Ecovision Systems Limited v Vinci Construction UK Limited [2015] EWHC 587 (TCC)

This summary was provided by CMS Cameron McKenna LLP.

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

summary

(1) Where the express, or if not express, implicit assumption underlying the correspondence between the Adjudicator and the parties was that he had given a direction that the Response was to be served within seven days of the Referral, the fact that the direction was initially given before receipt of the Referral did not invalidate the direction.

(2) An Adjudicator has no power to determine what rules of adjudication apply if there is a dispute about those rules and the dispute affects the procedure for appointment, the procedure to be followed or the status of the decision.

(3) A notice of adjudication or purported nomination made under a contractual provision or legislative power which, on a correct analysis, does not apply is invalid.

Technology and Construction Court, His Honour Mr Justice Havelock-Allan QC

BACKGROUND

Vinci Construction UK Ltd (“Vinci”), a building contractor, entered into a sub-contract with Ecovision Systems Ltd (“Ecovision”) on or about 8 December 2010 to carry out the design, supply and installation of a ground source heating and cooling system for an office development called Vanguard House on the Daresbury Science and Innovation Campus in Cheshire. Vinci was the main contractor for the development under a contract with the Northwest Development Agency dated 19 February 2010 (the “Main Contract”).

The Main Contract was based upon the NEC3 Engineering and Construction Contract (June 2005 with amendments in June 2006) and incorporated the Main Option C clauses of that Development Agency.

The Sub-contract was based upon the corresponding NEC3 Engineering and Construction Sub-contract and 16 Appendices. Part One of the Sub-contract Data in the NEC3 Sub-contract form was filled in by Vinci to refer to main Option “A” and secondary Options “X7, X16, X17 and Y (UK) 2”, naming the “President of the Royal Institute of Chartered Surveyors” as the Adjudicator. The dispute resolution Option in the NEC3 Sub-contract Form was Option W2. It was common ground that Secondary Option Z was used and a manuscript insertion under Option Z in the Sub-contract had the effect of incorporating pages 1-50 of the Main Contract which included further dispute resolution provisions.

The Sub-contract therefore contained three sets of terms under which, potentially, either party could request adjudication: (1) Option W2 of the Sub-contract, (2) Option W2 of the Main Contract as amended by Z16, incorporated into the Sub-contract by Appendix 1 and Document A or (3) if neither of the first two was operable or applicable, the Scheme in Part I of the Schedule to the Scheme for Construction Contracts (England and Wales) Regulations 1998 (the “Scheme”). The judge referred to them collectively as “the candidate rules”.

The procedure in each of the candidate rules was different, including the identity of the Adjudicator, the Adjudicator Nominating Body, the applicable timetable and as to the binding (or otherwise) nature of the Adjudicator’s decision.

Ecovision completed the Sub-contract works in or around March 2011. Following an operational failure of the ground source heating and cooling system in December 2012, a dispute arose between Vinci and Ecovision as to the adequacy of the design of the system. Vinci alleged that the design was defective in several respects.

In June 2014 Vinci referred the issue of liability (but not valuation and payment) to adjudication. On 11 June Vinci’s solicitors (“Systech”) served a Notice of Adjudication on Ecovision and said they would be applying to “the adjudicator(s) named in the contract and, if unsuccessful … to an adjudicator nominating body for the nomination of an adjudicator”. Upon inquiry, Systech were told that neither the President of the RICS, who was the Adjudicator named in the contract, nor any Vice-President was free to act and they filed a request for the nomination of an Adjudicator with the RICS. An Adjudicator was duly appointed on 16 June 2014.

During the course of the adjudication Ecovision’s solicitors (“RPC”) disputed the jurisdiction of an Adjudicator nominated by the RICS and requested that Vinci confirm which candidate rules applied. Vinci did not do so. On 27 June 2014 the Adjudicator gave directions and said that he was proceeding under Option W2 of the Sub-contract. Ecovision did not serve a Response, challenged the timetable laid down by the Adjudicator, including whether time for the Decision had been extended, and stated that they would not be participating in the adjudication.

The Adjudicator made his decision on 17 July 2014, granting Vinci a declaration as to liability, and directed that Ecovision should pay his fees.

The Adjudicator’s Decision was challenged by Ecovision on a number of grounds

ISSUES

The Court was asked to decide:

Whether the Adjudicator’s decision was made out of time.
Whether the rules governing the adjudication were a matter of jurisdiction.
Which rules governed the adjudication.
Whether the Adjudicator was biased.

DECISION

The Court granted summary judgment in favour of CSK:

A dispute had crystallised between the parties. Kingwood had not issued a valid Pay Less Notice within the relevant period. When CSK wrote to advise that a reference to adjudication would be made if the amounts it had claimed were not paid immediately the response received was that the claims were “unfounded and will be strenuously defended”. The Adjudicator therefore had jurisdiction to reach the decision.
The sentence, “It is preferred that any of the adjudicators in the attached list are not appointed”, was included in the application to the nominating body for the appointment of the Adjudicator. There was, however, no list attached to the application when it was submitted and CSK’s evidence was that the sentence was included in error. As such, the fraud identified in Eurocom Ltd v Siemens Plc [2014] EWHC 3710 (TCC) (where the claimant’s representatives had fraudulently misrepresented that a list of potential adjudicators could not be appointed for reasons of conflict of interest) had not occurred. There may be circumstances in which a stated preference could amount to a misrepresentation, but this would never be very straightforward.
CSK had proper cash flow reasons for pursuing the claim when they did and the timetable set down by the Adjudicator made the best use of the 28 days available. Kingwood had been in possession of the relevant invoices for a month before the adjudication and there was nothing of any great complexity about the disputes and the matter was easily determinable in 28 days. Furthermore, Kingwood did not request further time from the Adjudicator.
If the Court was wrong to reject the challenges to the adjudications, the challenges, whether by way of jurisdiction or breach of natural justice, had been waived by Kingwood. The challenges were waived by Kingwood’s failure to raise objections at the outset despite being aware of its right to challenge the Adjudicator’s decision and thereafter performed clear and unequivocal acts (such as the payment of the Adjudicator’s fees and the submission of corrections to the decisions) to show that the alleged breaches had been waived.
CSK began trading in July 2013 and its financial figures showed that the company was growing steadily. They did not indicate any reason why CSK would not be in a position to repay some or even all of the sums ordered by the Adjudicator if this were the end result of the dispute. Moreover, the financial position of CSK at the time of the hearing was at least as good, if not better than, the position at the time the contracts were entered into. The stay of execution was therefore refused.

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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