Neutral Citation Number: [2016] EWHC B30 (TCC)

Case No: HT-2015-000381 & HT-2016-000248

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

TECHNOLOGY AND CONSTRUCTION COURT

 

Royal Courts of Justice

Strand, London, WC2A 2LL

 

Date: 13/10/2016

 

Before :

 

MRS JUSTICE JEFFORD

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Between :

 

 

Imperial Chemical Industries Limited

Claimant

 

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Merit Merrell Technology Limited

Defendant

 

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Mr Sean Brannigan QC (instructed by Clyde & Co ) for the Claimant

Mr Justin Mort QC (instructed by Mills & Co ) for the Defendant

 

Hearing dates: 5 th October 2016

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Judgment Approved

MRS JUSTICE JEFFORD

 

  1. This is an application to enforce the decision of an adjudicator, Mr John Wright, made on 11 September 2016. By that decision, Mr Wright decided that the sum of£816,093.34 plus VAT and interest was payable by the Claimant to the Defendant. The Defendant seeks summary judgment for the payment of that amount. The Claimant resists enforcement on the basis that Mr Wright did not have jurisdiction to reach the decision that he did. I explain the apparent oddity in the roles of Claimant and Defendant below.

 

Background

  1. This adjudication arises out of a contract dated 18 December 2012 for steelwork and tank installation works at a new paint processing plant in Ashington, Northumberland. Imperial Chemical Industries (“ICI”) were the Employer and Merit Merrell Technology (“MMT”) the Contractor. The Contract was made on the NEC Engineering and Construction Contract, 3 rd edition, with various options including Option W2 in respect of adjudication.

 

  1. The contract came to an end on 17 February 2015 when ICI sought to terminate the contract.

 

  1. This project has so far given rise to 4 adjudications and further proceedings are currently pending before this Court. In these proceedings ICI is the Claimant and MMT the Defendant.

 

Adjudication/ procedural history

  1. In adjudication no. 2, ICI sought the provision of various documents under the terms of the contract. Amongst MMT’s defences to that claim was the contention that they were entitled to a lien on the documents sought by ICI because a sum of£816,093.34 plus VAT remained payable to them on their Application No. 23. There was no claim for payment of that amount within the adjudication.

 

  1. The adjudicator, Mr Sliwinski, in his Decision dated 15 June 2015, decided that ICI was entitled to be provided with the documents. The adjudicator therefore rejected MMT’s defences including its claim to be entitled to exercise a lien. In relation to that defence, he said the following:

 

“72. ….. Although no detailed submissions have been made in this respect I must accept that MMT’s Application No. 23 in December 2014 became a notified sum and that without a valid Pay Less notice this is the sum that was payable. Any Pay Less Notice should have been issued by 16 February 2015 and any payment would have been due on 23 February 2015. The balance shown …. is therefore correct - £816,093.34.

 

73. However, the repudiation and termination of the contract was on 17 February 2015 and as accepted by both parties the primary obligation came to an end. Payment is a primary obligation and as payment had not yet become finally due as at the date of termination the obligation to pay did not crystallise.

….

 

75. Accordingly as at the date of termination no further sum was to be paid to MMT under the contract ……”

 

  1. Adjudication no. 2 was the subject matter of proceedings in this Court in which Edwards-Stuart J. held that ICI was entitled to a declaration that the Adjudicator’s decision was valid and binding.

 

  1. Adjudication no. 3 concerned the propriety of the termination. The adjudicator was again Mr Sliwinski. He decided that ICI had neither validly terminated the contract under the contractual mechanism for doing so nor had it validly accepted a repudiatory breach of contract by MMT. Accordingly, he decided that ICI had repudiated the contract. That Decision was made on 3 August 2015.

 

The law

  1. Before I turn to Adjudication no. 4, I should say something about the law.

 

  1. It is well-established that a party to an adjudication who takes a point that an adjudicator does not have jurisdiction over the dispute must raise that jurisdictional objection and reserve its position as soon as possible. If it does so, it may then participate in the adjudication without prejudice to any defence it then raises in enforcement proceedings that the adjudicator lacked jurisdiction. If it does not do so, then it cannot avoid the effect of the adjudicator’s decision on jurisdictional grounds: it is taken to have consented or submitted to the adjudicator’s jurisdiction. This simple proposition is derived from The Project Consultancy Group v The Trustees of the Gray Trust [1999] BLR 377 and later cases referred to me such as Allied P&L Limited v Paradigm Housing Group Ltd. [2009] EWHC 2890 (TCC) and GPS Marine Contractors Ltd. v Ringway Infrastructure Services Ltd. [2010] EWHC 283 (TCC).

 

  1. Where an issue is raised in the adjudication about jurisdiction, the parties may give the adjudicator jurisdiction to determine that issue. They may do so by express or implied agreement. In Aedifice Partnership Limited v Shah [2010] EWHC 2106 (TCC), at paragraph 21, Akenhead J. drew together the strands of authority in relation to implied agreement to the adjudicator’s determining his own jurisdiction. If I can be forgiven for summarising further Akenhead J.’s summary, he set out the following propositions:

 

    1. One needs to look at everything said and done “to determine whether one can say with conviction that the parties must be taken to have agreed that the adjudicator had such jurisdiction.”

 

    1. One principal way of determining whether there was no such implied agreement is if a clear reservation is made by the party objecting to the jurisdiction of the adjudicator.

 

    1. A clear reservation can and usually will be made in words but one should look at everything said and done: “A legitimate question to ask is: was it or should it have been clear to all concerned that a reservation on jurisdiction was being made?”

 

    1. A waiver may arise where a party, who knows or ought to have known of grounds for a jurisdictional objection, participates in the adjudication without any reservation.

 

  1. The first point, therefore, for me to consider is whether ICI raised any objection to Mr Wright’s jurisdiction to determine the dispute referred to him. If they did not do so, or did not do so before they had submitted to his jurisdiction, they cannot do so now. If they did object to his jurisdiction, however, I then have to consider whether they expressly or impliedly agreed that he could determine his own jurisdiction. The fact of a clear reservation in respect of jurisdiction in itself would indicate that there is no such implied agreement, as Akenhead J said in Aedifice , but I can and should still have regard to everything said and done to determine whether there was, in fact, such agreement.

 

Adjudication no. 4

  1. On 5 August 2016 MMT gave notice of its intention to refer a further dispute to adjudication. The Notice of Intention to Refer described the dispute as “the dispute over our client’s entitlement to payment pursuant to our client’s application for payment No. 23 dated 19 December 2014” . The Notice set out that that application had been in the sum of £8,375,608.10 plus VAT. In the light of payments made, a sum of £816,093.34 plus VAT was outstanding, and MMT claimed that sum or such other sum as the adjudicator should find payable. As I have said, the adjudicator appointed on this occasion was Mr John Wright.

 

  1. The Referral Notice was served on 11 August 2016. In the Referral Notice, MMT relied on what Mr Sliwinski had said at paragraph 72 of the Decision in adjudication no.2 (set out above) that the sum payable to MMT was the sum of£816,093.34. MMT said (i) that the decision in adjudication no. 2 that there was no valid pay less notice or payment notice was binding; (ii) that in any event it was correct; and (iii) that Mr Sliwinski had not been asked to decide and had not decided whether ICI was obliged to make payment in circumstances where it had repudiated the contract after payment became due but before the final date for payment. MMT characterised that last point as the issue now falling due for determination in this adjudication no. 4. In doing so, it made it abundantly clear that an issue Mr Wright was being asked to determine was the effect of adjudication no. 2 on the claim now made in adjudication no. 4.

 

  1. In its Response served on 24 August 2016, ICI’s primary position was that nothing that Mr Sliwinski had said about Application No. 23 was binding on Mr Wright. To quote from the Response:

 

“[10] ICI contends that Mr Sliwinski’s comments in relation to the payment or pay less notices issued in relation to Application No.23 are not only incorrect but that they are not binding on the parties as Mr Sliwinski was not asked to decide the status of Application no. 23 or any notices issued in response to that Application.

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[12]Mr Sliwinski was not asked to decide whether Application No. 23 was payable, and nor was he asked to decide whether the notices issued by ICI in response to Application No. 23 were effective. Mr Sliwinski had jurisdiction to consider whether MMT’s defence of a lien over the documents was effective, but not to determine the effectiveness of payment and pay less notices issued by ICI. Mr Sliwinski did not therefore have jurisdiction to make the findings that he did in his Decision in Adjudication No. 2 and his comments in relation to the notices issued by ICI in response to Application No. 23 are not binding on the parties.”

 

  1. ICI, therefore, took no objection to Mr Wright’s jurisdiction to decide the dispute referred to him, namely whether £816,093.34 or some other sum was due and payable on Application no. 23. Unsurprisingly, therefore, ICI did not take any point about Mr Wright’s jurisdiction to determine the issue MMT had identified as to ICI’s obligation to make payment following its repudiation of the contract.

 

  1. ICI also, however, advanced an alternative case at paragraphs 28 and 29 of the Response: “In the alternative, if the Adjudicator considers that Mr Sliwinski did have jurisdiction to consider whether Application No. 23 resulted in any payment being due to MMT, then Mr Sliwinski’s decision was that no such payment was due.” For that contention, ICI relied on paragraph 73 of the Decision also set out above.

 

  1. The Response concluded by setting out what ICI asked the Adjudicator to decide, including that MMT was entitled to no further payment because there was a valid payment notice or pay less notice. ICI also asked the Adjudicator to decide that “if no valid payment notice or pay less notice was issued then MMT is not entitled to any further payment in respect of its Application No. 23 ….. because Mr Sliwinski determined in Adjudication No. 1 that no payment was due to MMT.” It is clear that the reference to Adjudication No. 1 is a typographical error and the reference should be to Adjudication No. 2.

 

  1. MMT’s Reply was served on 30 August 2016. It was mainly concerned with the substantive issues relating to payment. In relation to adjudication no. 2, MMT said that its primary case was that it was entitled to payment irrespective of adjudication no. 2 and that the parties were agreed that Mr Sliwinski was not asked to determine what payment should be made. In any event, they said that the crucial difference now was that it had now been determined that the contract had been repudiated by ICI which, as they put it, made available to MMT an argument that fell outside the scope of adjudication no. 2.

 

  1. Clyde & Co, solicitors for ICI, responded to this Reply by letter dated 1 September 2016. In this response, ICI expressly argued that even if the sum claimed in Application No. 23 became a “notified sum”, ICI was not obliged to pay, because following termination, the parties were released from their primary obligations, including any obligation to make interim payments. The letter continued:

 

“MMT is not entitled to “approbate and reprobate” the decision in adjudication no. 2….. having relied on the adjudicator’s decision in adjudication no. 2 …., MMT is not entitled to dispute part of the adjudicator’s findings” .

 

ICI then quoted from paragraphs 73-75 of the decision in adjudication no. 2 and concluded “Therefore regardless of whether there was any valid payment notice or pay less notice (and ICI’s case is that both were validly issued), ICI had no obligation to make any further interim payment to MMT following termination.”

 

  1. MMT responded by its solicitors’ letter dated 2 September 2016. In respect of adjudication no. 2, MMT characterised the issue between the parties as being “the precise effect of the decision in adjudication no. 2 for the purposes of deciding a different dispute”. MMT repeated that in adjudication no. 2 the adjudicator had not been asked to determine its claim for payment and repeated its argument as to the effect of the decision that ICI had repudiated the contract.

 

  1. Mr Wright then e-mailed the parties on 7 September 2016 with a small number of questions:

 

    1. Mr Wright asked whether ICI’s case was that the comments made by Mr Sliwinski at paragraphs 73 to 75 were unaffected by his later decision in adjudication no. 3.

 

    1. Mr Wright referred to what Mr Sliwinski had said in paragraph 5 about no further sum being due to MMT and said: “I understand MMT to say that this is no longer applicable in the light of the later finding regarding repudiation. Does MMT therefore say that this finding is not binding on me first because it addresses a different question (namely a lien over the document) and second that the finding regarding repudiation effectively annuls this finding”.

 

  1. Clyde & Co replied by e-mail the following day. In relation to (i), they said that Mr Sliwinski’s findings in adjudication no. 2 were binding and unaffected by adjudication no. 3 and asserted that the primary obligation to pay came to an end on termination, referring to paragraph 73 of his Decision.

 

  1. In relation to (ii), ICI said that ICI’s position was that “the Adjudicator does not have jurisdiction to decide whether ICI was obliged to make any payment in respect of application no. 23 because it has already been determined in adjudication no. 2.”

 

  1. If either or both of those responses is to be read as an objection to Mr Wright’s jurisdiction over the dispute referred to him in general, then I will say at this point that that is both contrary to ICI’s primary case and far too late. In my view, it is properly read as a clarification of ICI’s alternative case (in paragraphs 28 and 29 of the Response) as to the effect of adjudication no. 2 if the adjudicator in adjudication no. 4 considered himself bound by any or all of what Mr Sliwinski had said in that previous adjudication. If that can be read as contending that if Mr Wright reached a decision on the binding nature of Mr Sliwinski’s findings, he had no jurisdiction to decide the consequences that followed, then it is also contrary to ICI’s previous position.

 

The decision

  1. Mr Wright made his Decision on 11 September 2016. He decided that MMT was entitled to be paid the sum of £816,093.34 plus VAT and interest. In the course of his reasoning:

 

    1. Mr Wright found that Mr Sliwinski’s comments on whether ICI’s notices were effective were not binding on him.

    2. Mr Wright decided that ICI had not issued valid payment notice.

    3. Mr Wright decided that ICI had not issued a valid pay less notice.

 

It follows that, on this basis, Mr Wright could have and would have decided that MMT was entitled to further payment unless ICI’s obligation to pay was affected by the termination of the contract.

 

  1. On that issue, Mr Wright said that although he had found he was not bound by Mr Sliwinski’s comments on notices, it did not necessarily follow that he was not bound by his comments about payment following termination. Having noted that the effect of the termination was not raised in the Response, he nonetheless referred to what ICI had said in paragraphs 28 and 29 of the Response, the letter dated 1 September 2016 and the e-mail dated 8 September 2016 about Mr Sliwinski’s observations (on the rights and obligations of the parties following termination). Having analysed the decision in adjudication no. 2, he concluded that he was bound by these observations.

 

  1. Nonetheless he accepted MMT’s argument that that position was changed as a result of adjudication no. 3 and the decision that ICI had repudiated the contract. Mr Wright’s view was that the only reason ICI had been relieved of the obligation to make payment on 23 February 2015 was its repudiation of the contract on 17 February and that it could not rely on its own breach to avoid payment. Whether that decision was right in law or wrong (as ICI contends) is immaterial in these proceedings. The only issue is whether Mr Wright’s decision as to payment was one which he had jurisdiction to make.

 

The enforcement proceedings

  1. On 13 September 2016, MMT issued proceedings for summary judgment to enforce that decision. Directions were given and a hearing listed for 2 November 2016. On 19 September 2016, ICI issued an application in the pending proceedings for a declaration that no sum was payable pursuant to the decision of the adjudicator or in relation to Application no. 23. That application was listed for hearing on 5 October 2016 and the hearing was dealt with as the early hearing of MMT’s application for summary judgment. Hence the curiosity that the roles of Claimant and Defendant appeared to be reversed. ICI resisted enforcement on the grounds of a lack of jurisdiction.

 

  1. At this hearing, Mr Mort QC on behalf of MMT identified the following points for the Court’s consideration:

 

    1. Was the dispute in adjudication no. 4 capable of being referred to adjudication?

 

    1. If it was not, did ICI nonetheless waive the point (and submit to the adjudicator’s jurisdiction)?

 

    1. In any event, did ICI agree to the adjudicator deciding the status of adjudication no. 2?

 

  1. It is not, I think, strictly necessary for me to answer the first of Mr Mort QC’s questions. It is sufficient to say that both parties asserted as their primary cases that that there was a dispute capable of being referred to adjudication and that that was the dispute as to MMT’s entitlement to payment of the balance of Application No. 23.

 

  1. The answer to his second question and, indeed to ICI’s defence to enforcement, is in my judgment , to be found in the position set out in paragraph 16 above. The dispute referred to this adjudicator was whether MMT was entitled to payment on Application no. 23. ICI took no objection to his jurisdiction over that dispute: on the contrary they asked him to decide it. That is the dispute that he decided. It is ICI’s case that he decided it on a wholly wrong basis but that is not a ground for resisting enforcement. The effect of ICI’s submission is that Mr Wright’s jurisdiction was limited to deciding the dispute in a particular way or on a particular basis. That cannot be right. As Mr Mort QC reminded me in the course of the hearing, it is the decision of the adjudicator that is binding and not his reasoning.

 

  1. For ICI, Mr Brannigan QC’s argument can be summarised as follows:

 

    1. ICI’s primary position was that Mr Wright had jurisdiction over this dispute and that Mr Wright was not bound by anything Mr Sliwinski had said about payment or pay less notices in respect of Application No. 23 or about what was payable.

 

    1. ICI did not agree to the adjudicator having jurisdiction to decide whether he was bound by what Mr Sliwinski had said in his Decision in adjudication no. 2.

 

    1. But if Mr Wright did have that jurisdiction, then he decided that he was bound by Mr Sliwinski’s comments about payment, and it followed that he then had no jurisdiction to find that a sum was payable. In deciding that he was bound by these comments but in still deciding that MMT was entitled to payment, he had acted without jurisdiction.

 

  1. As I have already said, ICI did not in the adjudication or indeed on enforcement take a point that Mr Wright did not have jurisdiction over the dispute referred to him. This was the dispute he decided and that seems to me to provide a complete answer to the defence.

 

  1. Further if Mr Wright did not, as ICI contends, have jurisdiction to decide whether he was bound by what had been said in adjudication no. 2, then anything that Mr Wright decided about adjudication no. 2 was not binding on the parties. So, having expressed his opinion on matters over which (on ICI’s case) he had no jurisdiction and, by definition, reached a non-binding decision as to these matters, the adjudicator then proceeded to decide the dispute referred to him and over which he clearly had jurisdiction.

 

  1. Therefore, on ICI’s primary case in these proceedings, its defence must also fail.

 

  1. It would only be if Mr Wright did have jurisdiction (by agreement) to determine whether he was bound by adjudication no. 2 that ICI’s argument would get off the ground.

 

  1. In fact, in its Response, ICI positively contended that Mr Wright was not bound by anything said (as contrasted with the decision) in adjudication no. 2. It seems to me that they must have by the same token been agreeing that he had jurisdiction, or submitting to his jurisdiction, to decide the contrary, namely that he was bound. That is consistent with paragraph 28 of the Response which anticipated that Mr Wright might consider that he was bound.

 

  1. It seems to me that if an adjudicator has jurisdiction to decide the extent to which a previous decision is binding on him then it is inherent in that jurisdiction that he has jurisdiction to decide the consequences thereof.

 

  1. Paragraphs 28 and 29 of the Response are consistent with that understanding. In those paragraphs and in the conclusion of the Response, ICI asked Mr Wright to reach his decision on the basis that he was bound by what Mr Sliwinski had said in adjudication no. 2 as to payment. That is quite the opposite of contending that if he reached a binding decision as to the binding nature of what Mr Sliwinski had said, he did not have jurisdiction to reach a decision as to the consequences. The consequences were clearly in issue in this adjudication, MMT having set out its case as to the consequences of Mr Sliwinski’s decision that ICI had repudiated the contract. ICI did not suggest that the adjudicator had no jurisdiction over this issue: rather they contended that he should find that he was still bound, on its alternative case, by what Mr Sliwinski had said in his paragraph 73. I do not, therefore, read these paragraphs as raising a jurisdictional objection and, in any event, I read them as raising an issue in the adjudication as to the nature and effect of the decision in adjudication no. 2 which ICI asked Mr Wright to determine, albeit as an alternative to its primary case.

 

  1. Mr Brannigan QC pointed out that the adjudicator himself, however, seems to have construed paragraph 29 of the Response as raising a jurisdictional objection and therefore invited me to conclude that there could be no implied agreement that Mr Wright could determine that issue of jurisdiction. Mr Wright’s reading of that paragraph was that since it contended that a decision of a previous adjudicator was binding on him, it followed that the party advancing that argument must be contending that he had no jurisdiction over the same issue. But it is clear that he did not construe that as an objection to his deciding the consequences of the binding nature (as he found it) of Mr Sliwinksi’s comments because that is what he proceeded to do and, for the reasons I have given, I consider that he was right to regard himself as having been asked by the parties to do so.

 

  1. What ICI is, in reality, seeking to do is resist enforcement of the adjudicator’s decision by trying to constrain his jurisdiction in a very particular manner by relying on comments made in earlier adjudications on matters not referred to the previous adjudicator, whilst having itself recognised that the present adjudicator has jurisdiction over the dispute referred to him. That is the sort of argument the Court will approach with caution where there are serial adjudications.

 

Conclusions

 

  1. I reject ICI’s defence to enforcement for three reasons:

 

    1. I repeat what I said in paragraph 16 above that the dispute referred to the adjudicator was whether MMT was entitled to the payment of £816,093.34 or some other sum on Application No. 23, as to which ICI made no objection to the Adjudicator’s jurisdiction. That was the dispute he decided.

 

    1. If, as ICI contended in these proceedings, Mr Wright had no jurisdiction to decide the effect of adjudication no.2, then any conclusion he reached about this was part of his non binding reasoning and he then proceeded to decide the dispute referred to him, as to which I repeat that ICI had made no jurisdictional objection.

 

    1. If Mr Wright did have jurisdiction to decide the effect of adjudication no. 2 - and in my view he did - that was not limited to simply answering the question whether things said in the Decision were binding or not. It was within his jurisdiction to decide the consequences of his answer to that question which may have been that he considered that he had no jurisdiction over the dispute referred to him or that he did. He concluded the latter and that was within his jurisdiction.

 

Therefore, MMT is entitled to summary judgement in the amount of £816,093.34 together with VAT, interest and the other amounts set out in the adjudicator’s decision.