Clark Electrical Ltd v JMD Developments (UK) Ltd [2012] EWHC 2627

This summary was provided by CMS Cameron McKenna LLP.

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

summary

If two people agree to submit a dispute to a third person, they confer jurisdiction on that person to determine the dispute. Whether a party has agreed to confer jurisdiction on such third person is a question of fact. Where, as here, the agreement is said to derive from correspondence, the Court must construe the correspondence in accordance with the ordinary canons of construction to determine whether there has been a submission. In the present case it was impossible to interpret an e-mail sent by the defendant to the Adjudicator as a submission to the jurisdiction of the adjudicator in the full sense. Nor did payment of an appointment fee by the defendant to the adjudicator have that effect.

Technology and Construction Court, His Honour Judge Behrens

Background

JMD Developments (UK) Ltd (“JMD”) engaged Clark Electrical Limited (“CEL”) to carry out certain electrical works at the premises of Sedacol UK Limited at Selby, North Yorkshire. The site was being developed as an alcohol distillery.

CEL carried out works on the site between September 2011 and January 2012. Disputes arose regarding payment and, on 2 March 2012 CEL served on JMD a Notice of Adjudication on the ground that JMD had failed to make adequate and proper payments. It claimed £177,849.87 plus VAT.

On 5 March 2012, the Adjudicator sent a letter to the parties, enclosing an outline timetable for the adjudication and a copy of his conditions of appointment.  The conditions were headed “In the Matter of the Housing Grants, Construction and Regeneration Act 1996.” Section 9 dealt with the Adjudicator’s fees and provided for an hourly rate and expenses. Section 10 required each party to contribute equally as security for the fees an appointment fee of £6,000.  In his letter, the Adjudicator stated that, in line with section 10, he would raise an invoice and send it to each party in due course.

On 7 March 2012, the Adjudicator wrote to each of the parties enclosing a fee invoice for £6,000 plus VAT said to be due for payment by 14 March 2012. The invoice stated that the moneys were due in respect of the appointment fee as per section 10 of the conditions.

On 7 March 2012, JMD emailed the Adjudicator, explaining that JMD was not familiar with adjudication and did not have representation so would welcome the Adjudicator’s guidance on the procedures and JMD’s responsibilities. The email also stated that JMD had not received from CEL the supporting documents that should have been sent to them under paragraph 7 of the Scheme for Construction Contracts.  JMD requested the Adjudicator’s guidance on this, and anticipated that CEL would agree to an extension of the timetable to account for this and provide the correct documentation to allow JMD to proceed. The email concluded by looking forward to the Adjudicator’s proposal for moving forward and receipt of CEL’s claim.

On 13 March 2012, JMD paid the Adjudicator’s invoice.

Shortly thereafter JMD instructed a consultant to act for them in relation to the adjudication. The consultant wrote to the Adjudicator, drawing his attention to section 105(2) of HGCRA, submitting that the electrical work was carried out for the process and production on a site for construction of excluded plant and was therefore excluded under that section. He contended that the Adjudicator had no jurisdiction to proceed and submitted that the payment of the £6,000 by JMD was not to be treated as its acceptance that the Adjudicator had jurisdiction.

Following further exchanges between the parties, the Adjudicator made a non-binding decision on jurisdiction, agreeing that there was no statutory jurisdiction as the works were excluded under section 105(c)(ii), but stating that there was an ad hoc adjudication agreement contained in his letter of 5 March 2012 containing the terms of his appointment which was accepted by the conduct of the parties in paying the appointment fee.

JMD wrote to the Adjudicator challenging the non-binding conclusion and stating that it would take no further part in the adjudication process. The Adjudicator proceeded and awarded CEL £177,453.88 exclusive of VAT.

CEL then issued proceedings seeking summary judgement for the enforcement of the award. JMD resisted the proceedings, contending that there was no statutory or contractual right to adjudication and that the Adjudicator was wrong to find that the parties had formed an ad hoc adjudication agreement. Accordingly he had no jurisdiction to make the award and that JMD was not bound by it.

CEL accepted that there was no express contractual right to adjudication and that, for the purpose of the summary judgment application, it was arguable that there was no statutory right to adjudication. However CEL contended that it was clear that JMD agreed to be bound by the Adjudicator’s decision in the full sense – i.e. both in respect of the award itself and in respect of his jurisdiction to make the award. In support of this contention CEL relied on JMD’s email of 7 March 2012 and on the payment of £6,000 by JMD.

Issues

The Court was asked to address:

  • Whether JMD had agreed to be bound by the Adjudicator’s decision both in respect of the award itself and in respect of his jurisdiction to make the award with the result that an ad hoc adjudication had come into existence.

Decision

The Court held that:

  • If two people agree to submit a dispute to a third person, then the parties agree to accept the award of that person, or, putting it another way, they confer jurisdiction on that person to determine the dispute. 
  • Where the parties agree to be bound by the adjudicator's decision “in the full sense” they are agreeing to be bound by his decision on jurisdiction (subject to a later challenge – as provided in section 108 of HGCRA).
  • It is a question of fact whether a party submits to the jurisdiction of a third party. It is not a prerequisite of submission that there be a “clear and unequivocal” statement by the party concerned that he will abide by the adjudicator’s decision. Where, as here, the agreement is said to derive from correspondence, the Court must construe the correspondence in accordance with the ordinary canons of construction to determine whether there has been a submission.
  • In this case the email relied upon by CEL was “at the opposite end of the spectrum” to a clear and unequivocal statement. It contained no reference to the adjudicator’s decision at all. It was simply a request for guidance as to the procedure and a request for more time to deal with the matter having regard to the fact that JMD had not, at that time received the relevant documents. In all the circumstances it was impossible to interpret the e-mail as a whole as a submission to the jurisdiction of the adjudicator in the full sense.
  • Nor did payment of the appointment fee by JMD amount to such a submission. It was, at its highest, equivocal. The decision in Linnett v Halliwells [2009] EWHC 319 showed that a party could still be liable for the Adjudicator’s fee even if it contested the jurisdiction. The Adjudicator’s decision on jurisdiction based on an ad hoc agreement was wrong. He did not have jurisdiction. It followed that CEL’s application for summary judgment failed.

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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