PT Building v ROK Build Ltd [2008] EWHC 3434

This summary was provided by CMS Cameron McKenna LLP.

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

summary

A party who has elected to treat an adjudicator’s decision as binding for one purpose cannot at the same time claim that it is invalid for another purpose.

Mr Justice Ramsey, Queen’s Bench Division, Technology and Construction Court

BACKGROUND

ROK engaged PTB to carry out works in Council-owned properties in Harlow.  PTB claimed ROK had not paid, or paid late, certain payment applications and issued a notice of adjudication.  ROK contended that there was no dispute and said that PTB’s works were over-valued, so PTB issued a second notice of adjudication.  An adjudicator was appointed, to whom PTB issued a referral notice.  ROK challenged the appointment, claiming there was no dispute and the referral notice had not been received within the required 7 days from the first notice of adjudication.  The Adjudicator found there was a dispute at the date the second notice of adjudication was served, and judged the timing of the referral from that date (finding it was served within time).  He accordingly accepted the appointment.  ROK then made a number of jurisdictional challenges, all of which the Adjudicator rejected, deciding PTB was entitled to £314,242.18 plus interest.  ROK then paid the Adjudicator’s fees but not the sums awarded to PTB.

PTB became concerned that the decision would be challenged on the basis of there being “no crystallised dispute”.  To avoid this risk, they commenced a second adjudication on the same dispute as the first.  ROK asked the second Adjudicator to resign since there had already been an adjudication on “[t]he exact same dispute”.  The second Adjudicator did in fact resign, and PTB then sought summary judgement for the amount awarded in the first adjudication.  ROK opposed enforcement.

 ISSUES

PTB argued that ROK could not now claim the first decision was not binding since it had elected to treat it as binding by (a) using the first decision as a challenge to the second Adjudicator’s appointment and (b) paying the first Adjudicator’s fees.  There were also issues as to whether first decision was unenforceable because: the contract was not in writing for the purpose of section 107 of the Housing Grants, Construction and Regeneration Act 1996 (“HGCRA”); the dispute referred to the first Adjudicator had not crystallised or was referred to adjudication in such a way as to amount to a serious breach of the rules of natural justice; PTB had failed to comply with paragraph 7(2) of Part I of the Scheme for Construction Contracts (“the Scheme”), which governed the conduct of the adjudication; or the first Adjudicator had answered the wrong question.

DECISION

Could ROK contend that the decision was not binding?

Referring to previous authority, Mr Justice Ramsay held that a party cannot assert that an adjudicator’s decision is valid and at the same time seek to challenge the validity of that decision: they must elect to take one course or the other.  Since ROK had chosen to assert that the second Adjudicator could not proceed because of the first adjudication, the Judge considered that it had elected to treat the first decision as binding.  Paying the first Adjudicator’s fee also inferred that ROK had elected to treat the decision as valid.  Accordingly ROK could not now challenge the validity of the decision and summary judgment for PTB should be granted.

Other issues

Although not necessary to decide them, the Court also commented on the other challenges to enforcement raised by ROK:

  • No contract in writing: the Court held that where (as here) there was an express term in the contract that a party would provide further information about the works and give instructions for additional works (orally or in writing), the contract was “in writing” for the HGCRA – there was no need for the scope of works to be fully set out in or evidenced in the contract itself.
       
  • No crystallised dispute: the Court held that on the basis of the exchanges between the parties leading up to PTB’s second notice of adjudication there was a sufficiently crystallised dispute as to the proper valuation of PTB’s work for the matter to proceed to adjudication.  That dispute had crystallised by the time of the exchange following the first notice of adjudication at the latest.  The fact that the second notice of adjudication appended a document containing different sums and more detail from that appended to the first notice did not mean that there was a new dispute; it was a continuation of the dispute about the valuation of PTB’s work.  Nor did the additional material render the process so unfair that the result should not be enforced.  ROK were given a fair opportunity to present their case in the context of the adjudication.
  • Breach of Scheme: paragraph 7(2) of Part I of the Scheme requires a referral notice to be accompanied by copies of or relevant extracts from the contract and such other documents as the referring party intends to rely upon.  PTB provided the contract documents one day late.  The Court held that it would be undesirable for trivial breaches of the Scheme to impeach the process of adjudication.  This minor breach did not affect the validity of the process in this case.
  • Wrong question answered: ROK argued that although the sums claimed by PTB in the adjudication were set out in a document headed “Final Account”, the adjudicator had decided what sums were due to PTB as a matter of interim accounting.  The adjudicator had not answered the question which was put to him and therefore the award was not enforceable.  The Judge held that the contract contained no provision for a final account; there were merely applications for payment, which were all to be treated in the same way.  The dispute referred to the Adjudicator concerned sums due to PTB from ROK.  The Adjudicator had been entitled to come to the decision he did on the dispute before him and, in doing so, he answered the question posed to him.

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