Volker Stevin v Holystone Contracts [2010] EWHC 2344 (TCC)

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-cmck.com/Construction/Construction-Disputes

Volker Stevin v Holystone Contracts [2010] EWHC 2344 (TCC)

Judgment Date: 9 September 2010

summary

 (a) Where an adjudicator makes enquiries of the parties, and allows new material to be advanced as a result, his decision will not be reached unfairly or outside of jurisdiction provided that all parties see the new material and have an opportunity to comment upon it.  (b) A reduction in the sum claimed in an adjudication will not of itself give rise to a valid jurisdictional challenge as it is inevitable that in any complex construction claim the figures will alter as more information becomes available.  (c) The mere fact that an adjudicator knew that a without prejudice offer had been made does not of itself give rise to a valid challenge on the grounds of bias.  (d) The potential insolvency of an unsuccessful, paying party to an adjudication is irrelevant to the issue of enforcement.

Technology and Construction Court, Coulson J

Background

By a subcontract incorporating the NEC3 Standard Form the claimant (“Volker”) engaged the defendant (“Holystone”) to carry out drainage works.  Four months later Volker terminated the contract.  Holystone contended that this termination was not in accordance with the sub-contract, and referred the dispute to adjudication.  The adjudicator found that the termination was valid.  The adjudication did not address the financial consequences of the termination.  Accordingly, Volker commenced a second adjudication seeking the sums due as a consequence of the termination, presided over by a second adjudicator (the “Adjudicator”), who awarded Volker £562k plus interest.  Holystone refused to pay and Volker sought to enforce the second adjudicator’s decision by way of summary judgment.  Holystone, which was not legally represented at the enforcement stage, provided a written skeleton argument and a statement from its technical director.  However, it chose not to attend the hearing of Volker’s application for summary judgment and applied by letter for an adjournment and the fixing of a two-day hearing instead.

Issues

The Court addressed the following issues:

  • Whether the hearing should be adjourned.
  • Whether the Adjudicator had strayed from the agreed contractual procedure, and thereby exceeded his jurisdiction, by making enquiries of the parties and in allowing Volker to submit new material after the agreed deadline.
  • Whether the Adjudicator had erred by allowing Volker, in its Reply to Holystone’s Response, to reduce the sum claimed.
  • Whether the decision was reached in breach of the rules of natural justice by virtue of the fact that the Adjudicator was aware that there had been a without prejudice offer of settlement.
  • Whether the decision should not be enforced on the grounds that enforcement would render Holystone insolvent.

Decision

The Court held:

  • The well-established principles underlying the enforcement of adjudicator’s decisions provided a complete answer to Holystone’s application for an adjournment.  Subject to only any legitimate points that may be raised as to jurisdiction and natural justice, the unsuccessful party is obliged to pay now and argue later.  The application was based upon a misunderstanding of these principles and was accordingly refused.
  • The Adjudicator had not exceeded his jurisdiction by making enquiries of the parties.  An adjudicator must take the initiative and ask for information directly if he feels that he lacks vital information.  An Adjudicator is obliged to make sure that this process is fair, which had been done in this case by ensuring that Holystone saw the new material supplied by Volker and were given the opportunity to comment upon it.
  • It is inevitable in any complex construction claim that figures alter as more information becomes available.  As such, the reduction in the sum claimed by Volker did not mean that the Adjudicator had acted outside of his jurisdiction.  In any event, the notice of intention to refer did not confine the dispute to a particular claim figure but said instead that Volker would seek “such sum as the adjudicator determined”.  There could be no natural justice challenge, as Holystone were given notice of the new figures and commented upon them.
  • The test as to whether there was bias was whether a fair minded and informed observer would conclude that there was a real possibility that the tribunal was biased.  This test was not satisfied in the present case.  The mere fact that an adjudicator knows that a without prejudice offer has been made did not of itself suggest bias: see Specialist Ceiling Services Northern Limited v ZVI Construction (UK) Limited.  Given the outcome of the first adjudication in this case, any adjudicator would have thought it highly unusual if no offer of settlement had been made.
  • There was no evidence that Holystone would go into liquidation if the decision were enforced.  Even if there were such evidence, it would be irrelevant to the issue of enforcement as it would cut across the principle of pay now, argue later which lay at the heart of the enforcement regime.  There was no application for a stay of execution and no evidence of any alleged financial difficulties on the part of Volker
  • Accordingly, the decision would be enforced.

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-cmck.com/Construction/Construction-Disputes

 

 

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