Roland Horne v Magna Design Building Limited [2014] EWHC 3380 (TCC)

This summary was provided by CMS Cameron McKenna LLP.

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

SUMMARY

When deciding on the jurisdiction of the adjudicator the Notice of Adjudication must be analysed to ascertain what dispute is being referred to adjudication. This should be considered within the context of any previous communications between the parties. In this case it was held that although the adjudicator had jurisdiction to decide whether sums were payable to the referring party, he correctly decided that he did not have jurisdiction to award sums to the responding party as a net sum, as this was not part of the dispute in question. Furthermore, the Court could not decide summarily that a specific amount was due to the responding party on the basis of the Adjudicator’s award as the Adjudicator did not actually  find that the cross claim was proved.

Technology and Construction Court, The Hon Mr Justice Akenhead

BACKGROUND

Mr Horne engaged Magna Design Building Limited (“Magna”) to carry out various works at his flat. The contract sum was £55,000 and the contract incorporated the JCT Minor Works Building Contract 2011.

The contract included provision:

  • for termination of the contractor’s employment if the contractor failed to proceed regularly and diligently  with the works following continuation of such default for seven days from receipt of a notice which has specified such default;
  • that following such termination, the employer may employ and pay others to complete the works; and
  • that following termination no further sum would become due to the contractor other any amount that may become due pursuant to an account to be drawn up following completion of the works and the making good of defects which would take into account among other things the direct loss and/or damage caused to the employer as a result of the termination. 

There were issues between the parties as to the extent to which the works had been completed. It was asserted that the works were supposed to have commenced on 4 November 2013 with an estimated completion date of 7 December 2013. Mr Horne served two default notices on 23 January 2014 and 31 January 2014, by which he purported to terminate Magna’s employment under the contractual provisions summarised above.

On 10 June 2014, Magna served Notice of Adjudication on Mr Horne seeking payment of £16,214.88 which Magna alleged was due for works completed. In the Notice, Magna contended that Mr Horne had no grounds for terminating the contract.

The Adjudicator was nominated by the RICS on 11 June 2014 and on or about 13 June 2014 Magna served its Referral. On 14 June 2014, Mr Horne served a schedule with supporting documents which purported to identify additional costs which he had incurred in completing the allegedly incomplete works.

However, jurisdictional issues were raised and the Adjudicator concluded that whilst he had jurisdiction to decide the validity of Mr Horne’s purported termination of Magna’s employment under the contract and the extent if any to which Magna was entitled to payment for work done, he had no jurisdiction to decide the amount of any balance due to Mr Horne following any justifiable termination.

In his decision, the Adjudicator decided that termination of Magna’s employment occurred effectively and properly on 31 January 2014; he also found that Magna had no entitlement to payment of any part of its claim for £16,214.88; he referred to the fact that Mr Horne had prepared an account which produced a balance of £28,468.19 payable to him and adjusted this down to £27,164.79 in relation to underpaid agreed variations; but he decided that in view of his conclusions as to his jurisdiction it would be inappropriate for him to make any finding on the balance due following termination. He directed that Magna should be liable for his fees amounting to £4,692.

Magna did not pay the Adjudicator’s fees. On 15 September 2014, Mr Horne issued proceedings against Magna claiming the Adjudicator’s fees, some related solicitor’s costs incurred by the Adjudicator, a declaration that the Adjudicator did have jurisdiction to award a sum of £27,164.79 and an order that Magna pay that sum to Mr Horne, with interest. 

Mr Horne applied for summary judgment on all his claims in the proceedings.  Magna accepted at the hearing that it should honour the Adjudicator’s decision in relation to his fee and related solicitor’s costs but argued that the Adjudicator had been right to decide that he did not have jurisdiction to award any further sum to Mr Horne.

ISSUES

The court was asked to decide: 

  • whether Mr Horne was entitled summarily to a declaration that the Adjudicator had jurisdiction to award a net sum to Mr Horne; and
  • whether Mr Horne was  entitled to summary judgment in the sum of £27,164.79.

DECISION

The Court held that: 

  • When deciding on the jurisdiction of the Adjudicator the Notice of Adjudication must be analysed to ascertain what dispute is being referred to adjudication. This should be considered within the context of any previous communications between the parties.
  • In the present case the dispute which was referred was that which was identified in the Notice of Adjudication which reflected the fact that up to that point Magna was claiming that it was entitled to some £16,000 and that the defence to the claim was simply that Mr Horne did not have to pay because he had validly terminated. Mr Horne’s account documentation was not provided until after the adjudication had commenced and whilst the Adjudicator was entitled to consider that documentation to determine whether there was or might be a sum due to Magna, he was right to determine that he had no jurisdiction to award a net sum to Mr Horne.
  • The Adjudicator did not actually determine that a net sum of £27, 164.79 was due to Mr Horne; he had not considered the account in detail.  It was therefore not possible, let alone fair, for the Court to form the view that the Adjudicator would, if he believed that he had jurisdiction, have decided that £27,164.79 was due to Mr Horne.

  

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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