Case No: 3MA50059

Neutral Citation Number: [2014] EWHC 268 (TCC)

IN THE HIGH COURT OF JUSTICE

QUEEN’S BENCH DIVISION

MANCHESTER DISTRICT REGISTRY

TECHONOLOGY AND CONSTRUCTION COURT

Manchester Civil Justice Centre,

1 Bridge Street West, Manchester M60 9DJ

Date: 11 February 2014

Before :

HIS HONOUR JUDGE STEPHEN DAVIES

SITTING AS A JUDGE OF THE HIGH COURT

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Between :

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Miss Serena Cheng (instructed by Marsden Rawsthorn Solicitors, Chorley ) for the Claimant

Miss Gaynor Chambers (instructed by Mullaley & Company Limited ) for the Defendant

Hearing dates: 23 and 24 January 2014

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JUDGMENT

His Honour Judge Stephen Davies:

1. By these proceedings, issued on 2 July 2013, the claimant is seeking to enforce a decision of an adjudicator, Mr Robert Sliwinski, made on 6 June 2013, whereby he decided that the defendant should pay the claimant the sum of £213,844.99 plus VAT and a proportion of his fees. The claimant’s application for summary judgment in the normal way was listed for 26 July 2013, but in the light of the evidence filed by the defendant in response the claimant agreed to withdraw its application and proceed instead to a full trial of its claim. The trial was listed for 2 days on 15 October 2013 but subsequently the parties requested and the court agreed an adjournment of the trial date to 23 January 2014. I heard opening submissions and witness evidence over 2 days and adjourned for further written closing submissions which I received on 4 February 2014.

2. The issue upon which witness evidence was required was whether or not the dispute referred to the adjudicator arose under one contract, as the claimant contended, or under six separate contracts, as the defendant contended (“ the contract issue ”).

3. In addition to that issue, the following further issues arise:

(1) Even if the defendant is right, and the dispute as referred did on proper analysis arise under more than one contract, nonetheless did the adjudicator have jurisdiction to decide that very issue as part of his substantive jurisdiction, so that even if he was wrong on that point nonetheless his decision should be enforced (“ the substantive jurisdiction issue ”). The claimant says that it should, and relies on the decision of Akenhead J. in Air Design (Kent) Limited v. Deerglen (Jersey) Limited [2008] EWHC 3047 (TCC). It is the defendant’s submission that this decision is either distinguishable or, if not, was wrongly decided.

(2) The defendant’s fallback submission, if I am against it on the substantive jurisdiction issue, is that in circumstances where the court has heard full evidence and received full argument on the contract issue, and reached a decision contrary to that of the adjudicator, who himself reached his decision on a basis urged on him by the claimant’s then representatives which is contrary to the basis now advanced on its behalf in these proceedings, it would be wrong to order the enforcement of the decision (“ the substantive determination issue ”).

(3) Whether or not the adjudicator breached natural justice in failing to deal with a discrete defence advanced by the defendant, namely that the defendant was entitled to deduct 10% of the order value from any amount otherwise due to the claimant by reason of its failure to produce certain certificates as required under the terms of the contract which would, if decided in the defendant’s favour, have extinguished the amount which the adjudicator in fact found due to the claimant (“ the certificate defence ”).

(4) Whether or not the adjudicator exceeded his jurisdiction and/or breached natural justice in considering and deciding against the defendant the validity of a termination notice upon which the defendant relied as a complete defence to the claim (“ the termination issue ”).

(5) Whether or not the adjudicator exceeded his jurisdiction and/or breached natural justice by awarding the claimant an amount which included retention. The defendant says that he did, and that the decision should be severed so as to deduct the amount of retention from the decision (“ the retention issue ”).

4. In summary, the claimant is a specialist window sub-contractor based near Preston, Lancashire and the defendant is a construction company based in Woodford Green, North East London. In September 2010 the defendant was appointed as main contractor on a project for external refurbishment and internal decent homes works to a number of housing association owned properties at three estates in South East London known as the Leybridge, Newstead and Dorville Estates. The main contract works included the supply and installation of replacement windows and doors, for which the defendant invited the claimant to tender. The claimant tendered for the works and following various negotiations and discussions the defendant issued a number of separate orders to the claimant to undertake certain elements of the tendered works. The claimant’s position, in short, is that all of the sub-contract works were ordered under one order, known as order 24, dated 21 April 2011, and that the other orders were either works orders issued under that overarching order or alternatively were orders simply varying the original order, whereas the defendant’s position, in short, is that order 24 was never accepted by the claimant and all works were undertaken under those other orders, each amounting to separate contracts, one issued before order 24 and the others issued after it.

5. It is common ground that on 7 March 2013 the defendant purported to terminate the sub-contract(s) for breach. The claimant’s initial reference to adjudication of a substantial final account claim was met with an objection that the claim referred had not previously been advanced, so that there was no dispute capable of being referred. The adjudicator then appointed agreed with this objection and resigned, so that the claimant had to start afresh and served a further notice of adjudication on 1 May 2013. The duly appointed adjudicator, Mr Sliwinski, was met with a jurisdictional challenge by the defendant on the ground that the dispute encompassed claims arising under 6 separate contracts. Having received submissions on the point he enquired into the question of his jurisdiction, concluded that he had jurisdiction, and continued with the adjudication, producing the decision to which I have referred on 6 June 2013, amended under the slip rule on 13 June 2013. The defendant having declined to comply with the decision, these enforcement proceedings were duly commenced.

6. At trial I heard from the following witnesses in the following order:

(1) Kevin Mellor, employed by the claimant as a project co-ordinator, that being his role in relation to this project.

(2) Geoff Taylor, the claimant’s managing director.

(3) Gareth Stephens, the defendant’s chief QS in its construction division.

(4) Ben Bekker, a managing QS in the defendant’s construction division.

(5) Bruce Benson, the defendant’s operations director in its construction division.

7. I was also provided with a substantial quantity of documentation, including voluminous email correspondence. The parties had however in order to limit costs agreed to dispense with disclosure, so that I have not for example seen much in the way of internal documentation from either side. Since the contract issue must be determined by the court by reference to communications or conduct which “crossed the line” between the parties, rather than by reference to what they wrote or did internally, the absence of internal documentation is not material save insofar as it might have shed some light on disputed external conduct.

8. So far as the witnesses are concerned, whilst I have no doubt that they are all basically honest witnesses, doing their best to recall the events of 2011, I have not found it particularly easy to reconcile some of the evidence of each of Mr Mellor, Mr Taylor and Mr Bekker with the contemporaneous documents. This is not a case where I can simply prefer the witness evidence of one side to that of the other, and I make my findings of fact by assessing their oral evidence where it conflicted by reference to the contemporaneous correspondence and my assessment of the likely probabilities. Mr Stephens was able to add little if anything to the key disputed issues and Mr Benson, whose evidence was really limited to one disputed conversation, came across to me as credible on that particular point.

9. I will address the issues in the order set out in paragraphs 2 and 3 above and I will begin my making my factual findings on the contract issue by reference to the relevant events in broadly chronological order.

1. THE CONTRACT ISSUE

1.1 Chronology of relevant events

10. On 3 September 2010 the defendant was appointed as main contractor by its housing association employer for the project in question. It was a major project with a contract value of some £14.3 million. The project commencement date was 1 October 2010 and the contract completion date was 24 February 2012, a contract period of 73 weeks. The main contract conditions were based on the JCT design and build form of contract, 2005 edition, with bespoke amendments. The defendant identified and referred to this contract as contract number CD/L203.

11. It appears that the claimant was the employer’s preferred window and door supplier and installer and in August 2010 the defendant invited it to provide a tender. The claimant provided its first tender in August 2010, followed by two revised tenders in January 2011. The third tender was for some £2.4 million and, as with the others, was said to be subject to the claimant's standard terms and conditions. Although the claimant's case as presented in the adjudication was that the defendant had accepted this tender by its order 24, that was not the way in which the case was advanced in the amended Particulars of Claim or in the witness evidence, and in cross examination Mr Mellor accepted, realistically in the light of the evidence, that the claimant’s tender had not been accepted by the defendant in accordance with its terms.

12. Through February 2011 there were continuing discussions between the parties in relation to the tender and the proposed subcontract. It appears that those discussions involved, primarily, Mr Taylor and Mr Mellor on the claimant's side and Mr Bekker and his subordinate, Mr Madley, on the defendant's side. Mr Taylor accepts that in the course of those discussions he was made aware by Mr Bekker that he had no authority to agree non-standard payment terms without prior authorisation from the board of directors, obtained through those to whom he reported, namely Mr Stephens and Mr Benson.

Order 21

13. On 4 March 2011 the defendant signed and sent to the claimant its written formal “order for subcontract works” for the supply and installation of window and door units at a pilot property, 33 Wildwood. It is common ground that it was normal practice on a project like this for a prospective subcontractor such as the claimant to be asked to undertake works to a pilot property so that the defendant, the employer and the employer's agent could assess the standard of its products and services before deciding whether or not to place a subcontract. Nonetheless, and notwithstanding its modest value of some £2,500, the order was properly drawn up in similar form to order 24 which followed it, to which I shall refer in more detail below. It was identified as "order number CD/L203/O21” and, as is clear from the schedule of the subcontract orders produced by the defendant, the defendant's practice was to issue subcontract orders against the main contract in sequential numbered form.

14. Order 21 required the work to commence on 7 March 2011 and to be completed by 31 March 2011, and it is common ground that on receipt the claimant raised no objection to it and commenced work in accordance with its terms.

Discussions leading up to order 24

15. On 10 March 2011 there was a pre-order meeting, held by telephone and involving Mr Taylor and Mr Bekker, at which various matters relating to the proposed subcontract were discussed. On the following day Mr Bekker produced order 24, although as I shall explain it was not signed off or sent out until 21 March 2011. He accepted in evidence that at this point he felt that the stage had been reached where the defendant could issue a formal subcontract order, even though it is apparent that complete agreement had not been reached on all issues. The absence of agreement was made quite clear in Mr Taylor's e-mail to Mr Bekker of 15 March 2011, referring to the telephone meeting and identifying a number of matters as requiring resolution. In particular, as relevant to this case, it identified the following matters:

(1) The next stage, once the pilot had been satisfactorily completed, was for the claimant to be instructed to survey all of the relevant properties, and the timescale and cost of that process needed to be agreed.

(2) The claimant was awaiting receipt of a detailed programme from the defendant to assess its feasibility, in circumstances where both parties understood that the subcontract works would need to be completed to a revised expedited programme. Furthermore, and connected to this, the claimant was stating that it would not be prepared to accept any responsibility for liquidated damages for delay in such circumstances.

(3) The claimant's position was that the expedited programme would also have a significant impact on its cash flow, in that it would require the claimant to produce, supply and install a large number of units in a short period of time, so that it would not be prepared to accept that the defendants standard subcontract payment terms, which were in short monthly valuations to be submitted 14 days in advance of a payment due date, with payment being made 45 days after that payment due date. Instead, what the claimant was seeking was a separate payment arrangement for goods, to be invoiced weekly on delivery to site and to be paid within 14 days of invoice, whereas installation costs would be submitted on a 14 day valuation basis and paid within 21 days of valuation.

16. These issues were further discussed at another meeting between Mr Taylor and Mr Bekker on 17 March 2011 when, as Mr Bekker accepted, Mr Taylor reiterated the points he had made in his earlier e-mail. Furthermore, on 18 March 2011 Mr Taylor e-mailed Mr Bekker a payment analysis showing the effect on the claimant’s cashflow of the defendant’s standard payment terms. Nonetheless, Mr Bekker says that following the meeting he concluded that an order for the remainder of the window works could be issued [pars 16 and 17 WS1]. By reference to his oral evidence and what happened subsequently what I conclude he meant by this was that at the time he believed that the outstanding issues could be resolved so that there was no reason to delay issuing the order in circumstances where time was pressing.

17. It was Mr Taylor’s evidence orally that on either 17 or 18 March 2011 he also had a telephone conversation with Mr Benson who returned his call, Mr Taylor having left a voicemail message asking for his help in relation to agreeing revised payment terms. He said that Mr Benson suggested that Mr Taylor should send in details in the shape of a payment plan to justify the revised terms which he (Mr Benson) would consider with his team and, if appropriate, help by agreeing revised payment terms. Mr Taylor said that on 25 March 2011 this was done, by Mr Mellor sending an e-mail to Mr Bekker enclosing the claimant's proposed delivery and payment programme. This evidence is particularly significant on the claimant's case because it provides the backdrop to the claimant's contention that subsequently, in a further telephone conversation on 21 April 2011 between Mr Taylor and Mr Bekker, the latter confirmed that the defendant agreed the claimant's revised payment proposals.

18. However Mr Benson denied that any such conversation had taken place at this time. His evidence was that he would not have become involved in dealings at this level with a proposed subcontractor, and would have delegated the task of responding to someone at the appropriate level, such as Mr Bekker. His evidence was also that he would not have asked for a "payment plan", nor would he have said that he might be able to "help" the claimant. His evidence was that revised payment terms could only be agreed at board level, involving the finance director, so that this was not a decision which he would have said that he could sit down with his team to take.

19. On this issue I prefer Mr Benson's evidence as more credible and consistent with the contemporaneous documentation. In particular I rely on the following points:

(a) There were marked discrepancies between Mr Taylor's oral evidence and his evidence in his witness statements. Thus in his witness statements he said that the conversation took place "between 24 March and 21 April" [par 3 WS2] and that in the conversation agreement was reached as to the payment terms for the supply of materials subject only to confirmation [par 22 WS1 and par 5 WS2], in contrast to his oral evidence that the conversation took place on 17 or 18 March, and involved no agreement other than a willingness to consider a case based on a payment plan. There was no obvious explanation for the significant change in evidence.

(b) The subsequent e-mails of 18 and 25 March do not refer to this conversation. Instead, they indicate that the conversations had taken place between Mr Taylor and Mr Mellor on the one hand and Mr Bekker on the other hand, and if there had been a significant conversation involving Mr Benson it is likely, I find, that this would have been mentioned in those subsequent e-mails.

(c) If, as the claimant says, the conversation had ended with Mr Benson making an important concession on payment terms, I would have expected there to have been some subsequent reference to this, either in the subsequent e-mails or at some other point, but there is none.

(d) If, as the claimant says, Mr Benson had agreed to look at the payment plan once submitted, discuss it with his team, and revert to the claimant with a decision, I would have expected the claimant to have chased any response and a decision in the four weeks which elapsed between the payment plan being sent on 25 March and the alleged confirmation being provided by Mr Bekker on 21 April, but there is none.

20. Whilst I have no doubt that Mr Bekker would have told Mr Taylor at around this time that he would refer any request for revised payment terms with supporting justification upwards to the appropriate management level for consideration, I am satisfied on the balance of probabilities that there was no conversation with Mr Benson at around this time in this regard, and Mr Taylor is mistaken.

Order 24

21. On 21 March 2011 order 24 was signed off by the defendant's managing director and sent to the claimant, who received it on 24 March. Since it is on any view an important document, I shall refer to its terms at this stage.

22. Like order 21, it was headed "order for subcontract works" and the order number was stated to be “CD/L203/024”. The order value was stated to be some £1.76 million, the commencement date was stated to be 28 March 2011 and the completion date 6 September 2011, giving a contract duration of some 23 weeks. It stated "all works to be carried out in accordance with all of the Listed Documents and Conditions and the attached Mulalley subcontract general terms and conditions". The listed documents were specified as including the following:

(i) “sub contract order acknowledgement (must be returned)";

(ii) “subcontract sum analysis”

(iii) "schedule of valuation dates";

(iv) "sub contract pre-order agenda and meeting notes dated 10 March 2011".

23. The attached sub contract general terms and conditions extended over five pages. As relevant to the contract issue, they included the following:

Clause 2

"It is a condition precedent to the payment of any monies to the subcontractor that it shall first have returned to the main contractor the ... acknowledgement slip hereto duly completed to the main contractor's satisfaction … as a matter of practice the slip is required to be returned within seven days of the date of this order."

Clause 3.5

"Whether the acknowledgement slip is returned or not, the commencement of the subcontract works either on or off site is deemed to be acceptance of the terms of the order including such variations issued pursuant to clause 6. This clause does not vitiate the obligations of the subcontractor or have any other effect on the requirements or operation of clause 2 of these conditions."

Clause 6.1

"At any time the main contractor may require the subcontractor to undertake reasonable alterations or additions ("variations") to the subcontractor works. Such variations shall not vitiate this agreement. Variations shall not be undertaken however unless written authority/instruction is given by the main contractor …”

Clause 9

This clause set out, in some detail, the provisions for payment to the subcontractor, to which I have already referred in summary and need not set out in full here.

Also attached to the order as a listed document was a schedule of valuation dates, identifying the dates when the subcontractor application was required, the anticipated valuation date, and the anticipated payment due date.

Clause 13

Cause 13.1 provided that "if any dispute shall arise between the parties concerning this order and the subcontract works it shall be dealt with in accordance with the following provisions."

Clauses 13.2 to 13.10 set out the relevant adjudication procedure, including provision for the adjudicator to be nominated by the president or vice-president of RICS, and also provisions whereby the referring party should be liable for both parties’ costs and expenses and for the adjudicator’s fees and expenses.

24. The subcontract order acknowledgement stated that it should be completed and returned to the defendant's accounts department. It required the claimant to provide its insurance and CIS verification details and, at the bottom, was a section shaded in black, which read as follows:

"SUBCONTRACTOR MUST COMPLETE THIS SECTION

Executed as a deed by … Director/company secretary …

Witnessed by: … Date attested: …..”

25. The subcontract sum analysis was a detailed document, extending over 23 pages, which specified the properties to be worked on, the doors and windows to be supplied to each, and the individual and global price. It is worth noting that:

(i) On p.8 it stated “28-45 Wildwood Close (less costs for 33 Wildwood – PILOT)”.

The effect of that, in my judgment, is that the works to 33 Wildwood were intended to fall within order 24, albeit that the cost of those particular works should be deducted from the final contract price on the basis that they were already provided for by order 21.

(ii) On the last page it stated that design/survey is "incl".

The effect of that, in my judgment, is that if the claimant had accepted order 24 without revision it would not have been entitled to any extra payment for surveys – see also the meeting notes to which I next refer.

26. Finally, the subcontractor pre-order agenda and meeting notes extended over five pages. They purported to be a record of what was discussed at the meeting of 10 March 2011, although it is clear that they were in a standard format and thus, it seems to me, were not necessarily intended to be an accurate record of what was actually discussed, as opposed to comprising part of the terms proposed by the defendant in its order. In particular, as relevant to this case, they provided that:

(i) The scope of the subcontract works was to include surveys;

(ii) Liquidated damages weare stated to be "£6,100 per week or part thereof";

(iii) Payment terms were stated to be "as Mulalley standard order for subcontract works, 30 days from PDD".

27. So far as (iii) above is concerned, I should note that it was Mr Benson's evidence that even this modest revision to the payment terms, bringing forward the payment date from 45 days to 30 days, would have needed to have been specifically authorised by the finance director.

28. At trial an issue arose as to how, on an objective reading, order 24 was to be accepted. This is relevant because it is common ground that in fact no subcontract order acknowledgement for order 24 was ever signed or returned by the defendant, whereas it was for order 21 and the subsequent orders (although the claimant says, and I accept this as factually true although legally irrelevant, its motivation for doing so was to ensure that it received payment). Although the order itself does state that the subcontract order acknowledgement “must be returned”, there is no specific provision to say that this is the prescribed method of acceptance of the order. Instead, as I have said, although clause 2 provides that its return is required within 7 days “as a matter of practice”, it is only said to be a pre-condition to “payment”. Moreover, clause 3.5 makes it clear that commencement of the sub-contract works on or off site is deemed to be an acceptance “whether or not the acknowledgement slip is returned”.

29. It follows, in my judgment, that completion and return of the subcontract order acknowledgement was not a necessary condition precedent to the acceptance of order 24. As a matter of law it could have been accepted either expressly, in writing or orally, or by conduct, as specified by clause 3.5.

Post order 24

30. The claimant’s immediate response was not to agree order 24 in accordance with its terms. Thus on 24 March 2011 Mr Mellor on behalf of Mr Taylor e-mailed Mr Bekker to say that having today received order 24 “there are a number of items you listed that will need amendment and agreement prior to any acceptance”. These included the four points already mentioned on 15 March 2011, namely revised payment terms, programme, liquidated damages and survey costs. A total of 10 issues were raised, some of which even excluding those referred to above appeared to have actual or potential cost implications, namely scaffolding access for surveys, extra site supervision and materials handling arrangements. It is however also apparent that the claimant was actively seeking to reach agreement, as illustrated by the fact that it was willing to give ground on the payment terms for installation whilst maintaining its position in relation to materials payment terms, and was willing to discuss liquidated damages on receipt of a revised programme.

31. In his witness statements Mr Bekker says that at this point he realised that order 24 was not acceptable to the claimant and that the defendant would have to proceed on a different basis, beginning with issuing a separate order for the survey works to avoid delay. However in cross-examination, whilst maintaining his view that for this reason order 24 was unlikely to proceed, he also accepted that at that time he believed that the defendant’s board would ultimately agree to the claimant’s requested payment terms. Although strictly speaking irrelevant anyway, I do not accept his evidence that at this point he thought that order 24 was not acceptable and would not proceed. Although he must have realised by this time that order 24 was unlikely to be accepted as drafted, it must have been clear from the e-mail that the claimant was willing to compromise to achieve agreement, and as he said he had no reason to think that his superiors were not willing to give ground on the significant issue of payment terms.

32. On 29 March 2011 the defendant sent a more detailed programme to the claimant. The claimant’s evidence, which I accept, is that this gave sufficient detail in terms of the delivery requirements to particular properties for it to be satisfied that it could meet the programme and hence accept the provision for liquidated damages. However, there is no indication in the claimant’s evidence or in the contemporaneous correspondence that it notified this position to the defendant at this point.

33. On 4 April 2011 Mr Bekker received the first e-mail from Mr Mark Winter, an independent QS engaged by the claimant on a consultancy basis to assist with a number of projects including this one. He introduced himself and identified a number of matters which he understood required resolution. Most seem to be installation-related, and there is no reference to the more significant matters raised in previous correspondence. However on 8 April 2011 Mr Winter e-mailed Mr Bekker again, saying "I think we both know there are a number of items to finally resolve before the full works contracts can be issued. To that end may we suggest that a works order is produced by yourself just for the first survey". Items specifically mentioned are the programme, materials handling and extra design costs. He wrote again to similar effect on 11 April 2011, identifying 9 items which he said “needed to be finalised prior to a whole works order”.

34. I then come to 21 April 2011 which, as I have said, is the date when Mr Taylor says he agreed with Mr Bekker the outstanding issues in relation to payment terms, the cost of the surveys, the programme and liquidated damages. When asked, he said that this conversation took place by telephone towards the end of the working day.

35. Mr Bekker's evidence in his second witness statement was to deny that this conversation took place [par 14], although he did accept that he did discuss revised payment terms for materials with Mr Taylor "in around May 2011", but on the basis that this would be a decision for Mr Benson and that it related to the orders as subsequently placed [par 15]. However in cross examination his evidence was rather less emphatic, and it seemed to me that his evidence was more to the effect that he could not recall having such a discussion, rather than that he was certain that he had not had such a discussion.

36. He was pressed on the fact that in an e-mail sent by Mr Winter later that day, into which he was copied, a complaint was made by Mr Winter that the payment terms of the defendant's order for the surveys (to which I shall refer shortly) did not accord with the agreement made between Mr Taylor and Mr Bekker. I do not however consider this point material, because it seems to me that this is a reference to the payment terms for the surveys rather than to the payment terms for the supply of materials.

37. However more significantly, in my judgment, was Mr Bekker's own e-mail of 4 May 2011, referring to a continuing disagreement about the terms of the order for the surveys, where he said this:

“To note, this only applies to the works order for the surveys as the terms for the main works will vary from this, all as previously agreed with your Geoff Taylor.”

And when asked about this in cross-examination, he said that he simply could not recall whether or not this was a reference to an agreement reached to that effect on 21 April 2011. In my judgment it does very clearly indicate, read in context, that the payment terms which he was maintaining should apply for the surveys order were different to those which should apply to the main works, with the latter being more favourable to the claimant. Indeed this is consistent, in my judgment, with his earlier evidence to the effect that he believed that his superiors would agree to the claimant's revised payment terms. It is also consistent with the fact that there is no evidence of any subsequent mention of the revised payment terms being an outstanding issue. Finally, it is also consistent with the undisputed fact that when the orders for the substantial main works came to be placed later in 2011 they did include provision for payment to be made 14 days from the payment due date.

38. In short, it seems to me, by late April 2011 the defendant had decided that it would be willing to agree revised 14 day payment terms in relation to materials, and that Mr Bekker had notified Mr Taylor to that effect at some point in late April 2011. On the balance of probabilities I am satisfied that this conversation did take place on 21 April 2011, which is when the claimant was clearly exerting pressure on the defendant to make a commitment. I am satisfied that by this point those within the defendant responsible for taking this decision had agreed in principle to accept 14 day payment terms for materials and therefore that Mr Bekker felt able to confirm this to Mr Taylor.

39. However, this notwithstanding, it is also abundantly clear in my judgment that the claimant's contemporaneously communicated view was not that this meant that all outstanding issues had by then been resolved. Thus in Mr Winter’s e-mail to Mr Bekker of 21 April 2011 he noted that “an order is yet to be agreed for the main contract”, and that “this needs to be resolved as a matter of urgency". 5 outstanding items were mentioned, including the programme and materials handling. Furthermore, what Mr Winter was saying was echoed by Mr Mellor in his e-mail of 3 May 2011, where he said: "May I remind everybody that points are still to be agreed on both orders (survey and manufacture) and manufacture will not commence until these have been addressed and resolved".

40. In cross-examination Mr Mellor sought to explain this, and other, references to "orders" as being references to the claimant's own internal order acknowledgement procedure, under which the claimant required the defendant to sign off the order acknowledgement sheet produced by the claimant before manufacture started. I have to say that I found his explanation to this effect thoroughly unconvincing. So far as this e-mail is concerned, the fact that the reference to orders applies to the surveys as well as to manufacture demonstrates conclusively, in my judgment, that it is a reference to an order from the defendant. Precisely the same point may be made by reference to Mr Winter’s e-mail to Mr Bekker of the following day, 4 May 2011, where again he is referring both to the order for the surveys and the order as "yet to be agreed for the main contract", obviously both in the context of an order from the defendant, not an internal order acknowledgement from the claimant. I also refer to Mr Mellor's e-mail to Mr Bekker of 16 May 2011, where he says:

"Further to your e-mail last week please can you confirm our understanding of the areas and the assignment of colour. There are also other items that also require Mulalley's attention and agreement so that we can progress with the order elements. This is crucial if we are to make any headway with the manufacture of the products for Leybridge Maisonettes and Merridale Tower, all of which cannot be confirmed until we have agreed the order for these areas."

Mr Mellor's explanation is also clearly inconsistent in my judgment with the content of his later e-mail dated 8 July 2011, where he refers both to the need for an official order and also for the completion and return of the acceptance sheet, which is clearly in my judgment a reference to the claimant's internal order acknowledgement form.

41. The other point about these e-mails is that they illustrate, in my judgment, that the claimant plainly still considered that there were substantial issues yet to be resolved before the order for the principal subcontract works could be agreed. Thus even as at 16 May 2011 particular items which are mentioned as still outstanding relate to the design of certain elements, the pricing of certain elements, programme, materials handling, and extent of the works in relation to certain doors and also in relation to Leybridge Towers. These are all substantial items with cost implications. Whilst I appreciate that by this stage it was clear that the claimant and the defendant were in detailed discussions about the proposed subcontract works, so that further points were arising as discussions proceeded, nonetheless the claimant was, as I have said, still maintaining its position that there was still no agreed order in relation to the main works order.

42. If the claimant had genuinely considered, post 21 April 2011, that a binding contract had been concluded on the terms of order 24 as revised in subsequent correspondence and discussions by reference to those matters which were regarded as essential, with the remaining items simply being matters of detail to be resolved in the course of further discussions, then I have no doubt that it would have written to the defendant to say so. That is particularly so when I consider Mr Mellor's evidence in his witness statement that by 1 May 2011 he had commenced what he describes as the "extremely taxing and time consuming" work of collating the specification and preparing the full window designs, which he would not have done “unless a contract existed and was in place” [par 50 WS1]. If that really had been his contemporaneous understanding and position, I have no doubt that he would have written to that effect at the time, in contrast to the way in which he actually expressed himself.

43. On the balance of probabilities I find that what happened was that on or around 21 April 2011 there was a conversation or conversations between Mr Taylor and Mr Bekker in which the latter confirmed to the former that he had been authorised to agree 14 day payment terms for the materials, and whereby the former confirmed to the latter that the claimant was happy with the programme. I am not however satisfied that specific agreement was reached as to the precise payment terms agreed, in particular as to whether payment for materials would be made 14 days from delivery, or from submission or receipt of valuation or invoice, and in either case with what frequency the claimant was entitled to apply for payment, whether immediately on every delivery, or on a global weekly, fortnightly or monthly basis. Payment terms for installation was, I am satisfied, not specifically agreed either. Nor am I satisfied that Mr Taylor stated in terms that the claimant would accept the liquidated damages clause, nor that there was a conversation in which it was agreed that everything relating to order 24 was now agreed and that the parties could move forward on that express basis. Instead, I am satisfied that both parties viewed this confirmation as sufficient in principle to enable both parties to proceed onto the next stages, but that their contemporaneously expressed position was that further work needed to be done before everything was agreed sufficient to allow a formal contract to be concluded. I am satisfied that Mr Bekker would have taken the view by this stage that the better course so far as he was concerned was to issue an order for the survey works, to allow progress to be made, in the expectation that in due course once agreement was reached he could then issue a further order for the main works to include a further or a revised pre-order agenda and meeting notes which would contain the detail of what would by then have been agreed. I am also satisfied that the claimant was also willing to proceed on this basis which is, after all, what it had already suggested as the way forwards.

Order 28

44. As I have said, the defendant sent an order for the survey works to the claimant on 21 April 2011, numbered CD/L203/28. It is in precisely the same format as the previous two orders. The order value was stated to be £11,440, the commencement date was 26 April 2011 and the completion date 7 June 2011. It contained the same reference to listed documents and conditions and attached the same subcontract general terms and conditions. The pre-order agenda and meeting notes were also dated 10 March 2011, but they bore the order 28 reference and there were differences between this document and that attached to order 24, specifically the description of the scope of the works and the fact that under “liquidated damages” it stated "N/A for survey/measurement element".

45. In his witness statement Mr Mellor asserted [par 55WS1] that this was "a works order issued under the main framework contract CD/L203/24 which was already issued by that time". However that, in my judgment, is mere assertion not borne out by an examination of the facts, including the terms of the respective orders. Thus order 24 is not, and does not purport to be, a main framework contract, in the sense that it makes provision for the defendant to issue a series of separate works orders whose terms are all governed by the terms of the main framework contract. Furthermore, order 28 is clearly intended to be a separate freestanding contract, complete in itself. It does not state that it is, nor are its terms consistent with its being, a mere instruction to undertake a specified element of works already the subject of an existing overarching main framework contract.

46. Moreover, the claimant's contemporaneous response to it, which involved challenging its terms, are not consistent with the claimant’s position that it was simply a works order issued under an existing concluded contract. If that had been the case, the claimant would have needed simply to say so. It did not.

47. On 20 May 2011 the claimant submitted its first valuation in relation to the survey work. Although the claimant sought to derive comfort from the fact that the valuation identified the contract as being "Leybridge and Newstead Estates", without referring to order 28, I do not myself think that this assists one way or another. More significant, in my judgment, is that on 23 May 2011 Mr Bekker e-mailed Mr Mellor, stating that the defendant required the return of the completed subcontract acknowledgement slip to enable payment to be processed, and that the claimant duly executed and returned the acknowledgement slip, specifically referring to order 28, on 14 June 2011. In my judgment that demonstrates, on any objective analysis, that the claimant was seeking payment for survey works on the basis that they had been undertaken under order 28, as opposed to under order 24 or any other order for that matter. Moreover, when the defendant sent its payment notice to the claimant on 19 July 2011, it made clear reference to order 28.

Order 47

48. It is common ground that on 27 July 2011 the claimant signed and sent to the claimant a further order for subcontract works, numbered CD/L203/47, relating to further pilot work to 3 specified properties. It was in similar terms to the previous orders. It was not in financial terms a substantial order. It is apparent that by this stage both parties were working on the assumption that the claimant would be appointed to undertake the main works, but that for whatever reason (and there is no obvious explanation in the correspondence or in the evidence) the impetus to agree a formal contract for the main works appears to have disappeared. Nonetheless the fact that the defendant produced and sent, and the claimant received and implemented without objection, a further separate order is clear evidence in my judgment of a contemporaneous shared view that no contract for the main works had yet been concluded. Indeed given the context in which the first pilot order was sent it is clear in my judgment that the purpose of requesting further pilot works to be undertaken was that the defendant (and no doubt the employer and the employer’s agent) was still evaluating the quality of the claimant’s works before committing itself.

49. The claimant’s acceptance of this order can be demonstrated from the fact that the claimant undertook the works the subject of the order in accordance with the stated timetable, 1 August to 12 September 2011, and that in due course (albeit not until February 2012) it signed and returned the attached order acknowledgement slip – as indeed it did with all of the remaining orders.

Order 51

50. This order, signed and sent on 22 August 2011, is significant because it is a more substantial order, for the supply and installation of windows and doors to properties at 1 - 42 Merridale Tower, to the tune of some £164,000. It is important to note that this is work which was included within the scope of works in order 24. It also includes in the meeting minutes a provision for payment terms to be "14 days from PDD". When Mr Mellor in his e-mail of 31 August 2011 challenged this term on the basis that it should be 14 days from delivery, he referred not to an agreement to that effect made in April 2011, but to an agreement made on 17 August 2011.

51. Furthermore, in the whole of that lengthy e-mail he makes no reference to this being simply a works order issued under order 24 as a main framework contract. Indeed, he seeks to challenge the provision for liquidated damages on the basis that no revised programme of works has been supplied, even though on the claimant's case it had agreed liquidated damages in relation to order 24 on the basis that it was satisfied with the revised works programme then provided. Thus at the time he was not contending that order 24 governed the relationship between the parties, contrary to his evidence before me.

52. Finally, as the defendant draws to my attention, it contains an addendum to the standard terms and conditions of sub-contract which revises the adjudication terms in relation to the referring party’s liability for the costs of the adjudication.

53. All of this is consistent, in my judgment, with the parties regarding order 24 as having no contractual effect.

54. In cross-examination Miss Cheng referred Mr Stephens and Mr Bekker to the defendant’s list of sub-contract orders placed on this project, in numerical order, which included order 24 which was only marked as “ cancelled” at the point when order 77 (to which I refer below) was issued in November 2011. She suggested to them that this showed that the defendant must have regarded order 24 as “live” through summer 2011. However there was no suggestion or evidence that this was anything other than an internal list of sub-contract orders, carrying any particular significance either externally or internally, so that I place no weight on this piece of evidence. All that it shows in my judgment is that by November 2011 someone within the defendant organisation realised that once order 77 was issued order 24 had, insofar as it had ever had any effect at all, been completely superseded, so that it was cancelled for internal administrative reasons.

Order 62

55. This order is similar to Order 51, in that it is another relatively substantial order, issued in September 2011, to the tune of some £150,000, for further works within the scope of order 24. It also contained the same revised 14 days payment terms and the same revised adjudication provisions.

Order 77

56. This order is issued 15 November 2011. The version I have seen is not signed, although there is no dispute about its receipt. It is for the remainder of the works within the scope of order 24. As well as containing the same payment terms it also contains a revised version of the standard terms and conditions of sub-contract, which include further revised terms in relation to adjudication, most significantly introducing into the contract the statutory requirements of the Local Democracy, Economic Development and Construction Act 2009 in relation to the adjudicator’s power to correct slips and to allocate his own fees and expenses.

The claimant’s payment claims

57. On 4 November 2011 the claimant produced its first valuation claim for the works under order 51, claiming payment for materials delivered to site to be made 14 days from valuation date. It appears that the claimant was dissatisfied with the time taken for payment, and in February 2012 Mr Benson did become involved in discussions regarding payment which resulted in an agreed revised procedure. As Miss Chambers submitted, it is of note that at that point the defendant ensured that the agreed revised payment procedure was confirmed in a contemporaneous e-mail, which tends to support the defendant’s case that no final agreed revised payment procedure was achieved in April – May 2011.

1.2 The respective cases

58. The claimant’s case is as follows:

(1) As at 24 March 2011, when it responded to order 24 setting out the matters which required agreement before it could accept it, only three were, or were considered by the parties to be, essential to contract formation, namely: (i) payment terms; (ii) survey costs; (iii) programme including liquidated damages.

(2) All such matters were agreed orally on or around 21 April 2011, so that a concluded agreement was reached by that stage.

(3) Alternatively, order 24 was accepted by conduct by undertaking surveys, by producing drawings and by commencing off-site works on or around 1 May 2011.

(4) It is irrelevant that the sub-contract order acknowledgement was never signed and returned, because the contract did not on proper analysis require it to be signed or returned before a contract could come into existence.

(5) The further orders are either simply works orders placed under the overarching contract formed by order 24, or variations to order 24, as opposed to separate contracts in their own right.

59. The defendant’s case is that none of these items were agreed, and order 24 was never accepted by the claimant, which is why it issued the separate sub-contract orders.

60. The defendant also argues that:

(1) Even if the claimant was right and that order 24 was concluded on 21 April 2011, that does not affect the fact that order 21 was already in existence and was performed, so that even on that basis claims under two contracts were referred to adjudication, so that there was more than one dispute referred and the adjudicator had no jurisdiction.

(2) Even if the claimant was right and order 24 was accepted by conduct on or around 1 May 2011, that does not affect the fact that order 28 was already in existence by that time and was performed, so that even on that basis claims under three contracts were referred to adjudication, with the same consequence in terms of jurisdiction.

1.3. Relevant legal principles in relation to contract formation

61. The relevant legal principles are well-established. Miss Cheng referred me in her skeleton opening to the decision of the Supreme Court in RTS v Molkerei Alois [2010] UKHL 14 where Lord Clarke, giving the decision of the Court, set out the general principles at paragraphs 45 – 56.

62. At paragraph 45 he said this:

“45 The general principles are not in doubt. Whether there is a binding contract between the parties and, if so, upon what terms depends upon what they have agreed. It depends not upon their subjective state of mind, but upon a consideration of what was communicated between them by words or conduct, and whether that leads objectively to a conclusion that they intended to create legal relations and had agreed upon all the terms which they regarded or the law requires as essential for the formation of legally binding relations. Even if certain terms of economic or other significance to the parties have not been finalised, an objective appraisal of their words and conduct may lead to the conclusion that they did not intend agreement of such terms to be a precondition to a concluded and legally binding agreement.”

63. At paragraph 49 he set out the well-known summary of the relevant principles as summarised in the judgment of Lloyd LJ (with whom O'Connor LJ and Stocker LJ agreed)in the Court of Appeal in Pagnan v Feed Products [1987] 2 Lloyds Rep 601, at p619, to which Miss Chambers also referred me:

“(1) In order to determine whether a contract has been concluded in the course of correspondence, one must first look to the correspondence as a whole … (2) Even if the parties have reached agreement on all the terms of the proposed contract, nevertheless they may intend that the contract shall not become binding until some further condition has been fulfilled. That is the ordinary ‘subject to contract’ case. (3) Alternatively, they may intend that the contract shall not become binding until some further term or terms have been agreed … (4) Conversely, the parties may intend to be bound forthwith even though there are further terms still to be agreed or some further formality to be fulfilled … (5) If the parties fail to reach agreement on such further terms, the existing contract is not invalidated unless the failure to reach agreement on such further terms renders the contract as a whole unworkable or void for uncertainty. (6) It is sometimes said that the parties must agree on the essential terms and it is only matters of detail which can be left over. This may be misleading, since the word ‘essential’ in that context is ambiguous. If by ‘essential’ one means a term without which the contract cannot be enforced then the statement is true: the law cannot enforce an incomplete contract. If by ‘essential’ one means a term which the parties have agreed to be essential for the formation of a binding contract, then the statement is tautologous. If by ‘essential’ one means only a term which the court regards as important as opposed to a term which the court regards as less important or a matter of detail, the statement is untrue. It is for the parties to decide whether they wish to be bound and if so, by what terms, whether important or unimportant. It is the parties who are, in the memorable phrase coined by the judge [at p 611] ‘the masters of their contractual fate’. Of course the more important the term is the less likely it is that the parties will have left it for future decision. But there is no legal obstacle which stands in the way of the parties agreeing to be bound now while deferring important matters to be agreed later. It happens every day when parties enter into so-called ‘heads of agreement’.”

1.4 Discussion and decision

64. In my view this is a case where Lloyd LJ’s sixth proposition and commentary upon it is particularly relevant. Although Miss Cheng has submitted that only the issues relating to payment terms, survey costs and liquidated damages were terms which were, or which were considered to be, essential to contract formation, that submission ignores the fact that at the time the claimant was expressing itself in terms that these were not the only essential issues, and that there were a number of others which it also considered had to be resolved before it could agree or accept order 24. At the time the defendant did not suggest that this was wrong, and that so long as agreement could be reached on payment terms, survey costs and liquidated damages it would regard the contract as concluded. Accordingly, it is not now open to the court, in my view, to accept the claimant’s invitation to conclude, retrospectively, that in fact only some of those issues were, objectively considered, essential to contract formation. Even if the court ought to embark on that process it is clear in my judgment that a number of those other issues were – objectively speaking –important from a contractual perspective. Thus the continuing issue about the programme was obviously important, as it always had been, and the continuing issue about materials handling was also important, not least because it was not an academic debate but a real debate about who should have to provide operatives and equipment for this purpose, and at whose cost. Furthermore the issues in relation to design, pricing and scope were again all obviously important. Still further, despite what the claimant now says, I am satisfied that complete agreement in relation to payment terms was never reached, as evidenced by the terms of the subsequent orders and the disagreements in that regard, and that the claimant never made it clear to the defendant that it was accepting liquidated damages, as the subsequent dispute in relation to order 51 demonstrated. It is also apparent that there continued to be disagreement about the precise terms applicable to the survey costs, which was only resolved at the point where the claimant returned the signed order acknowledgement for order 28.

65. The fundamental problem which faces the claimant is that this is not a case where the court can conclude that since on any view the contract works were begun and performed to a significant extent there must have come a point where the parties can be regarded as having agreed that what they regarded as all of the essential issues had been settled, leaving non-essential issues over for further discussion and agreement if possible. That is because by the time the windows and doors came to be supplied or installed the defendant had already sent further orders in respect of those goods, amounting on their face to separate contracts complete in themselves, and containing in some respects materially different terms, which the claimant appeared to accept by supplying and installing the windows and doors, by signing and returning the order acknowledgements and by making claims for payments by reference to those orders. Thus there is no basis in my judgment for concluding that the claimant’s conduct can only be referable to an acceptance of an order which it had said at the time could not be accepted until a number of issues had been resolved, when those issues had never all been resolved. As I have said, it is simply not the case that these further orders can be considered to be either sub-orders placed under and by reference to an overarching framework contract or variations placed under and by reference to order 24.

66. Further, it does not avail the claimant to rely on clause 3.5 of the defendant’s standard terms, because on any objective analysis a claimant who subsequently claims to have accepted an order by conduct in commencing the sub-contract works off site cannot contend that he was accepting the order by that means whilst at the very same time communicating to the defendant his refusal to accept the order until further issues were resolved. On the facts of this case agreement was never in fact reached on those issues, and there is no basis for concluding that the claimant’s conduct in starting works off site and in then supplying and installing the windows and doors amounted, objectively, to a withdrawal of its previously stated position that order 24 would not be accepted until those issues were agreed.

67. In those circumstances I do not strictly speaking need to decide Miss Chambers’ fallback submission in relation to orders 21 and/or 28. All I need to say is that if I had found that order 24 had been accepted by the claimant, then I would have found that in the particular circumstances of this case, where both the pilot work and the survey works were expressly encompassed within order 24, that order 21 was subsumed into order 24 by necessary inference once order 24 was accepted, and that order 28 ought properly to be regarded as a variation order in relation to order 24. Furthermore I would have accepted Miss Cheng’s submission in paragraph 13 of her opening skeleton argument that, since the defendant’s position in the adjudication was that the claims advanced in the adjudication only related to substantive orders 51, 62 and 77 and no basis has been advanced before me for contending that on proper analysis they also included claims under orders 21 and 28 (which seems very doubtful anyway given their respective subject matter), there is no basis for the defendant to resist enforcement by contending that the claims included claims made under those orders.

68. Accordingly, and subject to the substantive jurisdiction issue, since I conclude that order 24 was not accepted by the claimant and that it undertook the substantive works under and by reference to the contracts formed by its acceptance of order numbers 51, 62 and 77, the adjudicator had no jurisdiction to decide disputes arising under three separate contracts, each with different terms and subject matter, including – in the case of order 77 – differing adjudication procedures, so that the claimant is unable to enforce the adjudicator’s decision. Whilst it may be regarded as a technical objection, devoid of any underlying substantive merit, it appears clear on the current state of the law that a referring party may refer only one dispute to adjudication, so that in the absence of express contractual provision or agreement to the contrary a party is precluded from referring a dispute arising under more than one contract to adjudication. If, as here, a referring party is met by such an objection by the respondent, then even if he can persuade the adjudicator to accept jurisdiction and proceed with the adjudication he nonetheless faces the risk that in any subsequent enforcement proceedings it is open to the respondent to contend that the adjudicator was wrong and, since this is a question of jurisdiction, if the court agrees the decision should not be enforced.

2. THE SUBSTANTIVE JURISDICTION ISSUE

69. Given my decision on the contract issue, it is necessary for me to consider Miss Cheng’s alternative submission, which is that since the adjudicator had substantive jurisdiction to determine which one (or more) of the orders governed the claimant’s works his decision can and should be enforced even if it can be said (as it now can, in the light of the decision I have just reached) that his decision on that point was wrong.

70. In making her submission Miss Cheng relied upon the decision of Akenhead J in the Air Design case to which I have already referred. In particular she referred me to paragraph 22 of his decision in that case, where he said this:

“22. However, there are two further factors which effectively override considerations as to whether or not there were one, two, three or four contracts between the parties which establish that the Adjudicator was acting within his proper jurisdiction:

(a) The substantive decision-making process upon which the Adjudicator had to embark in relation to the disputed claim put before him necessarily involved a consideration of whether there was more than one contract. It was thus within his jurisdiction to decide in effect that there was one contract, albeit one that may have been varied by agreement.

(b) It was thus a part of his jurisdiction to decide whether or not and if so to what extent the Basebuild Contract had been varied by the CPA and BMS Arrangements and indeed whether there were yet further variations ordered to the Basebuild Contract. There may be cases, and this is clearly one, where substance and jurisdiction overlap so that it is within the Adjudicator’s jurisdiction to decide as matters within his or her substantive jurisdiction whether there have been in effect variations to the contract pursuant to which he or she has properly been appointed Adjudicator. It cannot then in those circumstances be a valid challenge to his or her jurisdiction that upon analysis he or she may be wrong as a matter of fact or law in determining that such variations were made to the originating contract as opposed to a series of later legally unconnected contracts.

(c) ...

I have therefore formed the view that the Adjudicator did have jurisdiction to rule on all the matters which he did decide in his Decision. Whether he was right or wrong to find or make the assumption that there was effectively one contract which was varied and whether he was wrong as a matter of fact or law in any other part of his decision is immaterial. Any such errors do not mean that he does not have jurisdiction. Even if I was wrong about that conclusion, then my analysis that effectively the CPA and BMS Arrangements and the Supplementary Agreement were simply variations of the Basebuild Contract would apply.”

71. She submitted that in a case such as the present, where the parties were agreed that either the parties contracted on the terms of order 24 or on the terms of the other 6 orders, and where each order contained a valid adjudication clause containing the same appointment procedure, and substantially the same adjudication provisions, the same analysis applies.

72. Miss Chambers’ submission was that this is a clear question of jurisdiction. She submits that the fact that both parties contended that there was a construction contract (or contracts) in place did not mean that the adjudicator was empowered to decide the contractual issue as a substantive matter. She submits that it is only if it is entirely clear that the claimant’s contentions as to the contract are correct that the adjudicator had jurisdiction. She relies on the decision of the Court of Appeal in Pegram Shopfitters Ltd v Tally Weijl (UK) Ltd [2003] EWCA Civ 1750.

73. In that case the claimant contended that the contract between the parties had been formed on its own standard terms and conditions which contained no adjudication provisions so that the Scheme applied. The defendant contended that the contract between the parties had been formed under and incorporated a JCT Standard Prime Cost Form, with the result that the JCT adjudication procedure would apply, under which there was a specified nomination process and specified adjudication rules, different from those which would apply under the Scheme. The defendant also contended that if the contract had not been formed in that way, then there was no contract at all. The dispute as to which contract terms applied was important not just from the point of view of this jurisdictional dispute but also in order to determine the substantive dispute between the parties: see paragraph 24.

74. The Court of Appeal, May LJ giving the leading judgment, held that both contentions were properly arguable and, hence, that summary judgment should not have been awarded. What is important for present purposes is what he said about the position if on proper analysis the defendant was right about the JCT contract applying. In paragraph 32 he said this:

“The fact that adjudication under the Scheme and adjudication under a JCT Prime Cost Contract would be similar procedures does not overcome the twin difficulties that Mr Morris was appointed under the Scheme, and that a sufficiently secure identification of the contractual terms was intrinsically necessary to the proper performance of his adjudication task.”

75. Thus whilst Miss Chambers accepts that in this case the appointment procedure would be the same whichever order or orders governed, she submits that the adjudication procedures would be different and, accordingly, she submits that this is a question which goes to jurisdiction.

76. She submitted that the decision in Air Design could readily be distinguished on the basis that in that case, both parties were agreed that there was an initial “Basebuild Contract”, which incorporated the terms of the standard form JCT Intermediate Contract, and the central issue was whether three further agreements subsequently entered into between the same parties were separate contracts or variations to the Basebuild Contract. Thus in that case the parties were agreed that the Adjudicator was validly appointed pursuant to the adjudication provisions contained in the Basebuild Contract, which imported the Scheme adjudication provisions. That, she submitted, explained Akenhead J’s conclusion that since the adjudicator clearly had substantive jurisdiction to decide whether or not the second, third and/or fourth agreements were variations or separate contracts in their own right, even if he erred in deciding that they were variations rather than separate contracts, that was in effect an error of law which was within his jurisdiction.

77. Akenhead J has revisited his decision in Air Design in two further decisions, the first being Camillin Denny Architects v Adelaide Jones & Co [2009] EWHC 2110 (TCC) and the second being Supablast v Story Rail [2010] EWHC 56 (TCC).

78. In the Camillin case he commented on Air Design in the following terms:

“30. That was a case in which there could be no doubt that the adjudicator was properly appointed under the first contract and there could be no argument that, in that capacity, he had jurisdiction to decide whether later "contracts" were simply variations of the first contract or stood on their own entirely separately as contracts in their own right. I am not convinced that this case is authority for any proposition other than that there may be cases in which adjudicators properly appointed have jurisdiction to resolve jurisdictional issues if and to the extent coincidentally those issues are part of the substantive dispute referred to adjudication.”

79. In the Supablast case he referred both to Air Design and to Camillin and then said this:

“29. One must bear in mind that variations, that is additional, altered, substituted or omitted works, are very common and almost invariably feature in payment disputes between construction contract parties. Many of the adjudication decisions which come to be considered by the TCC involve rulings on whether particular work has been varied and if so what price is to be put on it. Generally, an adjudicator properly appointed under the original contract between the parties to the adjudication will have jurisdiction to determine whether or not particular work was or was to be treated as a variation under or pursuant to that original contract. Of course, it is open to either party to argue that, although the particular work was extra to the scope of works covered by the original contract, it was not a variation envisaged or permitted by that contract. That argument will or may in effect give rise both to a substantive defence under the original contract (“there is no entitlement to payment because there is no variation") as well as a jurisdictional challenge (“the adjudicator has no jurisdiction to decide because the extra work can not have been ordered under the original contract which gives the adjudicator jurisdiction in the first place"). This is where there will often be an overlap between jurisdiction and substance.

30. The Court of Appeal in Thomas-Fredric’s (Construction) Ltd v Keith Wilson [2004] BLR 23 confirmed broadly the uncontroversial view that an adjudicator does not have jurisdiction to decide his or her own jurisdiction unless the parties have effectively agreed or permitted him or her to do so. Simon Brown LJ (as he then was) said as follows:

“ 32. Let me now return briefly to the editors' commentary in the Building Law Reports. I readily recognise the concern lest this salutary new statutory power to promote early payment in construction contract cases be emasculated by jurisdictional challenges. The solution, however, seems to me not in finding defendants too readily to have, in the full sense, submitted to the adjudicator's jurisdiction, which if properly advised they plainly would not do. Rather, as Dyson J observed in paragraph 8 of his judgment in the Project Consultancy Group case, it is for courts (and adjudicators) to be "vigilant to examine the arguments critically." It is only if the defendant had advanced a properly arguable jurisdictional objection with a realistic prospect of succeeding upon it that he could hope to resist the summary enforcement of an adjudicator's award against him.

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.

34. Applying those propositions in the instant case, I would hold that this appellant did not submit to the adjudicator's jurisdiction in the full sense and that the adjudicator's ruling was, on any view, not plainly right. Indeed, as already indicated, it seems to me that the adjudicator's ruling was, if anything, plainly wrong. I would accordingly allow the appeal, set aside the order made below and substitute for it an order dismissing the respondent's application for summary judgment.”

There is nothing controversial in these observations with which the other members of the Court of Appeal agreed.”

80. It appears to me therefore that by reference to the subsequent observations of Akenhead J himself Miss Chambers is right to say that the decision in Air Design is authority only for the proposition that where an adjudicator is properly appointed under a contract about which there is or can be no dispute, then he may also have jurisdiction to resolve jurisdictional issues if they are coincidentally part of the substantive dispute referred to him.

81. In my judgment it is clear that this proposition cannot on any view be said to apply to the present case where, on the findings I have made, the defendant was correct in its contention, which it maintained clearly before the adjudicator, but which was always disputed by the claimant, that there was never any initial concluded contract about which there was no dispute, and that the claims made in the adjudication were all claims advanced under three separate contracts. It follows that the adjudicator could not properly have been appointed under any version of the initial concluded contract as contended for by the claimant, because no such contract was ever formed, in circumstances where there was a substantial dispute between the parties as to whether or not there was such a contract, or a series of separate contracts covering the same subject matter, and in circumstances where there were differences of substance in the adjudication procedures applicable to the differing contracts as well as in the other terms of those contracts. It is difficult to construe this as a case where the adjudicator was required, as part of the substantive dispute referred to him, to decide whether or not the subsequent orders were variations of the original order. The claim as advanced was a simple final account claim under a sub-contract, whereas the question as to whether or not the claim advanced arose under one or more than one contract was raised fairly and squarely as a question of jurisdiction, and the adjudicator decided it accordingly. In such circumstances there can, in my judgment, be no question of the court concluding that his answer on that question should, even if wrong, nonetheless be temporarily binding on the defendant, who never agreed to confer jurisdiction upon him to decide that question.

82. In the circumstances there is no need for me to take up Miss Chambers’ fallback invitation to consider whether or not the proposition stated in Air Design and clarified in subsequent decisions is right or wrong, nor to consider its breadth of application in cases other than the present.

3. THE SUBSTANTIVE DETERMINATION ISSUE

83. Given the conclusion I have reached on the substantive jurisdiction issue it is not strictly necessary for me to deal with this point, and I do so only briefly.

84. Although it was raised by Miss Chambers for the first time only in oral submissions, Miss Cheng accepted that as a point of pure law she was able to deal with it. In any event Miss Chambers was entitled to say that there was no need for her to raise the point until it became apparent (as it only did on receipt of Miss Cheng’s skeleton argument shortly before trial) that the claimant was seeking to re-run the substantive jurisdiction issue, because until that stage the defendant would have been entitled to proceed on the basis that if the court found against the claimant on the contract issue that would – absent the substantive jurisdiction argument – defeat the enforcement claim in any event.

85. In short, my view is that if the court has decided after a full trial that the adjudicator was wrong on his decision in relation to jurisdiction then, even though on this hypothesis that would have been a decision which he had jurisdiction to reach, so that it would be temporarily binding until such time as the dispute is finally resolved, there can be no sensible basis for enforcing that decision once the court has determined that the adjudicator was wrong. In this case, had the claimant pleaded in terms that it was relying on the substantive jurisdiction issue to enforce the decision regardless of the court’s finding on the contract issue, I have no doubt that the defendant would, and would have been entitled to, raise by way of counterclaim a declaration seeking a final determination on the contract issue. In such circumstances this judgment would have produced a final determination of the point wrongly decided by the adjudicator. Accordingly the decision could not have been enforced. I accept that in such circumstances it would have been necessary for the defendant to have produced an amended statement of case seeking such a declaration, and to have obtained permission to amend before judgment was handed down for it to succeed on this point. Had it been necessary to do so then I would, in the unusual circumstances of this case, have been prepared to grant permission for it to do so.

86. Miss Chambers also advanced, as a separate ground for resisting enforcement in such circumstances, the fact that the case as advanced before the adjudicator as to the contract issue which was seemingly accepted by him is different to the case now advanced before me, and different also to the position as found by me. She submitted that in such circumstances it would be wrong to permit enforcement even if I had ruled against the defendant on the substantive jurisdiction issue. I would not however have accepted that submission since, if the adjudicator did have substantive jurisdiction to decide the contract issue, then it would be irrelevant in my judgment that he arrived at the wrong answer on a basis not supported by the claimant in the subsequent enforcement proceedings.

THE REMAINING DEFENCES

87. In the light of my conclusions above it is strictly unnecessary to deal with the remaining arguments but, since they have been fully argued, I do so.

THE CERTIFICATE DEFENCE

88. The defendant’s case is that the adjudicator breached natural justice by disregarding a key defence which it had raised in the adjudication, and that as a consequence the decision is unenforceable.

89. At paragraph 3.30 of its response to the claim the defendant referred to clause 5.12 of its sub-contract conditions, which provided that:

“Where there is a requirement in the Main Contract or the Order for the provision of warranties, guarantees and/or test certificates the Sub-Contractor shall provide those warranties, guarantees or test certificates in a form acceptable to the Main Contractor within seven days of request to do so by the Main Contractor, and in any event prior to practical completion of the works. For the avoidance of any doubt the value of said warranties, guarantees and /or test certificates shall be deemed to be not less than 10% of the Order Value should the Sub-Contractor fail to adequately provide the same”

90. The defendant went on to contend in paragraph 3.30 that the claimant had failed to provide particular certificates which were required under the orders, namely Fensa, SBD and Gas Certificates, and that this had caused a reduction in the value of the work in the sum of £133,704.66, being 10% of the order values on the defendant’s case.

91. The defendant contends that in paragraphs 2.34 and 2.40 of its reply the claimant admitted that it had not provided gas surveys, and that therefore the adjudicator ought to have deducted the amount identified for non-compliance with clause 5.12. The defendant complains that the adjudicator failed to deal with this particular defence. It points to the fact that he dealt with the contra-charges on a global basis, rejecting them all in paragraph 92 on the basis that:

“… substantiation for the contra charges has not been provided. The defaults of Viridis that are relied upon are not shown by way of cause and effect or that it was indeed Viridis’ actions that have caused the charges that are being made by Mulalley. Additionally the quantum is shown as summaries of the costs without any substantiation of those sums ...”

92. The defendant submits that it is evident from this global rejection of the contra-charges that the adjudicator must have failed to consider and address the certificate defence separately, because if he had done so he would have appreciated that the claimant had admitted the breach and that the 10% deduction must follow without the need to show cause and effect or substantiation. The defendant points out that the amount involved was substantial in comparison to the amount he decided was due to the claimant and, thus, that the omission cannot be ignored as trivial.

93. The defendant submits that it is well-established that an adjudicator must attempt to answer the question referred to him, and that this must include addressing defences to the claim raised by the respondent. The defendant also submits that if it is established that he failed to do so, and that such failure was material, then there is a breach of natural justice and the decision will not be enforced.

94. There is no serious dispute about these principles, which are referred to and discussed by Sir Peter Coulson in Construction Adjudication (2 ^nd ed) at paragraph 13.26 onwards. The claimant submits that in this case the defendant is confusing a failure to address the defences to the claim raised by the respondent, which may if conscious and sufficiently material amount to a serious breach of natural justice, and a mere omission specifically to refer to that particular defence in the decision, or to give detailed reasons as to why it is rejected, which will not.

95. The defendant refers me to the decision of the Court of Appeal in Carillion Construction v Devonport Royal Dockyard [2005] EWCA Civ 1358. In paragraph 53 Chadwick LJ, giving the judgment of the court, referred to 5 propositions stated by Jackson J (as he then was) at first instance, and at paragraph 84 stated their broad agreement with those propositions. As relevant to this case they include the following:

“1. If an adjudicator declines to consider evidence which, on his analysis of the facts or the law, is irrelevant, that is neither (a) a breach of the rules of natural justice nor (b) a failure to consider relevant material which undermines his decision on Wednesbury grounds or for breach of paragraph 17 of the Scheme. If the adjudicator's analysis of the facts or the law was erroneous, it may follow that he ought to have considered the evidence in question. The possibility of such error is inherent in the adjudication system. It is not a ground for refusing to enforce the adjudicator's decision. I reach this conclusion on the basis of the Court of Appeal decisions mentioned earlier. This conclusion is also supported by the reasoning of Mr Justice Steyn in the context of arbitration in Bill Biakh v Hyundai Corporation [1988] 1 Lloyds Reports 187.

...

4. During argument, my attention has been drawn to certain decisions on the duty to give reasons in a planning context. See in particular Save Britain's Heritage v No 1 Poultry Limited, [1991] 1 WLR 153 and South Bucks DC and another v Porter (No 2) [2004] 1 WLR 1953 . In my view, the principles stated in these cases are only of limited relevance to adjudicators' decisions. I reach this conclusion for three reasons:

(a) Adjudicators' decisions do not finally determine the rights of the parties (unless all parties so wish).

(b) If reasons are given and they prove to be erroneous, that does not generally enable the adjudicator's decision to be challenged.

(c) Adjudicators often are not required to give reasons at all.

5. If an adjudicator is requested to give reasons pursuant to paragraph 22 of the Scheme, in my view a brief statement of those reasons will suffice. The reasons should be sufficient to show that the adjudicator has dealt with the issues remitted to him and what his conclusions are on those issues. It will only be in extreme circumstances, such as those described by Lord Justice Clerk in Gillies Ramsay [ Gillies Ramsay Diamond and others v PJW Enterprises Limited [2004] BLR 131], that the court will decline to enforce an otherwise valid adjudicator's decision because of the inadequacy of the reasons given. The complainant would need to show that the reasons were absent or unintelligible and that, as a result, he had suffered substantial prejudice.”

96. In this case, as Miss Cheng submits, the adjudicator stated in the opening section of his decision that he had carefully considered all of the documents and submissions supplied to him by both parties. It is apparent from paragraph 91 that he was aware that the defendant was relying on the certificate issue as a contra-charge. Moreover, in addition to the words quoted by the defendant from paragraph 92, he went on in paragraph 93 to find that:

“Whilst I note these charges I accept that as far as this adjudication is concerned Mulalley have not shown on the balance of probabilities that such sums are payable by Viridis as contra-charges.”

97. I entirely accept that it is possible that the adjudicator may through inadvertence have overlooked the fact that the claimant appeared to have accepted that it had not supplied the gas surveys, and may also have overlooked the point that the defendant was contending that in such circumstances it was entitled to deduct 10% of the order value without needing to show cause and effect. However it is equally possible that he had decided that the defendant had not proved this element of contra-charge. Thus he might for example have been influenced by the fact that the claimant was not admitting that it had breached its contractual obligations in not providing the gas surveys, or have concluded that the deeming provision in clause 5.12 was ineffective as matter of law to allow the defendant to deduct 10% without substantiation. Whilst the defendant might wish to contend that either such conclusion would have been wrong as a matter of fact or law, it would have been a decision within his jurisdiction and, hence, not one which the defendant can challenge in these enforcement proceedings. He was not obliged to state all of his reasons for rejecting this particular item of contra-charge. It is enough that he made it clear that he had considered all of the documents and submissions supplied by the defendant, that he was aware that the defendant was relying on the various contra-charges, including the certificate defence, and that he had considered those contra-charges and rejected them. This is not a case, unlike others referred to in Construction Adjudication in the section to which I have referred, where the adjudicator had – whether at the express instigation of the referring party or otherwise – specifically but erroneously concluded that he had no jurisdiction, and hence refused, to address that particular defence.

98. Finally, Miss Chambers also appeared in her skeleton argument to be contending that the adjudicator ought also to have addressed the further point that under clause 5.13 it was said to be a condition precedent to payment that the claimant should comply with the requirements of clause 5.12. This contention is entirely lacking in merit given that, as Miss Chambers implicitly accepts in her skeleton, the point was not even raised by the defendant in its response. If Miss Chambers is suggesting that the adjudicator was under a duty to consider points not even raised by the respondent I must disagree. In any event, even if it had been raised the same objections would apply as much to this point as they do in relation to the argument under clause 5.12.

99. For all of these reasons I would reject this defence.

THE TERMINATION ISSUE

100. At paragraphs 3.01 and following of its response the defendant sought to reply on its termination of the sub-contract on 7 March 2013 to found an argument that unless and until the other contractors it had brought in to complete the claimant’s works had done so the claimant had no right to submit or to be paid its final account claim. In its reply the claimant contested that the termination was justified or effective. In its rejoinder the defendant objected that the claimant had not referred any dispute about the validity of the termination to adjudication, so that it should not be considered by the adjudicator.

101. In his decision however the adjudicator did address the issue of termination at paragraphs 37 – 46, concluding at paragraph 46 that the defendant’s notice of termination was invalid so that the consequences contended for by the defendant were not applicable.

102. In these proceedings the defendant repeats its complaint that the adjudicator had no jurisdiction to decide on the validity of its termination notice, on the basis that this was not a matter which had been referred to adjudication by the claimant, and that the defendant had not, given the terms of its response, enlarged the jurisdiction of the adjudicator to decide the point. The defendant’s position is that the adjudicator was, therefore, obliged to address the defendant’s defence that the claimant had no entitlement to submit or be paid its final account claim and, in so deciding, was bound to make his decision on the basis that the termination was valid.

103. Responding to this Miss Cheng submitted that since the defendant chose to rely on its termination as a defence to the claim, it conferred jurisdiction on the adjudicator to decide on the validity of that defence which would include the validity of the termination as a point raised by the claimant in response to that defence. She submitted that it was not open to the defendant to raise a particular issue by way of defence and then to seek to restrict the adjudicator’s ability to decide that issue. She submitted that either the adjudicator had jurisdiction to decide the validity of the termination defence, including therefore the issue of the validity of the termination or he did not, in which case he was unable to take the defence into account at all, and that the defendant’s position amounted to an illegitimate attempt to force the adjudicator to accept its defence without actually being able to decide it.

104. I agree with Miss Cheng’s submissions. If a respondent raises a defence, it must in principle be open to the referring party to reply to that defence by advancing reasons as to why the respondent is not entitled to rely on that defence, and the adjudicator must therefore have jurisdiction to decide on those issues. I accept that in principle there may be circumstances where there are limits as to the the reasons capable of being advanced by the referring party. For example I can see that it might be said that if the referring party refers a claim for £X and the respondent defends by raising a set-off for £Y it may not be open to the referring party to reply by raising a set-off for £Z against that set-off. However I am unable to accept the defendant’s submission that because the claimant had not specifically contested the validity of the termination prior to the notice of adjudication the adjudicator had no jurisdiction to consider it once the defendant raised the termination as a defence. I note that so far as I am aware the defendant had not raised the effect of the termination on the claimant’s final account claim before the notice of adjudication and, indeed, it could well be said that by advancing a final account claim the claimant was by necessary implication contending that it was entitled to do so at the time when he did.

105. For those reasons I would reject this defence.

THE RETENTION ISSUE

106. It is common ground that the orders provided for retention of 3%, to be retained in accordance with clauses 9.11 and 9.12. The claimant’s final account claim did not make any allowance for retention. The defendant did not raise any question as to retention in its reply. The adjudicator did not therefore either address the issue of retention or make any deduction in his decision for retention.

107. The defendant contends that because the claimant did not make a specific claim for release of retention the adjudicator had no jurisdiction to award any sum which ought to have been deducted as retention and, accordingly, that the amount of the appropriate deduction ought to be deducted from his decision. The defendant does not suggest that the entire decision is unenforceable as a result of this alleged error.

108. Miss Cheng submitted that, since the notice of adjudication invited the adjudicator to decide that the claimant “should be paid the sum forthwith by the respondent of £213,915.39 + VAT that being the amount due under Final Account wrongfully held by the respondent or such other sum as the adjudicator may decide”, the adjudicator was entitled to decide that the amount due under the final account included the release of retention.

109. Again I agree with Miss Cheng. The claim was made for what was due under the final account. The claimant did not invite the adjudicator to deduct any amount for retention and nor, whether by oversight or otherwise, did the defendant. In the circumstances the adjudicator had jurisdiction to decide the final account entitlement and to decide that the defendant should pay that sum to the claimant. If and insofar as the adjudicator made an error in not deducting retention then that was an error within his jurisdiction.

110. Thus I would reject this defence as well.

CONCLUSIONS

111. The claim must fail by reason of my conclusions on the contract issue and the substantive jurisdiction issue. I will hear argument on any outstanding matters including costs in due course.