Mr & Mrs C Shaw v Massey Foundations & Pilings Ltd [2009] EWHC 493

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 held that a party who had been ordered to pay a sum of money by an adjudicator was not entitled to stay court proceedings which had been brought to enforce the adjudicator’s decision in order to commence an arbitration.  The Court also held that the contract in this case was not exempt from statutory adjudication on the grounds that it had been made with a “residential occupier” under s 106 of the Housing Grants, Construction and Regeneration Act 1996 (“the Act”), because, at the time the contract was made, the defendants neither occupied, nor intended to occupy, the property where the works were to be carried out as their residence.

Mr Justice Coulson, Technology and Construction Court (on appeal from Liverpool County Court Technology and Construction Court List)

BACKGROUND

Mr and Mrs Shaw brought two linked applications for permission to appeal from the decisions of Judges MacKay and Platts, both sitting in the Liverpool County Court.  The Shaws lived in Great Moreton Hall, a large country house in Cheshire.  Refurbishment works were carried out by Massey to East Lodge, a separate building owned by the Shaws about a quarter of a mile away on the same property.  At the time of the contract the Shaws did not live, or intend to live, in East Lodge, although the Court found an intention may have been formed later that Mrs Shaw would live there with her mother.

Disputes arose between the parties which Massey referred to adjudication under the Scheme for Construction Contracts implied by Part II of the Act, since the contract did not contain an express adjudication provision.  The Shaws argued that the contract was exempt from adjudication under the Act as they were “residential occupiers” under s.106.  The Adjudicator disagreed and decided the adjudication in favour of Massey.  The Shaws refused to pay and Massey commenced enforcement proceedings in Liverpool County Court, which the Shaws sought to stay under the Arbitration Act 1996.

In the Liverpool County Court, HHJ MacKay declined to stay the enforcement proceedings and granted summary judgment in favour of Massey.  Judge MacKay allowed the Shaws to seek to set aside his judgment on the grounds that the Adjudicator had no jurisdiction since the Shaws were residential occupiers.  HHJ Platts considered this application and agreed with the Adjudicator that the Shaws were not residential occupiers and that the Adjudicator thus had jurisdiction.

ISSUES

The Court considered whether Judges Platts and MacKay had, respectively, been correct to find that the Adjudicator had jurisdiction and that the application for a stay should be refused.

DECISION

HHJ MacKay

The Court held that HHJ MacKay had been right to dismiss the Shaws’ application for a stay.  Absent a want of jurisdiction or a failure to comply with natural justice, the court will enforce an adjudicator’s decision.  The paying party can commence court or arbitration proceedings in order to obtain a substantive decision on the merits, and that may lead to some or all of the money awarded by the adjudicator being repaid to the paying party.  But that does not affect the temporary finality of the adjudicator’s decision, or the imperative that that decision must be complied with and, if necessary enforced by the court.  The fact that the paying party has commenced substantive arbitration proceedings is usually irrelevant to the successful party’s right to enforcement of any judgment.  The only case in which it had previously been held that commencement of substantive arbitration proceedings affected the mechanics of enforcement was an exceptional case (unlike the present) where the winning party did nothing to execute the judgment, given in its favour almost 2 years previously, until a few weeks before substantive arbitration proceedings were due to commence.  

A party who is ordered to pay a sum of money by an adjudicator has promised, pursuant to the terms of the contract implied by the Act, to pay that sum, and that party is in breach of that contract if it does not make prompt payment.  He is not entitled to stay the action (which action has only been necessitated at all by his breach of contract in failing to pay) in order to commence an arbitration. 

HHJ Platts

Section 106 excludes from the ambit of statutory adjudication construction contracts with “residential occupiers” (i.e., construction contracts which principally relate to operations on a dwelling which one of the parties to the contract occupies, or intends to occupy, as his residence).  The Shaws claimed that East Lodge was part of the “dwelling” that was Great Moreton Hall (which they occupied as their residence) because (a) it was part of Great Moreton Hall on the Land Registry entry and title, and (b) East Lodge was an “outbuilding” or “appurtenance” of Great Moreton Hall and a different Part of the Act included these in the definition of “dwelling”.

The Court noted that the definition of “residential occupier” was the key one, not of “dwelling”.  In any case, the definition of “dwelling” in a different Part of the Act was expressed to apply to that Part only.  The classification of the Land Registry was similarly irrelevant to the construction of s 106.  Applying HHJ Platts’ findings that at the time the contract was formed (which Coulson J agreed was the relevant point in time) the Shaws neither occupied, nor intended to occupy, East Lodge, the Court agreed that the Shaws were not “residential occupiers” for the purposes of s 106.  The Adjudicator thus had jurisdiction and the application for leave to appeal must fail.

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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