In
CJP Builders Ltd v William Verry Ltd [2008] EWHC 2025 (TCC) Mr Justice Akenhead
considered whether an adjudicator lacked jurisdiction due to the appointment
procedure and if not whether there was a material breach of the rules of natural
justice in the Adjudicator's decision to disregard the delayed Response, due to
non-compliance with the contract specified timetable. Mr Justice Akenhead also
considered whether the amount applied for automatically stood as the amount due
in the absence of notice of the amount due or notice of withholding.
Appointment
Verry conceded in argument that the DOM/2 contract, Articles and Conditions,
were incorporated in the Sub-Contract. There was however a conflict between the
code for adjudication in Clause 38A and a different code in the particular
amendments of Clause 38.1. Akenhead J used Clause 2.2 to resolve the ambiguity
or alternatively the contra preferentem rule in favour of CJP. He held that
Clause 38A governed the adjudication between the Parties, that nomination was by
the RICS and not TeCSA and since that was how the adjudicator was appointed, he
had jurisdiction.
Although not necessary for his decision, Akenhead observed that Verry was
bound by the Adjudicator's decision that the TeCSA Rules were inapplicable.
There was no clear reservation on the matter of jurisdiction, referring to Thomas
Frederic's (Construction) Limited v Keith Wilson [2004] BLR 23 and
The Project Consultancy Group v The Trustees of the Grey Trust [1999] BLR 377. Instead this
became a part of the dispute which the Parties in effect invited the Adjudicator
to resolve; the Adjudicator expressly addressed that issue in his decision. Akenhead J observed that in those circumstances, the Adjudicator was given
jurisdiction by the Parties who effectively concurred in his deciding whether
the TeCSA Rules were applicable.
Breach of Natural Justice
The adjudicator had refused to consider Verry's response because it was late
on the contract specified timetable as modified by party agreement during the
adjudication. Verry argued that the adjudicator had a discretion to extend time
for service of the Response and CJP argued that he did not. Akenhead J held that
the adjudicator did have such a discretion for the following reasons;
- Clause 38A.2.5.1 was not prescriptive and did not bar the Adjudicator's
discretion.
- Clause 38A.2.5.5 allowed the Adjudicator to "set his own procedure"
and gave him an "absolute discretion" in taking the initiative in ascertaining
the facts and the law as he considered necessary. Accordingly he could grant
an appropriate extensions of time.
- Clause 38A.2.5.1 did not state that the Response could not be served later
than the specified seven day period, if the Adjudicator agreed.
- Clause 38A clauses had to be considered with common sense. One needed to
consider what might sensibly happen as a matter of business common sense if
there was some event beyond the control of the Responding Party which
prevented the service of the Response on time. It would be surprising if the
Adjudicator could not, within reason and the constraints of the timetable,
extend time for the service of the Response.
- 38A.2.5.5 gave the Adjudicator an absolute discretion with examples in the
following eight sub-sub-sub-paragraphs.
- One of the entitlements of parties to an adjudication is a right to be
heard, that being the rule of natural justice "Audi Alterem Partes". There was
thus a reasonable expectation of parties to an adjudication that, within
reason and within the constraints of the overall requirement to secure the
giving of a decision within the requisite time period, each party's
submissions and evidence will be considered by the Adjudicator. It was a
draconian arrangement (which the parties were free expressly to agree) that a
party was denied its right to be heard unless it has been given a fair and
clear opportunity to put its case. Very clear wording would be required to
ensure that such a right was to be denied.
Akenhead J suggested that in setting his or her procedure under Clause 38A an
adjudicator could impose "unless order" type arrangements, provided that the
parties were given the right first to argue whether that is appropriate.
Akenhead J summarised the principle succintly in a phrase which no doubt will
often be repeated - It is sometimes said by some commentators that adjudication
is or can be "rough justice". There is no need to make it even rougher by
construing provisions such as those contained in Clause 38A as circumscribing a
party's basic right to be heard.
The adjudicator had made sensible suggestions to solve the perceived problem
of his lack of discretion and had acted openly and honestly. Nonethless Akenhead
J held that he had decided in effect to exclude from consideration the
substantial response both in terms of argument and evidence from his
consideration. It was inevitable that, once he did so exclude such material, he
would come to the conclusion which he did. It was as if the adjudication was an
uncontested claim. There is no hint or suggestion in his decision that he took
into account any aspect of the Response which by then he had in his possession.
AkenheadJ held that the Adjudicator had failed to apply the rule of
natural justice that each party has a right to be heard and to have its evidence
and arguments considered by the tribunal. He held that the breach here was a
material breach for the following reasons:
- In itself, the failure to disregard the whole of Verry's response both
as to argument and as to evidence was and must have been material. There comes
a point when a breach of the rules of natural justice is so pervasive that the
only proper conclusion to come to is that the breach is material.
- It is not necessary for the Court to investigate
the facts to determine whether the adjudicator would have reached a different
decision in substance if he had considered the Response. All that was needed
was that there was a real possibility that the adjudicator could have
reached a different decision. Akenhead J was satisfied that there was a real (as opposed
to fanciful) possibility in the instant case.
- Because Verry decided to stop participating in the second adjudication
on the excluded matters part way through, there was no telling what the adjudicator would have decided
if Verry had pressed its case with force and logic throughout the remainder of
the adjudication.
Accordingly Akenhead J decided that the decision of the adjudicator should not be enforced
and CJP's claim for enforcement
failed.
Amount Due
Akenhead considered whether or not under Clause 21 as a matter of principle
CJP is contractually entitled to be paid the amount of its applications as
claimed by them in the event that no payment notice or no withholding notice is
served.
Akenhead J held not surprisingly that the value applied for by the
Sub-Contractor did not automatically stand as the amount due in the absence of
notices under Clause 21.3.2 or Clause 21.3.3 for the following reasons:
- (a) The Sub-Contract made no such provision contrary to some standard
forms. Clear wording was needed to secure that state of affairs and there were
none.
- By way of analogy the Scheme for Construction Contracts (England & Wales)
Regulations Part 2, Paragraph 2 provided, by way of default mechanism, for
interim payment on a basis equivalent to "an amount equal to the value of any
work performed in accordance with the relevant construction contract during
the period from the commencement of the contract to the end of the relevant
period..." That basis was a value based basis. The Scheme recognised that this
was an appropriate basis which one could properly presume complied with the
parent Act.
- In effect Clause 21.3 provided for the Contractor to value each
application as it came in. However the default mechanism was agreed to be that
the subcontractor would only be entitled to payment of sums properly due in
respect of the Sub-Contract Works.
- The expression was sufficiently clear and comprehensible. Clause 21.4
required the gross valuation to be made by the Contractor to relate to "the
total value of the Sub-Contract Work on-site properly executed by the
Sub-Contractor". The amount to which the Sub-Contractor was entitled and the
maximum which it could expect on an interim valuation was the value of
Sub-Contract Work properly executed (plus any further allowances for materials
and goods on and offsite together with certain other sums referred to in
Clause 21.4). If work has been improperly done then the Main Contractor, Verry,
was not obliged to pay to that extent.
Accordingly Akenhead J held that CJP was only entitled to be paid the
amount properly due for work properly executed by CJP notwithstanding the
absence of a payment notice or a withholding notice under Clause 21.3.2 or
Clause 21.3.3 of the DOM/2 Conditions as amended | 