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

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
BIRMINGHAM DISTRICT REGISTRY
TECHNOLOGY & CONSTRUCTION COURT

		BIRMINGHAM CIVIL JUSTICE CENTRE 33 BULL STREET BIRMINGHAM B4 6DS Dates of hearing: 12 June 2009 Date of draft judgment: 2 July 2009
		Date Of Judgment: 8 July 2009

 

1. This action arises from building work carried out at Wellington Square, Cheltenham. The claimant company, Aceramais, owns the site and is the vehicle for the development project. Its parent is Arion Investment Holdings Limited, a BVI company which owned or controlled a number of development companies.
2. The defendant company ("HPL") was involved with the development of the site. HPL is owned or controlled by Mr Leslie Grant and his wife Mrs Sarah Grant. Arion funded HPL's development of Wellington Square. Arion had also funded developments carried out by other companies owned or controlled by Mr and Mrs Grant. Generally, a different, single-purpose company was deployed for each development.
3. Work at Wellington Square began in March 2007. Problems arose and work stopped. On 10 March 2009 HPL served on Aceramais a notice to adjudicate. Aceramais wrote to the adjudicator stating that there was no contract in writing within the meaning of section 107 Housing Grants, Construction and Regeneration Act 1996 so that the adjudicator had no jurisdiction. On 16 March 2009 Aceramais issued proceedings seeking a without notice injunction to prevent the adjudication proceeding. Notwithstanding Aceramais' protest, the adjudicator proceeded with the adjudication. Aceramais did not participate, even on the basis that participation was without prejudice to their right to argue later that the adjudicator lacked jurisdiction. The adjudicator decided that Aceramais owed HPL about £800,000. Aceramais have not paid this.

The issues

4. Aceramais contend that Mr MacPherson of Aceramais agreed with Mr Grant that Aceramais would purchase the site; Mr and Mrs Grant would carry out the development at cost; any profit from the development would be split 50:50 between Aceramais and Mr and Mrs Grant. Its case is that it did not contract with HPL at all: its contract was with Mr and Mrs Grant. That agreement was not reduced to writing.
5. HPL's case is that it and Aceramais contracted on the JCT 2005 Design and Build standard form of building contract, a document dated 14 March 2008.
6. HPL contend that the claim in any event stands struck out by reason of failure by Aceramais to comply with the terms of an unless order. HPL also contend that this is not an appropriate case for the grant of the discretionary remedy sought by Aceramais. I deal first with the question whether there was a contract in writing.

Was there a contract in writing?

7. There is no dispute between the parties as to the wording or effect of section 107, bearing in mind the guidance in RJT Consulting Engineers Ltd v DM Engineering (Northern Ireland) Ltd [2002] BLR 217. The only issue here is whether, in fact, these parties entered into a JCT contract in March 2008. A JCT form exists. It has been signed on behalf of HPL but not by Aceramais.
8. I have heard evidence from a number of witnesses and have been taken to many documents. The principal witnesses are Mr Neil MacPherson and Mr Grant. Mr MacPherson describes himself as a director of Bastia Investments Ltd, one of Arion's group companies. He gave evidence on behalf of Aceramais. Mr MacPherson is currently in prison, having been sentenced to a prison term of three years following his conviction, (after a not guilty plea) of proceeds of crime offences.
9. Mr Grant describes himself as the contract manager for HPL. He has twice been declared bankrupt (he is now discharged). He is disqualified as a company director for a period of five years from 9 December 2005, and received a suspended prison sentence in connection with this disqualification. Mr Grant appears to tell the truth only if it suits him to do so. I have little confidence in his evidence. A characteristic of Mr Grant's behaviour and attitude is that he has no real concept of the distinctions which must be drawn between different legal entities. He and Mrs Grant have traded through any corporate or unincorporated vehicle which suited them at the time, ignoring the boundaries which should not have been crossed between one company and another and between themselves as individuals, or partners in Hadleigh Partnership, and the various companies which they owned or controlled from time to time.
10. Mr Grant and Mr MacPherson met in about 2003/2004. They began to collaborate on development projects from about 2004. Some of these projects were undertaken by Mr Grant through companies in a group called Hadleigh Group Ltd. One of these companies was Coventry Timber Frame Ltd (CTF). Most of these companies have since gone into administration or some other form of insolvency. In August or September 2006, Mr Grant and Mr MacPherson began discussions about developing the site at Wellington Square. Aceramais purchased the site. Mrs Alison Scott, a solicitor, acted for Aceramais on the purchase. She was also involved throughout the development: correspondence was addressed to her or copied to her and she maintained contact with Mr MacPherson, who appears at times to have been difficult to track down. It was decided that CTF should undertake the Wellington Square development.
11. The funding for the purchase and development of Wellington Square was provided by Royal Bank of Scotland (RBS). Bond Davidson, quantity surveyors, were engaged by RBS to monitor the project. They reported to RBS on progress and whether requests for payment had been properly made. Mr Grant says that Mr MacPherson told him that RBS required a JCT contract to be executed; Mr Macpherson made it clear that his own area of interest was arranging funding and that Mr Grant was to arrange the contract documentation which RBS required. Notwithstanding my reservations about Mr Grant's evidence, that has the ring of truth to it. Mr MacPherson was not at all interested in the contractual arrangements to be made. It seems to me likely that he did leave that aspect of matters to Mr Grant.
12. While I have seen no formal requirement by RBS that there be a JCT contract for the development, it is clear that Bond Davidson, on behalf of RBS, considered that the contract should be on a proper footing. They wanted a JCT contract in place. They chased throughout material periods for contract documentation to be completed.
13. The first of the two JCT contracts in this case is undated, but appears to have been prepared in early 2007. Aceramais was shown as the Employer and CTF as the Contractor. It appears that it was sent to Mr MacPherson for signature in March 2007, but it was not signed by or on behalf of Aceramais.
14. CTF ceased trading. In July 2007, HPL was incorporated and Mr Grant's intention was that this company would take over the Wellington Square development from CTF.
15. HPL engaged QS Collaborative (QSC) in March 2008 to undertake quantity surveying services on the Wellington project. Mr Lloyd-Jones of QSC learned that the first contract had not been completed, and at that time it could not be located. He recommended that a replacement JCT contract be prepared. He then handed over to Mr Chinn of QSC. Mr Chinn prepared a further JCT form of contract. Aceramais was shown as the Employer and HPL as the Contractor. This is the 14 March 2008 JCT contract in issue. (Although the same 2005 Design & Build form was used, the detail to be added to the standard form differed in many respects as between the first JCT contract document and that dated 14 March 2008. I return to that later.) Mr Chinn had not seen the first JCT form nor did he know the content. He completed the detail of the March 2008 JCT form on the basis of instructions given by a Mr Thomas of HPL and by Mr Grant. Understandably, as Mr Chinn said, he had expected that there would be what he described as an assignment (really a novation) as between Aceramais, CTF and HPL. That however did not happen. On 15 April 2008 Mr Chinn sent the JCT form to Mr Grant, with instructions that it should be signed by a director of HPL. Mr Thomas signed on behalf of HPL. Mr Grant sent the documents to Bond Davidson, asking them to arrange for it to be signed. His understanding was that Bond Davidson would ask Aceramais to sign it. By e mail dated 30 April 2008 Mr Grant asked for a copy of the contract after it had been signed by Aceramais. By letter dated July 2008 Bond Davidson reported to RBS that their understanding was that the contract had been sent to the "Employer" ie Aceramais. The document was not signed by Aceramais. Mr MacPherson denies receiving it, but I have little confidence in that evidence.
16. In my judgment Aceramais and HPL contracted on the basis of the JCT 2005 Design & Build standard form of contract, as set out in the 14 March 2008 document. I reach that conclusion after careful consideration of the evidence, notably the documents, and for the following reasons.
17. I do not have sufficient confidence in the oral evidence given by either Mr MacPherson or Mr Grant to conclude that they had agreed orally that Mr and Mrs Grant would undertake the development.
18. Mr MacPherson had authority to bind Aceramais. At material times he controlled Aceramais and gave instructions to Mrs Scott. There is no other person at Aceramais at the material time who undertook that role. The officers, acting through the Gold companies, clearly took their instructions from Mr MacPherson. Mrs Scott was involved with a number of aspects of the project.
19. There had been no JCT contract on any of the other projects on which Mr MacPherson's companies and the Grant's companies had worked together. However, on the Wellington Square project RBS wanted some formality. On their behalf Bond Davidson took steps to put a JCT contract in place.
20. Examination of the documents shows that the initial intention was that Aceramais would contract with CTF. I conclude that they did, and indeed did so on the basis of the JCT contract. The first JCT form, for the contract between Aceramais and CTF, had been sent to Mr MacPherson. Mrs Scott confirms that Mr MacPherson had it in his possession and, indeed, Aceramais have included this document in their disclosure list. Mr Grant himself sent a number of e mails to Mr MacPherson and Mrs Scott chasing them to have this JCT form signed and returned. Bond Davidson chased also, including Mrs Scott in their e mails. At no stage did Mr MacPherson dispute that the contractual relationship was between Aceramais and CTF. Mr MacPherson received the Bond Davidson reports which included repeated reminders that the contract document had not been executed. He did not raise any queries in respect of the JCT document. He did not return it. He did not deny its relevance or validity. Mrs Scott, a solicitor, received the JCT form. She said that she did not have a great deal of experience of forms such as these, though she had dealt with one some years ago. However, Mrs Scott did not question why she had been sent a JCT form in January 2007; she did not question its validity or relevance. Mrs Scott did not respond to the chasing messages from Mr Grant and Bond Davidson or challenge the relevance of their references to the JCT contract.
21. The fact that Mr MacPherson may have chosen not to inform himself as to what a JCT form of contract was or concern himself with the detail of matters such as which form of contract was to be used does not assist Aceramais. Mr MacPherson had left it to Mr Grant to deal with any formalities. The formality required by Bond Davidson, and adopted by Mr Grant, was that the companies would contract on the JCT form. Mr MacPherson tacitly agreed that approach.
22. On balance, I accept that HPL considered that they had contracted with Aceramais on the JCT form. The identity of the other contracting party had changed – from CTF to HPL – but the project continued. There is no suggestion that Mr MacPherson at that point wanted to deal with contractual matters and formalities differently from the way in which these had been dealt with between Aceramais and CTF. Bond Davidson still wanted a JCT contract in place. Aceramais were aware, through Mr MacPherson and Mr Bradbury, that HPL maintained that there was a contract on the JCT form yet did not deny either that there was a contract with HPL or that it was on the JCT form.
23. Mrs Scott was copied in to messages regarding the project which showed clearly that HPL's position was that a JCT form had been sent to Aceramais for signature and that HPL considered that that was the basis on which they had contracted. The documents show that Mrs Scott herself dealt with matters on the assumption that the agreed position between the parties was that they had contracted on the basis of a JCT contract. For example, she wrote by e mail to Mr MacPherson saying "One of the main problems at Wellington Square appears to be the lack of a formal JCT contract with [Mr Grant]. Some decision needs to be made as to what should now be included in this contract because I am told it should include some reference to the original agreement you made with [Mr Grant] as to profit share. Are you instructing Bond Davidson to deal with this for you?" Mrs Scott does not there challenge the underlying assumption that the contract is on the JCT form. Indeed, this message reinforces the clear impression that Aceramais had agreed that the formal requirement was for a JCT contract. In her e mail to Mr Grant dated 11 April 2008, Mrs Scott again refers to the JCT contract: "I attach a form of collateral warranty which I have adapted from a form supplied by the Bank's solicitors on [another project]. HPL is the developer and the party to the JCT…" (I have added the emphasis.)
24. Mrs Scott was copied in that day to an e mail from Mr Lloyd-Jones in which he mentioned the loss of the previous JCT form and his intention to purchase copies of a new JCT form and of collateral warranty forms. Again, Mrs Scott did not query these references.
25. On 6 January 2009 Mrs Scott received by e mail Mr Grant's note concerning Wellington Square. This referred to the payment terms specified in the JCT contract. Mrs Scott did not query this reference.
26. The following e mail dated 4 August 2008 from Mr Grant to Mr Bradbury is important:

"Dear Darren, I have given some thought to our conversation on Friday [1 August] and have come to a point that has been on the cards for a long time. I can no longer fund the developments on behalf of Rayleigh [another Arion company], the money you have paid to Hadleigh has gone towards the outstanding amounts owed to Hadleigh the works being undertaken at present have not been charged for yet.

All areas of credit have been closed to us, the agreement with [Mr MacPherson] (Rayleigh) was Gibraltar would fund the build this means payment up front.

We are as most companies are, under pressure to repay the money that has been loaned to us to build out your developments.

Our agreement has been changed many times, which has left Sarah and I with no trust and little enthusiasm which is a feeling I dislike

I shall continue with the render at St Paul's but will not be able to complete the roof due to the extra items requested by Building Control.

If you still wish Hadleigh to continue with the works then I will need the following:

A clear agreement in writing, something you have said would not be a problem.

An agreement on how the outstanding money will be played.

How any further payment would be made

Without the above in place I cannot see how Hadleigh can continue with the works for Rayleigh, this will not affect any of the works at Wellington Square. But I also require the agreement between us on this project put into writing. I hope the above is clear and you understand our position, and look forward to hearing from you.

Regards Lesley Grant"

27. At the ex parte hearing on 16 March, Aceramais relied on this in support of their argument that HPL did not consider that there was an agreement in place on the Wellington Square project. It is, however, clear, when the e mail is read in context and carefully, that HPL were not maintaining that there was no JCT contract on the Wellington Square project. To the contrary, in the penultimate sentence Mr Grant was in fact chasing Mr Bradbury to sign the JCT contract.
28. The question of profit share, raised by Aceramais in support of their case, is in my judgment a red herring. HPL claimed payment for the work they undertook. There may have been some arrangement agreed between Mr MacPherson and Mr Grant as to how profit from the project was to be shared – I make no finding on that – but that does not alter the fact that, as between Aceramais and HPL, Aceramais was to pay HPL for its work.
29. Aceramais rely on the fact that the detail in the March 2008 JCT contract differed from that in the earlier document. The differences have been helpfully identified by Mr Sampson in paragraph 15 of his closing submission. In my judgment these differences are not material or relevant. The contract between Aceramais and HPL was not a novation of the CTF contract. It was a new and stand-alone contract.
30. Mr Sampson submits that the 14 March 2008 agreement is incomplete on the ground that the document contains terms which were never agreed. I do not accept that submission. This is a case which Aceramais advance at a very late stage. They have not identified which of the matters set out in the March 2008 document they disagree with. At no time before the project terminated did Aceramais challenge the detail or matters set out in the document.
31. I conclude that Aceramais and HPL contracted on the basis of the JCT 2005 Design & Build standard form of contract to undertake development at Wellington Square.

Section 107 HGCRA

32. Section 107 of the Housing Grants, Construction and Regeneration Act 1996 provides as follows:

"107 Provisions applicable only to agreements in writing

(1) The provisions of this Part apply only where the construction contract is in writing, and any other agreement between the parties as to any matter is effective for the purposes of this Part only if in writing.

The expressions "agreement", "agree" and "agreed" shall be construed accordingly.

(2) There is an agreement in writing—

(a) if the agreement is made in writing (whether or not it is signed by the parties),

(b )if the agreement is made by exchange of communications in writing, or

(c) if the agreement is evidenced in writing.

(3) Where parties agree otherwise than in writing by reference to terms which are in writing, they make an agreement in writing.

(4) An agreement is evidenced in writing if an agreement made otherwise than in writing is recorded by one of the parties, or by a third party, with the authority of the parties to the agreement.

(5) An exchange of written submissions in adjudication proceedings, or in arbitral or legal proceedings in which the existence of an agreement otherwise than in writing is alleged by one party against another party and not denied by the other party in his response constitutes as between those parties an agreement in writing to the effect alleged.

(6) References in this Part to anything being written or in writing include its being recorded by any means."

33. The March 2008 JCT form set out the terms which the parties had agreed. Although not signed by Aceramais, the document clearly falls within the provisions of section 107(2)(a) and (c). It is a contract in writing within the meaning of section 107 and within the guidance given in RJT Consulting Engineers Ltd v DM Engineering (Northern Ireland) [2002] BLR 217.
34. Mr Sampson relies on the judgment of HHJ Havery QC in Redworth Construction Ltd v Brookdale Healthcare Ltd [2006] BLR 366 , a case where an agreement 'in principle' to agree to a JCT Form was held to be insufficient to satisfy the Act. For the reasons I have set out earlier, that is not the position here. This was not an agreement in principle; the parties here agreed, in the way I have described, to contract on the JCT form.

Does the claim stand struck out?

35. HPL contend that the claim stands struck out by reason of failure by Aceramais to comply with the terms of an order dated 17 April 2009.
36. On 20 March 2009 the court ordered Aceramais to serve its list of documents and disclosure statement by 13 April 2009, failing which its claim would be struck out. Aceramais provided disclosure. HPL considered that Aceramais' disclosure was deficient and made application to the court. On 17 April 2009 a consent order was made. This provided that, unless Aceramais gave disclosure by way of a further list, disclosed specified documents or classes of documents and searched its computer equipment for documents relevant to the issue of contract formation by 27 April 2009, its claim be struck out. Aceramais made further disclosure by a list served on 27 April 2009.
37. It became clear during trial that Aceramais did not have a clear understanding of the rules of disclosure. Aceramais failed to disclose a number of documents which may have been of assistance in this case eg notes of a meeting between Mrs Scott and Mr MacPherson; Mr Bradbury's notebook; and Mr MacPherson's files, which Mr Bradbury was holding. Further, it appears that no search was made to locate and disclose documents which Mr Bradbury said he kept at home.
38. HPL contends that Aceramais had failed to comply with the terms of that consent order. It seems to me that there is force in this. Paragraph 2 of the order dated 17 April 2009 required Aceramais' further disclosure list to include "a disclosure statement completed by an appropriate person as per rule 31.10 of the CPR". The officers of Aceramais are Gold Directors Ltd and Gold Secretaries Ltd, companies which are managed by Gold Management Services Ltd who are based in Gibraltar. Aceramais' disclosure document dated 27 April 2009 was signed by Mr Bradbury. Mr Bradbury describes himself as Aceramais' general manager in the UK. He appears to have been brought in to hold the fort while Mr MacPherson is in prison. Mr Bradbury's position within Aceramais is not clear at all. He is not an officer of the company. I am not persuaded that he is an employee. There is no evidence as to any actual authority given to him by Aceramais; the extent of his authority, if any, to act on behalf of Aceramais has not been explained. It appears that the rules of disclosure were not properly explained to Mr Bradbury; certainly, he did not understand these rules.
39. I accept Mr Ensaff's submission that Mr Bradbury is not an "appropriate person" pursuant to rule 31.10. I also accept his submission that the court should take a serious view of this: the duty to disclose is necessary for a fair trial, and the making of a disclosure statement by an appropriate person is necessary to ensure that the obligation of disclosure has been complied with. In this case, Aceramais failed to comply with paragraph 2 of the order dated 17 April, in that its disclosure statement was not completed by an appropriate person within the meaning of Part 31.10. The consequence of that failure is that the claim stood struck out as at close of business on 27 April.

Should a declaration be made in these circumstances?

40. So far as these proceedings are concerned, Aceramais appeared ex parte and without notice on 16 March 2009. The court adjourned the application to 20 March when both parties could be heard. The court did not make any order the effect of which would have been in effect to prevent the adjudication continuing, but gave directions for a speedy trial and ordered that, pending trial, HPL might not seek to enforce the adjudicator's decision. Aceramais have tried twice to adjourn the trial but neither application succeeded.
41. The only relief sought by Aceramais at this trial is a declaration that "the construction contract dated 14 March 2008 in relation to the works undertaken at Wellington Square….was not an agreement in writing for the purposes of section 107 of [HGCRA] and that accordingly the provisions of Part II of that Act do not apply to that construction contract." However, if I do not find for Aceramais on this point, I am not asked to make any other declaration eg as to what contract, if any, the parties entered into or the terms of any contract. Had I concluded that there was not a contract in writing within the meaning of section 107, then the decision to ask the court for a very limited declaration would have been a matter for regret. The parties have carried out extensive work to prepare for this trial. There are many witness statements and a mass of documents. The cost must be significant. Given the very limited nature of the relief now sought, it would probably have been a quicker and cheaper process if Aceramais had waited until the outcome of the adjudication and challenged the decision on the ground that there was no contract in writing, instead of following this path.
42. Further, given the narrow scope of the relief sought, I am cautious about making binding decisions on factual matters which may be the subject of later proceedings. As a consequence, there is a disproportion between the effort which has been put into these proceedings and the necessarily limited nature of the court's conclusions.
43. The approach taken by Aceramais in these proceedings appears to have resulted in no saving of costs.
44. HPL contend that the court's discretion to grant discretionary relief is to be exercised very sparingly; this case is not one of those exceptional cases referred to in Dorchester Hotel Ltd v Vivid Interiors Ltd [2009] EWHC (TCC). Aceramais' approach runs contrary to the intention of the statutory provisions and is inappropriate.
45. In the Dorchester case, the referring party had served a substantial number of documents, witness statements and experts' reports and the responding party maintained that, in all the circumstances, the timetable was too tight so that there was a very real risk of there being a breach of the rules of natural justice. In paragraph 11 of his judgement Coulson J referred to paragraph 9.4.1 of the TCC Guide (Second Edition, First Revision) which provides that the TCC will hear applications for declaratory relief arising out of the commencement of a disputed adjudication, including a dispute over the jurisdiction of an adjudicator. Coulson J then set out examples of the limited circumstances in which the TCC might provide assistance in an ongoing adjudication. At paragraph 17 he said: "Accordingly, for these reasons I have concluded that the TCC does have the jurisdiction to consider the application for a declaration in this case. But I make it clear …. that such a jurisdiction will be exercised very sparingly. It will only be appropriate in rare cases for the TCC to intervene in an ongoing adjudication. It is important that, wherever possible, the adjudication process is allowed to operate free from the intervention of the court. Applications of this sort will be very much the exception rather than the rule. They will only be granted in clear-cut cases such as (I venture to suggest) those that existed in CJP Builders"
46. I derive from this that the court should deal with an application of this sort only where the case is so clear-cut that it can act quickly and in effect stop the adjudication by way of a declaration; if the case is not clear-cut, then the court should not intervene and there should be an argument at the enforcement stage.
47. In my judgment, Aceramais' approach is inappropriate, for three reasons. The first is that this is not a rare or exceptional case. The question whether there was a contract in writing and thus whether the adjudicator had jurisdiction is common place. This is not a rare or exceptional case.
48. The second is that the issue here was not so clear cut that the court could act quickly: this case has involved a trial with disclosure and oral evidence.
49. Aceramais could – and in my judgment should – have raised this at the enforcement stage. As Coulson J pointed out in Dorchester, even if the resisting party is unable to resist enforcement, it can still later litigate matters in the usual course, as adjudication is of only temporary effect.
50. As for the third reason, as I have already identified, the parties must have spent a substantial amount of time and money in preparation before trial, yet the court has been asked to decide only a very narrow issue. The effort put into this litigation will bear little fruit. This approach is disproportionate
51. In FSA v Rourke 19 October 2001 (unreported) Neuberger J, as he then was, said

"The court should not, however, grant any declarations merely because rights, facts, or principles have been established and one party asks for a declaration. The court has to decide whether, in all the circumstances, it is appropriate to make such an order."

In my judgment, even if Aceramais had established that there was no contract in writing, the court should nevertheless have been reluctant to exercise discretion in favour of making the declaration sought.

52. An application of this sort plainly has the potential to prejudice HPL, which has the benefit of an adjudicator's award, by postponing the date on which HPL can apply to enforce that award. In this case, it has worked injustice to HPL as HPL has, until now, been prevented from seeking to enforce the adjudicator's decision. It is however likely that any enforcement proceedings can now be dealt with rapidly, given my conclusion that there is a contract in writing between the parties.

Conclusion

53. The claim stands struck out by reason of Aceramais' failure to comply with the terms of the order of 17 April 2009. Even if that were not so, the claim would have failed because the court would have declined to grant the relief sought. In any event, the parties did contract in writing within the meaning of section 107 HGCRA. Accordingly, the claimant is not entitled to the declaration sought.
54. Given these conclusions, it is not necessary to deal with Mr Ensaff's submission that Aceramais is estopped by convention or acquiescence from denying that the March JCT agreement was the agreement between the parties.

Frances Kirkham,

8 July 2009