CG Group Ltd v Breyer Group Plc [2013] EWHC 2722 (TCC)

This summary was provided by CMS Cameron McKenna LLP.

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

summary

(1) The broad scope of the dispute referred to the Adjudicator in this case meant that he had jurisdiction to decide the case on the basis that he did. (2) Where, as in this case, there were extensive issues raised on the written submissions between the parties in the adjudication which provided a variety of permutations upon which the adjudicator had to decide, the Court should not have to carry out a relatively minute examination of all the arguments and contentions put forward by the parties in the adjudication to seek to determine whether the final permutation in the exact form as found to apply by the adjudicator was or was not specifically highlighted by a party. If the permutation as found is covered by the presented arguments, it should be a rare case for a natural justice breach to be found.

Technology and Construction Court, Mr Justice Akenhead.

Background

In April 2012, Breyer Group plc (“Breyer”), as main Contractor, entered into a sub-contract with CG Group Ltd (“CG”), as Sub-Contractor, for interior refurbishment works to kitchens and bathrooms in a development in east London. Clause 8 of the sub-contract dealt with payment and clause 16 with determination of the sub-contract for sub-contractor default. On such determination, CG would be entitled to be paid for the works "properly executed", but Breyer would be entitled to recover any loss and expense caused by the determination. Work started in spring 2012. Following a number of disputes over valuations and payment, the parties had agreed at a meeting on 3 January 2013 that CG would not return to site after the Christmas break.

CG submitted a draft final account in January 2013, valuing the works at about £458,000 (including VAT), with a net sum of about £188,000 said to be due to it. In February 2013 Breyer produced its own valuation, showing that CG had been overpaid by some £184,000 (including VAT).

CG served a notice of adjudication on 8 May 2013 seeking payment for the works carried out under the sub-contract. CG contended among other things that:

  • At the meeting on 3 January 2013 the parties mutually agreed that the contractual relationship should end;
  • Because there were inconsistencies and discrepancies in the contract documents regarding payment terms, the Scheme for Construction Contracts applied;
  • Because Breyer had not given a payment notice or a pay less notice by the dates required by the Scheme, CG was entitled to be paid the amount claimed in its draft final account.

Breyer contended among other things that:

  • At the meeting on 3 January 2013 CG had repudiated the sub-contract;
  • The valuation process to be followed after that meeting was “akin to” what would follow on a clause 16 determination for default by CG;
  • Clause 8 was not relevant to the present dispute;
  • There were no inconsistencies or discrepancies in the contract documents regarding payment terms and even if there were the payment terms of the sub-contract conditions prevailed;
  • The Scheme did not apply to the valuation of CG’s account after determination.

On 3 July 2013, the Adjudicator produced his decision. This decided that:

  • CG had not repudiated the sub-contract at the meeting on 3 January 2013;
  • At that meeting the parties had agreed that CG would leave site but that the sub-contract was not terminated and therefore its terms continued to apply;
  • based on a combination of clause 8 of the sub-contract and the Scheme Breyer had not given a payment notice or a pay less notice by the required dates (albeit that these dates differed from those contended for by CG);
  • CG was therefore entitled be paid the amount claimed in its draft final account.

Breyer did not pay this sum so CG issued enforcement proceedings in the Technology and Construction Court. Breyer argued that the Adjudicator decided the case on a basis that had not been argued by either side, namely that the provisions of clause 8 were applicable. The Adjudicator therefore had no jurisdiction to decide the case as he did; even if he did, he was materially in breach of the rules of natural justice because Breyer had not been given an opportunity in the adjudication to address the point.

Issues

The Court was asked to decide the following issues:

  • Whether the Adjudicator had jurisdiction to decide as he did;
  • Whether the Adjudicator had been in material breach of the rules of natural justice.

Decision

The Court held:

  • the courts are required to respect and enforce an adjudicator's decision unless it is plain that the question which he has decided was not the question referred to him or the manner in which he has gone about his task is obviously unfair. When considering jurisdictional challenges based on an assertion that the adjudicator decided something which was not referred to him or her, the Court will have to analyse what the question or dispute referred to him or her was
  • in this case the dispute was a broadly disputed claim for the net sum resulting from the draft final account. Within that dispute were disputed assertions as to whether the Scheme provisions could be applied and as to whether Breyer had given appropriate notices in time. On that basis, the Adjudicator had jurisdiction to answer in effect the question which was referred to him, namely: what, if anything, was due for payment to CG in relation to its draft final account. The challenge based on lack of jurisdiction would therefore be rejected
  • there were extensive issues raised on the written submissions between the parties in the adjudication which provided in effect a variety of permutations upon which the Adjudicator had to decide
  • it behoves courts who are considering challenges on the grounds of breach of the rules of natural justice to have regard to the constraints under which adjudicators operate when faced with what are often complex legal arguments. It should not be the case that the Court should have to carry out a relatively minute examination of all the arguments and contentions put forward by the parties in the adjudication to seek to determine whether the final permutation in the exact form as found to apply by the adjudicator (being one of many open to him or her to find) was or was not specifically highlighted by a party. If the permutation as found is covered by the presented arguments, it should be a rare case for a natural justice breach to be found
  • in the light of the submissions made in this case, the Adjudicator had not acted unfairly in reaching the conclusion he did. The challenge to the enforcement of the Adjudicator's decision therefore 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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