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

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

		St Dunstan's House 133-137 Fetter Lane London, EC4A 1HD
		31st October 2005

 



 


His Honour Judge Peter Coulson QC:

INTRODUCTION

1. By an arbitration claim form issued on 6 September 2005, the claimant, the Council of the City of Plymouth ("the Council"), seeks permission to appeal, pursuant to section 69 of the Arbitration Act 1996, in respect of alleged errors of law arising out of an arbitrator's award dated 17 June 2005. The award, entitled "Award No.1", was produced by the arbitrator, Mr D J Cartwright, as part of an ongoing arbitration between the parties.
2. The claim form contained what was effectively a page and a half of submissions, under the heading "Remedy claimed and grounds on which claim is made". In addition, the Council relied on a separate document entitled "Submission on Claimant's Application for Permission to Appeal", which was itself supported by a witness statement from Mr Stuart Wallace, the person who is conducting the arbitration on behalf of the Council. That witness statement contained as many as ten exhibits, together with Award No.1. In response there was a witness statement of Ms Amy Higgins, the solicitor instructed by D R Jones, which exhibited Award No.1 and some later correspondence with the Arbitrator. There was also a short skeleton argument. In response to Ms Higgins' statement and the skeleton argument, there was a further five pages of reply submissions produced by the Council.
3. The Council and D R Jones are agreed that I should determine the application for permission to appeal on the basis of the documents referred to in paragraph 2 above. In accordance with the usual practice for this sort of application, there has been no oral hearing.
4. I have no hesitation in concluding that this application for permission to appeal should be dismissed, with costs. My detailed reasons for that conclusion are set out below. However, I am bound to say at the outset that, in my judgment, this is an application which never had any prospect of success.

THE CONTRACT

5. Before considering the award and the criticisms made of it, it is worthwhile setting out the contractual position, by reference to the documents supplied to the court by the Council. In my view, an entirely unremarkable story is there set out.
6. In October 1999, D R Jones provided a tender for proposed works at Mount Wise Primary School in Plymouth. The tender was in the sum of £497,229. This figure was not accepted by the Council who, on 30 November 1999, wrote to say that the scope of the proposed works was being reduced and the contract period was also being reduced to 39 weeks. They made clear that this was part of a cost-cutting exercise. A revised tender figure was sought from the contractors on the basis of the remaining items of work identified by the Council in that letter.
7. On 16 December 1999, D R Jones responded to this request, identifying a revised estimate for the reduced workscope of £382,881 plus VAT. This figure was expressly said to include various provisional sums.
8. On 13 January 2000, the Council wrote to D R Jones to say that this revised bid was "the preferred tender" and telling them that:

"All relevant details regarding the Contract have been forwarded to the Head of Legal Practice and he will be writing to you shortly."

9. On 26 January 2000 the Council wrote again to D R Jones referring to the tender "at the revised sum of £382,881 having been accepted". The letter enclosed contract documents for execution by D R Jones.
10. The work started on site in mid-February 2000. At the same time, on 14 February, the Council chased D R Jones for the executed contract documents. On 28 February, having executed them, D R Jones returned the contract documents to the Council. It appears that the Council signed and dated the documents on the 15 March 2000. All the complaints now raised by the Council must be considered against this background: that there was a written contract in existence which had been signed by both parties.

THE ARBITRATION AND THE AWARD

11. Notwithstanding that the contract was executed by D R Jones in the precise form sent out by the Council on 26^th January (subsequently dated by the Council on the 15^th March) it seems that, a long time later, the Council became convinced that, in some way, the contract documents did not reflect the true agreement between the parties. They therefore commenced arbitration proceedings in which, amongst other things, they sought to rectify their own contract documents.
12. There was a one day hearing on 21 March 2005 to deal with certain preliminary issues which the parties had identified as being relevant to the claim for rectification. These were:

i) the date of the formation of the contract;

ii) which documents are incorporated into the contract;

iii) which contractual dates are incorporated into the contract; and

iv) the contractual working hours.

13. The arbitrator's Award No.1 dated 17 June 2005 dealt in some detail with those four matters. He concluded that the contract was formed on 26 January 2000 when the contract documents were sent out under cover of the letter which said that the revised tender was "agreed"; that the contract documents were those listed in the signed agreement of 15 March 2000 and that rectification was unnecessary and mutual mistake unproven; that the contract period was 39 weeks from 14 February 2000 and that there were no binding sectional completion dates; and that the working hours were 8 am to 6 pm Monday to Friday save for Bank Holidays. These four conclusions, as the arbitrator pointed out at paragraph 96 of Award No.1, meant that the Council had failed on all four issues.

SECTION 69: APPLICABLE PRINCIPLES

14. Section 69(3) of the Arbitration Act 1996 provides that:

"(3) Leave to appeal shall be given only if the court is satisfied –

(a) that the determination of the question will substantially affect the rights of one or more of the parties,

(b) that the question is one which the tribunal was asked to determine,

(c) that, on the basis of the findings of fact in the award –

(i) the decision of the tribunal on the question is obviously wrong, or

(ii) the question is one of general public importance and the decision of the tribunal is at least open to serious doubt, and

(d) that, despite the agreement of the parties to resolve the matter by arbitration, it is just and proper in all the circumstances for the court to determine the question."

15. It therefore follows that, at the outset, the Council needs to demonstrate:

i) that there is a question of law;

ii) the outcome of which will substantially affect the rights of one or more of the parties;

iii) which the arbitrator was asked to determine;

iv) on which the arbitrator was obviously wrong (it being no part of the Council's case that the matters that they raise are of general public importance); and that

v) it is just and proper for the court to determine such questions.

I deal shortly with a number of these ingredients below.

Question of Law

16. There can be no error of law if the arbitrator reached a decision which was within the permissible range of solutions open to him: see The Matthew [1992] Lloyds Reports 323.

Substantially Affecting the Rights of One or More of the Parties

17. In this case the Council needs to demonstrate how and why the particular point which it claims that the arbitrator has erroneously decided has a substantial effect on the rights of the parties at issue in the arbitration: see the test formulated by Lord Phillips MR in The Northern Pioneer [2003] 1 Lloyds Reports 212.

Obviously Wrong

18. As I have already pointed out, the Council does not suggest, and nor could it suggest, that the alleged errors of law raise any point of public importance. Accordingly, the Council needs to demonstrate that the arbitrator was obviously wrong. The authorities make plain that the obvious error must normally be demonstrable on the face of the award itself: see, for instance Foleys Ltd v City and East London Family and Community Services [1997] ADRLJ 401 and Hok Sport Ltd v Aintree Race Course Co Ltd [2003] BLR 155. I also note that the Second Edition of the TCC Guide, published on 3 October 2005, states at paragraph 10.2.4 that, save in exceptional circumstances, the only material admissible on an application of this kind is the award itself, together with any documents attached to it.

THE DATE OF THE FORMATION OF THE CONTRACT

19. The arbitrator found that the date of the formation of the contract was 26 January 2000, for the reasons explained at paragraphs 25 to 52 of Award No.1. The Council contend that this result either constituted or resulted from an error of law on the part of the arbitrator.
20. The first fundamental difficulty with this part of the application is that the error of law is nowhere set out by the Council, despite the fact that they have produced three different documents setting out their case in relation to this application. In an application of this sort, the alleged error of law should be set out in clear, unambiguous terms by a claimant, and made directly referable to a paragraph or paragraphs of the award. This has just not been done here. The second, related difficulty is that it is not at all clear that this alleged error could be a matter of law at all. The arbitrator concluded that the relevant date was 26 January because the letter from the Council of that date refers to the revised sum of £382,881 having been accepted, and asked the contractor to sign the enclosed contract documents. It seems to me that that is a finding of fact and not a matter of law.
21. However, even if it was a matter of law, I do not consider that it is even arguable that the arbitrator's finding that the contract was made on 26^th January was obviously wrong, or that the alleged error can be seen from a perusal of the award itself. Indeed, how could it be, when, as the award makes clear, the letter of that date referred to the acceptance of the revised tender, and sent out the documents which the Council itself wanted to form the contract? Mr Wallace, on behalf of the Council, seems to suggest that at this stage the proposed contract and/or workscope and/or price were still unclear and vague, but that simply cannot be correct. Indeed, by their letter of 26 January, the Council were so sure about all the relevant terms that they sent out the contract documents to be executed by D R Jones. Accordingly, in my judgment, not only is it simply not possible to argue that the arbitrator was obviously wrong, but it seems to me that he was probably correct. In any event, the conclusion that the arbitrator reached was plainly one that was open to him, in accordance with the test in The Mathew.
22. It appears that, before the arbitrator, the Council were arguing that the contract was made on the 15^th February. No part of the three documents produced by the Council for this application, and to which I have already referred, explains such a case. Further, it is not supported by the contemporaneous documents the Council want to rely on in support of this application. Instead, there is a good deal of argument from the Council about the documents which might or might not constitute offer and acceptance. However, in the light of the undisputed existence of a written contract dated 15^th March, it is clear to me that disputes about earlier documents, and whether they constitute offers and/or acceptances, are quite beside the point.
23. Indeed, that leads onto the final reason why it is appropriate to reject the application for permission to appeal in respect of the arbitrator's finding as to when the contract was formed. Given that there was a written contract in this case, executed by both sides, which came into existence in the manner which I have set out above, I do not believe that the (earlier) date of the actual formation of the contract has any relevance whatsoever. In other words, I am not persuaded that the arbitrator's finding as to the date of the formation of the contract has any impact at all on the rights of the parties. Therefore, the test set out in The Northern Pioneer has simply not been met.
24. For all these different reasons, I refuse the application for permission to appeal the arbitrator's findings as to the date of the formation of the contract.

WHICH DOCUMENTS WERE INCORPORATED INTO THE CONTRACT?

25. The obvious answer to this question is: the documents listed at clause 2 of the contract agreement dated 15 March 2000. This clause set out, at sub-clauses (a)-(k) inclusive, an exhaustive list of the contract documents. The arbitrator concluded that those indeed were the documents incorporated into the contract.
26. The Council criticises that conclusion. Again, the error of law which the Arbitrator has apparently made is not clearly identified. Essentially, the Council appear to be saying that the arbitrator should have rectified the contract in accordance with their submissions that the contract was entered into on the basis of a mutual mistake. It seems to me that this attack is essentially a criticism of the arbitrator's findings of fact, and in particular his flat rejection of the suggestion that there had been a mutual mistake. That was a finding of fact which cannot be challenged under Section 69 in any event.
27. Again, even if I was wrong and that, in some way, the arbitrator's finding in respect of the incorporation of the documents was a matter of law, I reject the suggestion that the arbitrator was obviously wrong. The arbitrator dealt with this element of the dispute at paragraphs 53-67 of Award No.1. It appears that the Council's principal argument was that, since some of the contract documents referred to the originally intended work scope, these documents could not be described as accurately reflecting the revised agreement between the parties.
28. The arbitrator rejected that submission. I consider that he was quite right to do so. Indeed, I regard such a submission as fundamentally misconceived. As anyone with any experience of building contracts will know, it is common for the contract documents, particularly those setting out the detail of the work to be carried out, to contain ambiguities or inconsistencies. The other contract documents usually explain any such difficulties and render them irrelevant. That is what happened here. In the present case, the specification and the drawings incorporated all of the work originally intended. By January 2000, it was agreed that not all of that work would be done. However, one of the other contract documents was the letter of 30 November 1999, referred to above, in which the Council identified, from the specification, what works were to be performed as part of the revised scheme. Accordingly, the contract documents can be read together without any difficulty. Although the original specification was a contract document, where it included items of work originally intended but later excluded by the letter of 30 November, such items were irrelevant and of no contractual significance. That is a very common situation in the construction industry. It does not begin to justify the suggestion of mutual mistake, let alone rectification.
29. There is one final point. The Council spend a good deal of time complaining that, because the arbitrator found that the contract was made on 26^th January, he excluded as contract documents any documents which came into existence after that date. Indeed, this reasoning may explain why the Council thought that the point about the date was relevant to their rectification case. This argument was, with respect, a plain mis-reading of the award. The arbitrator found that the contract did not include any documents dated after 26^th January because none of the documents listed at clause 2 of the contract were dated after 26^th January. That was a perfectly correct approach: the only way any documents could be added to the contract list at clause 2 was if they had been erroneously omitted by operation of a mutual mistake, a contention which, on the evidence, the arbitrator rejected in its entirety.
30. Accordingly, for all these reasons, I again conclude that not only can it not be said that the arbitrator was obviously wrong, but that on the material before him, he reached the correct answer, and for the correct reasons. I therefore reject the second criticism of his award.

WHICH CONTRACTUAL DATES WERE INCORPORATED INTO THE CONTRACT?

31. The contract dated 15^th March 2000 provided that the commencement date was 14 February 2000, and that the works were to be completed 39 weeks thereafter. No other dates were identified in the contract. Unsurprisingly, therefore, the arbitrator found that the commencement date was 14 February and that the period for completion was 39 weeks.
32. Although the contract did not contain a sectional completion agreement, and did not make any reference to dates by which particular elements of the works should be completed, the Council argued that there was some sort of sectional completion agreement and that, in particular, there was an agreement that the internal works would be completed by the commencement of the autumn term, namely September 4, 2000. It appears that this argument was, in the main, reliant upon the programmes which D R Jones had produced.
33. As before, the alleged error of law made by the arbitrator on the face of the award is nowhere identified in the three documents relied on by the Council in support of this application. Again, it seems to me that the complaint made goes to matters of fact rather than matters of law. For both these reasons, I cannot see that this criticism even gets off the ground under Section 69 of the 1996 Act.
34. However, assuming that this was, in some way, a matter of law, I regard the Council's arguments as completely erroneous. It is trite law that if an employer wants to ensure that his contractor is obliged to complete parts of the work by specific dates, in advance of the overall completion date, he must stipulate some sort of sectional completion agreement, or provide other clear words that unambiguously impose such an obligation upon the contractor. There were no such documents, or clear terms, here. The Council were relying on the programmes produced by D R Jones. It does not appear that those programmes were contract documents identified in clause 2 of the contract itself but, even if they had been, the fact that the contractor proposed in his programme to do the work in a certain sequence does not, without more, oblige him so to do.
35. Accordingly, where at paragraphs 68-86 of Award No.1 the arbitrator sets out, in patient terms, the absence of a credible case as to a binding agreement for sectional completion, it seems to me that such findings are beyond sensible criticism. I therefore reject this third ground of the application.

WHAT ARE THE CONTRACTUAL WORKING HOURS?

36. The specification provided that the working hours were between 8 am and 6 pm on Mondays to Fridays. That is what the arbitrator found. It appears that, before the arbitrator, the Council had some curious argument that, although the working hours were not said to be subject to such matters, they were in fact subject to particular items in the specification, restriction of working hours to internal areas except in vacations, and the contract administrator's agreement to the hours worked.
37. No error of law is identified by the Council in respect of the arbitrator's findings as to the working hours: indeed, it is not at all clear to me that an application for permission to appeal is being made in respect of this part of Award No 1. However, on the assumption that it is, it seems to me that the arbitrator has considered the contract documents and has construed them properly. The Council's arguments were simply contrary to that which was provided by their own specification. It is impossible to see how the Council hoped that they could succeed in pursuing such a point, either before the arbitrator, or before me. I therefore reject this fourth ground of the application.

CONCLUSIONS

38. For the reasons set out above, I dismiss the entire application for permission to appeal under Section 69 of the 1996 Act. I consider that the application never had any real prospect of success. Throughout both the arbitration and this application, the Council seems to have ignored the simple point that the contract was executed by both sides in the form required by the Council itself, so that, in order to get anywhere, the Council was going to have to show that it had signed up to its own terms by mistake, and that this mistake was mutual. That was always going to be a difficult task, and it is perhaps unsurprising that the Council failed so completely to achieve it.
39. The failure of the claim for rectification before the arbitrator, depending as it did on findings of fact, could not properly be raised under section 69 of the 1996 Act. Thus this application was hopeless. It appears that, in recent times, applications under section 69 are being made, which arise out of building arbitrations, and which have no prospect of success: see, for instance, Sinclair v Woods of Winchester [2005] EWHC 1631 and Surefire v Guardian [2005] EWHC 1860 (TCC). In the latter case, Jackson J pointed out that it was wholly inappropriate for parties to seek to dress up matters of fact as matters of law, in the hope of triggering Section 69. I echo his comments as being directly applicable in the present case.
40. For the reasons set out above, I dismiss the application for permission to appeal. In the circumstances, I consider that it is appropriate to award the Defendant its costs to be assessed on an indemnity basis. I have been provided with a Statement of Costs for summary assessment in the sum of £4,261.14. I regard this figure as eminently reasonable in any event so that, even if the assessment was on the standard basis, I would allow the claim in full. For these reasons, I order that the Council pay the costs of D R Jones in the total sum of £4,261.14 within 14 days of this judgment.