All In One Building & Refurbishments Ltd v Makers UK Ltd [2005] EWHC 2943

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The time when a payment falls due under an interim or final application will not be determinative as to whether a dispute has arisen; in this case it was the entitlement to payment that was being denied and therefore it was irrelevant that the time for payment against the application had not yet lapsed. Criticisms as to how an adjudicator deals with apparent contradictions in evidence are not a matter for the court. Were it to have been demonstrated that the company was in insolvent liquidation then it would have been appropriate to refuse summary judgment.

Judge David Wilcox

Technology and Construction Court

All in One Building and Refurbishments Ltd ("AIO") were engaged by Makers UK Ltd ("Makers") in November 2004 as subcontractors to refurbish flats in a development in Northampton. AIO used agency labour and hired the necessary plant.

In July 2005, issues arose between the parties as to the provision of labour to the project by AIO. Makers proposed that in relation to 28 of the flats other subcontractors should undertake AIO's work. AIO countered this by suggesting that it would leave site completely, allowing other subcontractors to undertake its works, in return for a reasonable sum. Makers considered AIO's letter to be an acknowledgment that its works should be sub-let and that the financial package should be based on the value of the work undertaken as at that date. On 29 July, Makers issued a notice of its intention to determine the subcontract. On the same date, AIO issued a confirmation of a verbal instruction by Makers that it had instructed AIO to leave site. The CVI was purportedly signed by Makers' quantity surveyor, Mr Bullen, and was countersigned on behalf of AIO. On 13 August AIO wrote to Makers advising that Makers' actions amounted to a repudiatory breach of contract and terminated their employment, concluding that a dispute existed between the parties and advising that it would claim for damages for Makers' breach of contract.

On 15 August AIO issued a draft assessment of account to Makers. As part of this, AIO included a claim for interest and overheads as a result of the alleged repudiatory breach. This claim was not supported by detailed information. On the same date, AIO issued a Referral Notice stating that the nature of the dispute was the non-payment of AIO's 15 August application, that Makers had failed to serve a withholding notice for that application, and claiming that Makers was in repudiatory breach of contract. The adjudicator made a decision in AIO's favour.

Makers refused to comply with the adjudicator's decision. AIO commenced proceedings for the enforcement of the adjudicator's award. Makers challenged the enforcement of the adjudicator's award on a number of grounds:

  • Makers claimed that there was no dispute between the parties at the time of the Referral Notice. Makers contended that no dispute had in fact arisen between the parties because AIO's assessed account was either an interim payment or akin to a draft final account and the time allowed under the subcontract for payment of that account had not lapsed by the time of the referral.

    Judge Wilcox, referring to Collins Ltd v Baltic Quay Management, and Amec Civil Engineering Ltd v Secretary of State for Transport, stated that the proper approach to the question of whether a dispute has arisen is to adopt a "rigorous and common sense approach" and look at the substance of the claims rather than the labels the parties attached to them. The Judge held that a claim could be considered to be a dispute even though the contractual time limit for paying the interim application, or even a final account, had not lapsed. A distinction should be made between the date for payment and entitlement to payment. It was the entitlement to payment that was being denied in relation to these claims. Judge Wilcox concluded that it was clear in this case that from the very outset the parties both accepted that the contract had been wrongfully brought to an end, but each blamed the other for that. It was clear that Markers was not going to pay the sums AIO was claiming for the alleged financial consequences of the breach, whatever the level of supporting evidence that might have been provided for the interest and overheads claim.
  • Makers' secondary case was that the adjudicator breached the rules of natural justice by deciding to deal with the repudiation damages, i.e. lost profits and overheads claim. Makers contended that the adjudicator conducted an independent exercise that had not been contended for by either party, and fixed a figure of 8.6% for lost profits and overheads. The Judge concluded that, on the facts, the 8.6% was a figure suggested by Makers in July as an appropriate mark-up, and Makers made submissions to the adjudicator on this point during the course of the adjudication. There was no basis for concluding that there had been any procedural unfairness causing prejudice to Markers.
  • Makers also attacked the adjudicator's award on the basis that the vital issues of fact underlying the disputes were resolved in an unfair way thereby prejudicing Makers and offending against the rules of natural justice. This issue related to contradictory evidence given by Mr Bullen, Makers' quantity surveyor, regarding the question of whether he did in fact countersign the CVI. Makers' complaint was that the adjudicator proceeded to a decision without giving the parties the opportunity to adduce evidence on the allegation of fraud and without interviewing Mr Bullen to see what he actually had to say for himself.

The Judge commented that it was striking that neither of the parties, nor the adjudicator, contemplated adjusting the timetable to enable Mr Bullen to give evidence (if he consented to do so). While the Judge was critical of the adjudicator's approach, he held that Makers had failed to demonstrate that there was a breach of the rules of natural justice in relation to the resolution of the repudiation issue. It is not for the court to analyse the adjudicator's reasoning as to how he arrived at his primary factual position and then applied the law to those facts. Criticisms as to how the adjudicator dealt with apparent contradictions in Mr Bullen's evidence was not a matter for the court.

The court granted summary judgment for AIO. Makers sought a stay of execution of the summary judgment on the grounds that AIO might not be able to repay the judgment sum (because, amongst other reasons, AIO ceased trading in October 2005). The Judge, referring to Wimbledon Construction v Cago, held that the profile and substance of the company that Makers chose to deal with when they let the contract had not changed. Although the Judge concluded that in all probability AIO was insolvent and that its present ability to repay was doubtful, he also found that there was no evidence that AIO would or would not repay if it resumed trading, there was no evidence as to when (if at all) AIO might be called upon to repay as no proceedings or arbitration had been initiated, there was an inference that AIO's impecuniosity derived from non-payment by Makers, and that Makers had not demonstrated that AIO was in insolvent liquidation. The Judge refused the stay.

This summary was provided by CMS Cameron McKenna LLP.

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