intended to set out the terms agreed between the parties pending a formal agreement being signed. I accept that a formal contract was anticipated by both parties. However that does not prevent there being an agreement on the same terms (see Bryen & Langley ). In my judgment any reasonable person looking at this sequence of events would conclude that an agreement had been reached incorporating the JCT terms by 14 th July 2005 and that any work which commenced after that date was subject to those terms.
43. In reaching that conclusion I have taken into account the "multi-dimensional" challenges raised by Mr Baskind which I shall deal with now.
The authority of SRC to bind Mr Baskind
44. It is submitted that the evidence is that Mr Baskind himself, neither agreed to the wording of the proposed Contract nor assented to be bound by it. He never signed the JCT form of agreement and in fact would never have done so. Consequently he can only be bound by the JCT terms if SRC had authority to bind him. He submits that they did not.
45. He concedes that SRC had authority to put together the initial draft contract for the purpose of the tender. Further it is a necessary part OF his primary case that SRC had authority to bind him to the "simple contract" for which he contends. However it is argued that the very wording of the letter of intent which refers in terms to "the employer" as a separate entity who has the option of not entering into the contract shows that SRC's authority was limited. Further it is argued that Speymill knew that the contract had to be executed by Mr Baskind as is clear from the correspondence of the 7 th and 17 th November 2005 and the fact that they subsequently seemed anxious to receive a copy of the contract signed by him.
46 I accept that SRC had no authority to enter into the formal contract with Speymill on behalf of Mr Baskind. The correspondence shows that it was not anticipated that SRC would or indeed couid sign the contract documents on Mr Baskind's behalf. He had to sign them personally. But that does not mean that SRC did not have his authority in other respects.
47. The reality is that throughout the negotiation between March and December 2005 Mr Baskind permitted Speymill to deal with SRC on his behalf, They were authorised to draw up the tender document, send out the invitation for tenders, and to negotiate on the basis of that document with potential contractors. They clearly had authority to draw up and send out the letter of intent on Mr Baskind's behalf. There is evidence that Mr Baskind knew that the JCT form of contract was contemplated by SRC (see SRC's letters to Mr Baskind dated 11th January 2005 and 16th June 2005). He accepts that SRC had authority to bind him to the "simple contract". In my judgment these facts demonstrate that at the very least Mr Baskind's actions had given SRC apparent or ostensible authority when dealing with Speymill to bind him to a contract including the JCT terms pending his execution of a formal contract. I would however go further and hold that on the evidence available in these applications SRC probably had actual authority to bind him to these terms. On the evidence the only relevant limit to that authority was that they could not enter into the formal contract on his behalf.
Regulation 7(2) of the 1999 Regulations
48. It is argued that when construing the letter the court should have regard to the provisions of Regulation 7(2) of the Unfair Terms in Consumer Contracts Regulations 1999 and construe it in favour of Mr Baskind. Regulation 7(2) provides:
"If there is doubt about the meaning of a written term, the interpretation which is most favourable to the consumer shall prevail . . .."
49. It is conceded that Mr Baskind is a consumer for the purposes of the 1999 Regulations. However, I do not accept that this provision assists Mr Baskind in the context of the present argument. Here the argument is not about the "meaning OF a written term" but about whether or not certain terms are incorporated into the agreement in the first place. The Ietter of intent is the main document I have to consider in order to reach a conclusion as to the intention of the parties. I do not consider that Regulation 7(2) is engaged in the exercise I am presently performing.
50. In any event for the reasons given I am not satisfied that there is any doubt about the terms of the Ietter of intent such as to engage Regulation 7(2).
Uncertainty as to what is agreed
51. As to that part of the letter which states "Terms and conditions specified in the foregoing documentation will apply to the works instructed by this letter" it is argued that it is not clear what terms and conditions are here referred to or what works are referred to and therefore there is real uncertainty as to what the letter of intent means.
52. I reject that argument. The terms and conditions are those referred to in the body of the letter of intent and the documents enclosed. They were sufficiently certain and identified and if not identified, were capable of being identified by reference to the documents mentioned. Mr Baskind has not identified any terms which he contends were uncertain (other than to refer to ongoing negotiations to which I refer below). He has not specifically identified what terms there were left to agree.
53. I also reject the argument that it is not clear what works are referred to. Mr Wood abandoned his original argument that "arguably the letter does not instruct any works." In my judgment there can be no doubt that the works referred to were those for the alteration and refurbishment of Raby House as set out in the contract documents which were referred to in the letter of intent and the terms were to apply to those works once they started.
Negotiations were not complete
54. Mr Baskind seeks to argue that after 14 th July 2005 negotiations as to the terms of the contract were continuing and thus no contract can have been concluded then. A further bundle of documents in support of that contention was served during the hearing. There are a number of aspects to that argument which I have to deal with.
The performance bond:
55. Mr Baskind's evidence is that there was ongoing negotiation in relation to a performance bond after 14 th July 2005. However it is clear that the issue of the performance bond had been the subject of negotiation and was resolved as between SRC and Speymill as at the time of the Ietter of intent. Such is clear from the Summary of Contract Sum attached to the letter of intent which includes the provision "Omit performance bond". On any view the intention at the t ime is that the agreement was not to provide for a performance bond. If Mr Baskind was hoping to negotiate a performance bond separately or attempt to re-negotiate that point later then that was a matter for him. Objectively the parties appear to have been in agreement in July 2005 that the performance bond should not be included as part of the agreement.
The letter of the 7 th November:
56. It is suggested that the contents of this letter, in that it seeks to alter terms set out in the letter of intent, shows that there had been no agreement about the JCT terms at that time. I accept that the letter of the 7Ih November apparently includes additional documents to those sent with and identified in the letter of intent (items 6 to 10 listed in the letter of the 7 th November do not appear to be mentioned in the letter of intent.) There appears to have been discussion in particular concerning the mechanical and electrical works continuing after the 14 th July 2007. However I am not persuaded that the fact that there may have been such continuing negotiations means that there was no agreement reached in July. As I have found, the terms were sufficiently certain and agreed in July.
Ongoing negotiations about the work:
57. During the hearing Mr Baskind produced a bundle of documents which he argued showed that negotiations were continuing after July 2005. In my judgment whilst it is clear that the parties remained in discussion about the works and the details of it (as is inevitable in the context of this type of project) the documents produced fall far short of establishing that there had never been an agreement. The first document was described as an "Info Req Schedule". It is Speymill's document. It is clearly a working document and had been subject to a number of revisions the latest one on the 22 nd November 2005. It seems that this may well have been the document envisaged by clause 5.4 of the JCT contract but in any event, in my judgment, it is not at all inconsistent with Speymill's case. Further, the JCT contract itself envisaged and provided for variations. There were a considerable number of them dealt with and assessed by Mr Vinden in his decision.
58. The documents relied on are in my judgment all consistent with ongoing works pursuant to the agreement which had been made. It may be that issues and disputes arose about those works (including about who was responsible for design) but that does not mean that the agreement made in July was incomplete or had no binding effect. The fact that the parties may subsequently have agreed or tried to agree further terms by way of new contract or variation, in my judgment does not affect my conclusions that a binding agreement had been reached in July. In my judgment there is no good evidence to suggest that the parties continued to negotiate after the 14 th July to the extent that it leads to the conclusion that no earlier agreement had been reached.
The terms alleged to have been agreed are inconsistent and / or otiose.
59. Next, it is submitted that if it is correct that the terms and conditions are those contained in the JCT contract then the effect would be that, a JCT-based contract would have been in place expressly through no more than the wording of a letter of intent. Consequently the rest of the letter of intent, and in particular those parts of it relating to "the Contract", were otiose.
60. I reject that argument. As has been seen the letter does give Mr Baskind certain rights to request cessation of works that he would not enjoy under the formal agreement. I do not consider that creates any inconsistency with the terms of the JCT contract. The two terms can live side by side. If the parties do not enter into a formal agreement then the terms of the letter of intent will apply. If the parties had entered into the formal agreement then the terms of the letter of intent would not.
Distinguishing Bryden & Langley
61. In his submission Mr Wood sought to distinguish the facts of Bryen & Langley . In particular he pointed out that the letter of intent in that case stated that it was the employer' (Mr Boston's) intention to "proceed with the works" whereas in the present case the employers intention is stated to be to "enter into a contract". However it seems to me that the overall effect of the letter of intent is precisely the same as in this case. The different phraseology is, in my judgment, immaterial.
Conduct of the parties
62. My conclusion on this central issue is reinforced by considering the conduct of parties which tends to show that both parties considered themselves bound by the JCT terms even though a formal contract had not been signed.
63. The commercial reality is that it is unlikely that either Speymill or Mr Baskind would have commenced work on a project of this scale without an agreement as to the scope of works the price and the basis of contract being agreed. The extent of the works was substantial. It seems to me that either the agreement was subject to all the terms set out in the letter of intent or none. If it was subject to none then there was no agreement as to price. That seems to me to be an unrealistic proposition and indeed is not Mr Baskind's primary case.
64. Further, it is conceded that at all times both parties conducted themselves as if subject to the JCT terms: interim certificates were issued and paid by Mr Baskind; it is part of his Defence that he issued Withholding Notices against those certificates; at one point he was con templating seeking liquidated damages under the contract; extensions of time under the contract were considered by JSD who issued certificates of non completion and then a certificate of practical completion, The clear inference is that at that time of the works the parties (including Mr Baskind) considered themselves to be bound by the JCT terms. I also consider it relevant that the point was not taken by Mr Baskind in the adjudication itself and was only raised for the first time in March 2009. This part of his argument does have hallmarks of an afterthought.
Conclusion on the contract issue
65. In the circumstances I am quite satisfied that the terms of the JCT contract were incorporated into the agreement between the parties and, subject to arguments about unfairness, both the adjudication clause (clause 41A) and the arbitration clause (clause 41B) are binding on them.
66. Primarily. I accept that the contract was concluded by the 14 th July 2005. However, if necessary, I would in the alternative accept Speymill's pleaded case for largely the same reasons. I consider that even if the letter of intent did not have the effect which I have found, SRC's letter of the 7 th November 2005 constituted an offer which was accepted by Speymill on the 1" December and the agreement containing the JCT terms was then concluded. The effect on the outcome of these applications is the same.
The Unfair Terms in Consumer Contracts Regulations 1999
67. Mr Baskind next contends that the adjudication provisions contained in Clause 41A of the JCT contract fall foul of the provisions of the Unfair Terms in Consumer Contracts Regulations 1999 ("the 1999 Regulations") and are therefore not binding on him. This objection was specifically raised before the adjudicator Mr Vinden and was rejected by him.
68. The regulations provide:
"5. (1) A contractual term which has not been individually negotiated shall be regarded as unfair if F, contrary to the requirement of good Faith, it causes a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer.
(2) A term shall always be regarded as not having been individually negotiated where it has been drafted in advance and the consumer has therefore not been able to influence the substance of the term.
(3) Notwithstanding that a specific term or certain aspects of it in a contract has been individually negotiated, these Regulations shall apply to the rest of a contract if an overall assessment of it indicates that it is a pre-formulated standard contract.
(4) It shall be for any seller or supplier who claims that a term was individually negotiated to show that it was.
(5) Schedule 2 to these Regulations contains an indicative and non-exhaustive list of the terms which may be regarded as unfair.
6. (1) Without prejudice to regulation 12, the unfairness of a contractual term shall be assessed, taking into account the nature of the goods or services For which the contract was concluded and by referring, at the time of conclusion of the contract, to all the circumstances attending the conclusion of the contract and to all the other terms of the contract or of another contract on which it is dependent . . . "
In Schedule 2 Mr Baskind relies in particular on paragraphs (i) and (q) that is terms which have the object or effect of:
"(i) irrevocably binding the consumer to terms with which he had no real opportunity of becoming acquainted before the conclusion of the contract ....." or
"(q) excluding or hindering the consumer's right to take legal action or exercise any other legal remedy, particularly by requiring the consumer to take disputes exclusively to arbitration not covered by legal provisions, unduly restricting the evidence available to him or imposing on him a burden of proof which, according to the applicable law, should lie with another party to the contract."
69. It is common ground that for the purposes of the regulations Speymill is a seller or supplier and Mr Baskind is a consumer.
70. Mr Baskind relies upon the judgment of Ramsey J in Mylcrist Builders Limited v Buck [2008] EWHC 2172 (TCC)("Mylcrist”) a case relating to arbitration provisions. It is submitted, and I accept, that in this context there is no distinction to be drawn between an arbitration clause and an adjudication clause. Of particular assistance is Ramsey J's summary of the principles to be applied when considering the application of the 1999 Regulations at paragraph 51 of his judgment. Having reviewed a number of the authorities which were cited to me by Mr Baskind in this case he said:
"From those authorities the following principles can be derived in relation to the application of the 1999 Regulations:
(1) A term is unfair if it causes a significant imbalance in the parties' rights and obligations under the contract to the detriment of the consumer in a manner or to an extent which is contrary to the requirement of good faith.
(2) There is "significant imbalance" if a term is so weighted in favour of the supplier as to tilt the parties' rights and obligations under the contract significantly in his Favour.
(3) The element of "detriment to the consumer" makes clear that the Regulations are aimed at significant imbalance against the consumer, rather than the seller or supplier.
(4) The requirement of good faith is one of fair and open dealing in which:
(a) Openness requires that the terms should be expressed fully, clearly and legibly, containing no concealed pitfall is or traps. Appropriate prominence should be given to terms which might operate disadvantageously to the customer.
(b) Fair dealing requires that a supplier should not, whether deliberately or unconsciously, take advantage of the consumer's necessity, indigence, lack of experience, unfamiliarity with the subject matter of the contract, weak bargaining position or any other factor listed in or analogous to those listed in Schedule 2 to the 1994 Regulations (an inducement to the consumer to agree to [he term, whether goods or services were sold or supplied at the special order of the consumer or whether the seller or supplier dealt fairly and equitably with the consumer). The supplier should deal fairly and equitably with the consumer.
(5) Schedule 2 to the Regulations is best regarded as a check list of terms which must be regarded as potentially vulnerable to being unfair.
(6) Useful approaches include:
(a) assessing the impact of an impugned term on the parties' rights and obligations by comparing the effect of the contract with the term and the effect it would have without it.
(b) considering the effect of the inclusion of the term on the substance or core of the transaction; whether if it were drawn to his attention the consumer would be likely to be surprised by it; whether the term is a standard term, not merely in similar non-negotiable consumer contracts, but in commercial contracts freely negotiated between parties acting on level terms and at arms' length; and whether, in such cases, the party adversely affected by the inclusion of the term or his lawyer might reasonably be expected to object to its inclusion and press for its deletion.
(7) Where the consumer has imposed the term either by their own choice or a choice made by their professional agent then it is unlikely that there would be any lack of good faith or fair dealing with regard to the incorporation of the terms into the contract."
71. Speymill relies on the decision of the Court of Appeal in Bryen & Langley Ltd v Boston [2005] EWCA Civ 973 where, as has been seen, the facts were very similar to the facts of this case.
72. Mr Baskind's argument is that the clause is unfair because, given the scale of the issues and disputes raised by Speymill and the time available to him to respond (without any notice in advance having been given by Speymill) there is significant imbalance between the parties. In addition he argues that because of the various allegations of fraudulent conduct which he makes there is clear lack of good faith. Mr Wood specifically adopts the reasoning of counsel for Mr Boston in Bryen & Lanaley Ltd v Boston as set out in the first instance decision of His Honour Judge Richard Seymour QC at paragraph 41. It is argued that clause 41A in this contract was in reality Speymill's term in that it was contained in what he submits was "a Speymill document" which was never approbated, or adopted or agreed to by Mr Baskind.
73. Having considered the Regulations, the authorities to which I have been referred and the arguments advanced, I am quite satisfied that the term is not unfair For the purposes of the 1999 Regulations.
74. First, I doubt whether in the circumstances of this case that it could be said that the term was not "individually negotiated". In the tender documents SRC on behalf of Mr Baskind specifically chose the RICS as the nominating body for an adjudicator. There was clearly some attention given to this individual clause by Mr Baskind's advisers at the outset of the tendering process.
75. Second, and more importantly, SRC, on behalf of Mr Baskind, invited tenders on the basis of the JCT contract which included this adjudication clause. In that sense he invited the clause on himself. True it was a standard form of contract but it was not the standard form of either party. It was the standard form of the JCT which the parties were free to accept or reject or negotiate as they thought fit. There were negotiations before the contract was concluded. Neither party raised an issue with this clause. I reject as wholly unrealistic the contention that this became "Speymill's term" during the course of negotiations and thus (a) (by inference) ceased to be Mr Baskind's term; and (b) was in some way imposed by Speymill on Mr Baskind. That analysis flies in the face of the reality of the dealings between the parties before the letter of intent dated the 14 th July. In the circumstances it seems to me that it cannot properly be said there is any absence of good faith in the incorporation of such a term. In my judgment the facts fall squarely within the final proposition advanced by Ramsey J in Mylcrist when he said:
"Where the consumer has imposed the term either by their own choice or a choice made by their professional agent then it is unlikely that there would be any lack of good faith or fair dealing with regard to the incorporation of the terms in to the contract."
Although it cannot be said that Mr Baskind "imposed" the term on Speymill in this case, on any analysis of the facts this was a term chosen by him or his professional advisers. That is very different from the facts of Mylcrist where the relevant arbitration clause was clearly introduced by the builder as part of his standard terms and conditions.
76. In my judgment, the allegations of fraud raised by Mr Baskind would, even if proved, not be sufficient to amount to a lack of good faith for the purposes of the Regulations. The Regulations are directed to the term itself, its origins and its effect. The manner of performance of the contract in other respects on the Facts of this case is in my judgment immaterial.
77. Further, I do not consider that the clause created any significant imbalance between the parties. Mr Baskind argues that given the scale of the issues and disputes raised by Speymill (which I accept were substantial) the time available to him to respond was inadequate. I reject that argument. There is no suggestion in the decision of Mr Vinden that Mr Baskind had been unable to prepare his case. Indeed it seems that the final determination of the adjudication was delayed at Mr Baskind's request in order to allow him to present his case. Further, although he in this action seeks to argue that the adjudication award should not be enforced because of a breach of the rules of natural justice in the conduct of the arbitration, he has not alleged in support of that argument that he had insufficient time to prepare his case.
78. It was pointed out in argument that Mr Baskind is a residential occupier and as such there could have been no statutory adjudication under the provisions of the Housing Grants, Construction and Regeneration Act 1996. I do not see how that can be relevant given that on my findings above the parties agreed the adjudication clause should be part of their contract. It is of course relevant that Mr Baskind is an individual and Speymill are a large construction company. But it is also relevant that Mr Baskind was engaged in a significant project and had engaged professionals to help and advise him. Indeed, he had taken advice from SRC about the JCT contract both in January and June 2005 before the letter of intent was sent. Precisely what advice he was or was not given cannot be of relevance to Speymill. The fact that Mr Baskind himself may never have seen or approved the JCT contract is, in my judgment, for the same reason not to the point. The reality so far as the contract between him and Speymill was concerned is that Mr Baskind's agent acting on his behalf had agreed to such a term being incorporated.
79. In the final analysis I consider that the conclusion of Rimer J in Bryen & Langley, with which the other two members of the court agreed, are as relevant to this case as they were in that case. He said at paragraph 46:
"In my judgment, Mr Boston faces exactly the same difficulties in relation to his Regulation 5(1) argument as did the consumers in the Lovell and Beckingham cases. His problem is that the relevant provisions were not imposed upon him by B & L, the supplier. It was Mr Boston (the consumer), acting through his agent Mr Welling, who imposed them on the supplier, since they were specified in Mr Welling's original invitation to tender. I am prepared to assume that, in practice, Mr Boston played no part in the preparation of that invitation and that he did not receive any advice from Mr Welling on the provisions now in question; and it is clear that there was no individual negotiation over them with B & L. In principle, however, Mr Boston had the opportunity to influence the terms on which the contractors were being invited to tender, even though he may not have taken it up; ... Even so, in light of the fact that it was Mr Boston, by his agent, who imposed these terms on B & L, I regard the suggestion that there was any lack of good faith or fair dealing by B & L with regard to the ultimate incorporation of these terms into the contract as repugnant to common sense. If they were to tender at all, B & L were being asked by Mr Boston to tender on (inter alia) the very terms of which Mr Boston now complains. It was not for B & L to take the matter up with him and ensure that he knew what he was doing: they knew that he had the benefit of the services of a professional, Mr Welling, to advise him of the effects of the terms on which he was inviting tenders. In my judgment, there was no lack of openness, fair dealing or good faith in the manner in which the June 2001 contract came to be made and in those circumstances I, like the judge, regard Mr Boston's case under the 1999 Regulations as not made out."
80. In [he circumstances I regard Mr Baskind's case under the 1999 regulations as not made out.
More than one dispute
81. This objection can be dealt with relatively briefly. Mr Baskind submits that only one dispute can be referred to an adjudicator under the terms of the adjudication clause and that since more than one dispute was referred the adjudication award is Flawed and should not be enforced. This objection was taken before Mr Vinden and he rejected it.
82. I reject this submission. I cannot see anything in clause 41A which restricts the adjudicator to one dispute only and I was not taken to any term of the contract to support the argument that only one dispute could be referred. I agree with the comment of His Honour Judge Richard Seymour QC in R. Durtnell and Sons v Kaduna Ltd [2003] BLR 225 at par 41 when he said in relation to a similar clause:
"under clause 41A of the Contract any number of disparate disputes can simultaneously be the subject of one notice of adjudication."
83. That in my judgment disposes of this issue. However, if I am wrong about that then in any event I prefer Speymill's submission that in reality only one dispute was referred namely how much if anything was owing by Mr Baskind. That dispute involved a number of different issues which had to be resolved but in my judgment it remained one dispute. To suggest that each issue had to be the subject of a separate adjudication is unrealistic.
Natural Justice
84. Mr Baskind next objects that the adjudication was not conducted according to the rules of natural justice. Initially two arguments were advanced. First, that Mr Vinden failed to consider his claim as to abatement and, second, that he failed to consider the argument that Mr Baskind was not bound by the adjudication clause. The second argument was rightly abandoned at the hearing it being recognised that it was unsustainable because, as indicated earlier in this judgment, Mr Vinden was not asked to consider the point.
85. As to the first issue, it is based on a letter from Mr Vinden to the parties dated 14 th January 2009 when he wrote:
"Mr Baskind has raised items of snagging in its (sic) Response. Which SpeymiIl suggest may be new items which it has had no previous notification of, even though it would appear Mr Baskind had knowledge of these items some time ago.
"In relation to these new items of defects, assuming they are new, then it cannot be right for Mr Baskind to take advantage of his failure to communicate the existence of these defects to Speymill in this adjudication.
"Accordingly where I am satisfied that an item of snagging is one which has not been communicated to Speymill prior to this adjudication then I do not intend to allow any adjustment in respect of such defects from any monies, if any, which I ultimately decide are payable by Mr Baskind to Speymill"
86. It is submitted that in limiting Mr Baskind's abatement claim in this way, without hearing argument on the issue, Mr Vinden acted in breach of the rules of natural justice. I have not been referred to any reply by Mr Baskind to the letter of the 14 th January 2009.
87. Speymill invites me to consider the judgment of Chadwick LT in Carillon Construction Limited v Devonport Royal Dockyard Limited [2005] EWCA Civ 1358 and in particular paragraphs 85 to 87. At paragraph 87 Chadwick W said this:
"In short, in the overwhelming majority of cases, the proper course for the party who is unsuccessful in an adjudication under the scheme must be to pay the amount that he has been ordered to pay by the adjudicator. If he does not accept the adjudicator's decision as 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".
88. In my judgment the allegation has to be looked at in the context of the way the adjudication progressed as a whole. Mr Vinden did not specify in his decision whether or not he had taken into account all of the defects identified by Mr Baskind or whether he did in fact limit himself as set out in the letter. He did, however, refer to the letter in his decision at paragraph 8.8.
89. There is however no doubt that Mr Vinden considered Mr Baskind's case as to defects (see sections 10.5.41 to 10.5.52 of his decision). He had available to him Mr Baskind's expert's report from Mr Mottram and having considered it with Speymill's response deducted approximately f 75,000 from Speymill's claim on account of defective work. Further, he carried out a site inspection in order to consider aspects of Mr Baskind's case on the 271h February 2009. Therefore it cannot be said that Mr Baskind's case was ignored. In my judgment it is also relevant that Mr Baskind refused to allow his experts to meet Mr Vinden (see paragraph 10.5.47 of the decision). The broad issue is whether or not Mr Baskind had ample opportunity to present his case. On the basis of the evidence I have seen he plainly did.
90. In any event, I am not persuaded that in limiting the issues as he did (if he did) he can be said to have been unfair, In the context of this adjudication, he was attempting to be fair and do justice as between the parties at that time. In my judgment if he did ignore defects of which Speymill had had no notice at the time, that was a decision which he was entitled to make within the adjudication. It of course does not prevent Mr Baskind from raising the matters subsequently when the issues fall to be finally resolved. I am far From satisfied that this is a plain case of a breach of the requirements of natural justice. I therefore find against Mr Baskind on this issue.
Fraud
91. Mr Baskind argues that the adjudicator's decision should not be enforced because of the fraudulent conduct OF Speymill or their employees. He has raised a number of allegations of dishonesty which are pleaded at paragraph 33 of his Defence. The principal allegations relied on in this context are those at paragraph 33.3 and 33.4.
92. In short, he alleges that in September 2006 employees of Speymill stole some of his documents including copies of Withholding Notices. Partially as a result of that theft, and partially as a result of the destruction of files on his computer as a result of a power surge in October 2006, he was unable to produce copies of those Withholding Notices to Mr Vinden. Further, he alleges that the evidence presented by Speymill to Mr Vinden on this issue was patently false in so Far as Speymill suggested that it had not received any Withholding Notices.
93. Speymill deny the allegations entirely. The allegation concerning the Withholding Notices is dealt with specifically by Mr Latham in section 9 of his witness statement dated 161h January 1999 prepared for the adjudicator.
94. Mr Vinden did not think it appropriate to accept Mr Baskind's invitation to ha1 t the adjudication as requested in paragraphs 42 and 43 of his Response to the Referral Notice. Instead, he continued with the adjudication and dealt with the issue at paragraphs 10.1.1 to 10.1.22 of his decision. He said:
" 10.1.10 In order for Mr Baskind to show that he is entitled to withhold payment from Speymill it is necessary for him to satisfy me on a balance of probabilities that effective Withholding notices were issued by him."
He then considered the fact that, notwithstanding Mr Baskind's complaints. JSD had continued to issue interim payment certificates and then concluded:
"10.1.21 As Mr Baskind is unable to provide me with copies of the Withholding notices he alleges he issued to Speymill and given that Speymill clearly state that no Withholding Notices were received by it, I am unable to conclude that Mr Baskind has discharged the burden of proof.
10.1.22 For the above reasons I have come to the conclusion that no valid and/or effective Withholding Notices were issued by Mr Baskind in respect of the sums due and payable in respect of Interim Payment Certificate numbers 12, 13, 14, and 15."
In the result he allowed the sums certified in those certificates (E£100,704.25) as being payable by Mr Baskind to Speymill without deduction.
95. Mr Baskind's argument is that the reason he was unable to produce copies of the Withholding Notices was, in part, because his files had been stolen by Speymill's employees. In that sense the decision was obtained by or at least tainted by fraud perpetrated by Speymill's employees. It is argued that the court should not allow enforcement of an adjudicator's decision which has been obtained by fraudulent conduct. Reliance is placed on the judgment of Denning W in Lazarus Estates Ltd v Beasley [l9561 1 QB 702 at 712 when he said:
"No court in this land will allow a person to keep an advantage which he has obtained by fraud. No judgment of a court, no order of a Minister, can be allowed to stand if it has been obtained by fraud. Fraud unravels everything. The court is careful not to find fraud unless it is distinctly pleaded and proved; but once it is proved, it vitiates judgments, contracts and all transactions whatsoever.. ."
96. Speymill argues that the allegations of Fraud do not provide any ground for not enforcing the decision. The allegations were specifically raised in the adjudication and considered by Mr Vinden. The fact that Mr Baskind disagrees with the decision is not a ground for saying that the award should not be enforced. Mr Baskind can pursue the argument in further litigation or arbitration but the adjudicator's decision on this and any other issue is binding.
97. In my judgment there are two issues I have to decide:
a. Does the allegation of fraud, if proved, provide a defence to the claim to enforce the adjudicator's decision?
b. If so, is there sufficient cogent and credible evidence of fraud such that Mr Baskind has a real prospect of defending the claim to enforce Mr Vinden's decision on that ground?
It is not relevant to consider whether the allegations of fraud, if made out, would affect the final determination of the issues between the parties.
98. As to the first issue I have been referred to a decision of His Honour Judge Mackay in Pro-Design Limited v New Millennium Experience Company Limited (unreported, September 2001). In that case it was alleged that (presumably unknown to the defendant) the claimant company was owned and operated by an employee OF the defendant and that there had been a conspiracy to create such a company to undertake the work. The claimant adduced no evidence to refute the defendant's allegations. The learned judge described the situation as one which needed thorough investigation. In order to do justice, summary judgment was refused.
99. I have aIso considered the judgment of Her Honour Judge Frances Kirkham in Andrew Wallace Ltd v Artisan Regeneration Ltd & Anor ) [2006] EWHC 15 (TCC) (10 January 2006) where it was conceded that:
"if the court were reasonably satisfied that to enforce the adjudication decision in this case would be to assist perpetrate a fraud, then the court would be right not to enforce it." (par 42) On the facts of that case the learned judge held that there was no real prospect of the Defendant establishing fraud.
100. In this case it is said that if the award were enforced then Speymill would be benefiting from their employees' dishonest and criminal conduct in that they had stolen files which contained relevant evidence and thus prevented Mr Baskind adducing that evidence in the adjudication, In my judgment if that allegation were made out at trial then it would afford grounds for defending the claim. The allegation clearly goes to the underlying fairness of the adjudication as between the parties. To enforce the decision in those circumstances would clearly allow Speymill to benefit from illegal activity.
101. This conclusion only relates to the allegations of Fraud pleaded at paragraphs 33.3 and 33.4 of Mr Baskind's defence. Mr Baskind also alleges that he was misled as to Speymill's experience in this kind of work, and as to the experience of the employees engaged; and further he alleges that items of his were stolen from the site and that on occasions he has been dishonestly charged for work which had not been done. These allegations are relevant to the overall relationship between the parties and the manner in which the work was performed but in my judgment do not go sufficiently to the fairness of the adjudication proceedings themselves. They would not afford grounds for the decision not to be enforced.
102. In the light of this conclusion I must look to see if the evidence of fraud is sufficiently cogent and credible for me to find that there is a real as opposed to Fanciful prospect of the allegation succeeding. There is direct evidence from Sue Burton that in September 2006 she saw two named employees of Speymill in a room in Mr Baskind's property marked "Private - Keep Out" looking through his files and then leaving the property carrying a box containing those files. She called Mr Baskind. They then together found a box of files "dumped near the oil tank at the rear of the building" (see paragraph 15 of her witness statement dated 15'~ December 2008). Mr Baskind asserts that when the box was found certain files were missing including those Files marked "Speymill - Raby House" and those files included copies of relevant Withholding Notices "and calculations relating to the same" (see his witness statement dated 16 th December 2008 paragraphs 30.1 and 30.2). That evidence (particularly that From Mrs Burton) seems on the face of it to be cogent and credible. If correct, it would amount to a prima facie case of theft of the files.
103. Mr Latharn answers Mr Baskind's allegations in section 9 of his witness statement dated 16Ih January 2009. He raises an alibi defence in relation to the two employees alleged to have been guilty of the theft. He also raises a number of other points of which two seem to me to have particular relevance to Mr Baskind's case that copies of Withholding Notices were stolen:
a. Given that at the relevant time Mr Baskind apparently still retained the services of SRC and JSD (the latter being responsible for the issue of the interim certificates) it is surprising that copies of any Withholding Notices were not left with or retained by them; the fact that Mr Baskind and his team of advisers are not able to produce any copies of any of the notices raises a question as to whether there were any such notices in the first place;
b. In so far as Mr Baskind alleges that he served a Withholding Notice in October 2006 this cannot have been affected by the theft in September 2006. Given that it had been his practice, apparently, to retain hard copies of the previous Withholding Notices (allegedly in the files which had been stolen) why is there not a hard copy of the October Withholding Notice?
104 Of course these factual issues are not to be determined in an application for summary judgment. I have to consider whether or not there is a real prospect of the defence being made out. In my judgment there is a real issue as to whether files were stolen which can only be resolved by trial. Returning to the principle that the court should not be seen to be assisting a fraudulent claim or a claim that is fraudulently advanced, I am persuaded that there is an issue which can only be resolved by a trial which, if resolved in Mr Baskind's Favour, would lead to the claim to enforce the adjudicator's decision being defeated. In the circumstances 1 refuse summary judgment on this ground.
105. However I have reservations about the strength of the Defence on this point for the reasons set out above. Those concerns are such that I propose to exercise my power under CPR 3.1 (3) and CPR 24PD par 5 to make a conditional order. I have repeatedly been told that Mr Baskind has the means to pay any sums that might be awarded. In the circumstances I consider it fair and just that summary judgment should be refused on this ground but conditionally upon Mr Baskind paying into court the amount awarded by Mr Vinden in the adjudication.
STAY OF EXECUTION
106. Given my finding on the summary judgment application this issue does not strictly arise. However I propose to give my conclusion on it in the event that my decision is held to be wrong. In any event the issue may be relevant to the Further conduct of the proceedings and/or arbitration.
The Law
107. There is no dispute about the power to stay the execution of an order. The relevant principals were helpfully set out by His Honour Judge Coulson QC in Wimbledon Construction Company 2000 Limited v Vano [2005] EWHC 1088. Having referred to earlier authorities he said at paragraph 26:
"In a number of the authorities which l have cited above the point has been made that each case must turn on its own facts. Whilst I respectfully agree with that, it does seem to me that there are a number of clear principles which should always govern the exercise of the court's discretion when it is considering a stay of execution in adjudication enforcement proceedings. Those principles can be set out as follows:
a) Adjudication (whether pursuant to the 1996 Act or the consequential amendments to the standard Forms of building and engineering contracts) is designed to be a quick and inexpensive method of arriving at a temporary result in a construction dispute.
b) In consequence, adjudicators' decisions are intended to be enforced summarily and the claimant (being the successful party in the adjudication) should not generally be kept out of its money.
c) In an application to stay the execution of summary judgment arising out of an Adjudicator's decision, the Court must exercise its discretion under Order 47 with considerations a) and b) firmly in mind (see AWG).
d) The probable inability of the claimant to repay the judgment sum (awarded by the Adjudicator and enforced by way of summary judgment) at the end of the substantive trial, or arbitration hearing, may constitute special circumstances within the meaning of Order 47 rule 1 (1) (a) rendering it appropriate to grant a stay (see Herschell).
e) If the claimant is in insolvent liquidation, or there is no dispute on the evidence that the claimant is insolvent, then a stay of execution will usually be granted (see Bouygues and Rainford House).
f) Even if the evidence of the claimant's present financial position suggested that it is probable that it would be unable to repay the judgment sum when it fell due, that would not usually justify the grant of a stay if:
(i) the claimant's financial position is the same or similar to its financial position at the time that the relevant contract was made (see Herschell); or
(ii) The claimant's financial position is due, either wholly, or in significant part, to the defendant's failure to pay those sums which were awarded by the adjudicator (see Absolute Rentals)."
108. His Honour Judge Toulmin CMG QC in Ale Heavy lift v MSD (Darlington) Ltd [2006] EWHC 2080 (TCC) added at paragraph 84: -
"I respectfully agree with him that the financial considerations which should be taken into account are those set our in his judgment, but in my view they do not absolve the court from considering all the circumstances as set out in Order 47 RSC in the course of exercising its discretion whether or not to order a stay of execution absolutely or for such period and on such conditions as the court thinks fit."
109. The authorities do suggest therefore that the discretion is wider than just based on the ability or otherwise of Speymiil to repay any award made, Other matters than the courts have taken into account have been:
a) the justice of granting a stay when the adjudicator has declined to take into account a set off or counterclaim (see Ale Heavylift v MSD Darlington [2006] EWCH 2080(TCC) at paragraph 80); and
b) any delay on the part of the applicant in pursuing such set off or counterclaim (see the judgment of His Honour Judge Toulrnin CMG QC in AWG Construction Services Limited v Rockingham Motor Speedway Limited [2004] EWHC 888(TCC) at paragraph 187.)
The evidence
110. Mr Baskind relies on reports from Mr Grogan dated 15 th April 2009 and 17 th June 2009. Speymill rely on a report from Mr Adam Smith dated 161h June 2009. During the course of the hearing certain of the redacted documents seen by Mr Smith were disclosed for the first time to Mr Baskind who having seen them did not seek to adduce any further evidence.
111 There seems to be no dispute as to the following:
a. Speymill "experienced a significant deterioration in its financial performance and financial condition during 2008 with it suffering a substantial loss of some £11million in that year and having net liabilities of some E6.9million at 31 December 2008" (see paragraph 6.3 Mr Smith's report.)
b. At the end of the same period Speymill Group PLC ("the Group") had net liabilities of some £2,713 million (solely as a result of Speymill's liabilities).
c. On the 26th January 2006 because of the financial uncertainty that the Groups shares on the Alternative Investment Market were suspended the suspension only being lifted on the 7 th April 2009.
d. On the 30 th January 2009 two directors provided a loan facility to the Group of up to E3.3million of which as at April 2009 £1.135million had been drawn.
e. That the Group's business is likely to involve a "considerably smaller contracting operation" during 2009. On 7'h April 2009 the Group's announcement of preliminary results included the following:
"The Board has decided to continue to support Speymill Contracts as a significantly smaller business where the emphasis during 2009 will be on the completion of current projects, maintenance and improvement of margins, risk management and cost reduction with materially fewer projects expected to be undertaken during the current year than in 2008".
112. Based on that evidence Mr Grogan concluded at the conclusion of his first report that:
"Given that (Speymill) is insolvent on a balance sheet basis there must be real doubt as to its ability to meet any award unless it receives funding from the group to enable it to do so.
I am unable to assess Group's ability to provide any funding that (Speymill) may require to enable it to meet any award. However, the order of magnitude of Mr Baskind's claim is such that on any analysis it will obviously not be a straightforward matter for the group find such a sum in the midst of its current trading conditions".
Mr Smith does not appear to dissent from this view on the basis of what was available to Mr Grogan. However on the basis of documents he had access to, which Mr Grogan did not, he concluded that the "Group is a going concern with adequate working capital resources available to the middle of April 2010" (paragraph 6.12 of his report). Further he says there is good evidence from the financial statements that the Group intends to support Speymill. In addition I have seen a witness statement of Mr McDonald, the chief executive of Speymill PLC that in the event that Speymill is ordered to pay back the judgment sum "the Group will pay up to the judgment amount on behalf of Speymill Contracts limited".
Conclusion
113. Against that background I have to look at the probability that Speymill will be able to re-pay any sum now awarded in the event that after arbitration it is ordered to do so. I accept Speymill's argument the relevant sum for these purposes is the sum that might be awarded in the summary judgment application that is around £450,000 but even so the sums at stake are substantial.
114. It is clear that Speymill is in a significantly worse financial position now than it was at the time of its dealings with Mr Baskind. It is insolvent on a balance sheet basis. There can be no suggestion (and indeed it is not suggested) that the dispute with Mr Baskind has caused the Financial difficulty. The fact that it is still trading as a going concern does not in my judgment sufficiently address its ability to pay the significant sums at issue here. The evidence suggests that its trading will significantly diminish in the coming year. It appears to be common ground that Speymill's ability to repay any sum is likely to be dependent on the Group's support. In these circumstances I have serious doubts as to whether Speymill will be in a position to repay the money if ordered to do so. Despite the assurances from the Group and Mr McDonald, in view of the difficulties it has faced in the very recent past and the intended change of direction generally ot the Group as suggested in the annual statement I also have doubts as to whether the Group will be able to support Speymill to the tune of £450,000 if it became necessary when the arbitration is complete.
115 I would comment that on the 19 th June 2009 E refused Mr Baskind's application for security for costs in respect of these applications. That decision is irrelevant to my present conclusions. The sums at issue here are significantly higher than the sums I was considering in the security for costs application and the time when they might become payable is much further into the future.
116 On the basis of the financial position of Speymill alone I would think it right to exercise my discretion to order a stay of execution of any judgment.
However when looking at the wider discretion the Following two factors reinforce my decision:
a) Although the claim is based on interim certificates issued in 2006 and works carried out then it was not until 29 th November 2008, more than 2 M years later, that Speymill served its notice of intention to refer to adjudication. In these circumstances the principle of "pay now argue later" loses a considerable amount of its force.
b) In making the award it seems that Mr Vinden may not have considered the totality of Mt Baskind's claim against Speymill. First, his letter of the 14 th January suggests that he did not and, second, he did not have any evidence of "Withholding Notices" in the circumstances dealt with above. The counterclaim on Mr Baskind's evidence (supported by expert evidence) amounts to a figure well in excess of Speymill's claim. He has not delayed in bringing it once the adjudication started.
117. I recognise that Speymill have had the benefit of interim certificates issued by JSD which were not paid; they have the benefit of the decision of an independent adjudicator; and (for the purposes of this argument) they have the benefit of summary judgment. Consequently they have a strong case for immediate payment. However, in the circumstances of this case, I am persuaded that it is not fair or just that that the adjudication award should be enforced summarily two years after the work was complete when there remain real issues as Speymill's liability to Mr Baskind and serious issues about Speymill's ability to repay the sum to Mr Baskind if ordered to, In the circumstances I hold that that the enforcement of any summary judgment (if there were one) should be stayed pending the conclusion of the arbitration which will take place between the parties.
118. However in my judgment any stay should be on condition that Mr Baskind pays into court the sum claimed on the summary judgment application. This will give Speymill some security in respect of the sum to which they are entitled. I have repeatedly been told that Mr Baskind has the means to pay and I think it would be appropriate for him to do so. I have already ordered that summary judgment should be refused on the condition that Mr Baskind pays into court the sum claimed in the summary judgment application. If I am wrong on that then the money should be brought into court as a condition of the stay on execution.
THE CLAIM TO STAY TO ARBITRATION
119. I now turn to Speymill's application to stay Mr Baskind's claims to arbitration. There are two issues. First, is the arbitration clause (which is contained in Article 7 and at paragraph 41B of the JCT terms) binding on the parties? Second, if it is in the contractual terms does it fall foul of the 1999 Regulations?
120. The first issue is identical to that considered above in relation to the adjudication clause. For the reasons given in relation to that I find that the arbitration clause is incorporated into the agreement.
121. Similar arguments apply also in relation to the 1999 Regulations. However there are further matters relied on by Mr Baskind as to why the arbitration clause is unfair. First it is pointed out that this term (unlike the adjudication clause) is covered by part (q) of schedule 2 to the Regulations and is therefore a term which might specifically be regarded as being unfair under Regulation 5 (5).
122. Second. it is said that the clause is capable of being, and in fact is, wholly disadvantageous to Mr Baskind who has related causes of action potentially against SRC and JSD which would not be subject to any arbitration provision and where it would be wholly unlikely that any ad hoc arbitration could be negotiated. As a result he might find himself in the disadvantageous position of dealing with matters arising out of these works both in arbitration and separately in the courts. In that regard I am referred to Zealander v Laing Homes Limited (Judgment of His Honour Judge Havery QC 19 March 1999) where, if the arbitration clause were upheld the consumer faced arbitration and litigation against the same party. However here the potential litigation relied on by Mr Baskind, although connected with the same subject matter, would be against wholly different parties and would relate to the issues as between Mr Baskind and his advisers rather than the issues between him and Speymill. In that sense they are of no concern to Speymill.
123. Finally I was referred again to Mylcrist Builders Limited v Buck [2008] EWHC 2172 (TCC) where on the facts an arbitration clause was struck down as being unfair but I repeat my comments on that decision as set out earlier in this judgment. I consider the facts of this case to be materially different.
124. Having considered these points I am not persuaded that the arbitration clause is unfair. My conclusions are the same as those given in relation to the adjudication clause. The important factor, in my judgment, is that SRC on behalf of Mr Baskind invited tenders on the basis that the clause would be included. That being the case it makes it very difficult for him to argue that there was any lack of good faith or that the clause creates a significant imbalance between the parties. He or his advisers chose to include it in the tender documents. It is not an attractive argument for him iiow to say that a clause that he invited on himself is unfair.
125. I therefore uphold the arbitration clause. There is no dispute that as a result of that decision the claim of Mr Baskind should be stayed to arbitration pursuant to section 9 of the Arbitration Act 1996.
RESULT
126. In the circumstances my conclusions on the applications before me are:
a. In claim TCC 12/09 the application for summary judgment should be refused such order being conditional upon Mr Baskind paying into court the amount of the award by a date to be determined; and that upon payment of the sum into court Mr Baskind be given permission to defend solely on the basis set out in paragraphs 33.3 and 33.4 of his Defence;
b. Claim TCC 11/09 should be stayed to arbitration.
127. I will consider submissions as to the proper wording of the orders and any consequential orders, including whether TCC 12/09 should also be stayed pending the conclusion of the arbitration, in due course.
His Honour Judge Platts
Addendum
At the conclusion of argument on the 25'h June 2009 Mr Wood on behalf of Mr Baskind indicated that he was "uncomfortable" with the Fact Speymill had produced as part of its reply a written "skeleton argument in respect of the contract terms". He requested permission to produce Further written submissions of his own. I understood the nature of the objection to be that part of the Speymill's reply had been reduced to writing. As such I did not consider that it was appropriate to allow yet further written submissions. In my judgment Speymill, as the applicant, was entitled to the last word. The fact that some of that reply was reduced to writing was not something that could be considered objectionable. Indeed I found it helpful. I refused the request.
Subsequently, by letter dated the 1 st 2009 and a note dated the 5 th July 2009 I was asked again to consider allowing further written submissions. I am not sure if either of these requests was served upon Speymill and I have not sought their views. It is alleged that Speymill went beyond what was permissible in its reply and introduced new matters which Mr Baskind had not had the opportunity of responding to. However, having considered the documents I again refused permission. I now give my brief reasons:
1. Argument had already taken 4 days of the court's time and a considerable amount of work had been done in preparation of the judgment before the letter of the 1" July was received. I did not and do not consider that I would be assisted by further written submissions.
2. Mr Baskind had presented his case fully: his skeleton argument was detailed running to 43 pages and 108 paragraphs and was developed fully in oral argument. I was referred to 70 authorities and texts in support of his contentions. A substantial number of issues were raised which I have dealt with in this judgment.
3. I am not persuaded that the content of Speymill's reply was inappropriate. It did not appear to me to be so at the time nor am I convinced that it was by the matters now placed before me. Speymill was replying to arguments raised by Mr Baskind as was its right. In my judgment no new facts or propositions of law were raised that would have taken Mr Baskind by surprise. Consequently I am not persuaded that there was anything material which Mr Baskind had not had the opportunity to deal with. I do not consider that Mr Baskind has been prejudiced content of the Speymill's reply or by the inability to make further submissions.
4. There has to be finality in argument. If I were to allow Mr Baskind to produce further written submissions then Speymill would have to have the opportunity to consider them and might perhaps itself make an application to respond to them. I do not think prolonging argument in such a way is to be encouraged, particularly in this type of litigation where a speedy decision is sought by all.
5. I bear in mind the overriding objective set out in CPR 1.1(1) and 1.1 (2). I have a general discretion under the courts case management powers as to whether or to accept further submissions. In the exercise of my discretion, I do not think that this is a case where further submissions are either necessary or desirable.