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

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

		Royal Courts of Justice
		8th August 2011

MR. JUSTICE AKENHEAD:

1. This is an application by a scaffolding sub-contractor for disclosure and pre-claim disclosure under CPR Part 31.16. Given the time and that this is ex tempore I would refer to the terms of 31.16(1) to (4), but I am not going to read them out.
2. The background to this application is that Seele GmbH ("Seele"), a German company, was employed as a principal contractor working on the substantial refurbishment of King's Cross Station, London. Vinci was its main contractors, employing it. On 1 March 2010 Seele employed PHD Modular Access Service Ltd ("PWD") to carry out scaffolding works necessary for Seele's work in connection with the installation of the main concourse roof. It appears, although I am making no ultimate finding of fact, that the relationship certainly became a rocky one. The original sub-contract was for a sum of £528,000, but until very recently clearly PHD believed matters had occurred which justified substantial further entitlements relating to additional works and to delays which have been caused.
3. Seven adjudications have been started, so far as I can tell, each by PHD. In the first three adjudications Nos.1, 2 and 3, PHD claimed relatively small four figure sums and they were discontinued when Seele agreed to pay the amounts claimed. Adjudication No. 4 was £337,000 for attendances on site. The adjudicator awarded PHD about £207,000. Adjudication No. 5 claims an entitlement in principle to an extension of time and PHD appear to have been substantially successful in this adjudication in securing the extension of time they were claiming for. Adjudication No. 6 also relates to further extensions of time and no decision has yet been issued by the adjudicator on that.
4. Since then and indeed since this application was issued, I am told, and I make no factual finding that is binding in any later proceedings about this, Seele purported to terminate the employment of PHD under the sub-contract, and as I understand it PHD has ceased to work. Adjudication No 7 has been recently commenced by which PHD seek, in effect, a declaration that the termination was wrongful, unlawful or otherwise unjustified.
5. On 10 June claims consultants, Contract Construction Consultants ('CCC'), served on behalf of PHD an advance notice of pre-action application pursuant to CPR Rule 31.16. Substantial categories of documents were sought, most of which are reflected in the application which was issued. That notice did seek to qualify the documents sought. Confidential or commercially sensitive documents which were irrelevant were not sought, as were any other irrelevant documents.
6. The application that has been issued by PHD on 24 June is one which seeks categories of documents in very wide classes . Again, for the purposes of this ex tempore judgment, I will not read that application out, and it should be taken as read. PHD's application is supported by two witness statements of Mr. Gary Peacock, who is the managing director. In Paragraph 5 of his first witness statement he said, and this is undoubtedly true at that stage:

"There have already been five adjudications between the parties and a number of further adjudication proceedings and court proceedings are contemplated. There are two distinct categories of documents sought, those relating to time and those relating to money."

Other than that reference to "court proceedings are contemplated", there is nothing else particularly to indicate the circumstances in which court proceedings are contemplated. I do not say that by way of criticism. He addresses the issue in a bit more detail when it was challenged by the respondent's site operations manager. Mr. Zoch, in his witness statement, addressed that issue in rather more detail.

7. Mr. Peacock replied in a second witness statement served last week, in which he says this:

"9 It is clear that where there are disputes between the parties court proceedings will be contemplated as one of the options to resolve those disputes.

10 Further, given Seele's attitude to resolving even the simplest of disputes, it is difficult to imagine a situation where court proceedings are not contemplated. This has been further reinforced by recent events, namely Seele purportedly terminated the sub-contract. For the record …

10.2 Despite an award and adjudication for attendances … Seele have since refused to pay the same categories of attendances that have occurred …

10.3 In the same assessment Seele have assessed the overtime hours on the dismantle works at 100 per cent, but have only paid 50 per cent. This is further dealt with below.

11 Such actions on the part of Seele can only lead PHD to contemplate court proceedings. It is very likely that this will be the only option left open to it in accordance with clause 38.3 of the sub-contract.

12 In fact PHD's position that it is likely to have to rely on court proceedings to resolve disputes between the parties has been further verified by certain statements contained in Andreas Zoch's witness statement. This is dealt with in further detail below."

8. The first question is to what extent, if at all, it is necessary to show that proceedings are actually contemplated or likely or less than likely. CPR 31.16 does not actually specifically address that issue. What it does do is say in 31.16(3) that:

"The court may make an order under this Rule only where –

(a) the respondent is likely to be a party to subsequent proceedings; and

(b) the applicant is also likely to be a party to those proceedings."

It does not go into the likelihood of the proceedings themselves. This is supported, at least in part, by the Court of Appeal case in Black v. Sumitomo Corporation [2001] EWCA 1819 (Civ), in which Rix LJ addresses the issue, but he does not directly deal with the question of the relevance or the importance of the extent to which the proceedings are likely or are contemplated as such.

9. It seems to me pretty obvious here that if there are unresolved or unresolvable disputes the proceedings will be between PHD and Seele. They cannot really be between anyone else.
10. I form the view that it is important for there to be more than the faint possibility that proceedings will happen. It cannot be the case that simply because there are issues between commercial parties, and there is a possibility that at some time in the future there might be litigation between the parties, CPR Part 31.16 is engaged. That is because it is not the function of the Court to interfere with the commercial arrangements which parties have in place and to give to one party or another a possible commercial advantage which under the contracts they would not otherwise have by securing commercially sensitive documentation. It seems to me that, taking into account CPR Part 31.16.3(d), the Court must form the view that disclosure before proceedings have started is desirable in order to dispose fairly of the anticipated proceedings, to assist the dispute to be resolved without proceedings or to save costs. That envisages that proceedings are "anticipated". It is not enough that they are simply a possibility. There must be a real prospect, if not a certainty or likelihood, that there will be proceedings between the parties.
11. One can and must look at CPR Part 31.16 in the light of the Overriding Objective so that parties should not be put to unnecessary expense, particularly in circumstances where proceedings have not actually been commenced, or at least the relevant Pre-action protocol has not been instituted. The right to secure disclosure before proceedings start is one which should not be common or standard, and it should not be a procedure which is always available simply because there is an issue which has arisen between the parties which might result in litigation. There must be more than that.
12. In this case, as Mr. Peacock has said and as has been confirmed by counsel, to date PHD has been successful in these adjudications and there is no evidence that Seele is threatening or even necessarily wishing to take the matter further. It is anecdotal but it is abundantly clear, and certainly the experience of this court is, that the impact of adjudication has been to encourage final resolutions of disputes. The result has been unfortunately for those involved in arbitration that there is a reduction in the amount of construction related arbitrations, and there has also been a drop-off to some extent of court cases by reason by adjudication. This is partly because parties are willing to accept that the adjudicator has or may well have "got it right" and partly because parties do not wish to put themselves through the time effort and cost of yet another set of proceedings on the same dispute. I form the view that at least at this stage, based on the information available, it would be a very odd state of affairs if PHD, having won the adjudications to date, were seriously contemplating proceedings to hold on to adjudication decisions which it has successfully obtained in its favour in circumstances where the party against whom it has secured those adjudication decisions has not indicated clearly or even at all that it is going to challenge them.
13. Although I do not in any way seek to undermine Mr. Peacock's honesty, he really has not gone, in my judgment, anywhere near far enough to say that there is a realistic prospect that proceedings will be instituted. At best, PHD think that given the deteriorated relationship between it and Seele, exacerbated possibly by PHD having pursued no less than 7 adjudications against it, there might at some stage be court proceedings between the parties. What PHD is seeking here, as Mr. Peacock has said, is documents which relate to extensions of time and variations. The documents that are sought, unsurprisingly, given the timing of the application, are not documents which directly go to the issue of whether or not the recent termination was valid or not, but they simply go to extensions of time and to payment issues which, at least in part, have been looked at and addressed by adjudicators to date.
14. In those circumstances, I am certainly not satisfied, as a matter of discretion, therefore, that it would be appropriate yet to order disclosure. I am not saying that there will not come a time when disclosure of some of the classes of documents may be disclosable prior to any litigation being instituted, but I have the gravest doubts whether it can legitimately yet be said that the production of these documents is necessary to dispose fairly of any anticipated proceedings, to assist the dispute to be resolved without proceedings or to save costs. At the moment, I cannot see that it would save any costs.
15. I cannot see at the moment on the evidence, given the state of play between the parties and the recent termination, that there is readily going to be a resolution in the short term, and in some respects of course adjudication can exacerbate the relationship between the parties and render less likely a resolution. Sometimes, indeed quite often, following the adjudicator's decision, both parties are prepared to accept the outcome of the adjudication and reach a final resolution based on that. I cannot see at the moment, as I have said, that there are proceedings that can legitimately be said to be anticipated within the meaning of the words in CPR 31.16(3)(d)(i).
16. Mr. Peacock's language, particularly in his second witness statement, suggests that simply because there are disputes between the parties court proceedings will be contemplated. I do not accept that as a matter of logic. If anything, often court proceedings are positively not contemplated, particularly in circumstances where parties go down an alternative dispute resolution route. He then makes the point in Paragraph 10, for which see above, that the termination and other events which have happened since earlier adjudications may mean that court proceedings are contemplated. Those court proceedings, certainly in respect of the termination, do not relate, as I see it, to the documents which are sought in any event.
17. In my view, this is an inappropriate case, albeit properly arguable I hasten to say, for there to be pre-action disclosure.
18. That said, I will deal with this very quickly, with a view to assisting the parties if this matter comes up again. Certain classes of documents might well be considered to be of a type which would, if proceedings were commenced, be disclosable. I do not accept the arguments that have been put forward by Mr. Brogden that everything pretty well that happens up the line as between Seele and Vinci is irrelevant. It seems to me that what Seele claimed up the line to Vinci may well be relevant, if it exists at all, in relation to what PHD is claiming against Seele. That is both in terms of time and money. If, for instance, PHD is claiming an extension of time for exceptionally inclement weather, for let us say for a week's bad weather in July, and Seele says to it in correspondence, "You are not entitled to an extension of time because we do not accept that the weather was exceptionally inclement", but at the same time Seele seeks an extension of time for the same period of weather as exceptionally inclement from Vinci, then it seems to me that that documentation, that claim up the line, is documentation which is material. It is obviously material. It is adverse to Seele's position on the facts that it believed that the weather was exceptionally inclement. Similarly, if PHD is claiming for overtime work that was ordered and said to have been done, and Seele is saying, if it is, to PHD that PHD has not proved or established that the overtime was worked, but at the same time Seele is claiming the very self-same sum for the self-same hours from Vinci, then again that is relevant and material and would in ordinary circumstances be disclosable if there were disputes brought to court about those issues. The fact that it may be a different main contractual context to that which arises under the sub-contract is probably not going to be here or there because one is looking at facts, and as to whether Seele's factual case or factual defence is supported by the stance it was, in fact, taking up the line to Vinci.
19. I would not have dismissed the application on the basis that at least some of the documents sought were potentially disclosable and would otherwise have been disclosed. I do think, however, that the form of the order sought is impossibly wide. It would be wholly disproportionate for me to have made any order, if I had decided that it was appropriate to do so, along the lines contained in the draft order. For instance, what is sought is all instructions and variations from Vinci to Seele. It cannot be right that Seele has to provide all instructions and variations from Vinci, even ones which had no impact on PHD or on the progress of the work. It seems to me that that is drawn impossibly wide.
20. Similarly, all applications for extension of time made by Seele to Vinci, together with the responses from Vinci to Seele: they may all be relevant, but they are not necessarily all sufficiently relevant to justify disclosure. Then it says "all correspondence from any party in relation to extensions of time made by Seele to Vinci". Again, that is much too wide.
21. Within those classes there may well be documents that are disclosable. I would, on any count, very substantially have limited this pre-action disclosure if it was appropriate to order any, and very substantially indeed. That would be on the basis that it would disproportionate and unnecessarily expensive and disruptive for Seele to have to disclose at the level sought at this stage.
22. I hasten to say, I am not seeking to encourage or preclude PHD from making a further such application but it must be clear that there is a real possibility of proceedings to be brought by PHD, or proceedings on the same matters being threatened by Seele, and I would expect any further application to be seriously circumscribed from that put forward. To be fair to Miss Crowley, she made it clear that she would be prepared to accept qualifications and we have not got to the stage of discussing what those qualifications would be. I very much hope that, if there is to be a further application, those qualifications are made very clear in the draft order that is sought.
23. It is important that parties who are adjudicating, who have adjudicated or who are thinking about adjudicating do not see CPR Part 31.16 as some sort of procedural support and a tactical weapon for the purposes of adjudication. This is partly because it is only available when court proceedings are anticipated and partly because the Court should not interfere with the parties' contractual relationship where the contract itself does not as such give either party a right to documentation. The Court should be cautious about granting per-claim disclosure where the parties are actively pursuing for better or for worse the contractual or statutory adjudication route unless it is clear that notwithstanding this proceedings are anticipated.
24. Although it has been argued extremely well on both sides, the application is dismissed.