A.T Stannard v James Tobutt and Thomas Tobutt [2014] EWHC 3491 (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, the Court (1) held that the issue of whether an adjudication between two entities could be initiated where an alleged novation of the building contract removed the contractual link between those two parties was a jurisdictional issue and not a threshold issue; (2) found that the defendant had waived the right to challenge enforcement of the adjudicator’s award on this ground; (3) refused to adjourn a hearing for summary judgment because, even if the defendant had not waived its right, the evidence filed by the defendant did not provide an evidential basis for such an argument; (4) rejected an application for indemnity costs because there was “just about an arguable point” that there was a threshold as opposed to a jurisdictional challenge.

Technology and Construction Court, Mr Justice Akenhead.

BACKGROUND

Between 2007 and 2009, James Tobutt and Thomas Tobutt, two brothers trading as a firm, JT Tarmac (“JT”), engaged A.T. Stannard Limited (“Stannard”) to carry out works of repair to carriageways and footpaths  following works undertaken by or on behalf of Thames Water. In February 2010, the Tobutts incorporated their business as a company, JT Tarmac Limited (“the Company”), but from about May 2009  Stannard was employed by JT ‘on behalf of the Company’ on at least two projects, meaning that Stannard would be engaged by the Company on those projects after incorporation.

A dispute arose out of non-payment of retention monies (in the amount of £41,222.69 plus VAT) due to Stannard for works carried out up to May 2009. Stannard referred the matter to adjudication and served the referral notice on JT on 16 June 2014 through ISA Management Consultants (“ISA”), who was representing JT at the time. ISA wrote to the adjudicator on 25 June confirming that JT would participate in the adjudication. On 3 July ISA offered an “initial response” to the referral notice, but a formal response was never served before the adjudicator published his decision on 14 July 2014. Jurisdictional issues were not raised in this initial response or at any stage in the adjudication.

The adjudicator considered the initial response of ISA in his decision but found in favour of Stannard and ordered the payment of retention monies. Following non-payment, Stannard commenced enforcement proceedings. JT filed three witness statements as evidence in advance of the hearing, none of which mentioned the issue of novation of Stannard’s contract from JT to the Company.

At the hearing, JT filed further evidence which, it argued, supported an argument, now made for the first time, that there was no effective threshold referral to adjudication because the contract had been novated to the Company and so there was no contractual basis for Stannard initiating an adjudication at all. JT applied for an adjournment of the hearing to adduce further evidence on the novation issue.

Stannard maintained that this was a jurisdictional challenge, not evidentially supported, which was never raised before the adjudicator and JT had waived any right it had to challenge the enforcement of the adjudicator's decision on that basis. Stannard asked that costs should be awarded to it on an indemnity basis.

ISSUES

  • Whether the alleged novation of the building contract was a threshold or a jurisdictional challenge.
  • If the latter, whether JT had waived its right to raise a jurisdictional challenge.
  • Whether any effective evidential basis for such challenges had been raised.
  • Whether Stannard should be awarded its costs on an indemnity basis.

 DECISION

The Court held that:

  • The novation issue was a jurisdictional challenge, not a threshold challenge. JT's argument had to be that the adjudicator had no jurisdiction because there had been a novation.
  • As this jurisdictional challenge based on novation was never raised before, JT had waived the right to challenge enforcement of the adjudicator’s award on this ground.
  • Even if it remained open to JT to raise the novation issue, the evidence filed by JT did not provide an effective evidential basis for this argument.
  • Accordingly, the jurisdictional challenge was rejected; the application for an adjournment was refused, and there must be summary judgment in favour of Stannard in the full amounts claimed and as decided by the Adjudicator.
  • Stannard was not entitled to indemnity costs; the defence was unsophisticated but it was ‘just about arguable’ that there was a threshold as opposed to a jurisdictional basis of challenge.

 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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