Neutral Citation No. [2005] EWHC 138 (TCC)

 

IN THE ROYAL COURTS OF JUSTICE

QUEEN’S BENCH DIVISION

TECHNOLOGY AND CONSTRUCTION COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

 

Date: 13 th January 2005

 

 

 

 

Before:

 

HIS HONOUR JUDGE PETER COULSON Q C

 

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WILLIAM VERRY (GLAZING SYSTEMS)

 

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FURLONG HOMES LTD



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Transcript by MARGARET WORT & CO.,

(Official Court Reporters)

Edial Farm, Edial, Burntwood, Staffordshire, WS7 0HZ

 

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MR M MULLEN appeared on behalf of the prosecution

 

MR A BINGHAM appeared on behalf of the defence

 

 

JUDGMENT

 

13 th January 2005

 

JUDGE COULSON:

  1. One, by that party claim date the 21 st December 2004, the Claimant, William Berry (Glazing Systems) Ltd, whom I shall call Berry, seek a declaration that an Adjudicator’s decision dated the 26 th October 2004 was valid and binding upon both parties until the matters referred to in that decision were finally determined by the Court. The Defendant, Furlong Homes Ltd, whom I shall call Furlong, contend that the decision’s invalid because the Adjudicator exceeded his jurisdiction in arriving at his conclusions or alternatively acted unfairly in reaching that decision. As a result of the detailed nature of the dispute between the parties it is necessary for me to set out a number of matters by way of background.

 

2. By a Contract dated the 6 th March 2003 and signed in June 2003, Berry agreed to carry out certain works for Furlong. Those works were described as “design, supply and erect curtain walling, long span cladding, aluminium soffit, fascias and copings to high levels including all necessary fire stopping and sealing”. The Contract sum was £1,150,024.75, the Contract completion date was either October or November 2003. Clause 3 (B) was a contractual mechanism by which that date might be extended by form if delay was caused `by any act, instruction, default or omission’ of Furlong themselves. The works progressed during 2003 and into 2004 and therefore on any view there were significant delays. Furlong granted Berry two extensions of time to the 2 nd February 2004 but Berry maintained that they were entitled to a much longer extension. On the 2 nd July 2004 Berry submitted a claim for extension of time down to the 24 th June 2004, together with a final account claim. Their letter of the 2 nd July concluded as follows: “In summary, taking into account our completion date of the 19 th December 2003, we calculate our revised completion date as follows:

Items 1 – 7 inclusive 23 weeks = 27 th May 2004

Item 8 – variations + 4 NR weeks = 24 th June 2004

Our revised completion date is therefore the 24 th June 2004.

We have not taken into consideration the works we are currently carrying out on site such as retail units, east elevation gutter, door installation etc. which is solely dependant on Furlong Homes Ltd allowing us access to these areas.

Based on the above calculation you will see we are not in fact in delay as you have stated, your claims relating to your level offset - against our account - are therefore unfounded and without substance.

We enclose our final account schedule for your perusal and trust this matter can be settled amicably despite your Company’s reluctance to pay our account in line with our discussions in April 2004. We believe it should be noted however, the enclosed documentation excludes any loss and expense items incurred as a result of the additional works and resequencing/prolongation of our contract works.”

3. Furlong responded on the 13 th August 2004. Their final account figure was £1,036,88.13, as to various extension of time claim Furlong will agree that they said:

“As far as Item 16, An Extension of Time is concerned, you have provided nothing that would add to the extension of time to the 2 nd February 2004 previously granted. You appear to be of the opinion that despite your various breaches previously acknowledged in correspondence and your progress reports, that you are entitled to an extension of time to completion, the works were delayed by you. We have recognised that you are entitled to payment for the period between the 9 th December 2003 and the 2 nd February 2004.” They then set out details in respect of the final account and because the sum which they had previously paid was greater than the amount which they claimed the final account was worth, they sought repayment of the sum previously paid in the amount of £143,898.15. The letter concluded:

“In the event that we do not receive payment or payment proposals by the 19 th August 2004, where you disagree with our account we will confirm that we are in dispute with you and refer the matter to adjudication and issue a Notice for Adjudication.”

It should be noted there was no response to the detail of the Berry claim made on the 2 nd July, a point that the Adjudicator was to make in paragraph 65 of his decision.

4. On the 24 th August Berry replied to this letter making clear with a reply that was sent recorded delivery, that they were disappointed with Furlong’s stance. Amongst other things they said:

“We are disappointed that despite waiting around six weeks for your response to our assessment you continue to issue generalised comments which totally lack any substantiation. We previously stated that your own assessment is flawed, our own extension of time assessment is mainly taking on board the lead-in periods stated within the Contract and the periods for each activity indicated on our November 2003 programme, indeed until recently we had not even been given access to complete the remainder of our works.” Further assertions were made by Berry about the matter of substantiation of the claims being made against them and they concluded:

“In conclusion, may we reiterate that we disagree entirely with your own assessment of our account, including your assessment of unsubstantiated liquidated and ascertained damages and the value you purport that is outstanding to your Company.

You will note our earlier comments that we have only just been given the necessary access to complete our works, so any suggestion that we could have finished earlier is in our view unacceptable… We confirm that a dispute now exists between our respective Companies and this matter will now be dealt with by the Adjudication procedure unless you are prepared to address the matters realistically within the next seven days. 5. Furlong had written on the 16 th August extending the deadline in relation to their payment proposal until Friday 27 th August 2004. It was therefore clear that a dispute existed between the parties in relation to the value of the final account. 6. On the 31 st August 2004, Furlong through their Agents Henry Cooper Consultants Limited, whom I shall refer to as HCC, sent Berry a notice of Adjudication. In his submissions to me Mr Bingham submitted that this Notice `Was the foundation for the strength of jurisdiction of the Adjudicator.’ I agree with that, it seems to me that this Notice identified the parameters of the dispute that was being referred to the Adjudicator. In those circumstances, it is I think sensible for me to read that document in full:

“We are instructed to write to you on behalf of Furlong Homes Ltd of Wellington House, Trust Road, Waltham Cross, Hertfordshire. You confirmed by Recorded Delivery letter that you were in dispute with Furlong with regard to the sum due to you in respect of your final account. You have been sent details of your final account that takes into account variation of the common loss and expense, common liquidated damages and costs incurred by Furlong. You have also received Furlong’s assessment of extension of time that leads to your loss and expense and Furlong’s reason for deducting liquidated damages and charging you for direct costs caused by your delay.

Accordingly, by copy of this letter we confirm that the dispute exists and make application to the President and Vice President of the Royal Institute of Chartered Surveyors to refer this dispute to an Adjudicator appointed by them for his decision.

The decision sought will be as follows:-

  1. The Adjudicator will be requested to decide that the extension of time granted by Furlong to the 2 nd February 2004 is correct.

  2. The Adjudicator will also be requested to decide whether the final account figure, inclusive of variations, loss and expense payments and deductions of liquidated damages and direct costs as a consequence of delay £1,836,088.13 or such other amount that the Adjudicator may decide.

  3. The Adjudicator will be requested to decide that William Berry will be responsible for payment of the Adjudicator’s fees and expenses.

  4. The Adjudicator will be requested to decide that William Berry will be responsible for payment of the application fee to the RICS.

7. It is important to note two things about this Notice of Adjudication. First, it sought to refer to the Adjudicator the entirety of the dispute about the varying final account figure. This meant that Furlong wanted the Adjudicator, in twenty-eight days to reach binding decisions about variations, extensions of time, loss expense and liquidated damages. In other words, all the potential disputes which might arise under a Building Contract of this type were being referred to Adjudication. There was no express limitation or qualification it was, to use the vernacular, a kitchen sink final account Adjudication. While such Adjudications are not prohibited by the Housing Grants Construction and Regeneration Act as presently drafted, there is little doubt in my mind that some composite and complex disputes as this was are not easily accommodated by the summary procedure of Adjudication. A referring party should think very carefully before attempting to use the Adjudication process to try and obtain some sort of perceived tactical advantage in a final account dispute such as this. The second point about Notice of Adjudication concerns various entitlement to an extension of time. The dispute which was referred to in the Notice was a reference to the Adjudicator deciding whether or not `the extension of time granted by Furlong to the 2 nd February 2004 is correct’ (my emphasis). In other words, there was no attempt to limit the dispute to previous claims made or information previously provided by Berry and considered by Furlong, the dispute was whether the existing extension is – present tense – correct. Furthermore, such a wide range in definition of the extension of time dispute was consistent with the reference to the Adjudication of the dispute about Furlong’s entitlement to, amongst other things, liquidated damages. The Adjudicator could not decide Furlong’s entitlement to liquidated damages without first deciding what was the various entitlement to an extension of time.

8. The width of the dispute then referred to the Adjudicator was also apparent from the application to the RICS to appoint the Adjudicator, also dated the 31 st August 2004. In the RICS form in common with other standard forms of this type, there is a section dealing with the nature of the dispute. That was filled in by HCC in these terms, that the dispute was `dispute over final account together with extension of time and damages.’ It seems to me again that that definition of dispute was unlimited and unqualified.

9. On the 3 rd September Mr John Simms, the well known Arbitrator and Adjudicator was appointed to act as the Adjudicator in this case. In a Referral Notice of the 7 th September Furlong described the dispute as to the extension of time in slightly different terms. At paragraph 3.01 they asked the Adjudicator to decide that, `The extension of time granted to Berry by Furlong is correct based on the information provided. The date is the 2 nd February 2004. Alternatively the Adjudicator is requested to decide the appropriate extension of time.’ It is to be noted that this alternative formulation that the Adjudicator should decide the appropriate extension of time was again unlimited and unqualified. That, it might be thought, was consistent with the other references in the Referral Notice to which Mr McMullen has referred, including the very first page of the Referral Notice, which refers to the dispute as concerning, “The final account and extension of time”; paragraph 2.01, which again states that the dispute concerns the final account, “Inclusive of variations, loss and expense payments, liquidated damages, direct costs as a consequence of delay and extension of time.”; paragraph 2.17 which states, “Berry is entitled to an extension of time to the 2 nd February 2004. Berry is not entitled to an extension of time for their own failures to perform.” And, paragraphs 2.32 and 2.33 which make plain the degree of finality for which Furlong was seeking. These paragraphs read as follows:

“2.32. Further additional costs have been notified to Furlong since the account statement and, Furlong requests that the Adjudicator deals with that within this Adjudication in order to finally conclude the account.

2.33. The amounts are included in the summary of the accounts. The Adjudicator has been given jurisdiction to decide on any such other amount confirming requests that these additional costs are taken into account within the Adjudicator’s decision.”

10. The statutory twenty-eight day period for the Adjudication expired on the 5 th October 2004. On the 10 th September the Adjudicator sought and obtained an extension of time to the 12 th October 2004. Eventually by a process of ad hoc extensions the parties agreed to extend the Adjudicator’s time to the 26 th October 2004. Such ad hoc extensions are a common feature of Adjudications where the subject matter is the complete review of a long and extensive contract, see for instance CIB –v- Burse. In their turn Berry sought and obtained an extension of time to respond to the Referral Notice until the 21 st September 2004. Section D of that response was headed:

“What is William Berry’s proper entitlement to an extension of time?”, and paragraph 62 – 132 please see below that document set out in detail a claim and entitlement to an extension of time down to the 27 th July 2004.

11. It was not until eight days later on the 29 th September that HCC wrote to the Adjudicator to complain that Section D involved a new extension of time claim. Mr Smith of HCC said:

“The response includes several items that are not part of the dispute and have not previously been seen by Furlong, your jurisdiction is restricted to the crystalised dispute. Section D paragraph 62 – 132 of the response introduce a new extension of time frame. The headings may be the same but the narrative and dates are new. The crystalised dispute concerns Berry’s letter dated 17 th November 2003, Furlong’s letter dated 11 th May 2004, Berry’s letter dated 2 nd July 2004, Furlong’s notes on extension of time and the Berry letter dated the 24 th August 2004.

Berry had no right to seek decisions from you on this Adjudication that had not been referred to Furlong, Berry are required to respond to the crystalised dispute.”

In a separate letter on the same date Mr Smith sought an extension for Furlong to reply to the response to the 5 th October 2004 which would give Furlong a total period of fourteen days to reply which was as long as Berry had taken to respond to the claim itself.

12. Also on the 29 th September the Adjudicator in response to that letter said:

“The case now put forward in Section D of the response is narratively different from that previously put forward in Berry’s letter to Furlong dated 2 nd July 2004 and has not been seen by Furlong before the issue of the Notice of Adjudication subject to any submission from DCL (Driver Consultant Limited) on Berry’s behalf, I consider myself bound by the decision of His Honour Judge Richard Seymour QC in Edmund Nuttall Limited –v- R G Carter Limited going back to 2002 (BLR6312) and that I am therefore debarred from considering various claims as now put forward in the response but can only consider the claim as advanced in Berry’s letter dated the 2 nd July 2004.

13. On 1 st October 2004 DCL, acting on behalf of Berry, dealt at length with these suggestions. Essentially they contended that Nuttall was only relevant to a party making a claim and seeking to raise claims in an Adjudication which had never been raised before; they argued that where, as here, the referring party was contending that the responding party were only entitled to a specific extension of time, that responding party was entitled to refute that argument and if that meant making points which had not been made before then that was entirely legitimate. Making this submission DCL relied on the decision of His Honour Judge Tulmin QC in AWG Construction Services Limited –v- Rockingham Motors Speedway Limited, which did not adopt the analysis in Carter and Nuttall.

14. In his letter of the 4 th October 2004, the Adjudicator considered the point again and concluded that Berry were entitled to rely on the matters set out in Section D of the response. He said, having considered the two authorities to which I have previously referred:

“Both the cases considered, and others, relate to the situation where the referring party is seeking to put forward a case which is arguably different from that which was crystalised at the time of the Notice of Adjudication. In this case however, it is the responding party’s case which is being considered. The Notice of Adjudication dated 31 st August 2004, refers to Furlong’s assessment of extension of time and states that the Adjudicator will be requested to decide that the extension of time granted by Furlong to the 2 nd February 2004 is correct”. It is therefore Furlong’s decision on the extension of time which is being referred to Adjudication not Berry’s response to it. In the Referral under Decision sought paragraph 3.01 states: “The Adjudicator is requested to decide that the extent of time granted to Berry by Furlong was correct based on the information provided. The date is the 2 nd February. Alternatively the Adjudcator is requested to decide the appropriate extension of time. The extension of time to the 2 nd February was granted in Furlong’s letter dated 11 th May 2004 i.e. before Berry’s letter dated 2 nd July and is therefore based on information available to Furlong at that time. Furlong did not nullify their position following Berry’s letter and rely on their letter and the notes attached to their letter dated 13 th August in support of their case and therefore, are now of the view that Berry are not complying in responding to Furlong’s referral to the case they put forward in their letter of the 7 th July but are entitled to put forward a fully argued case in response to the Referral.”

15. Mr Smith of HCC was quick to respond to that letter making it plain that he did not agree with the Adjudicator’s new view. He said that Berry advanced a case for an extension of time to the 24 th June in their letter of 2 nd July and that in the response document Berry were trying to advance a case for an extension time to the 31 st July which was, he said, a different case. He went on to say that:

“If Berry wished to make a new extension of time claim outside of this Adjudication it would be considered by Furlong in the proper way.”

16. The Adjudicator’s change of view came too late to effect Furlong’s reply to Berry’s response, which was served on the 5 th October 2004 under cover of a letter which made clear that the new extension of time claim, as it was called, had been ignored. However, in the light of the Adjudicator’s decision on the point and his further letter of the 6 th October 2004, Furlong decided that they had to put in a response to what they called the new extension of time claim. A lengthy document containing 107 paragraphs was served on the 11 th October 2004, which purported to respond and reply to Section D of the response document. The response of the 11 th October 2004 did not in part of its text, claim that it had been impossible for Furlong or HCC to respond to the points made in Section D, on the contrary, it appeared to deal with each of the points advanced by Berry. As to the status of the document, it seems to me that Mr Smith of HCC rather muddied the waters in his covering letter of the 11 th October 2004 in which he said:

“We would point out that whilst you believe that Berry are entitled to respond in any way they choose and are not confined to any previous statements or assessments they may have made, we would expect you to take on board that their response should only be considered to the extent which it is a response to the position we asserted and does not represent a new case. Furthermore, we would expect you to weigh the evidence of the day more heavily than the new case they make now”.

It seems to me that it was going to be extremely difficult – if not impossible – for the Adjudicator to try and follow this instruction in practice because on any view the dividing lines between what they called the old claim and the new claim were extremely blurred. Take for example, an item of delay which was in both the old and what they call the new claim. If the only difference was to suggest that the delay actually caused by that item was longer rather than shorter, it seems very difficult to me for the Adjudicator to take that point into account by way of a response, but not by way of what is called a new case.

17. Berry responded to this document and also replied on other matters, on the 13 th October. Furlong, who were keen to have the last word, replied again on the 18 th October. The Adjudicator’s decision was provided on the 26 th October 2004. Amongst other findings that he made in favour of Berry, he concluded that Berry were entitled to an extension of time to the 27 th July 2004.

18. Furlong commenced the Adjudication but in the event, had done badly. They indicated that they did not regard themselves as banned by the Adjudicator’s decision, hence Berry’s claim in this action for a declaration that the Adjudicator’s decision is binding. As I have indicated, Furlong contend that the decision was not binding and should not be enforced because the Adjudicator did not have the jurisdiction to consider what they call Berry’s new claim for an extension of time and/or because Berry’s new claim led to unfairness and a substantial risk of injustice.

19. These arguments have been made clearly and succinctly today by Mr McMullen who appeared on behalf of Berry, and Mr Bingham who appeared on behalf of Furlong. I ought to point out that Counsel in this case have been able to complete their arguments in just over half a day despite the fact that there are documents and authorities which less skilful Counsel might have taken days to deal with, I therefore acknowledge with gratitude, my debt to them.

JURISDICTION

20. It seems to me that under this question of jurisdiction there are a number of sub issues. First was Section D of Berry’s response a new claim for extension of time which had not been made before? Secondly, if it was were they entitled to rely on it in an Adjudication? Thirdly, if Berry were not entitled to rely on it in principle, were they able to rely on it in fact because, by their conduct, Furlong effectively gave the Adjudicator the necessary jurisdiction.

Was Section D of Berry’s Response a New Claim ?

21. Mr Bingham who appeared on behalf of Furlong, submitted that the claim made in Section D was a new claim for an extension of time which had not been made pursuant to the Contract machinery Clause 3B and was very different to the claim of the 2 nd July 2004, which he said is the only claim which the Adjudicator was entitled to have regard to.

22. Mr McMullen who appeared on behalf of Berry, argued that the claim is not a new claim, that the Section D claim is fundamentally the same claim as that made in the letter of the 2 nd July 2004 and, the letter of the 2 nd July 2004 was a skeletal depiction of the claim which was expanded in greater detail in Section D.

23. In my judgment it would be excessively legalistic to classify Section D of Berry’s response as a new claim, I think it is a fuller explanation for the claim originally made on the 2 nd July 2004. The fact that a new extension date was sought in Section D, merely reflected the fact that work continued on site after the 2 nd July 2004 and down to the 27 th July 2004.

24. In reaching that conclusion I have had particular regard to Appendix A produced by Mr Smith of HCC. That analysis in my judgment makes clear that the events relied on by Berry in seeking an extension of time down to the 2 nd July 2004 in the letter, were repeated again in Section D. The only differences were that sometimes different periods of delay were subscribed to those events and in almost all cases further supporting information was provided in Section D. Thus, in my view, Section D was not a new claim and was a refinement or enhancement of the existing. I shall also refer to the evidence of Mr Gamble of Berry, his statement at paragraphs 4 and 5 said:

“The differences between the July claim and the claim brought in the Adjudication are as a result of:-

    1. The fact that since the claim for extension time had been submitted on the 2 nd July Berry had completed its work on site on the 31 st July and was therefore in a position to finance its claim

    2. The fact that Berry expanded its narrative to enable the Adjudicator, who unlike Furlong was not familiar with the project, to understand the factual background to various claims of extension of time

    3. The facts and basis of various claims for an extension of time did not change between the 2 nd July 2004 and the response document of the 24 th September 2004 and accordingly was not new.”

On the basis of the information with which I have been provided I agree with and accept that conclusion. It seems to me therefore that this case, on that balance, is far removed from the situation described by His Honour Judge Seymour QC in Carter –v- Nutall to which I refer in more detail below.

24. Accordingly, I find that Section D of Berry’s response was not a new claim and therefore something which the Adjudicator is entitled to have regard to. It seems to me therefore that on that ground the jurisdiction challenge should fail however, I go on to consider the second question identified above – namely whether, even if it was a new claim and the Adjudicator was entitled to have regard to it – on the assumption that I am wrong on this point and that it is appropriate to classify Section D of Berry’s response as a new claim.

If Section D was a New Claim, could the Adjudicator take it into account ?

25. Mr Bingham submitted that the Adjudicator could not take into account the claim in Section D because it was a new claim which had not previously been made. He said that the claim should have been submitted to Furlong’s Mr Dove under the Contract for proper consideration and the Adjudicator had no jurisdiction to consider a claim which had not been made before. He submitted that all arguments about extensions of time had to be put to Mr Dove and Mr Dove had to reject them before they could then be raised by Mr Berry in the Adjudication.

26. Mr McMullen submitted that it was wrong to assume that in the Adjudication Berry should in some way be restricted to the points in their letter of the 2 nd July 2004 and that there was nothing in the documents, and in particular the Notice of Adjudication and the Referral Notice, or in the authorities that could lead to any such restriction.

28. As a matter of commercial commonsense, I reached the firm conclusion that Mr McMullen is right. First, I have already made the point that neither the Notice of Adjudication or the Referral Notice can be fairly read as restricting the extension of time under consideration to that notified by Berry to Furlong on the 2 nd July 2004. The Notice of Adjudication makes no reference to that letter or claim at all and merely asks the Adjudicator to decide that the extension of time granted down to the 2 nd February 2004 is correct. That extension of time was of course granted before the claim of the 2 nd July 2004 had even been made. If Furlong had wanted to restrict the scope of the Adjudicator’s investigation they could have defined the dispute as being whether or not on the basis of the letter of the 2 nd July 2004 and the information contained with it, Berry were entitled to an extension of time beyond the 2 nd February 2004 they wholly failed to do so. Even when, in the Referral Notice, they did refer to the extension of time being correct “based on the information provided” they went on in the alternative to ask the Adjudicator “to decide the appropriate extension of time”. That was, it seems to me a completely open-ended and unqualified request not limited in any way to the extension time previously granted or the letter of the 2 nd July 2004. It is fair, I think to note, that in relation to the Notice of Adjudication and the Referral Notice, there was as sometimes happens, a certain amount of rewriting of history going on towards the end of the Adjudication. I refer by way of example only to Mr Smith’s letter of the 18 th October 2004. In that letter he said this:

“Notwithstanding Furlong’s Notice of Adjudication, asked you to decide whether the extension of time granted to the 2 nd February 2004 was correct and the Referral repeated this based on the information provided at the time of the crystalised dispute. We have followed your directions of the 5 th October 2004 to resolve entitlement on the basis of Berry’s submission on extension of time as they were the Claimant, which they are not. In so doing that Furlong’s initial position in respect of extension of time was totally put aside by you, your letter dated 4 th October 2004 refers”.

It seems to me clear that by changing the “is” to “was” and referring to “the information provided at the time” – which is not referred to in the Notice of Adjudication – Mr Smith was becoming aware of the open-ended nature of his original document.

29. Having reached that firm conclusion on the basis of the document, the remaining question is whether the many authorities on the question of what can or should constitute a dispute in Adjudication, must lead me to the different conclusion to the one that I have outlined above. There are, as has been pointed out, a raft of these decisions. A number of the more important ones have been usefully gathered together by Mr Justice Jackson in the case of AMEC Civil Engineering Ltd –v- The Secretary of State for Transport [2004] EWHC2339. The relevant authorities to which I have had regard and which he summarises there are Monmouthshire County Council –v- Costello and Kemple 5BLR83; Tradex International –v- Surah Hindaguree [1981] 3ODR344; Airey and Brothers –v- Clinger [1982] 1WLR175; Pring Construction with a Commission for New Towns Two Lloyds Law Reports 37; the important Court of Appeal decision in Howkey Shipping Construction –v- Sopex Oil [1988] 1WLR726; Fastrack Contractors –v- Morrison [2000] BLR168; Sindall –v- Soland a decision of His Honour Judge Humphrey Lloyd QC of the 15 th June 2001; and Beck Pappion Ltd –v- Norwest Holst Construction [2003] BLR316. These authorities were summaries by Mr Justice Jackson in Amec from which he then derived seven principles to which I was referred by Mr Bingham. It seems to me that these principles are mainly concerned with the question as to when a failure to respond to a claim or claim document can trigger or crystalise a dispute; as such the principles although not the authorities are not directly relevant to this case, which is more concerned with what can and cannot be relied upon by a party when dealing with a dispute in Adjudication.

30. The starting point for any consideration of that topic is the case of Carter and Nuttall to which I have previously referred. In that case Nuttall had made an extension of time claim which had been rejected. When they commenced Adjudication they did so by reference to an entirely new expert’s Report which put forward an extension of time claim in a way that was entirely different to the previous claim, in particular entirely new events were relied upon as being the cause of the critical delay. The Adjudicator decided that Nuttall were entitled to an extension of time on that basis but Nuttall were not able to enforce the decision because the Judge found that there could be no existing dispute in relation to the claim set out in the Report because the claim had not been provided prior to the Adjudication. The Judge said, at paragraph 36:

“However, when a party has had an opportunity to consider the position of the opposite party and to formulate arguments in relation to that position, what constitutes a dispute between the parties is not only a claim which has been rejected, if that is what the dispute is about, but the whole package of arguments advanced and facts relied upon by each side. No doubt for the purposes of a reference to Adjudication under the 1996 Act or equivalent contractual provision, a party can refine its arguments and abandon points not thought to be meritorious without altering fundamentally, the nature of the dispute between them. However, what a party cannot do in my judgment is abandon wholesale facts previously relied upon or arguments previously advanced and contend because the claim remains the same as that made previously the dispute is the same.”

31. This has been referred to in some of the later authorities as “the restricted view” of the word “dispute”. It has been distinguished in a number of the later cases including the decisions of Her Honour Judge Kirkham in Cowling Construction –v- C F W Architects [2003] BLR241; His Honour Judge Wilcox in London and Amsterdam –v- Waterman Partnership [2003] 91BLR; and His Honour Judge Tulmin QC in AWG Construction Services Ltd –v- Rockingham Motor Speedway Ltd [2004] EWHC888.

32. In these three cases and indeed those referred to in paragraph 33 above, the Courts have stated that the word “dispute” is to be given its ordinary and natural meaning and that it “included any claim which the other party refused to admit or did not pay whether or not there was an answer to the claim in fact in law.”

33. I note that in Sindall His Honour Judge Lloyd QC said:

“I am unable to reach that conclusion on the present facts for their to be a dispute for the purposes of exercising the statutory right to Adjudication it must be clear that a point has emerged from the process of discussion or negotiation that has ended and that there is something which needs to be decided.” In similar vein in Cowling Her Honour Judge Kirkham said:

“In my judgment the approach in Howkey is to be preferred and guided by the straightforward analysis in that case. In Howkey (in the context of the Arbitration Act 1996) the Court of Appeal reminded us that the Courts have generally construed widely the word ‘dispute’ and they declined in that case to construe the word more narrowly in the context of Arbitration. Whilst I accept that the Adjudication process involves short timescales and that there is a risk that the responding party might be ambushed, there is not in my judgment reasons to construe the word dispute more narrowly in the context of Adjudication than in other contexts. I bear in mind the practical difficulties faced by an Adjudicator whose jurisdiction is challenged on the ground there is no dispute, the Court should not add unnecessarily to those difficulties by giving a narrow meaning to the word dispute which would in turn permit a responding party to introduce uncertainties which might be difficult for an Adjudicator to deal with, otherwise there is the risk that the purpose of the 1997 Act may be defeated.”

34. The present position therefore as to the approach of the Courts to the scope or otherwise of the dispute in any given case is probably best summed up by His Honour Judge Tulmin QC in AWG. He analyses the various authorities and it is unnecessary for me to set out in full the relevant paragraphs of his judgment but I do set out one or two starting at paragraph 141:

“In my view each case must depend on the circumstances and the context in which the Referral is made. In some cases the issues referred are very specific in other cases it is clear that the issues are more general and have been so treated by the parties and that there is significantly more room for the case to be developed. The test in each case is first what dispute did the parties agree to refer to the Adjudicator? And secondly, on what basis? If the basis which is argued in the Adjudication is wholly different to that which a Defendant has had an opportunity to respond in advance of the Adjudication, this may constitute a different dispute not referred to the Adjudicator. Or put another way, in so far as the Adjudicator reaches a decision on the new issues it is not responsive to the issues referred to him.” At paragraph 144 he said:

“It is important that a Court should approach the question of what is a dispute with robust commonsense which takes into account the nature of the dispute and the manner to which it has been presented to the Adjudicator. I bear in mind that having an award enforced against a party is a serious matter for that party and there are circumstances where there is no alternative to saying that the basis on which the dispute was referred to the Adjudicator was essentially different from than upon which the Adjudicator based his decision.” At paragraph 145 the Judge dealt with his ability or otherwise to reconcile Nuttall and Carter with the other cases and a bit later at paragraph 149 he concludes that he cannot adopt in full the approach taken by His Honour Judge Seymour in that case. At paragraph 146 the Judge said:

“It follows from this that within the limits which I have described an Adjudicator is not confined to considering rigidly only the package of issues, facts and arguments which are referred to him.”

35. I take on board all of the principles in the authorities which I have sited above. Plainly I have to take a robust view in relation to what is comprised in the word dispute and I also have to approach this case on its particular facts. Taking on board the facts as set out above and the principles derived from these authorities, I consider that even if, which I do not accept, that Section D could be classified as a new claim for an extension of time, it formed part of the dispute which was referred by Furlong to Adjudication.

36. Of course in coming to that view I am considerably strengthened in my analysis of the point that swayed the Adjudicator in the first place. Namely that Berry were responding to this claim, they were not the referring party; they did not start the Adjudication. They had to defend themselves as best they could against the suggestion that their only entitlement to an extension of time was to the 2 nd February 2004 and that liquidated damages should be deducted for the period of delay thereafter. They were not to be taken, in my judgment, as having agreed that in some way they could only defend themselves with half a shield relying on some matters of fact but not others. It seems to me that that would be an absurd result. In my judgment Berry were entitled to take whatever points they liked to defend themselves against this assertion and the Adjudicator was obliged to consider all such points.

37. It seems to me that this is a classic example of what His Honour Judge Thornton QC was talking about in Fasttrack Contractors –v- Morrison where he said:

“The scheme [that is the Adjudication Scheme] gives the Adjudicator two powers: to take initiative in ascertaining the facts in the law… and to resign if the dispute varies significantly from the dispute referred to him… These powers show that it is possible that a dispute that has been validly referred to Adjudication can in some circumstances, as the details unfold during the Adjudication, become enlarged and change its nature and extent. If this happens it is conceivable that at least some of the matters and issues referred… which are not previously encompassed within a pre-existing dispute could legitimately become incorporated within the dispute that is being referred.” In similar vein it seems to me that what happened here was also the sort of thing envisaged by His Honour Judge Lloyd in the other case involving Sindall namely, K N S –v- Sindall which is 75, LR71 to the effect that:

“A party to a dispute who identifies the dispute in simple general terms has to accept that any ground that exists which might justify the action complained of is comprehended within the dispute for which Adjudication is sought”.

38. It seems to me that this is precisely the position here. Having made a general reference to the Adjudicator to decide the question of extension of time, Furlong cannot now complain because in seeking to defend themselves against that point Berry have raised a variety of matters which on Furlong’s approach are new. Furlong sought a resolution of that entitlement to an extension of time and they claimed positively that such an extension of time did not extend beyond the 2 nd February 2004. Berry can defend themselves against that assertion and if that means referring to matters which were not part of a previously made formal claim then there is nothing to stop Berry from doing so.

39. Accordingly I conclude that even if Section D did somehow constitute a new claim it was material which the Adjudicator was entitled to take into account when deciding the wide ranging dispute referred to him by Furlong the jurisdiction challenge fails. It is unnecessary therefore for me to decide whether or not Furlong voluntarily accepted his jurisdiction, it was always part of the Adjudicator’s jurisdiction to consider all the points put forward by Berry in defence of the assertion that their entitlement was limited to an extension of time to the 2 nd February 2004.

PROCEDURAL IRREGULARITIES

40. The remaining question is whether even though the Adjudicator was entitled to consider Section D he dealt with it in some way unfairly.

41. By way of background I should say in my judgment the Adjudicator did all that he could to ensure that both parties had sufficient time to deal with Section D. Section D was served on the 21 st September 2004 and it was not until the 11 th October 2004 that Furlong responded to it, which was a total of 20 days. In the context of an Adjudication which should have taken just 28 days from start to finish that was, it seems to me, more than adequate. I have already made the point that the response from Furlong did not suggest that there were any matters with which they could not deal.

42. As to the Procedural Irregularity it seems to me that before me Mr Bingham has put these points with considerable fairness and not a little skill however, as he recognises they are not straight forward. The first point is that the Adjudicator did not have enough time to deal with the Adjudication because of the introduction of Section D and should have warned the parties to that effect. In this regard Furlong rely on paragraph 40 of the Decision. I shall therefore read paragraph 40 in full because it seems to me to be important. In it the Adjudicator said:

“Both parties have made numerous submissions and have advanced a mass of documentary evidence in the form of witness statements, letters, programmes, progress reports, orders and delivery notes for materials and the like in support of their respective cases. Both parties have relied on this mass of evidence in support of their totally opposed assertions as to the reasons for delay in completion of Berry’s work until the 27 th July 2004. In the timescale of Adjudication, even with the extension of time granted to me by the parties it has simply not been possible for me to make the full analysis of this mass of evidence which would be appropriate in litigation or arbitration where the analysis would in any case probably have been carried out by experts for both sides. While I have carried out as much analysis as has been possible my decision is therefore based to a large extent on an objective overall view of events, causes and effects.” At paragraph 36 of his Statement, Mr Dove translates this paragraph into a statement by the Adjudicator that he did not have sufficient time to carry out the necessary analysis, and he goes on to say that it is clear that that was because of the introduction of Section D. On the basis of all the evidence I reject that assertion and therefore this part of Furlong’s case. 43. It seems to me that the Adjudicator’s comments at paragraph 40 were general and did not relate specifically to Section D. More importantly, it seems to me that no-one could expect an adjudicator operating on a tight timetable and obliged to reach a decision on every possible dispute that could arise on a building contract that took a year to perform, could properly deal with each point with the same care and detail as if the point was being decided in Litigation or Arbitration. This is Adjudication, which is an entirely different form of dispute resolution. It seems to me that ultimately that is all the Adjudicator is saying in this paragraph and I regard it as unexceptionable and a simple reflection of the realities of making final account claims like these in Adjudication. 44. Furthermore, in my judgment, it does not lie in the mouth of Furlong to criticise the suitability of the Adjudication process for these sorts of claims when they themselves started this Final Account Adjudication. They clearly thought, for better or for worse, that there was an advantage to be gained in starting an Adjudication which encompassed all the disputes and, they would have hoped, scored an early victory, despite the fact that the Adjudicator would always be struggling to deal in proper detail with everything in the time: they therefore took a risk and in the event it seems to me it backfired. For them now to complain about the result of the process that they put in hand, seems to me not only wrong and unfair but misconceived. 45. As I have said, in my judgment paragraph 40 of the Adjudicator’s decision is unexceptionable. The comments are a reflection of the summary nature of Adjudication generally and the complexity and difficulty of this type of Adjudication in particular. 46. Mr Bingham contended that if an Adjudicator runs out of time and cannot produce a fair decision within the time he should say so and not go on to make an unfair award. In my submission that is right and to that extent therefore, I would agree not only with Mr Bingham but with the analysis of His Honour Judge Tulmin QC in CIB –v- Burse. Here, just as in CIB –v- Burse despite the mass of material, the Adjudicator felt that he was able to come to a proper decision on the matters raised before him. I have seen nothing to suggest that the decision in this case was, or even might have been, unfair. On the contrary, it seems to me that the Adjudicator in this case produced a detailed and painstaking decision which properly reflected all the material with which he had been provided. I reject any suggestion that the decision, or the way it was arrived at, was or even might have been unfair. I have already said that this argument which is founded entirely on paragraph 40 reads far too much into paragraph 40 and effectively has an Adjudicator saying things which I do not believe are there. Finally, on this question of timing I am bound to note that the Adjudicator warned the parties that he might need longer than the 26 th October to produce his decision, he did that in his letter of the 19 th October. In the event he did not need that further time and produced his decision by the 26 th October. It might be thought that that is the best possible evidence that the Adjudicator did not need a time beyond the 26 th October. 47. Furlong’s final complaint was that the result of the Adjudication was unfair because the Adjudicator, having effectively encouraged Furlong to seek from Berry a considerable amount of further documentation, then wrote on the 18 th October 2004 to hint that if Berry did not produce the documents, that would be reflected in the result of the Adjudication. A course, Furlong would say that was not in the end reflected in the result of the Adjudication because Berry got a complete extension of time. Furlong complained that although Berry did not produce the documents they were still found to be entitled to that full extension of time. 48. Mr Bingham contends that these events, and in particular the letter of the 18 th October 2004 amounted to effectively a Procedural Irregularity on the part of the Adjudicator and he relies by analogy on a decision in respect of Arbitration namely, V Networks Ltd –v- E Connect Wireless International Ltd. That was a case in which at paragraph 90 Mr Justice Coleman sets out what is required in order to establish Serious Injustice under Section 68 of the Arbitration Act. He makes it plain that:

“The element of Serious Injustice in the context of Section 68 does not in such case depend on the Arbitrator having come to the wrong conclusion as a matter of law or fact, but whether he was caused by adopting inappropriate means to reach a wrong conclusion, whereas had he adopted appropriate means he might well have reached another conclusion favourable to the Applicant. Thus, where there has been an Irregularity of Procedure it is enough if it is shown that it caused the Arbitrator to reach a conclusion unfavourable to the Applicant which, but for the Irregularity he might well never have reached, provided always that the opposite conclusion is that it is reasonably arguable. Above all it is not merely appropriate for the Court to try the material issue in order to ascertain whether substantial injustice has been caused, to do so would be an entirely inappropriate inroad into the autonomy of the Arbitrary process.

49. On the basis of the information which I have, it seems to me that an

Irregularity has simply not been made out on the facts. The relevant part of the Adjudicator’s letter of the 18 th October 2004 said this:

“I therefore ask Furlong and HCC on their behalf, to consider very carefully whether it is really necessary for the establishment of their case, although accurately the reputation of Berry’s case, for the volume of material which DCL has indicated involved, to be copied and sent to them and to me, process which itself would take some time and not inconsiderable costs, followed by the process of analysis and comment by HCC for Furlong. It is possible that DCL for Berry, will then argue that they have a right to respond to Furlong’s submissions on this further evidence. They may well argue as DCL have already done in their letter, that delivery tickets etc. are not necessarily conclusive evidence that delays were due to later deliveries, as they may seek to show that deliveries were postponed because of previous delays, making it undesirable for materials to be delivered until they could be used. I understand that this whole process will take at least until the end of this week, and that it will require at least another week for me to finalise my decision.” As a result of that paragraph, Mr Smith of HCC, chose not to pursue further these outstanding delivery tickets, a point that was noted in the Adjudicator’s letter of the 19 th October 2004. It therefore appears that everyone, but in particular the Adjudicator, had reached the point where they had concluded that they had enough information to resolve the matters that were in dispute in the Adjudication. 51. For these reasons I do not believe that the point raised in respect of the documents and their non-provision gave rise to, or could have given rise to, any irregularity of the sort referred to in E Networks. In any event, it seems to me that it is impossible for the Court to reach the view that these further delivery tickets would have made any difference to the outcome of the Adjudication; it seems to me that the clear hint in the Adjudicator’s letter of the 18 th October is that they would not. Accordingly the necessary requirement of demonstrating the real possibility of injustice is also not made out. 52. I should conclude by referring again to the Adjudicator’s letter of the 18 th October. There the Adjudicator said:

“My task is certainly to arrive at a decision which, so far as practically possible, is soundly based upon evidence so that the parties may accept it as being a reasonable resolution of the dispute.”

On all the evidence I have seen, I have no hesitation in concluding that that is precisely what the Adjudicator did. His decision is therefore binding on the parties until it is the subject of a final decision in Mitigation or Arbitration. In those circumstances I grant the declaration sought by Berry.

 

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