Brims Construction v A2M Development Limited EWHC 3262 (TCC)

This summary was provided by CMS Cameron McKenna LLP.

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

summary

In this case it was found that a Notice of Adjudication was sufficiently broadly drafted to give the Adjudicator jurisdiction to decide as he did and that in any event the defendant had waived its right to raise a jurisdictional Further, in asking parties to make submissions on a point, a non-legally qualified adjudicator was not impliedly excluding parties from producing further evidence and therefore his conduct could not amount to a material breach of natural justice.

Technology and Construction Court, Mr Justice Akenhead

background

A2M Developments Ltd (“A2M”) contracted with Brims Construction Ltd (“Brims”) in October 2012 for Brims to construct a new care home. The contract was the JCT 2011 form of Intermediate Building Contract with Contractor’s design.

The contract provided that the Date of Possession would be 25 June 2012 and that the first interim payment due date would be ‘July 2012’ and thereafter the same date in each month until the date of practical completion. A footnote said that the first date should not be more than one month after the Date of Possession. The payment clause provided for the Contractor to make an application for interim payment not less than 7 days before each due date, for the Architect to issue an interim certificate 5 days after each due date and that the final date for payment would be 14 days after the due date. Clause 4.10 2 provided that if the Architect failed to issue an interim certificate then the contractor’s interim application would constitute an interim payment notice (clause 4.10.2.1) but that if the Contractor had not made such an application he could give an interim payment notice (clause 4.10.2.2). Clause 4.11.4 provided for the adjustment of the final date for payment where the Contractor gave an interim payment notice under clause 4.10.2.2 and clause 4.11.5 provided for the Employer to give a pay less notice not later than 5 days before the final date for payment.

Issues arose towards the end of the project in relation to payment due up to and including June 2013. Brims dispatched an Interim Application for Payment and Payment Notice to the Quantity Surveyor 28 June 2013 in the sum of £391,630.37 including VAT. A meeting was held between Brims and the Quantity Surveyor on the 8 July 2013 but no agreement was made on a figure that the Quantity Surveyor would recommend to the Architect. Practical completion was certified on 12 July 2013. On the 15 July 2013 the Architect issued an Interim Certificate in the sum of £120,340.30 exclusive of VAT. By letter dated 18 July 2013, A2M’s solicitors issued a Pay Less Notice for the sum of £62,940.30 In reply Brims’ solicitors maintained that Brims had made a valid Interim Application on 28 June 2013 which led to an entitlement to payment for the full amount because no Pay Less Notice was served in time. A2M’s solicitors argued that the ‘due date’ was 25 June 2013 and in effect the 28 June 2013 ‘application’ was not an Interim Application at all but, if the date of Brim’s application was relevant, the date of that application would be 8 July 2013 when Brims met with the Quantity Surveyor. Any such interim application, they argued, would have taken effect with respect to the due date which occurred not more than 14 days after the date of practical completion.

Brims instituted adjudication proceedings. In its notice of adjudication, Brims argued that the Scheme for Construction Contracts applied to the due date and that on the facts, this was, at the latest, 8 July 2013. Brims claimed two amounts in alternative. The first was the amount due pursuant to the Interim Payment Notice issued on the 28 June 2013 (on the basis that clause 4.10.2.1 applied); the alternative, which applied if the application of 28 June 2013 was not an Interim Payment Notice, was the amount due pursuant to the Interim Certificate issued on 15 July 2013. In both cases the final date for payment was 22 July2013 and the pay less notice had not been given in time. In its Referral Notice Brims repeated these two claims in more detail and added that, if A2M’s contentions that the due date was 25 June 2013 and that Brims’ Interim Application was made on 8 July 2012 were correct, the result would still be that A2M should have paid the amount of Brims’ application in full. This was on the basis that the Interim Application would then have constituted an Interim Payment Notice under clause 4.10.2.2. A2M served a response in which it argued that the Interim Certificate was issued in accordance with the contract, that the final date for payment was 8 August 2013 and that the pay less notice had been given in time. The Adjudicator asked both parties to make submissions in relation to the effect of clause 4.11.4 of the contract on the parties’ dispute. A2M’s solicitors asserted that clause 4.11.4 ‘can have no application to the current Adjudication, due to…jurisdictional…barriers…’ This was on the basis that the Referral Notice had purported to expand upon the Notice of Adjudication to add the argument based upon clause 4.10.2.2. The Adjudicator replied that he considered that his jurisdiction encompassed contentions based on clause 4.11.4.

In his decision, the Adjudicator found that due date was the 25 June 2013 and that Brims’ Application for payment dated 28 June 2013 was not a valid Interim Payment Notice for the work done by Brims in June 2013. He decided that Brims’ Application for Payment dated 8 July 2013 was a valid Interim Payment Notice under clause 4.10.2.2 and, applying clause 4.11.4, the final date for payment was 17 July 2013. A2M had not issued a Pay Less Notice in time and therefore Brims was entitled to receive the sum of £263,418.34 plus VAT from A2M.

Brims sought to enforce the Adjudicator’s decision. A2M challenged it on jurisdictional grounds (on the basis that the Notice of Adjudication defined and constrained the dispute to claims for specific amounts of money as asserted in the Notice) and on grounds of breach of the rules of natural justice (on the basis that the Adjudicator only invited submissions on the clause 4.11.4 point and that by necessary implication he did not ask for evidence, which , if A2M had been allowed to submit it, could well have resulted in the claim being dismissed).

Issues

The Court was asked to decide:

  • Whether the Notice of Adjudication was sufficiently broadly drafted to give the Adjudicator jurisdiction to decide as he did.
  • Whether the way in which parties chose and were invited by the Adjudicator to argue matters in the adjudication amounted to a waiver of any jurisdictional challenge.
  • Whether the Adjudicator wrongly shut out one of the parties adducing evidence.

Decision

The Court held that:

  • The Adjudicator had jurisdiction to decide what he did. The real issue between the parties was whether and to what extent Brims was entitled to what it claimed in the 28 June application document. The Notice of Adjudication on its face described the dispute essentially as relating to ‘the failure of [A2M] to pay the amount to which [Brims] was entitled for work done up to 28 June 2013 by the final date of payment’, which was ultimately what the Adjudicator decided upon in favour of Brims. The fact that the Notice of Adjudication did not specifically mention the argument raised by A2M that the application should be considered as having been made on 8 July 2013 was not material.
  • Even if in some way the argument based on the application for payment having been made on the 8 July 2013 was not part of the dispute being referred to adjudication in the Notice of Adjudication, it was clear that A2M waived any right to raise a jurisdictional challenge. A2M did not raise its objection until 14 days after it had served its response since when Brims had deployed its solicitors and itself in producing a not insubstantial reply.
  • There was no material breach of the rules of natural justice on the part of the Adjudicator. He behaved absolutely properly in raising with the parties a point which he believed had not been fully addressed. It could not be said that he was in some way going off “on a frolic of his own” but even if it might be said that this was the case, he was putting to the parties for their response a particular point.
  • When the adjudicator ‘invited’ the parties to ‘address’ him on the effect of clause 4.11.4 and directed that any ‘submissions’ should be filed, he was not excluding or barring the parties from producing any further evidence; in the context of adjudication, part of the submissions could have been an evidential submission. When a non-legally qualified adjudicator calls for ‘submissions’, one can not infer that he was by his words intending to exclude the submission of further evidence.
  • There was no good reason why the adjudication decision should not be enforced. There should be judgment in favour of Brims.

This summary was provided by CMS Cameron McKenna LLP.

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

 

Click here to read full-screen | Click here to print the case