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
		27th January 2009

MR. JUSTICE COULSON:

1. This is an adjudication enforcement application under CPR Part 24 which raises a number of issues that are becoming a feature of these straightened times. From my particular vantage point, it appears that the current recession is providing the first real test of the adequacy of the adjudication regime introduced by the Housing Grants (Construction and Regeneration) Act 1996 since the initial flurry of cases when the legislation first came into force.
2. In addition, in view of the fact that neither the claimant nor the defendant has been able to afford to instruct those solicitors who represented them in the adjudication proceedings, and given that the defendant is unrepresented and has chosen not to attend today's hearing at all, I have ordered that a transcript of this short Judgment be prepared and provided to both parties.
3. The defendant ("Forest") is a property developer. In January 2008, Forest engaged the claimant, Able Construction Ltd ("Able"), to carry out a residential development at 15 to 19 Northolt Road in Harrow, Middlesex. There is no issue that this contract was anything other than a written construction contract incorporating the JCT Conditions, 1998 edition.
4. A dispute arose between the parties which was referred to an Adjudicator, Mr. Andrew Dixon. By written decision dated 24^th September 2008, he decided that Forest should pay Able £130,927.17 plus VAT, plus interest of £5,151.97. He also ordered Forest to pay his fees of £6,356.95 plus VAT. That made a total of £166,464.33.
5. The dispute having been referred to adjudication, it appears that the contractual relationship between the parties came to an end. I understand that other contractors are now engaged in carrying out the next stages of the works. Notwithstanding that, the parties met following the adjudication decision and reached a written Settlement Agreement dated 9^th October 2008. This Agreement contained the following provisions:

"In consideration of Able Ltd. restraining itself from taking further legal action to enforce the Adjudicator's decision, Forest Ltd. agrees as follows:

(i) Pay £150,000 in cleared funds as follows:

(a) £40,000 on 10^th October 2008 by 12.00 p.m.;

(b) £60,000 on or before 31^st December 2008;

(c) £25,000 on or before 31^st January 2009; and

(d) £25,000 on or before 28^th February 2009.

(ii) Forest Ltd. shall pay the Adjudicator's fee of £6,259.95 plus VAT immediately.

(iii) On making the full payment in cleared funds it will be accepted by Able Ltd. in full and final settlement in all claims or liabilities so that neither Able Ltd. will sue Forest Ltd. or Forest Ltd. can sue Able Ltd. on any matter related to the Timber Carriage Project which is the subject of these proceedings.

(iv) If Forest Ltd. fails to pay Able Ltd. the amount payable in full under the adjudication decision as mentioned above, Able Ltd. shall take such legal advice as it sees fit to enforce the adjudication decision or any balance unpaid together with all other liabilities as stated in the Final Account without further reference to Forest Ltd. with full costs and interest."

6. The first instalment of £40,000 was paid on 10^th October 2008. I am also informed that the Adjudicator's fees were paid by Forest at the same time. However, the second instalment of £60,000 was not paid by 31^st December 2008 and has not been paid subsequently. There is no dispute on the papers that Forest are therefore in breach of the terms of the Settlement Agreement.
7. In consequence of Forest's default, on 7^th January 2009 Able commenced proceedings pursuant to CPR Part 8 in the TCC for the outstanding sum due under the Settlement Agreement. The claim was therefore limited to £110,000. On 9^th January 2009 Ramsey J gave directions for the early hearing of the Part 24 application.
8. In a letter dated 23^rd January 2009, and received by the court yesterday, Forest sought to adjourn the hearing of the Part 24 application fixed for today. That application was opposed, and so Forest were informed that any such application would have to be made orally at this hearing this morning. Forest have, for reasons which are unknown, chosen not to attend this morning. Having considered all of the relevant material, it seems to me that there is no reason to adjourn the hearing. All the court papers have been properly served on Forest, and no cogent reasons have been put forward as to why the hearing should be adjourned or (as we shall see), what possible defence Forest can have to the Part 24 claim. This is an application to enforce an Adjudicator's decision which is now four months old, and which has been triggered by Forest's admitted default in respect of the terms of the Settlement Agreement, which they agreed in October. There is no basis for an adjournment.
9. I therefore move on to consider the merits of the enforcement application. The starting point, of course, as with any application to enforce the decision of an adjudicator, is that subject to arguments about jurisdiction and natural justice, the TCC will ordinarily enforce the decision on a summary basis: see the Court of Appeal decisions in Bouygues (UK) Ltd. v Dahl-Jensen (UK) Ltd. [2000] BLR 522 and Carillion Construction Ltd. v. Devonport Royal Dockyard Ltd. [2005] EWCA Civ 1358. No question of jurisdiction arose either in the adjudication itself or subsequently, when the parties were both represented by solicitors. No alleged breach of natural justice has been identified in any of the documents. In short, no defence of any kind to the substantive claims made by Able has been put forward by Forest in any of the documents that I have seen. On that basis, therefore, this would be appear to be an adjudicator's decision which should be enforced.
10. The first issue which does arise on the facts of this case is whether or not the subsequent Settlement Agreement has any effect on Able's right to pursue this claim for summary judgment under CPR Part 24. It has been suggested in the past that a settlement or compromise agreement may not be a construction contract within the meaning of the 1996 Act: see, for example, Shepherd Construction Ltd. v. Mecright Ltd. [2000] BLR 489 and Latham Construction Ltd. v. Brian and Ann Cross [2000] CILL 1568. But in those cases, the point mattered because the adjudicator had been appointed under the settlement agreement, and not the original construction contract. That is not the case here. The Adjudicator had been appointed under the original construction contract and therefore had the requisite jurisdiction to decide the dispute before him.
11. Indeed, in the present case it seems to me that the Settlement Agreement is of limited relevance. It expressly provided for what would happen if Forest defaulted. It made plain that, if Forest did not pay in accordance with the Settlement Agreement then Able were entitled, without any further reference to Forest, to enforce the Adjudicator's decision. That essentially is what Able now seek to do. As a concession to Forest, so it seems to me, Able are restricting their claim to the sum due under the Settlement Agreement, as opposed to the slightly larger net sum due under the Adjudicator's decision. But that simply limits the claim to the amount agreed; it does not affect the validity of the underlying adjudicator's decision.
12. For that reason, therefore, it seems to me that the fact that this claim comes before the court as a claim due in consequence of a breach of a Settlement Agreement makes no difference to the general approach that the court should adopt, and which I have set out above. Indeed, on one view, the fact that this claim arises both from an Adjudicator's decision and a breach of a subsequent settlement/compromise agreement only confirms the approach that, all other things being equal, Able are entitled to summary judgment.
13. The second issue arises in this way. Once the enforcement proceedings were underway, Mr. Padda of Forest sought a meeting with Mr. Lakhanpal of Able. That meeting took place on site on 15^th January. It is common ground that Mr. Padda gave Mr. Lakhanpal a cheque for £10,000 at that meeting and, happily, that cheque has been honoured. That, of course, reduces the claimant's claim this morning to the net sum of £100,000 plus interest and costs.
14. However, there is a dispute surrounding the terms on which the sum of £10,000 was paid. In the letter of 23^rd January to which I have previously referred, Mr. Padda maintains that that sum was paid as part of an overall agreement reached with Mr. Lakhanpal at the meeting on 15^th January, to the effect that £10,000 would be paid now and that the remainder of the debt would be paid off by Forest at a rate of £3,000 a month. In Able's reply, Mr. Lakhanpal denied this, pointing out that no such agreement could have been reached because it would have been wholly contrary to his interests. He notes that, if the debt was paid off at the rate of £3,000 a month, then it would take almost three years for the full sum to be paid. Given Able's own debts as a result of this work, he emphasised in his reply that such an arrangement would have been unacceptable to him.
15. I was therefore faced with a position where, at least on the face of the documents, there was a matter in dispute (what was agreed on 15^th January) which could only be resolved by oral evidence. It seems to me that, in enforcement proceedings such as this, the court's procedures ought to be flexible enough to ensure that the raising of a point of this kind can be addressed, if at all possible, straightaway. It is not generally acceptable for a party seeking to avoid judgment arising out of an adjudicator's decision to raise an issue which requires oral evidence, in the hope and expectation that this would mean that the determination of the enforcement claim would have to be adjourned. In my judgment, the right way to resolve such a short and self-contained point is to deal with it by way of oral evidence at the enforcement hearing. The fact that the defendant has chosen not to attend this morning means that it has not had an opportunity of putting forward its own oral evidence (although the case is set out in writing), but to the extent that any prejudice has been caused thereby, that is solely the responsibility of the defendant.
16. Mr. Lakhanpal gave evidence about the meeting. He told me that the £10,000 was agreed as being a payment on account of the £60,000 which should have been paid on 31^st December. He also told me that, although Mr. Padda did raise the possibility of paying the rest of the money off at a rate of £3,000 a month, Mr. Lakhanpal told him that that was "absolutely out of order … I told him I could not agree that … I was paying my own creditors plus interest. I told him I wanted judgment". Mr. Lakhanpal went on to say that Mr. Padda was "trying any old way not to pay me".
17. It seems to me that Mr. Padda's case, that an agreement was reached on 15^th January at which he would pay off the debt at a rate of £3,000 per month, is unsustainable for a whole variety of reasons. First, it seems clear to me that Mr. Lakhanpal had a clear recollection of the meeting and that, because of the unhappy history of his dealings with Mr. Padda, he was quite clear that he did not and would not reach any such agreement. Secondly, it seems to me that there would have been no motivation whatsoever for Mr. Lakhanpal to reach such an agreement on behalf of Able, given that the proposed terms would mean that Mr. Lakhanpal would be waiting every month for the next three years to receive a cheque of £3,000 from Mr. Padda. Given Mr. Padda's disastrous track record of non-payment so far, it is, in my judgment, inconceivable that Mr. Lakhanpal would have willingly put himself in that position.
18. There are a number of other reasons why I conclude that Mr. Padda's case as to the alleged agreement is unsustainable. Chief amongst those is the fact that, as Mr. Lakhanpal identified, any agreement reached with Mr. Padda would have needed to be put in writing, just as the Settlement Agreement was on 9^th October 2008. This alleged agreement was not put in writing and indeed it was not even asserted by Forest until their letter of 23^rd January 2009 which was eight days after the alleged agreement, and just before the hearing of this Part 24 application. If Forest had obtained such a hugely beneficial agreement from Mr. Lakhanpal on 15^th January, then in my judgment it is inconceivable that they would not have recorded it in writing straightaway.
19. For all those reasons, I therefore reject the suggestion that some other settlement agreement was reached on 15^th January 2009. Thus the position is that:

(a) Forest are in breach of the existing Settlement Agreement; and

(b) Able are entitled to judgment for the unpaid balance due under that Settlement Agreement, and pursuant to the original Adjudicator's decision.

20. Accordingly, Able are entitled to judgment pursuant to CPR Part 24 in the sum of £100,000. There is a claim for interest in accordance with the Late Payment of Commercial Debts (Interest) Act 1998 at a rate of 8% over base. It seems to me that, as a matter of discretion, I should permit that claim. This is just the sort of case which that Act was designed to cover: a debt which is agreed to be overdue and where there is no reason whatsoever for its non-payment. Furthermore, in circumstances like this, where cash flow is so important, it is necessary for the courts to utilise the 1998 Act, wherever appropriate, to arrive at a significant rate of interest. That claim gives rise to an interest amount of £613.69. Accordingly there will be judgment for Able in the total sum of £100,613.69.
21. That leaves the question of costs. In accordance with the principles set out in Gray & Sons Builders (Bedford) Ltd. v. Essential Box Co. Ltd [2006] EWHC 2520 (TCC) I conclude that this is a case in which Able are entitled to costs on the indemnity basis. Forest had and have no defence to this claim and have put Able to extensive costs in order to recover sums which Forest agreed to pay as long ago as last October. This is therefore a case in which an order pursuant to the indemnity costs regime is entirely appropriate. In addition, I note that the Settlement Agreement entitled Able to 'full costs' in these circumstances (see paragraph 5 above), which I would also take to mean indemnity costs. I require Able to provide a bill of costs within the next seven days so that I can assess the costs due. That sum will then be added to the judgment sum.