England and Wales High Court (Technology and Construction Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT

		19 July 2001

 


Arbitration - Jurisdiction - Arbitration Act 1996, s 32, JCT "Name-Borrowing Provisions - JCT Management Contract, Section 9, - JCT Works Contract, Clauses 1.11, 4.27 and 9 - Whether indemnity and security have first to be provided (yes). Cases considered: Northern Regional Health Authority v Derek Crouch Construction Limited [1984] 1 QB 644 (CA); Lorne Stewart Ltd v William Sindall plc and N W Thames RHA (1986) 35 BLR 109; Gordon Durham & Co Ltd v Haden Young Ltd (1991) 52 BLR 61; Co-operative Wholesale Society Ltd v Birse Construction Ltd (1996) 46 Con LR. 110; (1997) 84 BLR 58 (CA); Beaufort Developments (NI) Ltd v Gilbert-Ash (NI) Ltd [1999] 1 AC 266.

JUDGMENT

1. The applicant, Belgravia, asks for the determination of the jurisdiction of an arbitral tribunal, pursuant to section 32 of the Arbitration Act 1996. The arbitrator has agreed to the application being heard by the court for reasons which will become apparent. The declarations and orders sought are set out later in this judgment. Essentially the application concerns the "name-borrowing" provisions to be found in some of the JCT forms of contract, in this case, an edition of Works Contract/1 which is used in conjunction with the JCT Management Contract, 1987 edition. The application raised a number of familiar questions, some of which have not previously been the subject of argument or decision. The name-borrowing provisions have been considered before, principally in Northern Regional Health Authority v Derek Crouch Construction Limited [1984] 1 QB 644; Lorne Stewart Ltd v William Sindall plc and N W Thames RHA (1986) 35 BLR 109; Gordon Durham & Co Ltd v Haden Young Ltd (1991) 52 BLR 61; and Co-operative Wholesale Society Ltd v Birse Construction Ltd (1996) 46 Con LR. 110 (and see also the appeal: (1997) 84 BLR 58) . I shall refer to these cases later. Crouch has, of course, been overruled by the House of Lords in Beaufort Developments (NI) Ltd v Gilbert-Ash (NI) Ltd [1999] 1 AC 266. Most of the judgments have explicitly recognised the very great difficulties in trying to fathom how in practice the name-borrowing provisions should work. The cases all concerned forms of sub-contract which have since been superseded or changed. A Works Contract within the framework of a JCT Management Contract may not be treated as equivalent to a sub-contract to be used by a nominated sub-contractor (although they have much in common). An arbitrator under the Works Contract has express power to open up, review and revise certificates, valuations and other expressions of opinion. The existence of this power means that one cannot use all the reasoning in the cases as the contracts did not have those words. It was also supposed, following Crouch, that an arbitration clause in a sub-contract which did not so provide precluded an arbitrator from doing what a main contract arbitrator could have done. The fallacy in this supposition was authoritatively exposed and disposed of by Beaufort Developments, so it is now not strictly necessary to have express provision to "open up...". The forms of contract now potentially effective provision for multi-partite arbitration, whether in Section 9 or by the incorporation of the JCT Arbitration Rules or the Construction Industry Model Arbitration Rules. (The effect of such rules does not arise on this application but it is unlikely to do anything other than reinforce the effect of the inclusion of provisions for multi-partite arbitration.) In approaching the issues raised by this application it is necessary and appropriate to start again, as it were, but without disregarding any helpful analyses that have already been made.
2. On 15 August 1995 Belgravia entered in a contract with the second respondent, TWML, for the renovation of 37 Chesham Place and 2 Lowndes Place, London, SW1. The contract incorporated the JCT form of Management Contract. The scheme of this form of management contract is that the management contractor engages works contractors to carry out all the actual work. Payment is governed by clause 4 which includes the following provisions:

"4.1 Payment by Employer

The Employer shall pay the Management Contractor in accordance with the provisions of clauses 4.1 to 4.12.

the Prime Cost of the Project ascertained in accordance with the Second Schedule; and the Management Fee.

4.2 Issue of Interim Certificates – timings

The Architect/the Contract Administrator shall issue Interim certificates stating the amount due to the Management Contractor from the Employer at the following times or periods:

.1 during the Pre-Construction Period: at the period stated in the Appendix under the reference to clause 4.2.1;

.2 from the Date of Possession up to and including the end of the period during which the certificate of Practical Completion is issued: at the period of interim certificates stated in the Appendix under the reference to clause 4.2.2;

.3 after the end of the period of interim certificates during which the certificate of Practical Completion is issued: as and when further amounts are ascertained as payable to the Management Contractor by the Employer provided always that the Architect/the Contract Administrator shall not be required to issue an Interim Certificate within one calendar month of having issued a previous Interim Certificate;

.4 at the time referred to in clause 4.11 (final amounts – Works Contractors).

4.3 Payment of amounts due in Interim Certificates

.1 The Management Contractor shall be entitled to payment of the amounts stated as due in Interim Certificates within 14 days from the date of issue of each Interim Certificate.

.2 Notwithstanding the fiduciary interest of the Employer in the Retention as stated in clause 4.8.1 the Employer is entitled to exercise any right under this Contract of deduction from monies due or to become due to the Management Contractor against any amount so due under an Interim Certificate whether or not Retention is included in that Interim Certificate.

.3 Where the Employer exercises any right under this Contract of deduction from monies due or to become due to the Management Contractor he shall inform the Management Contractor in writing of the reasons for that deduction.

4.4 Ascertainment of amounts due in Interim Certificates

Interim valuations shall be made by the Quantity Surveyor for the purpose of ascertaining the amounts to be stated as due in Interim Certificates.

.....

4.6 After the Pre-Construction Period

The amount to be stated as due in an Interim Certificate to which clauses 4.2.2, 4.2.3 and 4.2.4 refer shall be, as related to a date not more than 7 days before the date of the Interim Certificate, the sum of the following:

.1 the amounts due and payable under the respective Works Contracts ascertained in accordance with Part 2 of the Second Schedule, after the deduction of any retention deductible in accordance with the terms of the Works Contract,

.2 the amounts for site staff, general facilities etc, site facilities, services and materials properly provided by the Management Contractor ascertained in accordance with parts 1, 3A, 3B, 4A, 4B and 4C of the Second Schedule which amounts shall be subject to Retention, together with

.3 the Pre-Construction Period Management Fee,

.4 an instalment of the Construction Period Management Fee adjusted, where appropriate in accordance with clause 4.10.2, being the ratio that the Construction Period Management Fee bears to the Contract Cost Plan Total applied to the sum of the amounts referred to in clauses 4.6.1 and 4.6.2, subject to a maximum of 97% of the amount of the Construction Period Management Fee, adjusted, where appropriate, in accordance with clause 4.10.2, and

.5 any expenditure incurred by the Management Contractor for which he is entitled to reimbursement by the Employer in accordance with clauses 3.21 and 3.22 and nay other costs incurred by the Management Contractor which are not included in clauses 4.6.1 to 4.6.4 inclusive and which are payable by the Employer to the Management Contractor in accordance with the Conditions

less the sum of the following:

.6 any payments to or credits received by the Management Contractor for materials etc which have arisen from the carrying out of the Project,

.7 any payments to or credits received by the Management Contractor which the Employer is entitled to recover in accordance with clause 3.21.2.3 or any other clause in the Conditions, and

.8 the sum of the amounts stated as due in all the Interim Certificates previously issued under clauses 4.2.1, 4.2.2 and 4.2.3.

4.7 Retention – amount

The Retention which the Employer may deduct and retain as referred to in clause 4.6.2 shall be:

.1 3 per cent of any amount as relates to work which has not reached Practical Completion (as referred to in clauses 2.4 and 2.8.1)

.2 1.5 per cent of any amount as relates to work which has reached Practical Completion (as referred to in clauses 2.4 and 2.8.1) but in respect of which a Certificate of Completion of Making Good Defects under clause 2.6 or a certificate under clause 2.8.22 has not been issued.

......

4.9 Final Certificate – ascertainment of Prime Cost

.1 Not later than 6 months after Practical Completion of the Project the Management Contractor shall provide the Quantity Surveyor, unless previously provided, with all documents necessary for the purposes of the ascertainment of the Prime Cost including all documents relating to the accounts of Works Contractors.

.2 Not later than 3 months after receipt by the Quantity Surveyor from the Management Contractor of the documents required under clause 4.9.1, the Quantity Surveyor shall deliver to the Architect/the Contract Administrator a statement of the Prime Cost and of the management Fee (including any adjustment of the Construction Period Management Fee under clause 4.10.3) and the Architect/the Contract Administrator shall send a copy of the statement to the Management Contractor. If the statement refers to any disallowance of any item of cost put forward by the Management Contract or part of the Prime Cost there shall be included in the statement the reasons for such disallowance.

....

4.11 Final amounts – Work Contractors

So soon as is practicable after the end of the Defects Liability Period or the issue of the Certificate of Completion of Making Goods Defects whichever is the later but not less than 28 days before the date of issue of the Final Certificate referred to in clauses 4.12 and notwithstanding that a period of one month may not have elapsed since the issue of a previous Interim Certificate, the Architect/the Contract Administrator shall issue an Interim Certificate which shall include the amounts in respect of Works Contractors payable to the Management Contractor ascertained in accordance with part 2 of the Second Schedule.

4.12 Final Certificate

.1 The Architect/the Contract Administrator shall issue the Final Certificate not later than 2 months from whichever of the following events occurs the latest;

the end of the Defects Liability Period;

the issue of the Certificate of Completion of Making Good Defects under clause 2.6;

the delivery by the Quantity Surveyor to the Architect/the Contract Administrator of the statement referred to in clause 4.9.2.

.2 The Final Certificate shall state:

the sum of the amounts already stated as due in Interim Certificates, and the sum of the Prime Cost and the Management Fee as set out in the statement to which clause 4.9.2 refers

and the difference (if any) between the two sums shall (without prejudice to the rights of the Management Contractor in respect of any Interim Certificates which have not been paid by the Employer) be expressed in the said Certificate as a balance due to the Management Contractor from the Employer or to the Employer from the Management Contractor as the case may be. Subject to any deductions authorised by these Conditions the said balance shall, as from the 28th day after the date of the said Final Certificate, be a debt payable as the case may be by the Employer to the Management Contractor or by the Management Contractor to the Employer."

The Second Schedule provides that the Prime Cost payable to the Management Contractor should include the costs of the Works Contracts. Part 2 says that they are: "The amounts due and payable under the respective Works Contracts whose terms comply with Section 8... ". Section 8 of the Management Contract states:

"8.1 Items of work – Works Contractors

Clause 8.1 to 8.5 shall apply in respect of the items of work to be carried out by Work Contractors which are identified in the Contract Cost Plan or in Instructions.

8.2 Selection of Works Contractors – terms of Works Contracts

.1 The Works Contractors to carry out the items of work so identified shall be selected by agreement in writing between the Management Contractor and the Architect/the Contract Administrator and that selection shall be confirmed in an Instruction. Provided that, save where the Employer or the Architect/the Contract Administrator on his behalf and the Management Contractor otherwise agree, the Management Contractor shall only employ any persons as Works Contractors who will

.1 enter into a contractor on the current unamended standard Form of Work Contract (Works Contract/1 and Works Contract/2) issued by the Joint Contractors Tribunal with the Management Contractor and execute that Contract under seal where this Contract is under seal; and

.2 if so required (as recorded in Works Contract/1) enter into an Employer/Works Contractor Agreement (Works Contract/3) with the Employer and execute that Agreement under seal where the Works Contract is under seal.

Nominated suppliers to Works Contractors

.2 The Management Contractor shall send to the Architect/the Contract Administrator any submissions by a Works Contractor under clause 8.4.1 of the Works Contract Conditions in respect of restrictions, limitations or exclusions in a proposed contract of sale between such Works Contractor and a Nominated Supplier; and the Management Contractor shall not be required to instruct a Works Contractor to enter into a contract of sale with such Nominated Supplier unless and until the Architect/the Contract Administrator has specifically approved in writing to the Management Contractor the said restrictions, limitations or exclusions. Such approval shall be immediately confirmed in writing by the Management Contractor to the Works Contractor. Where any liability of a Works Contractor to the Management Contractor is limited under the provisions of clause 8.4.1 of the Works Contract Conditions the liability of the Management Contractor to the Employer shall be limited to the same extent.

8.3 Duties required from Management Contractor under Works Contracts

.1 The Management Contractor shall fulfil all the duties required from him under each Works Contract.

.2 The Architect/the Contract Administrator shall on the issue of each Interim Certificate direct the Management Contractor as to the amounts in respect of each Works Contractor which are included in the amount stated as due in such Interim Certificate.

.3 Where any Works Contractor requests the Management Contractor, who shall forthwith send such requests to the Architect/the Contract Administrator, that he be informed directly by the Architect/the Contract Administrator of the amount included for him in each relevant Interim Certificate, the Architect/the Contract Administrator shall so inform that Works Contractor.

.4 The Management Contractor shall immediately inform the Architect/the Contract Administrator of all notifications from Works Contractors under clause 2.13 of the Works Contract Conditions of the practical completion of their work together with the management Contractor's observations thereon. When in the opinion of the Architect/the Contract Administrator practical completion of the Works Contractor's work is achieved he shall consent to the Management Contractor issuing a certificate of practical completion to the Works Contractor in accordance with clause 2.14 of the Works Contract Conditions.

8.4 Final payment to Works Contractor

If following a request by a Works Contractor it is desired by the Employer or by the Architect/the Contract Administrator on his behalf to secure final payment to such Works Contractor before the issue of the certificate referred to in clause 4.11, and if such Works Contractor has satisfactorily indemnified the Management Contractor against any latent defects, then the Architect/the Contract Administrator may in an Interim Certificate direct an amount to cover the said final payment.

8.5 Loss and expense caused by matters materially affecting regular progress – Works Contracts

Upon receipt of a written application properly made by a Works Contractor under clause 4.45 of the Works Contract Conditions in respect of matters affecting regular progress of the Works by matters referred to in clauses 4.46.1 to 4.46.7 of the Works Contract Conditions the Management Contractor shall pass to the Architect/the Contract Administrator a copy of that written application together with his comments upon the application. Thereafter, if and as soon as the Architect/the Contract Administrator is of the opinion that the regular progress of the Works Contract or any part thereof has been or is likely to be materially affected as referred to in the aforesaid clause 4.45 and as set out in the application of the Works Contractor then the Architect/the Contract Administrator shall himself ascertain, or shall instruct the Quantity Surveyor to ascertain, the amount of such loss and/or expense in collaboration with the Management Contractor."

3. Article 8 of the Management Contract Agreement provides for the arbitration of disputes, ie

"any dispute or difference as to the construction of the contract or any matter or thing of whatsoever nature arising thereunder or in connection therewith, shall arise between the Employer or the Architect/Contract Administrator on his behalf and the Management Contractor... ".

Section 9 gives further effect to Article 8. It states:

"9.1 Dispute or difference – appointment of Arbitrator

If a dispute or difference as referred to in Article 8 has arisen including a dispute or difference relating to

— any matter or thing left by this Contract to the discretion of the Architect/the Contract Administrator or

— the withholding by the Architect/the Contract Administrator of any certificate to which the Management Contractor may claim to be entitled or

— the rights and liabilities of the parties under section 4, clauses 6.13 and 6.14 or 7.1 to 7.13 or

— the unreasonable withholding of consent or agreement by the Employer or the Architect/the Contract Administrator on his behalf or by the Management Contractor or

— the adjustment of the Management Fee under clause 4.10.2 or 4.10.3 or as to any rate or any addition which ha to be agreed under the Second Schedule or

— the refusal by the Architect/the Contract Administrator to include an item as Prime Cost

then such a dispute or difference shall be referred to the arbitration and final decision of a person to be agreed between the parties to act as Arbitrator, or, failing agreement within 14 days after either party has given to the other a written request to concur in the appointment of an Arbitrator, a person to be appointed on the request of either party by the person named in the Appendix.

9.2 Arbitration – joinder

Provided that if the dispute or difference to be referred to arbitration under this Contract raises issues which are substantially the same as or connected with issues raised in a related dispute between

the Employer and any Works Contractor under an Employer/Works Contractor Agreement, (Works Contract/3); or

the Management Contractor and any Works Contractor under a Works Contract; or

the Works Contractor and any Nominated Supplier to whom section 8 of the Works Contract Conditions applies

and if the related dispute has already been referred for determination to an Arbitrator, the Employer and the Management Contractor hereby agree that

1 the dispute or difference under this Contract shall be referred to the Arbitrator appointed to determine the related dispute; and

2 such Arbitrator shall have power to make such directions and all necessary awards in the same way as if the procedure of the High Court as to joining one or more defendants or joining co-defendants or third parties was available to the parties and to him; and

3 the agreement and consent referred to in clause 9.6 on appeals or applications to the High Court on any question of law shall apply to any question of law arising out of the awards of such arbitrator, in respect of all related disputes referred to him or arising in the course of the reference of all the related disputes referred to him; [and]

save that the Employer or the Management Contractor may require the dispute or difference under this Contract to be referred to a different Arbitrator (to be appointed under this Contract) if either of them reasonably considers that the Arbitrator appointed to determine the related dispute is not appropriately qualified to determine the dispute or difference under this Contract.

9.3 Time of opening of arbitration

Such reference, except

.1 on article 3 or article 4; or

. .2 on the questions

whether or not the issue of an instruction is empowered by the Conditions; or

whether or not a certificate has been improperly withheld; or

whether a certificate is not in accordance with the Conditions; or

whether a determination under clause 6.4.8 will be just and equitable;

.3 on any dispute or difference under clauses 2.12 to 2.14 and 6.13 and 6.14, or

.4 on any dispute or difference under clause 2.3.4 or clause 3.8 in regard to a withholding of consent by the Contractor, under clause 3.3.3, under clause 3.6.4 in regard to any objection by the Management Contractor whether for himself or on behalf of a Works Contractor

shall not be opened until after Practical Completion or alleged Practical Completion of the Project or termination or alleged termination of the management Contractor's employment under this Contract or abandonment of the Project, unless with the written consent of the Employer or the Architect/the Contract Administrator on his behalf and the Management Contractor.

........".

4. TWML had the plastering work carried out by the first respondent, S & R, under a JCT Works Contract/2, 1987 edition, section 4 of which contained the usual provisions whereby S & R was to receive payment from amounts certified by the Architect under the Management Contract as a result of valuations made for the measured work and ascertainments of claims for loss and expense carried out by the Quantity Surveyor under the Management Contract as directed by the Architect. Clause 4.17 provided a key link to the payment provisions in the Management Contract:

"The Management Contractor shall ensure that the Employer operates clause 8.3.2 of the Management Contract Conditions under which the Architect is required to direct the Management Contractor as to the amount in respect of the Works Contractor which is included in the amount stated as due in Interim Certificates issued under clauses 4.2.2, 4.2.3 and 4.2.4 of the Management Contract Conditions; and that the amount in respect of the Works Contractor is computed in accordance with clause 4.18.".

Clause 4.27 stated:

"If the Works Contractor shall feel aggrieved in regard to any amount certified by the Architect under clause 4.2 of the Management Contract Conditions, and included in a direction in respect of the Works as referred to in clause 8.3.2 of the Management Contract Conditions, or by his failure so to certify or direct, then, subject to clause 1.11, the Management Contractor shall allow the Works Contractor to use the Management Contractor's name and if necessary will join with the Works Contractor in arbitration proceedings or litigation at the instigation of the Works Contractor in respect of the said matters complained of by the Works Contractor."

Clauses 4.45 - 4.48 made provision for the recovery by the Works Contractor of loss or expense suffered or incurred by it in consequence of certain events. The amount was to be ascertained by the Architect or the Quantity Surveyor in consultation with the Management Contractor and, by clause 4.47, was to be treated as part of the Works Contract sum and, by virtue of clauses 4.18 and 4.20.1, was payable by way of Interim Certificates issued under the Management Contract.

5. In addition the Works Contract provided:

"1.11 The Management Contractor will so far as he lawfully can at the request of the Works Contractor obtain for him any rights or benefits of the provisions of the Management Contract so far as the same are applicable to the Works and not inconsistent with the express terms of the Works Contract but not further or otherwise. Any action taken by the Management Contractor in compliance with any aforesaid request shall be at the cost of the Works Contractor and may include the provision by the Works Contractor of such indemnity and security as the Management Contractor may reasonably require."

The Works Contract provided for arbitration in virtually the same terms and to the same effect as the Management Contract. Section 9 reads:

9.1 Dispute or difference – appointment of Arbitrator

If a dispute or difference as referred to in Works Contract/1, Section 3, Article 3 arises in regard to any matter or thing of whatsoever nature arising out of the Works Contract then such dispute or difference shall be referred to the arbitration and final decision of a person to be agreed between the parties to act as Arbitrator or, failing agreement within 14 days after either party has given to the other a written request to concur in the appointment of an Arbitrator, a person to be appointed on the request of either party by the person named in Works Contract/1, Section 1, item 15 or Section 2, item 5:

9.2 Arbitration – joinder

.1 Provided that if the dispute or difference to be referred to arbitration under the Works Contract raises issues which are substantially the same as or connected with issues raised in a related dispute between

the Management Contractor and the Employer under the Management Contract, or

the Works Contractor and the Employer under the Employer/Works Contractor Agreement,or

the Employer and any other Works Contractor under an Employer/Works Contractor Agreement, or

the Management Contractor and any other Works Contractor under a Works Contract, or

the Works Contractor and any Nominated Supplier whose contract of sale provides for the matters referred to in clause 8.3.2.8

and if the related dispute has already been referred for determination to an Arbitrator, the Management Contractor and the Works Contractor hereby agree that the dispute or difference under this Works Contract shall be referred to the Arbitrator appointed to determine the related dispute and that such Arbitrator shall have power to make such directions and all necessary awards in the same way as if the procedure of the High Court as to joining one or more defendants or joining co-defendants or third parties were available to the parties and to him; and that the agreement and consent referred to in clause 9.6 on appeals to the High Court on any question of law shall apply to any question of law arising out of the awards of such Arbitrator in respect of all related disputes referred to him or arising in the course of the reference of all the related disputes referred to him.

.2 Save that the Management Contractor or the Works Contractor may require the dispute or difference under this Works Contract to be referred to a different Arbitrator (to be appointed under this Works Contract) if either of them reasonably considers that the Arbitrator appointed to determine the related dispute is not appropriately qualified to determine the dispute or difference under this Works Contract.

9.3 Time of opening of arbitration

Such Arbitrator shall not without the written consent of the Management Contractor and Works Contractor enter on the arbitration until after the practical completion or abandonment of the Project except to arbitrate

.1 whether a payment has been improperly withheld or is not in accordance with the Works Contract; or

.2 whether practical completion of the Works shall be deemed to have taken place under clause 2.14; or

.3 in respect of a claim by the Management Contractor or counterclaim by the Works Contractor to which the provisions of clauses 4.37 to 4.44 apply in which case the Arbitrator shall exercise the powers given to him in clauses 4.37 to 4.44; or

.4 any matters in dispute in regard to a reasonable objection or reasonable withholding of consent by the Works Contractor or under clauses 2.2 to 2.10 as to extension of time.

9.4 Powers of Arbitrator

Subject to the provisions of clauses 3.7, 4A.4.3, 4B.5.3 and 4C.5 hereof and of clause 1.14 and clauses 4.1 to 4.12 of the Management Contract Conditions the Arbitrator shall, without prejudice to the generality of his powers, have power to direct such measurements and/or valuation as may in his opinion be desirable in order to determine the rights of the parties and to ascertain and award any sum which ought to have been the subject of or included in any certificate and to open up, review and revise any certificate, opinion, decision, requirement or notice and to determine all matters in dispute which shall be submitted to him in the same manner as if no such certificate, opinion, decision, requirement or notice had been given.

9.5 Award final and binding

Subject to clause 9.6 the award of such Arbitrator shall be final and binding on the parties.

6. S & R considered that the Architect had not given proper consideration to the valuation of its work so that it had been undervalued in interim certificates and thus S & R had not been properly paid. On 21 January 2000 it gave notice of arbitration, through its solicitors, to TWML in respect of its claim that it had not been paid £156,347. (S & R has decided not to act on this notice until the position is clear.) S & R's solicitors treated TWML's attitude as indicating that TWML thought that S & R's claim was for under-certification so that S & R ought to invoke clause 4.27 of the Works Contract. In a letter of 4 May 2000 they therefore asked TWML's solicitor "to confirm that it will comply with its contractual obligation in that clause [4.27] to join such proceedings [against the Employer pursuant to clause 4.27] with our client". "If your client gives our client that confirmation we see no need to go further at this stage with the arbitration against your client." In the correspondence that ensued TWML's solicitor took the view that TWML was entitled to "such indemnity and security as the Management Contractor may reasonably require" since clause 4.27 was subject to clause 1.11 which contained those terms. It therefore wished to avoid "any loss being incurred by [TWML]". S & R's solicitors disagreed. They thought that clause 1.11 did not apply to action under clause 4.27. They considered that the reference to "join with" in clause 4.27 meant no more than supporting "our client in their claims by providing such documents and witness evidence that is reasonably required by our client and not to collude with or assist the Employer in opposing our client's claim".
7. On 21 June 2000 S & R's solicitors wrote to Belgravia giving notice under clause 4.27 that it was "aggrieved with regard to amounts certified and/or the failure so to certify and direct in respect of our client's final account and the failure to release retention monies". It continued:

"And our client requires you, in the name of Taylor Woodrow Management Limited, to concur in the appointment of an Arbitrator to resolve the dispute or difference between your company and our client, which by this letter stands referred to arbitration".

The solicitor to Chelsfield plc (one of the companies that control Belgravia) replied on 26 June. He did not accept that the letter was valid notice or that the contractual requirements had been complied with. Further correspondence with TWML and Belgravia took place in which everybody reiterated what had been previously said and during the course of which S & R gave notice of arbitration about the dispute concerning the relationship of clauses 1.11 and 4.27 (although the notice was subsequently withdrawn.) TWML made clear its belief that

(1) it was a pre-condition to the use of TWML's name by S & R that S & R should first indemnify TWML in respect of any liability which TWML might incur in respect of costs as a result of its name being used;

(2) TWML was entitled to refuse its consent to the use of its name so long as S & R refused to provide such an indemnity;

(3) as S & R had refused to indemnify TWML and as TWML had refused to allow S & R to use its name to commence an arbitration against Belgravia, S & R had no right to commence arbitration proceedings in TWML's name against Belgravia.

Nevertheless S & R proceeded to ask the President of the RICS to appoint an arbitrator. The application named S & R as the applicant or claimant and Belgravia as the other party or respondent. Clause 4.27 was cited as giving the President of the RICS power to make the appointment. Thereafter S & R continued to present itself as the claimant.

8. Mr D.H. Simper FRICS was appointed as arbitrator. Belgravia pursued its objection to his jurisdiction. S & R refused to agree that the question should be dealt with by the court. However on 9 January 2001 the arbitrator agreed to Belgravia's request that an application might be made under section 32 of the Arbitration Act 1996 to decide whether he had jurisdiction. Contrary to the tenor of the submissions of behalf of S & R I have no doubt that the arbitrator was right to consent. The issues raised by S & R's case go directly to the jurisdiction of the arbitrator and are not dependent on nor will they be affected by the outcome of any investigation into its claims. Such issues have to be determined at the outset of any arbitration proceedings (unless, for example, the party maintaining that the arbitrator has jurisdiction agrees to indemnify the other party or parties against their costs and expenses if it is unsuccessful and has either the money readily available to meet that liability or can provide sufficient security).
9. In summarising the history of the proceedings I have not set out correspondence which contained a number of contradictory or inconsistent statements which have been made by S & R's solicitors (summarised in paragraphs 30 to 34 of the witness statement of TWML's solicitor). For example, although S & R gave notice under clause 4.27 the arbitration was actually commenced in its own name.
10. In the claim form Belgravia asks for:

"1. a declaration that the above-named arbitrator does not have jurisdiction in respect of the matters referred to him by the first-named Respondent, S & R (London) Limited; and/or

2. an order that the above-named arbitrator be removed; and/or

3. an order that the arbitration proceedings be stayed unless and until the First Respondent, S & R (London) Limited, obtains the consent of the second-named Respondent, Taylor Woodrow Management Limited, to the use by the First Respondent of the Second Respondent's name.

The questions on which the Application seeks the determination or direction by the Court are as follows:

1. Whether the First Respondent is entitled to bring these arbitration proceedings against the Applicant, there being no arbitration agreement in existence between them;

2. Whether, if the first Respondent is entitled to bring these or any arbitration proceedings against the Applicant, it is obliged (under the terms of the Works Contract made between it and the Second Respondent) to do so in the name of the Second Respondent;

3. Whether, if the First Respondent is obliged to bring these or any other arbitration proceedings in the name of the Second Respondent, the Second Respondent must consent to the use of its name by the First Respondent;

4. Whether, if it is a necessary pre-condition to the use of the Second Respondent's name by the First Respondent that the Second Respondent shall have consented to the same, the Second Respondent is entitled to impose any condition upon the first Respondent in respect of the grant of any such consent;

5. In particular, whether the Second Respondent is entitled, under the terms of the Works Contract, to require that the first Respondent should indemnify the Second Respondent and/or provide security in respect of any liability which the Second Respondent may incur as a result of the First Respondent being permitted to use its name."

The parties' submissions about the first question revealed most of the fundamental issues. The submissions of Mr Rowan Planterose for S & R in relation to questions 3, 4, and 5 referred back to his submissions on question 1. Although Mr Baker made a number of helpful submissions on behalf of TWML he was mainly concerned to observe the proceedings on its behalf so I shall concentrate on the submissions of Mr David Sears, counsel for Belgravia (whose case naturally reflected much what had been said in correspondence on behalf of TWML) and of Mr Planterose for S & R.

11. Mr Sears pointed out that the first question is primarily concerned with the fact that S & R commenced and has pursued the arbitration against Belgravia in its own name. He submitted that this was wrong as there was no contract or arbitration agreement between Belgravia and S & R. Mr Rowan Planterose maintained that this was a technicality since clause 4.27 conferred authority on S & R to commence a name-borrowing arbitration. It referred to "the instigation of the Works Contractor". He relied on Gordon Durham & Co Ltd v Haden Young Ltd (1991) 52 BLR 61 at page 82 where His Honour Judge Forbes QC said: "A "name borrowing arbitration" arbitration is instituted and controlled by the sub-contractor (albeit in the name of the contractor) ....". However he accepted that the second question had to be answered: Yes.
12. Mr Sears argued that since the permission granted by clause 4.27 was "subject to clause 1.11" and, since the reference to clause 1.11 only made sense if it embraced the requirement to provide "indemnity and security", TWML was entitled to require that indemnity and security before S & R could invoke clause 4.27. As that had not been done S & R was not entitled to start a name-borrowing arbitration even if it had done so in TWML's name. He maintained that the arbitration envisaged by clause 4.27 was an arbitration between the main contractor and the employer, as Judge Forbes had said in Gordon Durham both at page 82 (where he was dealing with an arbitration under a provision comparable to clause 1.11) and later at pages 88 ff:

"In my judgment, the subject matter of each of the relevant disputes for which the "name borrowing" procedure is available to the sub-contractor, is limited by the wording of the appropriate clause to a dispute between sub-contractor and employer arising out of a decision, act or omission on the part of the architect on behalf of the employer which affects the sub-contractor but not the main contractor. The main contractor's role in those matters which can give rise to such a dispute is that of a "mere conduit pipe" (see Browne-Wilkinson LJ in Northern Regional Health Authority -v- Derek Crouch at [1984] 1 QB 665 B-D; 266 BLR 26 quoted above).

The contractual arrangements which give rise to the "device" of the "name borrowing" procedure create relations between employer, main contractor and nominated sub-contractor to which it is very difficult if not impossible to put any jurisprudential label (see Dunn LJ in Northern Regional Health Authority -v- Derek Crouch [1984] 1 QB at page 662H; 26 BLR 23). Mr Reese submitted that, whatever the legal nature of the relations between the parties might be, it was clearly envisaged that the main contractor in a "name borrowing" arbitration was not really the main contractor but was, in reality, the sub-contractor. In particular he submitted that this was clear from the express wording of the "name borrowing" clauses, each of which provides for the main contractor to join with the sub-contractor (who is, of course, already using the main contractor's name). In each clause the obligation of the main contractor to join in the arbitration is mandatory if it is necessary. Mr Reese submitted that if the main contractor was already fully a party to the arbitration by reason of the sub-contractor's use of its name, these provisions would be meaningless. As has already been observed, it is apparent that Mr Simms seemed to view the matter in a similar way because he considered that Haden Young were the effective claimants and that Gordon Durham were not present and not represented. Mr Reese submitted that the fundamental problem in the present proceedings was deciding the answer to the question: "Is the sub-contractor in a "name borrowing" arbitration really the main contractor or is he really still the sub-contractor, albeit using the name of the main contractor? Mr Reese submitted that if the sub-contractor in the "name borrowing" arbitration was in reality still the sub-contractor, although using the main contractor's name, then nothing that the sub-contractor did in the "name borrowing" arbitration could prejudice or affect the rights of the main contractor.

Ingenious though Mr Reese's arguments were, I am not persuaded that this is the right approach to the matter. Undoubtedly the "name borrowing" provisions are very difficult to construe and any interpretation does give rise to "grave difficulties" (Judge Hawser QC in Lorne Stewart -v-William Sindall (supra) at page 128. See also the observations of Browne-Wilkinson LJ in Northern Regional Health Authority -v- Crouch at [1984] 1 QB 665F-H; 26 BLR 27). I accept that the way in which the "name borrowing" clauses provide for the joinder of the main contractor as claimant in the "name borrowing" arbitration appears to indicate that those clauses contemplate a situation in which the main contractor, who is thus joined, is a separate party from and additional to that party which is constituted by the sub-contractor using the main contractor's name. In those circumstances, quite what is the nature of the relationship between "the real" main contractor and the sub-contractor using the main contractor's name, I hesitate to say. Fortunately, perhaps, I do not consider that it is necessary for me to analyse this aspect of the matter further. In my judgment the correct approach is for the court to endeavour to give effect to the relationships which the parties have chosen to adopt, however unwise that choice may seem to be: see Brown-Wilkinson LJ in Northern Regional Health Authority -v- Derek Crouch [1984] 1 QB at page 665F; 26 BLR 27. The parties' choice is to be found in the contracts which have been entered into by them and thus the court must try to give effect to the terms of those contracts. I agree with Mr Baatz' submission that the correct approach is to construe the terms of the contracts to the extent that is necessary for determining the issues before the court and give effect to those terms as construed.

In my opinion, the main contractor is bound by the terms of an award which is made in a "name borrowing" arbitration which the sub-contractor has conducted within the limits of the authority granted to the sub-contractor by the "name borrowing" clause or clauses in question. Even though it can be said that in such an arbitration the sub-contractor is "in effect" the claimant or that the main contractor is "not really" the claimant, the claim is nevertheless a claim in the name of the main contractor, made under the main contract pursuant to a right granted to the sub-contractor under the terms of the sub-contract. It is a claim which the sub-contractor is given express authority by the main contractor to bring in the name of the main contractor under the arbitration clause in the main contract between the main contractor and the employer, a contract to which the sub-contractor is not privy. In my judgment, it is thus a claim by the main contractor. This is so, even though the sub-contract contemplates the main contractor having a further more "real" identity, capable of being joined in the arbitration as a separate claimant. Were it otherwise, the contractual provisions would be such that the sub-contractor could sue in its own name under the main contract: see Donaldson MR in Northern Regional Health Authority -v- Derek Crouch at [1984] 1 QB page 673F; 26 BLR 37.

However, the authority of the sub-contractor to arbitrate in the name of the main contractor is strictly limited to and by the subject matter of the relevant disputes which are identified by clauses 7(2), 8(b) and 11(d) of the sub-contract. In my judgment, the sub-contract bestows no authority on the sub-contractor to arbitrate any claim in the name of the main contractor or to seek any award from the arbitrator which goes beyond the limited subject matter of the relevant disputes which are set out in those clauses. As I have already indicated, when properly understood, the terms of the sub-contract define those relevant disputes so that any arbitration which is restricted to such a dispute gives rise to no conflict between the interests of the sub-contractor and those of main contractor. In my opinion, the fact that the "name borrowing" clauses provide for the joinder of the "real" main contractor as a separate and additional claimant reinforces my view that the authority of the sub-contractor, under these clauses, to arbitrate in the name of the main contractor is a very limited one."

13. Mr Planterose submitted that the reference to clause 1.11 meant that an arbitration under clause 4.27 was not available to the Works Contractor where it had resorted to clause 1.11. He argued that the Management Contractor had given its consent absolutely in clause 4.27: "shall allow the Works Contractor to use the Management Contractor's name....". There was in any event no need or justification for a requirement for indemnity and security. TWML should not be concerned about possible costs orders against them, orders for discovery, or possible counterclaims. He maintained that the nature of the arbitration under clause 4.27 was tripartite, as had been said by His Honour Judge Hawser QC in Lorne Stewart Ltd v William Sindall plc and N W Thames RHA (1986) 35 BLR 109 at pages 126-127:

"[Counsel] submitted that there existed a tripartite agreement, to which the Authority was, in all the circumstances a party, namely by reason of the original instructions (which I have quoted), the position of the nominated sub-contractor and the terms of the sub-contract agreements (of which the Authority had full knowledge). This is possibly the best way of formulating the position, though it is obviously open to legal objections, particularly to clause 3 of the sub-contract, which I have read above. It does seem to me however to be nearer to what the parties intended by their phraseology than any other interpretation."

and at page 130:

"I do not think that the position is truly analogous to that of two plaintiffs. This is in effect a tripartite agreement and I think that the arbitrator can and should be empowered to order discovery against all parties to the arbitration. Furthermore I think that the arbitrator is empowered so to order against Sindall under the implied term as to assistance and co-operation. It is to be remembered that the only claims actually put forward in a name borrowing arbitration are those of the sub-contractor."

Thus if orders for discovery could be made directly against S & R so too could orders for costs. However Mr Planterose accepted that if such orders were made against TWML then it would have an implied right to be indemnified, as such a right was to be implied in clause 4.27. There could be no counterclaims (for which proposition reference was again made to Lorne Stewart).

14. Mr Planterose also supplied a helpful analysis of the earlier cases. He began with Northern Regional Health Authority v Derek Crouch Construction Limited [1984] 1 QB 644, relying on the remarks of Dunn LJ at 662D-663E to the effect that name borrowing recognises a separate identity in the claimant (here the Works Contractor) for certain limited purposes, ie the specific classes of dispute in which there is or should be no conflict with the interest of the main (or management) contractor (see Gordon Durham at pages 82 and 86-91, passim) - ie disputes "with which the main contractor is not at all concerned" (per Dunn LJ in Crouch at page 661C). In Crouch Sir John Donaldson MR characteristically said at page 674C-D: "every conceivable complication will arise if [the main contractors] disagree with the case which [the nominated sub-contractor] wishes to submit in their name". (See also His Honour Judge Hicks QC in Co-operative Wholesale Society Ltd v Birse Construction Ltd (1996) 46 Con LR. 110 at page 123, para 25.) Judge Forbes QC repeated the unease expressed by virtually every court in trying to rationalise the provisions in these forms of sub-contract:

"The contractual arrangements which give rise to the "device" of the "name borrowing" procedure create relations between employer, main contractor and nominated sub-contractor to which it is very difficult if not impossible to put any jurisprudential label (see Dunn LJ in Northern Regional Health Authority -v- Derek Crouch 1984] 1 QB at page 662H)."

However Mr Planterose said that the practical effect of the relationship was clear. The active or "real" claimant is the Works Contractor (see Lorne Stewart at page 127) who is able to conduct "direct litigation" (see Gordon Durham at page 79). In contrast an arbitration commenced in response to a request by a Works Contractor under clause 1.11 is instituted and controlled by the Management Contractor (see Gordon Durham at page 82). Under clause 4.27 the Management Contractor is not an active claimant unless "joined in" under "joining in" provision. In CWS Judge Hicks said at paragraph 33:

"33. On that basis the provision for use of the main contractor's name is entirely consistent with the basic principles of para 29, since the main contractor is the only person entitled to refer disputes with the employer under the main contract to arbitration or to conduct such arbitrations. The only apparently contrary indication is the provision for the main contractor 'if necessary [to] join with the Sub-Contractor ¼ in ¼ . arbitration proceedings by the Sub-Contractor' (my emphasis). If that were in truth irreconcilable with the basic principles it would in my judgment simply be ineffective; nothing in the sub-contract can alter the rights and obligations of the parties to the main contract inter se under that contract, or give the sub-contractor rights against the employer under it, contrary to cl 27(f) of the main contract conditions. In my view, however, there is no such irreconcilability; the provision in question can be understood perfectly well as a procedural one enabling the main contractor to be separately represented by a team of its own choice, as well as by that instructed in its name by the sub-contractor, or as a 'fall-back' position inserted ex abundante cautela in case of challenge to the sub-contractor's authority to use the main contractor's name. The draftsman's use of the phrases italicised in the quotation above may be infelicitous but cannot affect the result."

Mr Planterose maintained that the Management Contractor is otherwise a nominal claimant, and remains so. He is a mere "conduit pipe" (see Browne-Wilkinson LJ in Crouch at page 665B-D, adopted by Judge Forbes in Gordon Durham at page 89). Where there is no "joining in", the arbitration is controlled and conducted solely by the Works Contractor.

15. Amongst other points Mr Sears submitted that contrary to the submissions made for S & R the two clauses were not mutually exclusive, nor was there anything in either clause which limited S & R to only one of the two possible routes to a recovery. For the purposes of clause 1.11 the rights and benefits under the Management Contract would include the rights and benefits by virtue of clause 8.3.2 of the Management Contract – with which clause 4.27 is exclusively concerned. There was nothing in clause 1.11 which prohibited S & R from making a request in respect of rights and benefits to which it is entitled under Clause 8.3.2. The words "subject to clause 1.11" must have the effect of making the operation of clause 4.27 subject to the limitation imposed by clause 1.11, namely that S & R should indemnify TWML in respect of all costs incurred in acting upon any such request from S & R. Clause 4.27 exposes TWML to a potential costs liability, either as a result of allowing its name to be used or as a result of joining S & R in arbitration proceedings or litigation. It made no sense for the right to borrow TWML's name to be made subject to the other part of clause 1.11, namely the general obligation contained in the first sentence. Mr Sears accepted that it was just possible that the words "subject to" might require S & R to exhaust whatever remedy it had under clause 1.11 before resorting to the name-borrowing provision in clause 4.27, but in that event S & R would still be obliged to pay all TWML's costs of making the relevant claim. If that claim had been attempted and failed, then there was no obvious reason why the obligation to indemnify TWML should not apply in respect of other attempts to achieve the desired result (e.g. through the mechanism afforded by clause 4.27).
16. Mr Sears also submitted that even if the words "subject to clause 1.11" did not have the effect for which TWML contends, there must be some control which TWML could exercise over the use of its name. It was implicit in the use of the word "allow" that TWML should have at least some degree of control. It is therefore to be implied in clause 4.27 that the right given to S & R to use TWML's name was subject to obtaining TWML's consent, such consent not to be unreasonably withheld. It would not be unreasonable to withhold consent in the absence of an indemnity or some other protection in respect of any potential costs liability.

Discussion and Conclusions

Clause 4.27

17. In order to understand the reference to clause 1.11 in clause 4.27 it is necessary to look at the contractual arrangements for payment. In doing so it must be assumed, in the case of the 1987 Works Contract, that the selection of the scheme to be found in clause 4.27 took into account not just the cases on the old "green" form of nominated sub-contract which was intended for use with the 1963 editions of the JCT forms but also the changes made to the JCT forms in 1980 and thereafter. In interpreting such JCT forms it is also necessary to bear in mind that they are product of consensus by the JCT and that the text may therefore reflect an agreement or compromise not just on policy but on the wording. The result may be not entirely satisfactory but it has to suffice and may have to remain until either events make a revision essential or further agreement is reached. Some of the more obscure or troublesome provisions of standard forms may thus be explicable even if they are not entirely comprehensible.
18. Works Contracts under the JCT form of Management Contract have much in common with nominated sub-contracts. For example, the Works Contractor is selected by the employer (albeit in agreement with the Management Contractor); the form of contract is prescribed; there may be a direct contract with the employer; the amounts payable to the Works Contractor are generally those determined by the employer's agents (architect or contract administrator and quantity surveyor). On the other hand, the amount of loss or expense is ascertained in consultation with the Management Contractor and the Management Contractor has a greater role in the direction of the Works Contractor than a main contractor would normally have over the work of a nominated sub-contractor. In contrast to the normal position in relation to sub-contracts clause 3.21 creates apparent limitations on the liability of the Management Contractor for breaches by the Works Contract by the Works Contractor, although it does not affect the Management Contractor's liability for the performance of its own obligations: see Copthorne Hotel (Newcastle) Ltd v Arup Associates (1997) 85 BLR 22. This policy is also reflected in the provisions of the Second Schedule which exclude from the Prime Cost payable to the Management Contractor "any costs incurred as a result of any negligence by the Management Contractor in discharging his obligations under the Contract...". Subject to such matters both the Management and the Works Contract form provide an apparently comprehensive code for determining the value of the work and the circumstances in which progress or completion may be affected by matters which are not or which are to be regarded as falling within the Works Contractor's risk and for the effects of which additional payment may have to be made, primarily under the Works Contract by the ascertainment of loss or expense as set out in clause 8.5.
19. There may however be matters for which the Works Contract does not make provision but which are to be found in the Management Contract, and which confer "rights or benefits" on the Management Contractor. These are the subject of clause 1.11. In Keating on Building Contracts, 7th ed, the editor of the commentary on the JCT form of nominated sub-contract says of the clause comparable to clause 1.11 of the Works Contract: "The extent of the duty of the Contractor under clause 1.13 is not altogether clear". The judgment of Judge Forbes QC in Gordon Durham is then referred to where he said ((1990) 52 BLR 61 at page 81):

"It can be seen that clause 12 is expressed in very wide terms. I do not think that it is appropriate or necessary for me to try and identify all the rights and benefits of the main contract which are capable of being regarded as applicable to the sub-contract works. However, I do consider that the powers of an arbitrator to open up, review and revise such things as the decisions and certificates of the architect are benefits of the main contract which are capable, on the facts of a particular case, of being applicable to the sub-contract works. In such a case, clause 12 of the sub-contract entitled to sub-contractor to require the contractor to obtain for the sub-contractor, at the cost of the sub-contractor, the benefit (for example) of the power of an arbitrator to open up, review and revise a decision or certificate of the architect ... "

As I have already indicated this reasoning was based on the proposition that the relevant arbitration agreement in the old "green form" of sub-contract precluded an arbitrator from opening up, reviewing and revising an architect's certificate. Even if that proposition had been correct the House of Lords in Beaufort Developments overruled Crouch so the point of the example given by Judge Forbes QC is no longer valid. Keating then says "the clause presumably requires the Contractor, for example, to arrange for meetings with the Architect or Employer, write letters and perhaps even, at the Sub-Contractor's expense, take legal advice upon matters under the Main Contract which may benefit the Nominated Sub-Contractor". These rather thin suggestions indicates the great difficulty that even the highly experienced have in trying to find realistic situations which would illustrate the purpose of clause 1.11. Subcontractors (or some of their advisers) are suffused with ingenuity but I cannot recall any occasion in which such a provision has been invoked for the purposes suggested by Keating. (Other commentators also cannot provide any help as to what might really constitute an effective or practical right or benefit to justify the present purpose of the clause, especially given the existence of other conditions such as those in Section 9). A contractor does not normally have any right to a meeting with the employer or any member of its professional team of advisers, although it is now common to find a right or duty of consultation, but this does not imply a right to a meeting as consultation can be achieved by other means. Writing letters could not be termed a right conferred by any contract, although requiring the contractor to give a notice might fall within such a clause. In my view this type of clause is intended to cover situations in which the contractor has some right or benefit under its contract which does not enure to the sub-contractor under the sub-contract so that the sub-contractor will be bereft of any remedy. Most modern standard forms of sub-contract or Works Contract designed for use with a principal or management contract legislate expressly for every common eventuality so the rights or benefits to which this type of clause is directed will almost certainly be specific to the principal contract. These will probably arise as a result of special conditions. For this reason the clause is in wide terms. It is certainly easier to think of examples in traditional forms of contracting. A sub-contractor might use the clause to obtain (and to pay for) the extension of a right to use an application, program or process granted to the contractor. Such a situation would however not normally arise under a management contract (e.g. project software will by its nature and purpose be made accessible to all participants by the Employer and the Management Contractor).

20. If the Works Contactor is dissatisfied with what has been certified for its work the Management Contractor may not itself be able to adopt the normal neutral position. If there is dissatisfaction with the performance of the Works Contractor the Employer will look primarily to the Management Contractor. The amount of the Prime Cost may be affected by default on the part of the Management Contractor. The process of consultation about loss or expense incurred and possibly recoverable by the Works Contractor may lead to the Management Contractor questioning the amount or grounds. Section 9 of each contract enables such disputes to be dealt by a single arbitrator who will appointed to determine the rights and liabilities under the relevant contract (including, where appropriate, Works Contract/3).
21. On the other hand there may be disputes which do not involve the Management Contractor in any significant way. A Works Contractor responsible for works which had or no effect on other works (eg preliminary site clearance completed well before the start of the main work, and, after completion of such work, landscaping, the provision of sculpture or other peripheral work) may complain that some act of the Employer constituted a breach of the Management Contract which affected the performance of its operations or their cost. If for any reason (factual, legal or commercial) the Management Contractor does not wish to be involved it will not want to have joined arbitrations with the same arbitrator under section 9 of either contract, in which it is a go-between, or, worse still, two arbitrations with different arbitrators. Similarly the Works Contractor may not wish to involve the Management Contractor. Yet in each case the dispute is about the Works Contractor's right under the Works Contract which then becomes a dispute about the Prime Cost due under the Management Contract. The orthodox route would therefore be for the Works Contractor or the Management Contractor to invoke clause 9.1 and then for the relevant party to require the dispute under the other contract to be referred to the arbitrator appointed under the Works Contract or Management Contract, as the case may be. The wide terms of clause 1.11 would however permit it to be used to enable a Works Contractor to use the Management Contractor's right to commence an arbitration against the Employer, e.g. about the amounts to be included in certificates or to make a claim for damages for breach of the Management Contract where the sole damages were suffered by the Works Contractor.
22. In contrast clause 4.27 is specific and limited. It is concerned only with complaints about what ought to have been included in certificates issued under the Management Contract (and thus also about a failure to issue a certificate or to give a direction). The arbitration or litigation contemplated must be with or against the Employer since the commercial purpose is to obtain a revision of the amount certified and its replacement with a larger amount or, possibly, the same or a similar amount arrived at in a different way (where, for example, the dispute is about the rate applicable). The clause refers to "proceedings... at the instigation of ...". (The forms of sub-contract the subject of earlier cases said "proceedings... by [the nominated sub-contractor]".) Since the amount in dispute is that due under the Management Contract and since the parties to that contract and its arbitration agreement are the Employer and the Management Contractor, the only person who could give notice of arbitration to the Employer for the purposes of Article 8 and clause 9.1 is the Management Contractor and the only person who had a cause of action under that contract in respect of the amounts claimed that might be justiciable in litigation would be the Management Contractor. If the Works Contractor issued a claim form against the Employer it would be liable to be struck out.
23. Thus clause 4.27 authorises the Works Contractor "to use the Management Contractor's name" for otherwise the Works Contractor would have to make a request to the Management Contractor under clause 1.11 to give notice of arbitration and thereafter to conduct an arbitration to obtain from the Employer whatever the Works Contractor desired. This mechanism is commonplace. It is frequently found in insurance policies to enable the insurer to act where there is as yet no right of subrogation. Mr Sears referred to Clarke on Insurance Contracts, 1999 ed, para 31-4, where the author points out that this is "subject to indemnity provided by the insurer against costs", citing Yorkshire Ins Co Ltd v Nisbet Shipping Co Ltd [1962] 2 QB 330 at page 341, per Diplock J. Para 31-6B1 says the same in the context of actions to enforce subrogated rights. In either situation the proceedings are by or against the insured, not the insurer. The permission given by clause 4.27 is apparently unqualified but, if it were considered by itself, it must be subject to some obvious and commonsense implied conditions. To that extent Mr Sears is right in his submission that "allow" signifies something more than a synonym for "permit" or "authorise" (although not otherwise). For example, the Works Contractor must inform the Management Contractor of its intention to start proceedings in the name of the Management Contractor and the Management Contractor is obliged to inform the Works Contractor of any notices or other correspondence that it receives. The clause does not provide that the Works Contractor can use its own address for the purpose of conducting the proceedings, presumably since under the Management Contract no provision for the use by the Employer of any other address than that given by the Management Contractor, (although in practice an Employer will usually accept the address of solicitors engaged by the Works Contractor to act for it in the name of the Management Contractor). Similarly the Works Contractor will have to ensure that the Management is promptly informed of everything that is done or received in the name of the Management Contractor. The Management Contractor may therefore have to devote significant time and expense to monitoring the conduct of the arbitration in case it affects its interests. Although the Management Contractor has no right to withdraw the permission and authority granted by clause 4.27 the Management Contractor, in my judgment, has the right to do so if the arbitration or its conduct were, for example, to reflect badly on its reputation (in the eyes of the Employer since an arbitration is a private matter). The Works Contractor's right to use the name is a device to enable it to make its claim against the Employer and it is not a right to use or abuse the name in any other way. However I do not accept Mr Sears' submission that the permission is impliedly "not to be unreasonably withheld". That could have been said quite easily.
24. As the Employer is liable only to the Management Contractor it is not surprising that clause 4.27 provides that the Management Contractor "if necessary will join with the Works Contractor in arbitration proceedings or litigation at the instigation of the Works Contractor in respect of the said matters complained of by the Works Contractor." The word "join" cannot mean join in a procedural sense. Clause 9.2.1 shows where it is correctly used in that sense. If, for example, the claim was pursued in litigation the claimant would have to be the Management Contractor as it has the only cause or causes of action against the Employer about what is due under the Management Contractor. So too in arbitration. The proceedings are in the name of the Management Contractor so the Management Contractor cannot be joined to them as it is already the claimant. The word is used in a commercial or practical sense to signify that co-operation may be required: "join with". There are any number of other reasons for this stipulation. The Employer may need to be satisfied not only that the Management Contractor is aware of the proceedings and that it recognises that it has become a party to them. The Employer is entitled to defend the claim on any grounds available to it (e.g. that the work is now defective as a result of some neglect by the Management Contractor) or to bring a counterclaim to reduce the amount that might be payable to the Management Contractor on grounds which do not concern the Works Contractor so the Management Contractor has to be aware of them. Clause 4.27 does not prevent the Employer counterclaiming. So far as it is concerned it is involved in an arbitration under clause 9 of the Management Contract and has the right to raise any defence or counterclaim. It is not nor should it be concerned with the internal arrangements whereby the Works Contractor has the conduct of the proceedings. The requirement in the Management Contract that the Works Contract should be used cannot be construed as an undertaking by the Employer not to raise in proceedings brought via clause 4.27 matters which would constitute a valid defence or counterclaim against the Management Contractor had the claim not been instigated by the Works Contractor. Such a limitation would have to be spelled out clearly. The requirement is an assent by the Employer to the use of the name borrowing procedure but it is not a consent which would found an agreement between the Employer and Works Contractor to arbitrate a dispute which is truly a dispute between the Management Contractor and the Employer. Furthermore clause 4.27 confers a benefit on the parties to the Works Contract. It enables the Management Contractor to avoid two arbitrations. The Employer has no obvious benefit: it will be the defendant to proceedings brought against it, eg under Article 8 and section 9 of the Management Contract, if applicable. The requirement to use the Works Contract is in this respect no more than a recognition that the form of contract will be acceptable to the parties to it.
25. There may also be circumstances, especially where the proceedings continue at or after the end of the process of certification, when the Employer if held liable will wish to know to whom any amount awarded should be paid. Clause 4.27 apparently only authorises the Works Contractor to instigate proceedings. It would be an empty right, if limited to giving notice of arbitration, so the authority to instigate proceedings must presumably extend to pursuing those proceedings. The clause does not however authorise the Works Contractor to enforce the award since the award has to be in the form of a new or revised certificate the effect of which will then be dealt with in accordance with the terms of the two contracts (see on this Birse Construction v CWS (1997) 84 BLR 58).
26. On the other hand the arbitrator may at any stage of the proceedings order or award costs to the Employer. An order might be made for discovery by the Management Contractor. The Employer has no right to recover costs or to obtain sight or knowledge of the Management Contractor's documents from the Works Contractor. So as to be sure that the Management Contractor is a real and not a nominal "off stage" party for these and other purposes, it may be necessary, eg by direction of the arbitrator to meet the Employer's request, for the Management Contractor to be required to join with the Works Contractor (for the same reasons that an assignor may have to be joined in litigation). The Employer will thus be certain that its rights and liabilities to the Management Contractor in respect of the subject-matter of the claim by the Works Contractor have been settled conclusively and that they are not liable to be set aside on a technicality, such as an assertion that the Management Contractor was not actually aware of what was being done in its name. The reference to joining the Management Contractor is also apt so as to enable the Works Contractor to comply with obligations as to discovery etc.
27. "Join" is therefore no more than a somewhat coded reference to an obligation on the part of the Management Contractor to assist the Works Contractor effectually to conduct the arbitration and to achieve its objectives, as was suggested in and accepted by Judge Hawser QC in Lorne Stewart - see 35 BLR 109 at pages 127 and 129:

"The words "if necessary" etc seem to me to import a situation in which a sub-contractor cannot effectively conduct his proceedings without the active and not merely the nominal assistance of the contractor. I think that it is his necessity, or perhaps a necessity arising from the fact that justice cannot be done which gives rise to the right to require the contractor to join in fully in the arbitration proceedings initiated by the sub-contractor in the name of the contractor. For my part I think that it is probably only the sub-contractor who can take advantage of this provision but, for the purposes of these applications, I do not think it matters if the employer, or possibly even the main contractor, can take advantage of them. The question I have to determine is whether the sub-contractor can pray them in aid. Mr Taverner said that they were mere verbiage. Mr Reese suggested that they were put in simply out of caution on the part of the draftsman.

I do not think that either of these submissions is correct and in my view the words have a real meaning and the court must give full effect to them. I think that they import rights on the part of the sub-contractor and duties on the part of the main contractor to ensure that situations such as the present one can be deal with. This seems to me to be the correct interpretation which follows logically from the actual words in the sub-contract provision. If however they do not, of themselves, completely give rise to that interpretation, I think that the term suggested by Mr Fernyhough's must necessarily be implied in all the circumstances and, applying the words of Lord Pearson and the provisions in the Trollope & Colls case, I think that the implied term here is established."

However the near universal description of the arrangements as "unique" and the general recognition that they do not easily attract any conventional "jurisprudential label" does not in my judgment justify treating them as giving rise to any "tripartite" agreement or arrangement such as that suggested by Judge Hawser in Lorne Stewart. That tentative characterisation was recognised by him as not ideal. It has attracted widespread and valid criticism and needs little further discussion. It does not describe these arrangements. Clause 1.9 of the Works Contract makes it plain that the fact that the Employer and the Management Contractor have agreed in the Management Contract that Works Contractors are to be engaged on terms which included clause 4.27 does not mean that there are thereby any contractual rights or duties available to either the Employer or the Works Contractor in respect of the other. Clause 1.9 reads in part:

"Nothing contained in the Works Contract shall be construed so as to... create any privity of contract between the Works Contractor and the Employer (except by way of and in terms of the Employer/Works Contractor Agreement) ....".

The exception reinforces the general intention (see also clause 1.6). Accordingly it cannot be argued that the Employer by requiring the use of the Works Contract is in some way accepting some tripartite arbitration agreement or that it might be involved in a tripartite arbitration. In addition for the purposes of dispute the terms of Section 9 of each contract delineate very clearly the only circumstances which the Employer and the Works Contractor accept that each may find itself in the same set of proceedings whereby some carefully defined tripartite arrangement will arise. There is otherwise no tripartite arbitration agreement or legally enforceable arrangement created by the conjunction of the two contracts and the stipulation in the Management Contract that the Works Contract must be used. There is therefore no possibility of reading clause 4.27 as entitling the arbitrator to make orders against the Works Contractor directly: they must be made against the Management Contractor. The Works Contractor will then be obliged to secure compliance with them if it is to avoid sanctions against the Management Contractor which might prevent or prejudice the further pursuit of its claims. In the same way the Employer cannot be ordered to do anything more than it would be obliged to do had the arbitration been an ordinary one under clause 9 of the Management Contract, e.g. disclosing documents to a third party such as the Works Contractor. (The Works Contractor and the Employer may of course arrive at a special agreement whereby the Works Contractor obtains access to and use of the documents in return for the usual undertaking to preserve confidentiality.) There are therefore considerable practical limitations in an arbitration under clause 4.27.

28. I therefore agree with the analysis made by Judge Forbes in Gordon Durham:

"Even though it can be said that in such an arbitration the sub-contractor is "in effect" the claimant or that the main contractor is "not really" the claimant, the claim is nevertheless a claim in the name of the main contractor, made under the main contract pursuant to a right granted to the sub-contractor under the terms of the sub-contract. It is a claim which the sub-contractor is given express authority by the main contractor to bring in the name of the main contractor under the arbitration clause in the main contract between the main contractor and the employer, a contract to which the sub-contractor is not privy. In my judgment, it is thus a claim by the main contractor. This is so, even though the sub-contract contemplates the main contractor having a further more "real" identity, capable of being joined in the arbitration as a separate claimant. Were it otherwise, the contractual provisions would be such that the sub-contractor could sue in its own name under the main contract: see Donaldson MR in Northern Regional Health Authority -v- Derek Crouch at [1984] 1 QB at page 673F; 26 BLR 37."

Clause 1.11

29. I reject the submission that the words "subject to clause 1.11" mean only that the Works Contractor cannot resort to clause 4.27 if it has already invoked clause 1.11. The latter is so general that if there were a restriction of that kind the proviso would mean "subject to the Works Contractor not having used clause 1.11 to obtain an arbitration against the Employer". That is not only reading too much into the words but it also suggests that the proviso is for the benefit of the Employer so that it is not confronted with two arbitrations about the same subject matter. Yet the restriction would naturally be to protect the interests of the Management Contractor. If protection of that kind were needed it would be simpler to say "provided that no proceedings about that amount [ie the amount certified] or the failure [ie to certify or direct] have been commenced". But, even if one were to ignore section 9, such interpretation does not make sense. Clause 4.27 only permits certain types of claims to be made. If the sub-contractor has other claims, and provided that the Management Contractor has no adverse interest and is otherwise agreeable, they may be pursued by arbitration via clause 1.11 (as was done in the proceedings that led to the Birse case.) The Employer's defence to claims made via clause 1.11 may cause the sub-contractor to reconsider their basis and to resort to clause 1.11. The two routes cannot therefore be exclusive, although in practice it is highly unlikely that an arbitration commenced via clause 1.11 would be succeeded by one pursued via clause 4.27, where the subject-matter was essentially the same.
30. The reason for the words "subject to clause 1.11" is plain as soon as one looks at clause 1.11. That makes it clear that, if the Management Contractor is going to be used to get something for the Works Contractor to which it is not entitled under the Works Contract, it will not do so gratuitously. Mr Sears rightly submitted that it would be odd if clause 4.27 was only available without charge, as it were, when, if clause 1.11 had been used, the Management Contractor would be paid. In both cases the litigation or arbitration is for the benefit of the Works Contractor and if under clause 1.11 there are obligations to indemnify and to provide security there is no reason why they should not be provided under clause 4.27. Indeed S & R accepted that there would be an implied term that the Works Contractor would indemnify the Management Contractor against costs that it might incur arising out of the use of its name so it recognised that the policy of clause 1.11 also applied to clause 4.27. The Works Contractor will have to pay the cost under clause 1.11 and for that purpose the Management Contractor is entitled to receive a request and not only to obtain, by way of an indemnity, formal recognition and acceptance of the extent of the costs that might be incurred and to which it may be exposed (for which an indemnity may be necessary) but also to obtain security to back up the liabilities of the Works Contractor. The nature and amount of that security cannot be determined until it is clear what indemnities the Management Contractor is seeking and the extent of its liabilities. In my judgment the words "subject to clause 1.11" in clause 4.27 are intended to ensure that the same applies if an arbitration or litigation is started in the name of the Main Contractor by the Works Contractor. The "action taken by the Management Contractor" as described in clause 1.11 will, for the purpose of clause 4.27, be that taken by the Works Contractor in so far as it does or may render the Management Contractor liable to others (primarily the Employer and the arbitrator). The most obvious example would be where the Works Contractor was unable to pay the Management Contractor the costs of the arbitration were it to be unsuccessful and a award of costs was made in favour of the Employer against the Management Contractor. Had the proceedings been commenced by the Works Contractor under clause 9.1 the Management Contractor would in principle be entitled to security under what is now section 33 of the Arbitration Act 1996 (or an applicable arbitration rule). The incorporation of the provisions of clause 1.11 also ensures that the Management Contractor does not have meet any bill for fees (eg of any appointing body or the arbitrator) or expenses or any other costs that may have to discharged before the arbitration or litigation can be commenced or continued. Since the arbitration has ostensibly been commenced by the Management Contractor the arbitrator, for example, is not obliged to deal with the Works Contractor and would be entitled to look to the Management Contractor for the provision of security. Contrary to Mr Planterose submission, the reference to clause 1.11 is not meaningless (by which I understood he really meant if it bear the meaning he suggested) and has sound practical reasons to justify it.
31. I have set out that in my judgment the permission granted by clause 4.27 (looked at in isolation) would be subject to certain implied conditions, some of which are likely to involve the Management Contractor in management time, the costs of which will have to borne by the Works Contractor, if required by the Management Contractor. However the basis of most of these conditions is imported by the reference to clause 1.11 and its requirements so it is not necessary to imply them (unless and to the extent required to achieve what cannot be done by a sensible construction of the two provisions read together). The Management Contractor will not know of the circumstances which entitle it to indemnity or security unless and until it is informed and kept in the picture by the Works Contractor. This seems to me to be the primary reason (or a telling reason) for the inclusion of the words "subject to clause 1.11". The "request" of clause 1.11 means notify in the context of clause 4.27. The purposes are identical: to put the Management Contractor in the picture so that it can consider its position. The Management Contractor needs to be notified of the intention to resort to clause 4.27 in order to be sure that the Works Contractor's claim falls within it. The permission granted by clause 4.27 only applies if the claim goes "straight through". It does not apply, for example, if the Works Contractor's claim raises issues which are or might be the same as those affecting a claim or issue raised by the Management Contractor or another Works Contractor or if the Management Contractor foresaw that the claim would lead to such a conflict. The vice of clause 4.27 is epitomised by the well-known observation of Sir John Donaldson MR in Crouch at page 674C-D: "every conceivable complication will arise if [the main contractors] disagree with the case which [the nominated sub-contractor] wishes to submit in their name". That vice or risk (which it is in no one's interest to court) will be averted or minimised if the Management Contractor is kept posted. It will then be able to preserve its right to say that clause 4.27 is not available to the Works Contractor. The Works Contractor should not be prejudiced as it has adequate alternatives such as those in Section 9. The Management Contractor will or may be better able to procure that the Works Contractor's dispute is brought before the arbitrator under the Management Contract. If the Works Contractor were to question the Management Contractor's view then that dispute would have to be resolved under the Works Contract. That is unlikely as it would have little practical point and would only delay the inception of the proceedings proper.
32. The position of the words "subject to clause 1.11" in clause 4.27 show clearly that they would not otherwise detract from the permission granted by the opening part of that clause. Thus before a Works Contractor can start proceedings via clause 4.27 it must first observe clause 1.11 and tell the Management Contractor of its intention. Once that is done and once the Works Contractor has satisfied the Management Contractor's reasonable requirements as to indemnity and security then the authority granted by clause 4.27 comes into operation. I have indicated some of the matters likely to cause a Management Contractor expense and which it might reasonably be concerned about and against which it could reasonably require an indemnity. Judge Hawser rightly said in Lorne Stewart the indemnity is "a full indemnity against costs and expenses properly incurred by [the Contractor] in the course of the name borrowing arbitration" (see pages 130-131).
33. The extent of the indemnity and the amount of security, if disputed, would presumably have to be settled in the same way as any other dispute between the Works Contactor and the Management Contractor (and thus, of course, not, unless agreed, by the arbitrator appointed under the Management Contract, assuming that he had first been appointed satisfactorily). The questions posed by the application do not require me to go further but I was invited to do so in order to assist the parties. I proceed with some diffidence. The practice in relation to the provision of costs under section 726(1) of the Companies Act 1985 (see now Rules 25.12 and 25.13 of the CPR) provides a useful model, especially as regards providing security commensurate with the progress of the case and the likelihood of an adverse order for costs. A Management Contractor does not necessarily need security for the whole of the proceedings or on a pessimistic basis (although it must be adequate to cover all the costs and expenses for which the indemnity exists) and it would normally not be reasonable to require security in more than the usual tranches, eg up to disclosure, up to the completion of witness statements and experts reports or a prehearing review, up to the award (assuming that there are no other intermediate stages such as occur where some the issues are heard before others). I now return to the five questions.

The Questions

34. In my judgment the questions posed in the application should be answered as follows:

1. Whether the First Respondent is entitled to bring these arbitration proceedings against the Applicant, there being no arbitration agreement in existence between them.

On the facts the answer is: No. S & R started the arbitration in its own name and not that of the TWML. In addition it asserted that the there was a dispute between it and Belgravia. That could not be a dispute within the words of Article 8 of the Management Contract as the dispute has there to be with the Management Contractor. However its intentions were clear, for example, from its solicitor's letter of 21 June 2000, so if these were the only points at issue they would have had no practical consequence. They are easily remedied so as to regularise the position and to put the arbitrator's jurisdiction beyond doubt.

2. Whether, if the first Respondent is entitled to bring these or any arbitration proceedings against the Applicant, it is obliged (under the terms of the Works Contract made between it and the Second Respondent) to do so in the name of the Second Respondent.

It is rightly accepted that the answer must be: Yes.

3. Whether, if the First Respondent is obliged to bring these or any other arbitration proceedings in the name of the Second Respondent, the Second Respondent must consent to the use of its name by the First Respondent.

The answer to this question is: No, provided that the First Respondent has first complied with the requirements of clause 1.11 by notifying the Second Respondent of its intention and providing the Second Respondent with such indemnity and security as it may reasonably require. (S & R did so notify TWML.)

4. Whether, if it is a necessary pre-condition to the use of the Second Respondent's name by the First Respondent that the Second Respondent shall have consented to the same, the Second Respondent is entitled to impose any condition upon the first Respondent in respect of the grant of any such consent.

This question does not strictly arise but the answer would be: No, the only conditions are those set out in or to be inferred from clauses 1.11 and 4.27 of the Works Contract.

5. In particular, whether the Second Respondent is entitled, under the terms of the Works Contract, to require that the first Respondent should indemnify the Second Respondent and/or provide security in respect of any liability which the Second Respondent may incur as a result of the First Respondent being permitted to use its name.

The answer to this question is: Yes.

The Declarations

35. In the light of the answers to the questions set out in the application and the fact that S & R did not provide TWML with an indemnity or security before commencing the arbitration or subsequently, S & R did not satisfy the conditions necessary to have TWML's authority to commence the arbitration and thus the arbitrator has no jurisdiction. However if S & R can provide TWML with an indemnity and security then the proceedings can be regularised with retroactive effect. Since the points raised by this application have not been decided under a modern form of JCT contract for which there was no guidance I see no reason why S & R should be put to the trouble of having to start all over again, although in any other case a strict view would be justified.
36. Subject to any further submissions I propose to make this declaration:

"1. Mr D. H. Simper FRICS does not yet have jurisdiction in respect of the matters referred to him by the first respondent, S & R (London) Limited."

and, exceptionally, I propose to make this order (which would not be required where there is no jurisdiction and regularisation is not envisaged whereby the arbitration is a nullity):

"2. The arbitration proceedings be stayed unless and until the first respondent, S & R (London) Limited, provides the second respondent, Taylor Woodrow Management Limited, with such an indemnity and security as the latter may reasonably require."

37. Finally I must record my thanks to all the advocates and solicitors for their most helpful concise and effective presentations.

Orders: 1. Mr D. H. Simper FRICS does not yet have jurisdiction in respect of the matters referred to him by the first respondent, S & R (London) Limited.

2. The arbitration proceedings be stayed unless and until the first respondent, S & R (London) Limited, provides the second respondent, Taylor Woodrow Management Limited, with such an indemnity and security as the latter may reasonably require.

S & R to pay costs of applicant summarily assessed at £17,000 and the costs of the second respondent summarily assessed at £9,500.