Neutral Citation Number: [2009] EWHC 64 (TCC)

Case No: HT-08-362





Royal Courts of Justice

Strand, London, WC2A 2LL


Date: 28 January 2009


Before :



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Between :






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Mr Sean Brannigan and Ms Lynne McCafferty instructed by the Claimant

Miss O’Farrell QC (instructed by Linklaters LLP ) for the Defendant


Hearing dates: 15 and 28 January 2009

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The Hon Mr Justice Akenhead :


  1. Bovis Lend Lease Limited (“Bovis”) makes an application for summary judgment for enforcement of an Adjudicator’s decision made on 14 November 2008. The Trustees of the London Clinic Ltd (“the Clinic”) are the Defendant.

  2. The case and the adjudication arose out of a contract, dated 8 July 2004, made between Bovis and the Clinic by which Bovis agreed to carry out and complete the redevelopment of 3-5 Devonshire Place, London to form a medical consulting facility. The Clinic is a registered charity. The Building Contract was the JCT Standard Form of Building Contract (1998 Edition), incorporating Amendments 1 to 4 Contractor’s Designed Portion Supplement and as further amended by the parties. The Clinic’s architect was Terry Farrell & Partners (“the Architect”), of which firm a Mr Wade played a major role. The Clinic’s Quantity Surveyor was Davis Langdon LLP (“DL”) of which a Ms Bicknell played a major role.

  3. The building contract completion date was 24 June 2005 but in fact practical completion was achieved on 4 August 2006, 58 weeks later. Although the Architect granted a four week extension of time and DL allowed some £150,000 on account of prolongation costs in its valuations, Bovis applied for further extensions of time and prolongation costs.

  4. In August 2008, Bovis sought to refer to adjudication its claims for extension of time, the recovery of liquidated damages which had been applied by the Clinic with regard to delay and for time and disruption related loss and expense. Mr Anthony Bingham was appointed as Adjudicator and, following the exchange of extensive written submissions and evidence, he produced his decision pursuant to which he ordered that the Defendant pay to the Claimant £4,174,503.78 (inclusive of interest) and that the Clinic reimburse Bovis with regard to his fees and expenses in the sum of £29,803.88.

  5. Issues are raised as to whether or not the Adjudicator had jurisdiction, at least with regard to the loss and expense claim, and as to whether the Adjudicator failed to apply the rules of natural justice. Issues as to severability are also raised.

The Detailed History

  1. During the course of the Works, Bovis applied for extensions of time and prolongation costs. This is reflected, for instance, in Bovis’ Valuation No. 9 which related to work up to 24 January 2004; in that Bovis claimed the sum of £40,000 for prolongation costs. In the early stage, these were clearly “on account” claims for prolongation costs. Initially, up to Valuation No. 11 (in which Bovis’ claim for prolongation costs was some £214,000), DL (and the Architect) allowed nothing for Bovis on the ground that they were “awaiting justification” for the claim. However, following the award of the four week extension of time, the sum of £150,000 was allowed in Valuation No. 12.

  2. As time went on, the on account claims for prolongation costs by Bovis increased to reflect the further delays which were occurring which Bovis contended should attract extensions of time under the contract. For instance, by Valuation No. 22 for work completed up to 31 January 2006, some £1,927,200 was claimed under some 20 heads of financial claim, such as Bovis’ “prolongation preliminaries”, finance costs, enhanced preliminaries and various sub-contractors’ delay-related costs. Again, DL was not prepared to allow anything more than the £150,000 previously permitted. With regard to Valuation No. 29, which related to the period up to 31 August 2006 (following practical completion), the sum of £2,554,300 was claimed for extension of time and prolongation costs. Again, DL only allowed £150,000.

  3. In late 2006, Bovis made applications for further extensions of time. It relied upon the expert report of John Marshall, dated 27 November 2006, and a report of a Mr Sworder relating to problems associated with mechanical and electrical services. Bovis had also retained Navigant Consulting, and in particular a Mr Wort, to produce a preliminary report on loss and expense relating to delays. Mr Wort’s report is dated 30 November 2006 and this was provided shortly thereafter to the Clinic and its professional advisers. Mr Wort identified a sum of £3,669,718 as representing at that stage “the amounts claimed for loss and/or expense”. It was this which then appeared in Bovis’ valuations; thus a figure related to this appears in Valuation No. 31 submitted on 6 December 2006 and again in Valuation No. 32 submitted on 2 February 2007. Attached to this latter valuation was a breakdown relating to the nine heads of cost or loss identified in Mr Wort’s report. The figure totals £3,669,718 from which an allowance is subtracted in relation to supervision costs on variations producing a net sum of £3,561.410, which is the figure which then finds itself in the body of the valuation.

  4. It is clear throughout the period from December 2004 onwards that Bovis made claims through its interim applications for payment which were, bar the £150,000 allowed, rejected, so far as can be ascertained, upon the basis both that the Architect and DL did not consider that Bovis were entitled to extensions of time exceeding the four week allowance, and that the figures put forward in any event needed justification.

  5. I now turn to Mr Wort’s first report. Material parts of it are as follows:

‘1.2.2 This is a preliminary report. At this stage the costs in this report are mostly estimated but are based on Bovis’ … cost data and records for the project and final accounts and costs claims submitted by the work package contractors employed by Bovis … The claim items and costs require further development and substantiation. Bovis … are currently investigating their costs and settling the work packages/final accounts and will be submitting their detailed claims for loss and/or expense in due course.

2.1.1 The following items are claimed in this report:

2.1.2 Loss and/or expense incurred as a result of extensions of time awarded under the Contract and further extensions now sought by [Bovis] in the Preliminary Report of Mr John Marshall …

2.1.3 Loss and/or expense incurred through the provision of additional site supervision and site establishment resources (“Preliminary Thickening”) …

2.1.4 Non-productive overtime costs expended …

2.1.5 Design costs incurred by [Bovis] and the sub-contractors …

2.1.6 Head Office costs arising from greater than planned Head Office staff input.

2.1.7 Finance costs in respect of liquidated damages that [Bovis] consider have been wrongly imposed …

3.2.1 The estimated amount currently claimed for staff costs is £392,557 …

3.2.4 The staff resources currently claimed for the delay period and the planned tender staff, with utilisations assessed by [Bovis], have been priced at tender rates. These estimated costs will be replaced with actual costs in a later claim.

4.2.1 The estimated amount currently claimed [for preliminaries and the thickening] is £427,902. The build-up of this amount is in Appendix 2 of this report. This amount is an estimate for advice purposes that will be replaced by actual, substantiated costs supported by the narratives referred to earlier.

5.2.1 The estimated amount currently claimed is £102,708 which is for the claimed extended period of 42.4 weeks to 4 April 2006. The build-up of this amount is in Appendix 3 of this report. This amount is an estimate for advice purposes that will be replaced by actual, substantiated costs.’

[At paragraphs 6, 7 and 8 are similar statements with regard to non-productive overtime costs, design and sub-contractors.]

“9.2.1 This claim [for head office costs] is currently being prepared. However, for the purposes of this report head office costs are currently at 4% of the total of the claim amounts before the addition of finance costs plus the costs of employing Mr Preston. The 4% is an estimate by [Bovis] of the head office costs compared with turnover.

10.2.1 The amount claimed [in finance costs] is £30,729 … This is a provisional calculation using simple interest. A more detailed calculation will be prepared when the full assessment of the extensions of time has been completed.”

  1. There was a summary at paragraph 11 in which the eight heads of claim were summarised below the following statement:

“The amounts claimed for loss and/or expense are summarised below.”

There then followed this:

“11.1.2 The above amounts are estimated and based on incomplete [Bovis] and sub-contractors’ costs and other data and on the current preliminary report of Mr Marshall. They are therefore subject to amendment when further and better information is available.”

  1. As I have indicated above, the sums referred to as being “claimed” in Mr Wort’s November 2006 report were claimed in the valuation applications for payment which Bovis made after his report was prepared. It is equally clear that those claims were not accepted by DL and the Architect, justifiably or not.

  2. Following receipt of Mr Marshall’s report, Mr Wade on behalf of the Architect carried out an apparently thorough review of the delay and programs relating to the project. By letter dated 16 March 2007 sent to Bovis, Mr Wade sent his detailed “post-Completion Date Review”. He concluded:

“You will note that we have found no grounds to fix a later completion date than the date we gave notification of by cover of our letter … dated 23 March 2005.”

Put another way, Mr Wade was sticking by the four week extension of time which had been granted relatively earlier during the project. The 51 page review looked only at the delay and programming considerations. It did not consider Mr Wort’s quantum report.

  1. There appears to have been some, somewhat desultory, communication between the parties in the months that followed, Bovis complaining to the Architect, for instance, on 27 September 2007 that Mr Wade’s review did not deal specifically with or rebut Mr Marshall’s report. They added:

“We give you and your client notice that should the differences between us proceed to adjudication, then we will seek a direction from the Adjudicator that, if we have not been provided with the report upon which you subsequently seek to rely, your client should be prevented from adducing the same.”

Mr Wade replied on 9 November 2007 saying that they had considered Mr Marshall’s report but they did not accept Mr Marshall’s analysis or conclusions. On 13 November 2007, Bovis submitted their Valuation No. 35 which sought the same payment as before for loss or expense based on Mr Wort’s report of 30 November 2006. Again, that application was not accepted by the Clinic’s professional advisers.

  1. On the basis of Mr O’Donnell’s witness statements (Mr O’Donnell being the in-house solicitor of Bovis), it seems (and it is not challenged) that as from about September 2007 a decision was made within Bovis to pursue the claim for recovery of liquidated damages which had been deducted with regard to the delay together with claims for extension of time and the recovery of loss and expense. Substantial efforts were made over the following months to prepare for such an eventuality. For instance, five witness statements were prepared by mid-April 2008 and a further report from Mr Wort was commissioned, being produced by him on 10 June 2008.

  2. Thus it was that on 7 July 2008, Bovis wrote in the following terms to the Clinic:

“I refer to [the Architect’s] letter dated 16th March 2007, by which they notified BLL of their decision that there are no grounds to fix a later completion date than that notified on 23rd March 2005, namely 22nd July 2005.

BLL have applied for an extension of time by letter dated 18th May 2006. BLL relied on the expert reports issued to you on 30th November 2006 and 4th December 2006.

There is clearly a dispute between … the … Clinic and us in respect of our application and extension of time.

BLL claims:

(1) an extension of time of 40.2 weeks (over and above the four weeks previously granted),

(2) reimbursement of the Liquidated and Assessed Damages paid during this period in the sum of £1,608,000,

(3) loss and expenses arising from this delay and disruption in the sum of £3,437,245.44 less £150,000 already paid by you on account for loss and expense, i.e. £3,287,245.44.

Please pay BLL the total sum of £4,895,245.44 by 12 noon on Monday 21st July 2008.

If the Trustees fail to do so, BLL will proceed to refer this dispute to adjudication forthwith … in accordance with Clause 41A of the JCT Standard Form …

Please find attached BLL’s Draft Referral Notice together with supporting documentation for your consideration. BLL is ready to refer this dispute to adjudication and will do so if the Trustees fail to pay the sums claimed by 12 noon, as stated above. Please notify us as soon as possible if you do not intend to pay the sums claimed.

In the event that you do not intend to pay the sums claimed, it would be sensible for us to agree upon an adjudicator without delay. Please indicate whether you agree to proposal of one of the following three adjudicators …”

The draft Referral Notice had with it Mr Wort’s latest report, with other new expert reports, together with the five witness statements. It referred to some 31 files of contemporaneous documentation which were not enclosed in the package sent to the Clinic under cover of Bovis’ letter of 7 July 2008.

  1. By letter dated 21 July 2008, the Clinic responded as follows:

‘We acknowledge receipt of your letter of 7 July 2008 and confirm that it did not enclose the documents referred to at paragraphs 4.3 and 5 in the draft Referral Notice. Please forward copies as soon as possible.

We are in the process of reviewing the documentation enclosed with your letter and our file for this project …

… our file indicates that your application for an extension was dated 21 October 2006, the “Interim Case” (your letter of 21 December 2006 refers, copy attached) to which was attached two reports issued to us on 30 November (from Mr Marshall, dated 27 November 2006 and from Mr Sworder, dated 30 November 2006) and a further report issued on 4 December 2006 (from Mr Wort, dated 30 November 2006).

On the basis of the material enclosed with your letter of 7 July 2008, it appears that you now rely on a different application for an extension of time as well as two further reports that we had not previously seen dated 2 April (Mr Marshall) and 10 June 2008 (Mr Wort) respectively.

We would be grateful if you could please clarify our understanding of your position and confirm the status of the “Interim Case”.

As you will appreciate, there is a substantial amount of documentation to get through and we are doing our best to consider and digest their contents as soon as possible. We will similarly aim to review the documents referred to in paragraphs 4.3 and 5 of the Draft Referral Notice.

Accordingly, we would be grateful if you would allow us until 18 August to provide you with our considered response to your letter of 7 July. We consider this a reasonable request in the circumstances.

We propose to also, at that time, address the appointment of the Adjudicator.

We look forward to hearing from you.’

  1. Bovis replied promptly on 22 July 2008:

“… I accept that in the case of Mr Wort’s report you have not seen this before. Mr Marshall’s report you will have seen as it is essentially the same document delivered previously. It has, of course, been updated to address the report prepared by [the Architect] delivered by letter dated 16th March 2007 and their refusal to grant any additional extension of time and clearly you will have to consider what we say in response. Additionally, you now have the benefit of our witness statements.

The documents referred to within the draft Referral Notice at paragraphs 4.3 and 5.0 are apart from our list of case authorities documents that you will have seen before and which are within your care, custody and control. In those circumstances, I do not propose to furnish you with these documents, but they will, of course, be supplied in support of our referral when served.

Our letter of 7th July clearly sets out the areas where there is a dispute between the parties and is the basis upon which we propose to proceed.

Given the passage of time since completion of this project your request for yet another month in which to provide us with your considered response to the claim, the existence of which you were well aware, is surprising but given the nature of your request I am prepared to accede to this and allow you until close of business on Monday 18th August 2008.”

Therefore, in the event, the Clinic was given six weeks from 7 July 2008 to respond.

  1. That response came on the due date, on 18 August 2008, in the following terms:

‘We write further to recent correspondence regarding the draft Referral Notice enclosed with your letter of 7 July.

We have devoted considerable time and resources to review and consider the matters raised in the Notice in a relatively short period of time. This difficult task could have been easier had you agreed to (a) provide us with a copy of the bundle of supporting documentation referred to in the Notice and which were clearly intended to be read in conjunction with the Notice, and (b) to clarify the position with respect to previous application(s).

Nevertheless, we have done our best in the circumstances – we have taken the Notice and the documents enclosed with your letter of 7 July at face value and given them due consideration.

With respect to the factual evidence upon which you rely, the first we saw of this was as set out in the five witness statements enclosed with your letter of 7 July. We have reviewed the matters raised in these statements with the relevant personnel involved with the project.

With respect to the expert evidence upon which you rely, you have provided copies of reports prepared by Messrs Marshall, Sworder and Wort respectively. We have likewise considered the contents of these reports with the relevant personnel and the project professional team.

You accept that Mr Wort’s report, stated to be to quantify your claim for loss and expense, had not previously been provided. It appears to us that prior to receiving this report, any application for loss and expense had not been substantiated. Perhaps you could clarify the position in this regard. We understand that this could have implications for the matters to be considered to be “in dispute”.

You also say that Mr Marshall’s report is an updated version from that provided in support of a previous submission. We note that the “updates” to his earlier report include a completely new section. We would have thought it reasonable for Mr Marshall to have identified in the body of his revised report the changes to the original text.

In short, the Notice sets out a very significant claim for which you rely on new evidence in support and in order to substantiate. Notwithstanding the difficulties with reviewing the claim in its entirety as noted above, on our review of the material provided and following detailed consideration of the matters raised in the documents received with your letter of 7 July with our project team and our professional advisers on the project, we do not consider that there is sufficient evidence to support the claim that you set out.

In the event, it is appropriate to point out that, as a minimum, we consider that a valid application under clause 26 of the Contract requires the following additional categories of information to be provided (and which request is hereby made on behalf of Terry Farrell Partnership and/or Davis Langdon):

(1) Each of the documents referred to in Mr Wort’s Report which enabled him to reach his conclusion and in particular [there then follow six categories of documents related to sub-contractors and suppliers].

(2) Copies of your diary records for the project and labour allocation sheets for resources employed.

(3) Where claims are made for overtime working, thickening and design, identify the work (or additional work) undertaken in each instance and the instruction in relation thereto. In the case of Inviron, please provide details of the work undertaken in the pre-construction period, both planned and actual.

(4) Correspondence exchanged with BLL regarding the acoustic/fire partition/ceiling issues.

Finally, as to adjudicators, we do not agree with either of your proposed alternatives. We would suggest instead the parties appoint Mr Paul Darling QC of Keating Chambers.

We would also confirm that our solicitors, Linklaters, are instructed to accept service of any proceedings on our behalf. (Reference: Digby Hebbard).’

  1. By letter dated 20 August 2008 to the Clinic, Bovis notified the Clinic of Bovis’ “intention to refer the following dispute to adjudication”:

“The dispute comprises the following inter-related issues:

(1) Whether and to what extent delay and/or disruption was caused by BLL’s Contract works by reason of matters for which the Clinic was responsible;

(2) The period of any Extension of Time to which BLL is entitled;

(3) BLL’s entitlement to reimbursement of Liquidated and Ascertained Damages deducted during the period of this Extension of Time in the sum of £40,000 per week;

(4) The losses and expenses incurred by BLL by reason of the delay and disruption to the Contract Works.”

The letter also goes in some detail into the Factual Background and the basis for Bovis’s Claim. There is a page’s worth headed “Crystallisation of the Dispute” followed by a “Summary of Redress Sought”. Extension of time of a total of 44.2 weeks was sought (including the four weeks already awarded), together with the recovery of £1,608,000 for liquidated damages deducted and £3,287,245.44 for loss and expense arising from delay and disruption. There were various other aspects of redress sought.

  1. Mr Bingham was duly appointed Adjudicator by the RICS. There is now no complaint that he was in some way improperly or ineffectively appointed.

The Course of the Adjudication

  1. On 26 August 2008, Bovis served their Referral Notice, running to some 53 pages. It was in effect identical to the draft Referral Notice which had been served under cover of Bovis’ letter of 7 July 2008. It was accompanied, as was the draft, by the latest reports of Mr Wort, Mr Marshall and Mr Sworder, together with five witness statements as before (slightly but immaterially amended). Also accompanying the Referral were the 31 files of contemporaneous documentation supporting (purportedly) the claim made. The claim for loss and expense was expressly based upon the June 2008 report of Mr Wort and was said to be supported by the witness statements. The claim for loss and expense was expressly “made under clauses 26.1 and 26.2 of the JCT Conditions of Contract (paragraph 109).”

  2. Mr Hebbard of Linklaters was primarily involved on behalf of the Clinic and emailed Mr Bingham early on 28 August 2008. Later that day, Mr Hebbard again emailed Mr Bingham, reacting to the suggestion made by the Adjudicator that the parties might consider first addressing the question of extension of time and repayment of liquidated damages and later dealing with loss and expense. Mr Hebbard wrote as follows:

‘It is sensible to ignore the element of BLL’s claim for loss and expense for the reasons that you say. However, more importantly, simply, BLL is not in any event entitled to loss and expense under the contract. Clause 30.1.1 (as amended) provides that “as a condition precedent to the issue of any such Interim Certificate, the Contractor shall have submitted to the Architect and to the Quantity Surveyor a claim for payment in respect of amounts eligible for inclusion in an Interim Certificate in accordance with the provisions of clause 30.2. Such claim should be supported by a detailed valuation”.

A quick review of the history of BLL’s “loss and expense position”, demonstrates that BLL haven’t complied with these relevant provisions and therefore have not satisfied the condition precedent. Their interim applications have singularly failed to substantiate claims for loss and expense items by way of detailed valuation …

The first that the Clinic knew of BLL’s current claim for loss and expense and Mr Wort’s 10 June 2008 report on which the claim is based was when the Clinic received a draft referral notice under cover of the letter dated 7 July containing a “loss and expense” section. The nature of this claim was materially different to that which was the subject of the 2006 report from Mr Wort. Indeed, the Mr Wort’s (sic) subsequent report is significantly larger than the November 2006 document.

In short, the Clinic maintain that BLL has never submitted an application for payment pursuant to clause for monies allegedly due as loss and expense and as set out in Mr Wort’s 2008 report. Further, by letter dated 22 July, BLL confirmed to the Clinic that Mr Wort’s report upon which they rely to support this element of the claim had not previously been submitted.

Accordingly, the Clinic would agree that the loss and expense elements of the referral be disregarded entirely by the Adjudicator and the Clinic.

Alternatively, if the loss and expense elements are not disregarded entirely, the Clinic submits that the dispute on loss and expense become the subject of a further adjudication in respect of which the contractual rules would of course apply …’

  1. Under the adjudication timetable, technically, the Response to the Referral was due on 2 September 2008. However, there was a meeting held on 1 September 2008 attended by the Adjudicator, Counsel and Solicitor for Bovis and Mr Hebbard on behalf of the Clinic. There is some (probably immaterial) dispute about what may or may not have been said at this meeting. Mr Bingham having been so invited has submitted a statement to the Court. However, it is probably simpler if I base my findings on the file note which Mr Hebbard himself produced about this meeting. There was a discussion about several jurisdictional challenges (no longer pursued before this Court). The file note continues:

“TB [the Adjudicator] queried why we’d asked this point, was it to gain more time? I said that we did want more time. He said that up until two weeks ago, he may not have had any discretion to grant extensions, however, following recent guidance from Akenhead J, TB now has that discretion. He queried what sort of extension I was seeking and I said until Friday would be suitable, 5 September.

SB [Counsel for Bovis] said that although he cannot understand the grounds upon which are being relied to request an extension his view would be that no extension is warranted because the Clinic has had the claim for almost two months. I said that although we had the claim and the expert reports and witness statements, we’d not been provided with the documents relied upon and forming the bundle. SB said those were common to the parties. I said that regardless, it was a big job to try to get the documents together. I said that we needed time to get through the documents and to consult with the members of the professional team to consider the points in the Referral. I said we were doing our best to get a Response out. He [SB] then agreed to the extension until midnight, Thursday. This extension was then agreed and the procedure became regularised, in other words, there were no points that were going to be taken on the contents of the Referral Bundle and the Adjudicator’s appointment.

TB raised the issue of a meeting with experts. He said that this was something he might like to do and felt could be very productive. He felt that lawyers need not attend. However, he was not going to exclude them. He said that the appropriate time for these meetings would be following the Response. On the material that he has read to date, he would like to definitely meet with Mr Marshall and possibly Mr Wort.

I said that the Clinic had not yet made a decision on expert evidence for the Response … I said that a decision had not yet been taken. However, that as stated we were discussing the points in the Referral with the professional team. I said that if there was not sufficient time to obtain expert reports, then expert evidence could be incorporated into a Response. If the Clinic was not going to include expert evidence with its Response, the nature of the case was going to be opening up the Award/Certificate and in that regard, TB would still want to meet with TFB and Marshall …” (emphasis added)

  1. This was followed by the “Adjudicator’s Notice No. 2” dated 2 September 2008 which recorded that the Response was to be served by midnight 4 September 2008, as agreed at the meeting the day before. The Reply to Response was to be by 18 September 2008 and there was to be liberty to apply to serve a Rejoinder. The Adjudicator also fixed 19 September 2008 for a meeting with the extension of time experts and the Architect and 29 September 2008 for a meeting with loss and expense experts.

  2. The Respondent’s Response to the Referral was served within the extended timetable on 4 September 2008. It is a substantial document, running to 43 pages, and a substantial number of appendices. Only one witness statement was served but no expert reports. Material parts of the Response are as follows:

‘2.1 BLL has not established in the Referral the entitlement to additional time and money that it seeks by this Adjudication.

2.2 The Clinic will demonstrate in this Response that the true causes of delay to completion were not as BLL allege; that their expert analysis is misconceived; and that a significant element of the claim for a declaration as to money should be disregarded as a consequence of it not being part of a dispute capable of adjudication. The Clinic will also explain (a) why BLL’s claims for variation should not be entertained and (b) that [the Architect’s] Post-Completion Review was correct and justified …

2.4 As to the claim for additional money (loss and expense), this cannot be part of the dispute because BLL has failed to submit its claim in accordance with the Contract. In any event, the expert evidence relied upon is fundamentally deficient …

4. The Dispute

4.1 BLL have referred a “Dispute” to Adjudication under clause 41A of the Contract. Clause 41A.1 provides that Clause 41A applies where “either party refers any dispute or difference arising under this Contract to Adjudication” [emphasis added].

4.2 BLL contend that the dispute referred to in this Adjudication includes BLL’s claim for loss and expense in the sum of £3,287,245.44.

4.3 The Clinic’s position is that this loss and expense claim cannot be included as part of the dispute before the Adjudicator, because, even if it could be said that the parties were in dispute about loss and expense, such dispute has not arisen under the Contract.

4.4 BLL’s entitlement to additional money for loss and expense arises under the Contract and indeed, their claim is said to be based on a contractual entitlement. However, BLL have never made an application for payment for (or including) loss and expense in the sum of £3,287,245.44.

4.5 It must follow then that there is no dispute or difference under the contract in respect of this claim.

4.6 By failing to make an application for payment in accordance with the agreed contractual machinery for loss and expense in this amount, BLL is precluded from relying on the Contract to justify referral of a dispute or difference in respect of loss and machinery, to Adjudication, in accordance with Clause 41A.

4.7 Accordingly, the Clinic respectfully submits that the Adjudicator makes a declaration that he has no jurisdiction to decide the dispute on loss and expense as set out in the Referral.

5.1 It is self-evident that BLL’s case is heavily reliant on expert reports of Mr Marshall, Mr Wort and Mr Sworder. The Clinic has carefully reviewed their reports with its own advisers and the project professional team and consider that BLL’s experts have simply got it wrong. This Response will highlight the fundamental flaws in BLL’s expert analysis

[There then follows over the next 32 pages a detailed analysis of the delay claim.]

12.1 For the reasons set out above at Section 1 of this Response, “the Dispute”, the Clinic’s case is that the loss and expense claim in the Referral is not part of the present dispute for the purposes of this Adjudication.

12.2 Without prejudice to that contention, the Clinic’s submissions below are made entirely without prejudice.

[Paragraph 12.9 to 12.14 addresses the defence that because no application for the current claim was ever made in whole or in relation to any individual sum that there was any obligation to pay.]

12.18 Moreover, as the analysis in Appendix 6 shows, the Clinic can legitimately conclude that the Report does not evidence that any further sum is currently due to BLL, for amongst other reasons:

12.8.1 The report is in truth little more than an extensive figures as figures vouching process. It does not fully and properly consider the contract itself …

12.8.2 The Report is not an application for Payment, for which Clause 30 provides a condition precedent requirement, nor a Clause 26 ascertainment.

12.8.3 Further, it is in very many cases devoid of the very details that the Architect and the Quantity Surveyor require to arrive to an ascertainment …

12.8.4 This Report [Mr Wort’s later report] does not provide the documents that are fundamental for a proper analysis and whilst Mr Wort acknowledges that the evidence does not always exist, he includes the sums nonetheless.

12.8.5 Events of BLL’s culpable delay are ignored.’

  1. The Appendix 6 referred to was not included in the documents before the Court, but I was told by Mr Brannigan on behalf of Bovis that it contained 20 pages or more of analysis of the quantum claimed in Mr Wort’s later report. That assertion was not challenged in any way by Miss O’Farrell QC for the Clinic.

  2. On 18 September 2008, Bovis served its Reply to the Response. In the Summary at paragraph 6 the following is stated:

“6.3 The Clinic has employed experienced and competent solicitors. It has obviously taken care with the drafting of its Response. Costs have clearly not been an issue. It has been given every opportunity to put its best foot forward in this Reference and it has taken it;

6.4 It is all the more revealing, then, that the Response is almost entirely unsupported by factual or expert evidence …”

This Reply addresses the Response in some detail but makes emphatically the points that the Response was unsupported by factual and expert evidence.

  1. On 24 September 2008, the Clinic served its Rejoinder to the Reply. It does not address the assertion in effect set out in paragraph 6.3 of the Reply. The following material is however stated:

‘5. “No dispute”.

5.2 The correct characterisation of the dispute is of course fundamental to this, and any Adjudication. The Clinic’s position is that the Adjudicator had no jurisdiction to consider this issue because a loss and expense dispute has not crystallised.

5.3 There is clear authority for the contention that a dispute does not arise unless and until it emerges that a claim is not admitted …

5.5 Whilst the Clinic admits it received the draft Referral Notice, it denies that the failure to admit the claim for loss and expenses crystallised the dispute. The Clinic also denies that BLL must comply with clause 26.

5.6 The draft Referral contained the report from Mr Wort dated 10 June 2008 which the Clinic had never seen. BLL rely on Mr Wort’s report to quantify the claim for loss and expense. The documents provided to the Clinic along with the draft Referral did not contain the necessary information to support a claim for loss and expense …

5.9 The Clinic submits that this 18 August letter did not crystallise the dispute on loss and expense. It is self-evident that further information was required in order for the claim to be considered as an application under clause 26. Rather than “not admit the claim”, the intention of the letter was to request further and necessary information. The Clinic’s view is that the true meaning and effect of this letter will be apparent to the Adjudicator …

5.10 Notwithstanding that a dispute had not crystallised (and without providing further information requested) BLL proceeded to refer a dispute to Adjudication and this dispute includes the claim for loss and expense in the sum of £3,287,245.44.

5.11 On the basis that a dispute regarding this element of the claim has not crystallised, the Clinic submits that the Adjudicator has no jurisdiction.’

The Clinic attached a witness statement from a Mr Lovell.

  1. For logistical reasons, it proved not to be possible to have the meeting before the Adjudicator in relation to loss and expense. However, a full day’s meeting was held before the Adjudicator to address delay and extension of time. This was attended by Counsel for both parties, Mr Marshall and representatives of the Architect. There was cross-examination and questioning. That meeting took place on 15 October 2008. Another witness who attended for the Clinic was Mr Wiltshire of a firm of quantity surveying claims consultants called Pontin Associates, who was also heard.

  2. Up to the time of the decision of the Adjudicator, there were no requests by or on behalf of the Clinic for additional time to prepare or serve further documentation, evidence or submissions other than the two day extension which was agreed on 1 September 2008 for the service of the Response.

The Decision

  1. This was issued on 14 November 2008. In summary, the Adjudicator decided as follows:

(a) that Bovis was entitled to the full extension of time (44.2 weeks) claimed;

(b) that the Clinic should reimburse Bovis for the liquidated damages: a sum of £1,608,000 was ordered to be reimbursed. In addition, interest thereon was allowed in the total sum of £301,088;

(c) against the sum of £3,287,245.44 in respect of loss and expense, he decided that the Clinic should pay the sum of £1,878,257.09; and

(d) he ordered the Clinic to pay the Adjudicator’s fees and expenses.

It is a substantial document and there is some genuine analysis of the delay claim and an item by item assessment of the loss and expense.

  1. Following the Decision, Bovis submitted a VAT invoice for the amounts decided in its favour on 20 November 2008. Following some email communication between Bovis and the Clinic’s solicitors, the latter wrote a letter to Bovis on 5 December 2008 stating as follows:

“As stated in our email of 2 December, the Clinic has repeatedly made the point that the Adjudicator lacked jurisdiction to decide the loss and expense elements of the Referral. In addition, the Clinic will challenge your application on the basis that the timing and manner in which your claim was presented and subsequently prosecuted and dealt with (by way of adjudication) amounted to an abuse of process and a breach of natural justice.”

This latter assertion was made for the first time in this letter.

  1. Proceedings were then issued in the TCC for the enforcement of the decision and the application for summary judgment was heard.

The Clinic’s Contentions in Summary

  1. The Clinic’s position was summarised in the skeleton argument of Miss O’Farrell QC at Paragraph 13:

“(1) The claim for loss and expense made in the Adjudication was new and based on new expert evidence. Therefore, there was no crystallised dispute in respect of the claim and the Adjudicator had no jurisdiction to determine the claim.

(2) The nature and volume of new evidence served by Bovis for the purpose of the Adjudication and the timetable imposed on the Clinic in the Adjudication did not give the Clinic a fair or effective opportunity to respond to the new case. As such, the Decision was in breach of the rules of natural justice and invalid.”

  1. So far as the “no dispute” contention was concerned, reliance was placed on various authorities (to which I will refer below). It was expanded upon in paragraph 18 of the skeleton argument as follows:

“(1) Bovis’ application for prolongation and/or loss and expense contained in its applications for payment did not amount to claims for loss and expense in accordance with Clauses 26 and/or 30 of the Contract …

(2) Mr Wort’s First Report dated 30th November 2006 did not contain a claim for loss and expense in accordance with Clauses 26 and/or 30 of the Contract and has not put forward as such a claim. The Report identified the loss and expense figures as estimated figures for advice purposes that will be replaced by claims for actual and substantiated figures …

(3) Although Bovis intended to included figures for loss and expense in its subsequent applications, they were based on Mr Wort’s preliminary report. Bovis failed to serve any actual and substantiated figures for loss and expense prior to the service of its draft referral in July 2008.

(4) Mr Wort’s Second Report was the first time that Bovis served on the Clinic its loss and expense claim the subject of the Adjudication:

(a) The figures for each element of the loss and expense claim are different to those estimated for the First Wort Report and were included as actual rather than estimated costs.

(b) The report contained much more detailed presentation of the nature of the claims and the figures …

(c) The report referred to 31 appendices of calculations and supporting documentation amounting to some 300 pages of relevant information not previously seen by the Clinic.

(5) Bovis held back service of Mr Wort’s Second Report (completed on 10th June 2008) until it served its draft referral on 7th July 2008 …

(6) Bovis refused to provide the Clinic with much [of] the supporting documentation relied on in support of its new claim prior to service of the Referral Notice.

(7) The Clinic did not have sufficient time to consider the new claim, to obtain an audit of the costs information or to obtain a report in response to the same from its consultants. Such a review would take months (particularly in circumstances where its Project Quantity Surveyor was on maternity leave and its external consultants, Pontins, had been stood down).

(8) In its letter dated 18th August 2008, the Clinic neither accepted nor rejected the new claim for loss and expense. The Clinic reasonably requested additional details of the claim and the supporting documentation that had been deliberately withheld by Bovis …

(9) The Clinic challenged the jurisdiction of the Adjudicator to deal with the loss and expense claim as set out in the Adjudication documents … ”

  1. So far as the natural justice contention is concerned, reference is made to a number of authorities (see below). Some emphasis was placed on the fact that Bovis had had many months to prepare their claims as set out in the draft Referral dated 7 July 2008; arguably that was a 16 month period whilst the Clinic were initially given only two weeks to respond to the draft Referral (albeit extended to six weeks). It was submitted that the way Bovis had behaved “was a clear case of adjudication by ambush” with the result that the Clinic did not have sufficient time to consider the new claims and evidence properly.

  2. Bovis’ contentions are that there was a crystallised dispute by the time that the adjudication was initiated in late August 2008; this dispute covered questions of extension of time, the recovery of liquidated damages and the payment of delay and disruption related loss and expense. Even if there had been no crystallised dispute prior to 18 August 2008, there was certainly such a dispute by then. Bovis through its Counsel argued strenuously that this was not a case of adjudication by ambush; even if it was, that was immaterial if Parliament in effect permitted a party to do what Bovis did here. So far as natural justice is concerned, Bovis argues that, as the Clinic was given all the extra time which it asked for, because it never asked for any more time than it was given and it took during the adjudication, there can be no question that the Adjudicator failed to follow the rules of natural justice.

  3. A further issue arises between the parties as to whether or not it is legally and practically possible to “sever” the Adjudicator’s decision if it be the case that he did have jurisdiction to address the dispute relating to delay, extension of time and the recovery of liquidated damages but did not have jurisdiction to address the loss and expense claim.

The Law

  1. I deal first with the question of dispute and when it crystallises. Jackson J (as he then was) in Amec Civil Engineering Ltd v The Secretary of State for Transport [2004] EWHC 2339 (TCC) said this having reviewed, extensively, the authorities:

‘68. From this review of the authorities, I derive the following seven propositions:

1. The word “dispute” which occurs in many arbitration clauses and also in section 108 of the Housing Grants Act should be given its normal meaning. It does not have some special or unusual meaning conferred upon it by lawyers.

2. Despite the simple meaning of the word “dispute”, there has been much litigation over the years as to whether or not disputes existed in particular situations. This litigation has not generated any hard-edged legal rules as to what is or is not a dispute. However, the accumulating judicial decisions have produced helpful guidance.

3. The mere fact that one party (whom I shall call “the claimant”) notifies the other party (whom I shall call “the respondent”) of a claim does not automatically and immediately give rise to a dispute. It is clear, both as a matter of language and from judicial decisions, that a dispute does not arise unless and until it emerges that the claim is not admitted.

4. The circumstances from which it may emerge that a claim is not admitted are Protean. For example, there may be an express rejection of the claim. There may be discussions between the parties from which objectively it is to be inferred that the claim is not admitted. The respondent may prevaricate, thus giving rise to the inference that he does not admit the claim. The respondent may simply remain silent for a period of time, thus giving rise to the same inference.

5. The period of time for which a respondent may remain silent before a dispute is to be inferred depends heavily upon the facts of the case and the contractual structure. Where the gist of the claim is well known and it is obviously controversial, a very short period of silence may suffice to give rise to this inference. Where the claim is notified to some agent of the respondent who has a legal duty to consider the claim independently and then give a considered response, a longer period of time may be required before it can be inferred that mere silence gives rise to a dispute.

6. If the claimant imposes upon the respondent a deadline for responding to the claim, that deadline does not have the automatic effect of curtailing what would otherwise be a reasonable time for responding. On the other hand, a stated deadline and the reasons for its imposition may be relevant factors when the court comes to consider what is a reasonable time for responding.

7. If the claim as presented by the claimant is so nebulous and ill-defined that the respondent cannot sensibly respond to it, neither silence by the respondent nor even an express non-admission is likely to give rise to a dispute for the purposes of arbitration or adjudication.’

  1. This was quoted with approval by Clark LJ (as he then was) in Collins Ltd v Baltic Quay Management (1994) Ltd [2005] BLR 63 and, indeed, in the Court of Appeal decision in the Amec case itself [2005] BLR 227. May LJ in the Amec appeal indicated at paragraph 31 certain further observations:

‘31. Each of the parties has accepted in this court that the Judge’s propositions correctly state the law. I am broadly content to do so also, but with certain further observations, as follows:

1. Clause 66 refers, not only to a “dispute”, but also to a “difference”. “Dispute or difference” seems to me to be less hard-edged than “dispute” alone …

2. In many instances, it will be quite clear that there is a dispute. In many of these, it may be sensible to suppose that the parties may not expect to challenge the Engineer’s decision in subsequent arbitration proceedings. But major claims by either party are likely to be contested and arbitration may well be probable and necessary. Commercial good sense does not suggest that the clause should be construed with legalistic rigidity so as to impede the parties from starting timely arbitration proceedings. The whole clause should be read in this light. This leads me to lean in favour of an inclusive interpretation of what amounts to a dispute or difference …

5. I agree with the judge that, insofar as the existence of a dispute may involve affording a party a reasonable time to respond to a claim, what may constitute a reasonable time depends on the facts of the case and the relevant contractual structure. The facts of the case here included that:

(a) Major defects in very substantial works emerged relatively shortly before the perceived end of the limitation period. These required detailed investigation. In consequence, the formulation of a precisely detailed claim was impossible within a short period.

(b) Liability for the defects was bound to be highly contentious, but Amec were bound to be a first candidate for responsibility.

(c) Amec (and others) were inevitably going to resist liability well beyond the perceived end of the limitation period.’

  1. The Amec case involved alleged defects in a viaduct on the M6 motorway. Some five and a half years after practical completion of the construction works some of the roller bearings on the bridge appeared to have failed. Amec, the contractor, was informed of the alleged defects in July 2002 and a meeting took place in September 2002 in which further investigations were discussed, with Amec expressing the view that it was not responsible. In early October 2002, the Highways Agency told Amec that the Secretary of State would be seeking to recover the cost of the works. Amec responded by requesting further information, saying that it could not otherwise formally respond. On 6 December 2002, the Highways Agency sent a formal letter of claim to Amec holding Amec responsible for the defects and inviting Amec to confirm by 10 December that it accepted liability. That letter was received on 9 December 2002 and Amec replied on 10 December in non-committal terms. Very shortly thereafter, the Highways Agency followed the dispute resolution procedure in the engineering contract by referring what it said was the dispute to the Engineer for its decision. Thus it was that issues arose as to whether there had been a crystallised dispute prior to the reference to the Engineer. It is clear that the Court at first instance and the Court of Appeal very much bore in mind that prior to December 2002 over the preceding six months there had been some discussions between the parties about the alleged defects. It was decided that there was a dispute.

  2. Reliance is placed by the Clinic on the decision of HHJ Bowsher QC in Carillion Construction Ltd v Devonport Royal Dockyard [2003] BLR 79, in which the Judge considered the point at which it could be said that a dispute had arisen in the case of a claim which it was said required further clarification or consideration. It is doubtful whether this decision, in so far as it addresses the issue as to when a dispute may crystallise, can survive the decision in Amec . It was a case in which the contractor submitted an application in mid-April 2002, effectively the claim which it pursued to adjudication. Further information was sought in relation to this claim by the Employer. HHJ Bowsher QC materially said as follows:

‘51. Now this present case is obviously different. DML did not just ignore Application 33, they asked for further information. That is an every day occurrence in the construction industry and if every request for information was regarded as a dispute leading to adjudication there would not be enough adjudicators to go round …

53. I entirely agree with Judge Gilliland’s statement of principle [in Cruden Construction Ltd v Commission for the New Towns [1995] 2 Ll. Rep. 387 at 393] and with his application of principle to the facts of that case, but how should the principle be applied to the facts of this case? It would be most undesirable if a practice grew up of examining in minute detail the terms of letters between the parties to ascertain the precise details of any dispute there set out, and then compare those details with the details of what was put before the adjudicator.

I can see that some lawyers might be tempted to take that course. A broader approach is required. Application No. 33 was made and it was not paid. Is that enough to make a dispute? In one sense there was a dispute. The paying party was denying that payment was due at least until some verification was forthcoming. But DML were not denying the claim outright, nor were they ignoring it; they were asking for clarification. The best approach to clarification that they got was so close in time to the notice of adjudication that they had no opportunity to respond to it. The conduct of the adjudication indicates that, if given a reasonable opportunity to respond, there would have been a dispute, but that is not the point.

54. This is not as plain a case as the one before Judge Gilliland, but I take the view that, in the words of Judge Gilliland, this is a case where DML at the date of the adjudication notice:

“… has not in fact been told and is unaware in what respects it is alleged to have broken his obligations.”

I therefore find that on this additional ground the adjudicator was lacking in jurisdiction …’

  1. Unless the claim as presented in a given case is “nebulous and ill-defined” (as suggested in Jackson J’s seventh proposition), the fact that a claim for payment is refused or not accepted on the basis that insufficient information has been provided will usually at least give rise to a dispute, part of which is whether or not sufficient information had been provided and, part of which, even if sufficient information had not been provided, would be whether there was some legal or contractual requirement for such information to be provided before a claim can be established as good. As has been said in the Court of Appeal however (see above), one needs to look at the history of the alleged dispute and consider the claim, which may or may not be rejected or not admitted, in context. Judges need to be cautious about requests for information made by a potential defending party in adjudications following receipt of a claim in circumstances in which the context suggests that it has a good idea what the claim is about.

  2. In determining whether and when a claim is disputed, it is necessary to differentiate between whether a point taken by the potential defending party is one which truly goes to the issue as to whether there is a dispute and a potential substantive defence to the claim in question. Analysis will be required.

  3. If a claim is presented which has never been put in any form before, it may take somewhat more than the day in the Amec case before a dispute can be said to arise. It may well be that, if the response to such a claim is a request for some further information, particularly in circumstances where the claiming party indicates a willingness to provide such information, a dispute may not arise until later.

  4. Once it is clear that there is a crystallised dispute, it is necessary to differentiate between the substance of the dispute which is then referred to adjudication (or arbitration) and the evidence needed to support or contest that disputed claim. The fact that some of the evidence has not been formally or informally submitted by the claiming party before the adjudication is not, and is certainly not necessarily, in itself determinative of the ambit of the referred dispute.

  5. Turning to the requirement that adjudicators apply the rules of natural justice, this has now been accepted for some years as a valid ground to challenge the enforcement of an adjudicator’s award. Dyson LJ in Amec Capital Projects Ltd v Whitefriars City Estates Ltd [2005] BLR 1 said at paragraph 14 of the judgment:

“The common law rules of natural justice or procedural fairness are two-fold. First, the person affected has the right to prior notice and an effective opportunity to make representations before a decision is made. Secondly, the person affected has the right to an unbiased tribunal. These two requirements are conceptually distinct. It is quite possible to have a decision from an unbiased tribunal which is unfair because the losing party was denied an effective opportunity of making representations. Conversely, it is possible for a tribunal to allow the losing party an effective opportunity to make representations, but be biased. In either event, the decision will be in breach of natural justice, and be liable to be quashed if susceptible to judicial review, or (in the world of private law) to be held to be invalid and unenforceable.”

This current case is not concerned with issues of bias. The real complaint is that the Clinic had insufficient notice of the claim and did not have an effective opportunity of responding to Bovis’ claims.

  1. It was accepted by both parties (properly in my view) that a breach of the rules of natural justice must be material in order to give rise to a challenge to an adjudicator’s decision; authority for that is Cantillon Ltd v Urvasco Ltd [2008] BLR 250 and CJP Builders Ltd v William Verry Ltd [2008] BLR 545 and the authorities referred to in those two cases.

  2. Various other matters of principle are also agreed (properly in my view) by the parties:

(a) The fact that a dispute is complex or involves consideration of large volumes of material does not necessarily mean that any decision reached within an adjudication is procedurally unfair (see CIB Properties. Ltd v Birse Construction [2005] BLR 173).

(b) The mere fact that there has been an “ambush” by the claiming party in an adjudication does not in itself amount to procedural unfairness (see London & Amsterdam Properties Ltd v Waterman Partnership Ltd [2003] EWHC 3059 (TCC) at paragraph 179).

  1. With regard to the question of “ambush”, the statutory framework of the Housing Grants Construction and Regeneration Act 1996 is one which enables a party to a construction contract to refer anything, which might be classified as a dispute to adjudication, in the ordinary course of events for a decision to be provided by the adjudicator within 28 days of the reference. Therefore, the threshold to a reference to adjudication is simply and only that there is a crystallised dispute. Thus, if a dispute has arisen by 23rd December in a given year, the referring party may refer that dispute to adjudication on 24 December. That might give rise to an assertion that there has been an “ambush” because the defending party may well have insufficient time, given the Christmas break common in the construction industry, to prepare its defence. It is not uncommon, similarly, for claiming parties to refer matters to adjudication during the summer holidays when it is known that key personnel of the defending party are away. Again, this might be said to be an “ambush”. However, for better or for worse, Parliament does not expressly give an adjudicator the power to extend the 28 days by reason of that fact. However, there is a sensible school of thought which suggests that in those circumstances an adjudicator can in effect decline to accept the appointment on the grounds that justice cannot be done or the adjudicator can simply say to the claiming party words to the effect: “Unless you agree to an extension of time I will not be able to produce my decision within 28 days.” Indeed, that is commonly what adjudicators will do and it is a very rare case when the claiming party does not accede to some extension of time accordingly.

  2. So far as “severability” is concerned, I addressed this matter in Cantillon Ltd v Urvasco Ltd [2008] BLR 250 at paragraph 63:

“On the severability issue, I conclude, albeit obiter in the result, as follows:

(a) The first step must be to ascertain what dispute or disputes has or have been referred to adjudication. One needs to see whether in fact or in effect there is in substance only one dispute or two and what any such dispute comprises.

(b) It is open to a party to an adjudication agreement as here to seek to refer more than one dispute or difference to an adjudicator. If there is no objection to that by the other party or if the contract permits it, the adjudicator will have to resolve all referred disputes and differences. If there is objection, the adjudicator can only proceed with resolving more than one dispute or difference if the contract permits him to do so.

(c) If the decision properly addresses more than one dispute or difference, a successful jurisdictional challenge on that part of the decision which deals with one such dispute or difference will not undermine the validity and enforceability of that part of the decision which deals with the other(s).

(d) The same in logic must apply to the case where there is a non-compliance with the rules of natural justice which only affects the disposal of one dispute or difference.

(e) There is a proviso to (c) and (d) above which is that, if the decision as drafted is simply not severable in practice, for instance on the wording, or if the breach of the rules of natural justice is so severe or all pervading that the remainder of the decision is tainted, the decision will not be enforced.

(f) In all cases where there is a decision on one dispute or difference, and the adjudicator acts, materially, in excess of jurisdiction or in breach of the rules of natural justice, the decision will not be enforced by the Court.”

  1. The starting point is the analysis of what is the referred dispute (or disputes). If there is a disputed claim A and there is another claim B which has not yet got to a stage of being disputed, and the claiming party refers A and B to adjudication, there is on analysis only one dispute being referred, namely A because that is all that is in dispute. Even if, mistakenly, the adjudicator adjudicates on A and B, that part of his decision which addresses dispute A will be enforced unless it is simply not possible verbally or mathematically to identify what his decision on A alone is.

Discussion – Jurisdiction

  1. It is wholly clear that up to March 2007 there was an expanding dispute between the parties as to the responsibility for the delays which had occurred on the project. However good or bad the arguments or assertions put forward by Bovis were, the bare fact of the matter is that claims were made for substantial extensions of time, and only four weeks’ extension was allowed by the Clinic and its professional advisers. Thus, by March 2007 there was a clear dispute as to Bovis’ claim for substantial extensions of time exceeding 44 weeks. That encompassed the deduction of liquidated damages in a substantial sum by the Clinic in relation to what it asserted were the culpable delays on the part of Bovis. There is no real challenge to the proposition that there was as from March 2007 and probably before a dispute in this regard.

  2. So far as loss and expense is concerned, there were succeeding applications by Bovis for payment for sums related to delay and disruption. It is clear, on the evidence before the Court, that until late 2006 these claims were for monies on account rather than by way of a substantiated claim for loss and expense.

  3. However, following the service of Mr Wort’s first report in early December 2006, rather more detail was provided in relation to the claim for loss and expense. It is impossible, in my judgment, to read Mr Wort’s first report as containing anything other than a claim for sums of money representing loss and expense, albeit that it was clearly put on the basis of estimated costs and losses with actual costs to be provided at a later stage. For what it was worth, so far as Bovis’ claim for loss and expense as contained in Mr Wort’s report and the succeeding applications for interim payments were concerned, I have no doubt that they were disputed. The applications for payment based on that report were not accepted by the Clinic or its professional advisers. A primary reason why they were not accepted was that, if no further extensions of time were due over and above the four weeks allowed, there was no legal basis for any or any significant amount of loss and expense over and above the sum of £150,000 already certified and paid on account. A further reason was that the sums claimed were rejected as unjustified and unsubstantiated.

  4. It was in that context that one needs to consider what happened in July and August 2008. What was submitted by Bovis in its letter of 7 July 2008 in effect was an updated claim for extension of time, recovery of liquidated damages and for loss and expense. So far as the claim for delay and extension of time is concerned, it was not materially different from that which had been put forward before. It was supported by some different evidence and information at least to a limited extent, but it was essentially and substantially the same.

  5. So far as quantum was concerned, as Miss O’Farrell QC properly accepted, the real difference between the first and second Wort reports is that the latter provided (alleged) actual cost and loss figures as opposed to the estimated figures contained in the first report. There was a substantial amount of new information and evidence in terms of witness statements and accounting documentation provided for the first time at this stage. However, this needs to be looked at in the context of the fact that over many months up to late 2007 applications for payment for loss and expense had been made including that adumbrated in Mr Wort’s first report. The heads of loss and expense were effectively the same, albeit the figures were substantially different. The only difference between the two is that in the latter there was a more detailed breakdown of the heads of subcontractors’ claims for loss and expense.

  6. I do not have to decide whether or not the “new” quantum claim put forward in the draft referral was so new that it amounted to a new claim. I have formed the view that the whole of the contents of the draft referral were in effect and in substance disputed by the Clinic. My reasons are as follows:

(a) One needs to examine the Clinic’s letter of 18 August 2008 in the context that the Clinic had indicated on 21 July 2008 that it was intending to revert with its “considered response” to Bovis’ letter of 7 July 2008.

(b) It is clear on the face of the Clinic’s letter of 18 August 2008 that the Clinic and its professional advisers had given “detailed consideration [to] the matters raised” in that letter.

(c) The Clinic had provided that “detailed consideration” within the time limit which they themselves had asked for: whilst the letter of 7 July 2008 called for a response within two weeks, the Clinic had asked for an additional four weeks. That request had been granted by Bovis.

(d) Upon any proper interpretation of its letter of 18 August 2008, the Clinic was rejecting the claims (both as to time and as to money) put forward in or by the letter of 7 July 2008. Its expression that “we do not consider that there is sufficient evidence to support the claim that you set out” is the clearest defence being put forward that the whole claim (extension, liquidated damages return and loss an expense) is being rejected because it is not substantiated, properly or at all. That might have been or might prove to be a good defence. It is in one sense a classic “non-admission” defence.

(e) However, a further defence and challenge to jurisdiction is put forward which is that no valid application has been made under Clause 26 of the Contract. That is why the Clinic makes a request in this letter on behalf of the Architect and DL for a number of documents. Again, and I make no finding about that, this might be or might have been a valid defence. The argument is based on Clause 26.1 of the building contract conditions, which materially says as follows:

“If the Contractor makes written application to the Architect stating that he has incurred … direct loss and/or expense (of which the Contractor may give his quantification) in the execution of this Contract for which he would not be reimbursed by a payment under any other provision in this Contract … or because the regular progress of the Works or of any part thereof has been … materially affected by any one or more of the matters referred to in Clause 26.2; and if and as soon as the Architect is of the opinion that the direct loss and/or expense has been incurred … or that the regular progress of the Works or any part thereof has been or is likely to be so materially affected as set out in the application of the Contractor then the Architect from time to time thereafter shall ascertain, or instruct the Quantity Surveyor to ascertain, the amount of such loss and/or expense which has been or is being incurred by the Contractor; provided always that:

26.1.1 The Contractor’s application shall be made as soon as it has become, or should reasonably have become, apparent to him that the regular progress of the Works or of any part thereof has been or was likely to be affected as aforesaid; and

26.1.2 The Contractor shall in support of his application submit to the Architect upon request such information as should reasonably enable the Architect to form an opinion as aforesaid; and

26.1.3 The Contractor shall submit to the Architect or the Quantity Surveyor upon request such details of such loss and/or expense as are reasonably necessary for such ascertainment as aforesaid.”

This was coupled to a specific amendment to Clause 30.1, which deals with interim certificates and interim payments, which sought to provide for a condition precedent to the issue of any Interim Certificate that

“the Contractor shall have submitted to the Architect and to the Quantity Surveyor, to assist them in making the appropriate valuation a claim for payment in respect of amounts eligible for inclusion in an Interim Certificate in accordance with the provisions of Clause 30.2 …”

Thus, it was the case that the letter of 18 August was arguing by way of defence that unless and until further information was provided there had not been a valid application under Clause 26. The clear inference from this was that no sum was due under Clause 26 because no “valid application” had been made.

  1. In the course of argument in Court (and not before) the Clinic by its Counsel stated that no dispute could be said to have arisen in effect unless and until a three month period had elapsed from the letter of 7 July 2008. There was no evidence before the Court, and I am not in a position to infer, that any such period was necessary to enable a dispute to crystallise. Indeed, in fact, the Clinic did not need three months to carry out a detailed consideration of the claims asserted in Bovis’ letter of 7 July. The Clinic asked for a period of six weeks to carry out that exercise and were given six weeks. There is nothing in its letter of 18 August 2008 which suggests that a longer period of time was needed to form the view which is spelt out in that letter that the claim was insufficiently supported by evidence to be justified and that no valid application under Clause 26 had yet been made.

  2. I do not consider that in the circumstances (as they emerged) that there was an “ambush” here by Bovis. Although it called for a response to its letter of 7 July 2008 within two weeks, it readily agreed to the full extension to that period asked for by the Clinic. It is unfortunate (from the Clinic’s point of view) that the quantity surveyor at DL was on maternity leave in July and August 2008 but there is no suggestion that Bovis knew about that or that appropriate assistance could not be obtained from other people at DL or from the Clinic’s quantum expert, Pontin. Even if there was an ambush, that in itself does not mean that a dispute did not crystallise.

  3. Even if the Carillion case decided by HHJ Bowsher QC stood in all respects in the light of the later Court of Appeal decisions, this was not a case in which the Clinic was seeking more information to try to understand what the nature of the claim for loss and expense really was. That is not in any event how the Clinic expressed itself. It stated that the application was not a valid application under Clause 26 and requested more information (interestingly not on behalf of itself but on behalf of the Architect and the Quantity Surveyor).

  4. Thus, on analysis, the argument put forward in the Clinic’s letter of 18 August 2008 was not that no dispute could arise; it was that, apart from the claim not being substantiated, there could be no claim under Clause 26 and no liability for any interim payment under Clause 30 unless and until more information was provided. Indeed, that is what Mr Hebbard of Linklaters alluded to in his email to the Adjudicator on 28 August 2008. That may or may not be a good defence to the loss and expense claim. That became part of the dispute which was referred to adjudication. Indeed, the Adjudicator properly addressed this issue as a matter of substance.

  5. The Clinic argue also that the claim for the loss and expense under Clause 26, if it is not justified, can not and does not arise under the Adjudication Clause which permits disputes “under the Contract” to be referred. The issue as to whether it is a valid claim under the contract is however part of the dispute which has arisen. The adjudication clause is not limited only to claims which are established under the contract. In the ordinary course of events, one would construe the adjudication clause in a purposive and commercial way as inclusive. If the Clinic was right, any disputed claim under the contract in practice would not be referable or could be challenged on a jurisdictional basis.

  6. I am wholly satisfied that the Adjudicator had jurisdiction to address the whole claim which was referred to him including the claim for loss and expense. It is accepted that there was a crystallised dispute at least in respect of the delay, extension of time and recovery of liquidated damages claims.

Discussion – Natural Justice

  1. It is axiomatic, in considering assertions of a failure to apply the rules of natural justice that, absent fraud, it is necessary for the asserting party to establish that it is the tribunal which has been “guilty” of any such breach. The fact that one party has behaved “badly” does not mean in itself that the Adjudicator has acted in breach of the rules of natural justice.

  2. It will be a rare case, if ever, in which it can be said that there is a material breach of the rules of natural justice in adjudication proceedings (in relation to a party not being given a reasonable opportunity to present its case, defence, evidence or other submissions) that the party complaining of such a breach has not raised the issue during the course of the adjudication. Of course, there may be cases where the complaining party does not know of the unfairness. That could arise, for instance, when an adjudicator receives evidence or argument from one party which has simply not been communicated at all to the other party.

  3. I am wholly satisfied that there has been no and certainly no material breach of the rules of natural justice in this case:

(a) A most important factor is that not once during the course of the adjudication did the Clinic or its professional advisers complain or even raise the assertion that it had had insufficient time at any stage during the adjudication to prepare its Response or Rejoinder or do anything else which it wanted to do to put forward its position. It is difficult to criticise the Adjudicator on the grounds that he did not give the Clinic sufficient time to do whatever it wanted to do if the Clinic never asked for more time.

(b) Whenever (and it was only one occasion) the Clinic by its professional advisers asked for more time, the Adjudicator granted such additional time and, indeed, Bovis agreed to it.

(c) The contents of the Response and the Rejoinder do not begin to indicate that insufficient time had been allowed. To the contrary, the letter of 18 August 2008, the Response to the Referral and the Rejoinder demonstrate in candid and express terms that the Clinic had been able to give sufficient time to give a detailed consideration and carefully review Bovis’ claim in the adjudication. Detailed consideration was given by the Clinic both as to time and loss and expense. A whole day was given over to examination and cross-examination of key witnesses (programming, experts and the Architect) to review the time issues. A relatively detailed analysis clearly was done as to the loss and expense which, indeed, found some substantial favour with the Adjudicator who reduced the claim by over 40%.

(d) It was argued that the Adjudicator should have been able to see, infer or deduce that the Clinic had insufficient time. The facts that no point was raised on this topic by the Clinic, that their written pleadings did not raise the issue and that the Clinic was represented by well known and highly experienced Solicitors and Counsel wholly undermine that argument.

(e) It is difficult to see how there can have been a material breach of the rules of natural justice where, if it was material, the Clinic or its professional advisers did not see fit to mention it as something which was materially affecting them during the course of the adjudication.

(f) For reasons given above, I do not consider that there was any “ambush”. Even if there was, this is not a term of art and sufficient time was requested, given and taken by the Clinic to address the issues in the adjudication.

The Clinic has simply failed to establish any or any realistically arguable case that there has been a breach of the rules of natural justice.

Discussion - Severability

  1. It follows from the above that, since the Adjudicator had jurisdiction and there has been no breach of the rules of natural justice, the question of severability simply does not arise. If I had had to decide the point, I would only have done so on the basis that the Clinic had established its jurisdictional argument in relation to the loss and expense claim (which it has not). If I had formed the view that the Adjudicator had simply, consciously, not given the Clinic sufficient time to respond (within the constraints of the adjudication timetable available in this case), this would probably not have been a case which would have led to severance. However, on a jurisdictional basis, if I had formed the view that the crystallised dispute did not include the claim for loss and expense, I would have been of the view that that part of the decision which demonstrably related to the extension of time claim and the recovery of liquidated damages could be recovered. The Award was one which was eminently severable. The Adjudicator indicated clearly what “redress” he was granting with regard to the extension and liquidated damages issues. He allowed Bovis a declaration of entitlement to an extension of 44.2 weeks and directed that the Clinic reimburse Bovis liquidated damages in respect of the extension of time together with interest up to 10 June 2008.

  2. The only difficulty would have come with regard to the question of the Adjudicator’s fees and expenses which were not apportioned as between the two parts of the claim. If that had proved an insuperable difficulty, leave to enforce that part of the decision would simply not have been made.


It follows from the above that Bovis’ application for summary judgment succeeds and the Adjudicator’s decision should be enforced.