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

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

		Royal Courts of Justice Strand, London, WC2A 2LL
		21/12/2015

Mr Justice Stuart-Smith :

Introduction

1. The Claimant ["RMP"] is a groundworks subcontractor which carried out works for the Defendant ["Chalcroft"] in late 2014 and 2015. A dispute arose about payment, which RMP referred to adjudication. By a decision made on 10 November 2015 the Adjudicator found in favour of RMP, declaring that RMP was entitled to be paid £258,760.67 plus VAT and the Adjudicator's fee. When Chalcroft did not pay the awarded sums, RMP issued these proceedings on 17 November 2015 and now brings an application for summary judgment to enforce the award.

The Factual Background

Preliminary

2. The parties are agreed that RMP carried out its works pursuant to a construction contract, within the meaning of s. 108 of the Housing Grants, Construction and Regeneration Act 1996 ["the Act"]. They are not agreed about how that contract was formed. RMP says it was formed by an email sent to RMP by Chalcroft on 5 December 2014 at 16:45, which accepted an offer made by RMP. Chalcroft says it was formed either (a) by a Letter of Intent on 8 December 2014, or (b) by the Letter of Intent taken together with a subsequent exchange of emails on 18 December 2014, or (c) by the placing and subsequent acceptance of a sub-contract order on 13 April 2015. It is Chalcroft's case that, if the contract was formed by (or including) the Letter of Intent or by (or including) the sub-contract order, the contract incorporated a standard form of JCT contract wording.
3. Although it will be necessary to describe the various suggested routes by which the construction contract was formed, there are two features of the contractual case that are central to the arguments on this application. First, whatever route applies, the Scheme for Construction Contracts as laid down in the Scheme for Construction Contracts (England and Wales) Regulations 1998 ["the Scheme"] applies and no adjudicator nominating body was specified by the parties. Thus, whichever is the correct contractual analysis of the construction contract, the procedure for appointing the adjudicator was the same, being that laid down by the Scheme. The Adjudicator was appointed in accordance with the Scheme.
4. The second feature of the contractual case is that, if RMP's interpretation is correct, it is common ground that Chalcroft did not serve a pay less notice in time, with the result that the Adjudicator's conclusion on RMP's entitlement would have been correct. However, it is also agreed that if one of Chalcroft's interpretations of the substantive obligations imposed by the applicable contractual arrangements were right, it is at least reasonably arguable that a pay less notice sent on 26 August 2015 was valid and in time, and the Adjudicator's conclusion on RMP's entitlement would have been wrong.
5. These two features give rise to RMP's primary argument in the application. RMP submits that, once it is acknowledged that the Adjudicator would have had jurisdiction and would have acquired jurisdiction by the same procedural route whichever contractual interpretation is correct, the fact that different contractual interpretations may have led to different substantive outcomes is irrelevant. RMP submits that, in such circumstances, the Adjudicator was validly appointed and if, which is disputed, he misinterpreted the substantive contractual provisions so as to come to an incorrect answer, that is no bar to enforcement of his decision. This raises an important point on which no directly applicable authority has been identified.
6. The parties raise subsidiary arguments, as a result of which it is necessary to outline the various contractual interpretations in more detail. In particular, RMP submits that Chalcroft's proposed routes are not reasonably arguable.

The 5 December 2014 Emails

7. The contracting process was generally fairly informal, which is a reflection of the size of the two businesses and the fact that the individuals concerned knew each other: Mr Saggers, the commercial manager at RMP, had worked for Chalcroft in the past and RMP had previously done a very good job for Chalcroft on a smaller project. During November and into early December 2014 negotiations were conducted for the groundworks package for the construction of a Shell service station, which formed the main works package, and for other smaller items of work which are not relevant here. In the course of negotiations, as would be expected, the parties discussed price, time for payment and retention percentages. On 21 November 2014 RMP provided a priced bill of quantities for the main package in the sum of £935,671.01. On 3 December 2014 Mr Saggers sent Chalcroft a revised bill of quantities/price breakdown, now in the sum of £720,121.52, and held out the prospect of offering a discount for improved payment terms.
8. At 12:26 on 5 December 2014 Mr Saggers asked for an update, to which Mr Campbell of Chalcroft replied by asking "what level of LOI would you require to start up, whilst we are agreeing the overall full value LOI?" Mr Saggers replied at 13:10 that "… [r]egarding LOI its not my preferred route … ." In reply to Mr Saggers' 13:10 email, Mr Campbell explained at 13:31 that Chalcroft was subject to a full value Letter of Intent from its employer and had placed most of the packages on that basis. At 15:06 Mr Campbell sent Mr Saggers an adjusted price breakdown (omitting some items that had previously been included) in the sum of £524,910.01 and wrote "Trying to keep the same payment terms as agreed at 28 days from main valuation date, can you see what percentage you could do to secure the works based on the attached."
9. It is evident that Mr Campbell and Mr Saggers then spoke and agreed a 3% discount because Mr Campbell then sent the email, which is relied upon as a contractual document by RMP, at 16:45 in which he said:

"It is my intention to place the order for the agreed value as attached £509,162.71 (which includes 3% discount as agreed), I will raise the LOI for this value on Monday, as it shall take me some time to pull together, I would like to see some meaningful works happen next week if possible.

Can you advise on a short term programme to attach the works hard prior to Christmas, can you liaise … to make sure we get some good work in prior to the Christmas break."

10. The email attached a further copy of the bill of quantities/breakdown in the sum of £524,910.01 with an additional page effecting the 3% discount to bring the total down to £509,162.71. In its Referral Notice in the adjudication, RMP described the contractual effect of this email as follows:

"RMP provided its tender on 21 November 2014(15:19). Negotiations then took place between the parties and on 5 December 2014, Chalcroft accepted RMP's offer by way of email at 16:45. This confirms the agreed value for the Works at £509,162.71. No terms were agreed between the parties, save for the scope of the Works and the contract sum."

11. At this stage it is sufficient to note that the Adjudicator accepted this analysis in a non-binding ruling on jurisdiction, which he attached as an Appendix to his adjudication award. He concluded that the email confirms that the parties had reached agreement on the scope, price and discount for the works and that it represented an instruction to get on with the works. The Adjudicator rejected Chalcroft's submission, repeated in these proceedings, that the 5 December 2014 email merely states the writer's intention to issue a Letter of Intent on the following Monday (8 December) and, at some point thereafter, to issue a formal order. It is Chalcroft's submission (as it was before the Adjudicator) that the email cannot reasonably be construed as an acceptance of any pre-existing offer, or as an offer to contract in itself.

The Letter of Intent

12. Chalcroft relies upon a Letter of Intent dated 8 December 2014 as its first alternative source of contractual obligations. Mr Saggers, in a witness statement for these proceedings, says that RMP did not receive the letter of intent; and RMP draws attention to the fact that, where all other relevant documents were sent by email (whether or not they were also sent by post), it is Chalcroft's case that the Letter of Intent was sent by post only. Chalcroft's evidence on the point for this hearing is extremely thin. There is no direct evidence from Mr Campbell. Ms Stratton, who is Chalcroft's contracts manager, says in her witness statement that "the letter of intent was then firmed up by Stuart and was sent out by Stuart on the morning of Monday 8 December 2014 to RMP's Norwich office for the attention of Ben Saggers." Her source of information or knowledge is not stated and is not self-evident. The reference to sending it out on the morning of Monday 8 December does not obviously fit with the assertion that it was sent by post, though it could carry that meaning.
13. The Court cannot on this application conduct a mini-trial or reach a concluded view on whether the Letter of Intent was sent by Chalcroft or received by RMP; but these evidential considerations are important because Chalcroft necessarily starts its submissions on the Letter of Intent by submitting that it is reasonably arguable that the Letter of Intent was or may have been received by RMP. On Chalcroft's behalf Mr Pilling QC submits, correctly, that disclosure has not yet happened; but he recognises and accepts that RMP are represented by reputable solicitors who could not in the proper exercise of their responsibilities as solicitors in contentious litigation competently have allowed Mr Saggers to make such an emphatic statement without taking at least some steps to check the position. It is also to be recognised that, since the Letter of Intent was purportedly addressed to Mr Saggers, he should be in the best position to know whether it was received. Taking into account the features I have outlined, the prospect that the document would emerge on disclosure, or that Mr Pilling QC might cross-examine his way to a concession by Mr Saggers that he had received it, seems remote though not impossible.
14. The terms of the Letter of Intent are not entirely straightforward. They included the following:

"Further to our recent discussions, we are pleased to confirm it it our intention to place the Groundwork's package with your company. Please accept this as a letter of intent to the value of £509,162.71 & VAT for the initial works, in lieu of the full order.

Please accept this letter as your instruction to proceed with the necessary procurement, mobilisation and carrying out of the works on the basis set out in the terms and conditions of this letter up to a total financial commitment as stated above, or any other such amount as we may agree upon in writing …. . We shall be under no obligation to you, either as to the making of any further payment, or as to any other matter, until agreement and execution of the Contract and all security required by the Contract.

The works are to be carried out under a standard JCT 2011 Design & Build Contract Without Quantities. Items of note at this stage are:

LAD's have been set at £10,000/week.

Retention Indemnity Letter replaces % held retention.

Commencement date is 8^th December 2014.

…

The sum stated above is to include but not be limited to the following general items/attendances: -

…

Payment will be made 42 days from the date of the main valuation; these will be carried out in accordance with the attached Valuation Schedule. Please ensure you forward applications in accordance with the schedule (to follow).

Programme – full dates to be confirmed.

…

All other dates will be confirmed within our formal order …."

15. Certain points may be noted at this stage. First, there is and was no such thing as a "standard JCT 2011 Design & Build Contract Without Quantities". Chalcroft submits that the Letter of Intent should be read as if it had referred to the JCT 2011 Design & Build Contract. Second, it is common ground that the reference to payment being made 42 days from the "date of the main valuation" is a reference to the date of the valuations that were to be made under the main contract between the employer and Chalcroft. Third, no Valuation Schedule was attached to the Letter of Intent, so that there was no way of identifying the dates for payment either by reference to the valuation dates under the main contract or otherwise.
16. Chalcroft did not identify any principle of construction that would entitle the Court to rewrite its contract so as to substitute "JCT 2011 Edition Design and Build Contract" for the words "standard JCT 2011 Design & Build Contract Without Quantities". I take the most expansive permissible approach from Chartbrook Ltd and another v Persimmon Homes Ltd and another [2009] 1 AC 1101 at [25] where Lord Hoffmann said that "…there is not, so to speak, a limit to the amount of red ink or verbal rearrangement or correction which the court is allowed. All that is required is that it should be clear that something has gone wrong with the language and that it should be clear what a reasonable person would have understood the parties to have meant." While the first of these requirements may be satisfied, Chalcroft has not satisfied the second: it has merely asserted that its alternative form of contract should be held to be incorporated. In the absence of any proper foundation for the submission, it is rejected. Since the contract is said to be based upon the documents that have been identified, Chalcroft has not shown that it is reasonably arguable that a different outcome would follow at a full trial.
17. Chalcroft submits that the Letter of Intent provisions can be interpreted as meaning that payment shall be within 28 days from the main contract valuation dates and that both the 28 days and the main contract valuation dates can be derived and incorporated from the terms of previous correspondence. This is an unsustainable submission because the 28 days are flatly contradicted by the express reference to 42 days in the Letter of Intent; and the submission that the parties meant to refer back to and incorporate terms of previous correspondence to establish the main contract dates is inconsistent with the express reference to a Valuation Schedule as establishing what those dates were and were to be for the purposes of the sub-contract. The mechanism provided by the Letter of Intent is therefore inoperable and inadequate. Chalcroft's submissions on the payment provisions in the Letter of Intent are subject to the further difficulty that they make payment conditional upon the performance of obligations under the main contract (i.e. the valuing of main contract valuations), which is an inadequate mechanism pursuant to s. 110(1A).
18. Each of these objections is fatal to Chalcroft's interpretation of the Letter of Intent. That means that the provisions of the Scheme as to timing of pay less notices would apply if the Letter of Intent was the proper basis for the contract. Accordingly, even if Chalcroft is right in submitting that the Letter of Intent forms the proper basis for the parties' substantive contractual obligations, those obligations are materially the same as if the emails on 5 December 2015 are the proper basis.

The Letter of Intent as Varied

19. On 18 December 2014 Mr Saggers emailed Mr Campbell and asked "do you have the valuation dates to hand?" It is common ground that this was referring to the valuation dates under the main contract. Mr Campbell replied on the same day that "our valuation dates are 3^rd Monday of each month, I would need your [sic] in on 2^nd Monday of each month, but payment shall be make [sic] 28 days after Chalcroft Valuation date." Again it is common ground that "our valuation date" and "Chalcroft Valuation date" in this sentence are both references to the valuation date for Chalcroft's valuations under the main contract; and that the reference to needing "your in on the 2^nd Monday of each month" is a reference to needing RMP's monthly valuations so that they could be incorporated in and claimed by Chalcroft's valuations submitted to the employer under the main contract. On the same day Mr Saggers replied "Gotcha", indicating that he understood what he had been told.
20. Chalcroft submits that the Letter of Intent and emails of 18 December 2015 can and should be read together and that when they are read in the light of the email sent by Mr Campbell to Mr Saggers at 15:06 on 5 December, a contractual obligation emerges which required Chalcroft to pay RMP 28 days after the main contract valuation date. The effect of the 18 December 2014 exchange of emails is therefore to plug the gap left by the failure to provide a Valuation Schedule with the Letter of Intent in the first place. For the purposes of this application I would be prepared to accept as reasonably arguable that the exchange established that the dates on which main contract valuations were meant to take place were the third Monday of each month; but the exchange of emails does not say and does not mean (either when viewed alone or when viewed in the context of the Letter of Intent) that payment to RMP would be 28 days after the third Monday in the month. At its highest it said and meant that payment would be 28 days after the valuation date under the main contract, which was meant to take place on the third Monday in the month. Whether the parties to the main contract adhered to that date would be a matter for them and outside RMP's control. Accordingly I hold that bringing into account the exchange of emails on 18 December 2014 provides an answer to the first of the objections outlined in [17] above, but not the second. It follows that, even if the Letter of Intent plus the 18 December emails are the proper basis for the parties' contractual obligations, the Scheme applies to establish the requisite date for payment and pay less notices, as is the case if the parties' substantive obligations are determined by the 5 December 2014 email.

The Sub-contract Order

21. On 13 April 2015 Chalcroft sent a form of sub-contract order to RMP. The covering letter included that:

"You will note that Sheet 4 of 4 … requires completion by yourselves (Insurance details) and return to our Kings Lynn office within 14 days of receipt. Upon receipt Chalcroft will complete with a signature and return the top sheet for your retention."

22. Sheet 1 of 4 was in conventional form for a sub-contract order. It was clearly in a standard form for Chalcroft and said:

"Please supply all labour, plant and materials necessary to carry out the groundworks all as detailed in the attached/referred to information for the Lump Sum of £747,693.83 incl 3% discount."

23. The information that was referred to was "RMP breakdown update 02/04/2015" which was in the sum of £747,693.83. It was in similar form to previous bills of quantities/breakdowns but was for more extensive works than had been listed in, for example, the December breakdowns to which I have referred above.
24. Sheet 2 of 4 contained further information as set out below:

"The following information is given from the main contract, and shall apply to this sub-contract which is placed under the general terms and conditions of the JCT standard form of sub-contractor (DSC/C) as adjusted or amended by the following:

Main Contract Form JCT Design and Build 2011

Main Contract Commencement Date 20^th October 2014

Main Contract Completion Date 8 May 2015

…

Liquidated and ascertained damages £10,000.00 per week

…

Period of Interim Certificates Monthly

Valuation Dates 20/04/15; 18/05/15

Period of honouring sub-contract payments 28 days from the date of valuation"

25. A number of points emerge. First, the reference to "the JCT Standard form of sub-contractor (DSC/C)" was inappropriate since that form had last been printed in 2002 and was now obsolete. Chalcroft does not submit that the obsolete form should be incorporated and has not provided a copy for the Court's consideration. Instead, it submits that "the intention is clearly that the sub-contract order incorporated the JCT 2011 Standard Conditions of Sub-Contract" (being the latest form of JCT Standard Form of Sub-contract) "with the reference to DSC/C being obviously a redundant reference to an earlier template." Once again this is a bold submission where the document is Chalcroft's standard form of sub-contract order and, on present information, the second limb of the Chartbrook approach is not satisfied. I reject the submission. Second, the only specified valuation dates are 20 April and 18 May 2015. While it is true that those dates are the third Mondays in the respective months, the sub-contract order form does not specify valuation dates by reference to the third Monday in the month and does not state anything about valuations after May.
26. Sheet 4 of 4 provided a mechanism for the acceptance of the Sub-contract Order with the statement "We [RMP] accept your order on the terms and conditions therein" and the provision of boxes to be signed by RMP and Chalcroft. It also required that further information be provided, and was the sheet referred to in the covering letter.
27. It is common ground that Sheet 4 of 4 was not signed or returned by RMP to Chalcroft. Instead, Mr Saggers replied the same day:

"I will take a look at this as this is totally different to our original bill and at a glance discount has been taken off lump sum variations which wasn't agreed at any point."

28. Despite this unpromising beginning, Chalcroft submits that it is reasonably arguable that RMP accepted the sub-contract order by conduct so that its terms should govern the substantive outcome of the case. It submits that Mr Saggers' response on 15 April 2015 is not to be taken as outright rejection of the sub-contract order. And it relies upon three further documents.
29. First, on 18 June 2015 Mr Saggers sent an email to Mr Bedford of Chalcroft, with an attachment "Internal programme 6 12.06.15". The Court was not taken to that attachment. It is reasonable to infer from its title that it was a recent programme for the works. It also seems likely from the contents of the email that the programme suggested that RMP was in delay against the programme, as the email intimates a claim for an extension of time. In the course of the email Mr Saggers wrote: "As a mechanism of the contract I need to apply for an extension of time as well as make you aware of loss and expense on Barton Mills Project due to the variations taking us out of sequence and over the contract period. I am not sure who the contract administrator is as they are from Trundley's according to the order we received mid-April 2015…." Chalcroft submits that the opening words of the passage set out above ("As a mechanism of the contract …") show that Mr Saggers was accepting that the sub-contract order was in place and contractually binding; and that the reference to the need to apply for an extension of time shows that RMP must have accepted that a date for completion had been fixed. Chalcroft made no submission about what that date might be, other than to point to the fact that the sub-contract order form had identified a date. The Court does not know whether that date (8 May 2015) was the date on the programme attached to the email or whether other documents exist which refer to or establish a completion date. Furthermore, the second sentence with its reference to the subcontract order being "received" is at least equivocal as to its status.
30. The second document upon which Chalcroft relies is an email from Mr Saggers to Mr Bedford on 1 July 2015. The background to the email is that RMP's internal accounts section informed Mr Saggers that morning that they had received £125,400 from Chalcroft that day but that they had been expecting £155,000. RMP's accounts section asked Mr Saggers if he had received a pay less notice so that RMP knew why they were short of what they considered they were owed. Mr Saggers forwarded the email to Mr Bedford asking for an explanation and raising the prospect that RMP would notify an intention to cease works "as we haven't received notification at all on this job…". Mr Bedford replied that he had told Mr Saggers by email (which he attached) what they would be getting, which led to the email upon which Chalcroft now relies. Mr Saggers wrote (referring to the attached email) "This doesn't tell me what we're being paid and account have said one thing then done another … We need full payment (pay less notices) which is the mechanism chosen in Chalcroft's order otherwise we don't know on which items we are having monies withheld or how much – plus without a notice we are technically due the full amount!" The words in italics are relied upon as indicating that Mr Saggers understood there to be a mechanism based upon the terms of the sub-contract order received in April 2015.
31. Lastly, Chalcroft relies upon an email from Mr Saggers to Mr Bedford on 15 July 2015 in which Mr Saggers wrote: "When your [sic] back can I have a pay less notice for this please as I have no idea where you have taken monies from as it stands as this has taken 63k off our account without using the procedure within the contract in essence meaning we are due the full amount applied for." Chalcroft submits that this is recognition of the existence of a contract which included in its terms the procedure of using pay less notices when an entitlement to be paid was disputed.
32. There is an important difference between (a) identifying conduct which itself amounts to acceptance of a contractual offer and (b) using conduct which is alleged to be post-contractual as an aid to interpretation of the contract. While the first of these is conventional and acceptable, the second is not. In general terms, a contract cannot usually be construed by reference to the subsequent conduct of the parties: see Miller v Whitworth Estates [1970] AC 583, 603D-E, 606E, 611D, 615A. There are limited exceptions to this general rule, one of which is that the subsequent conduct of the parties may be relevant when trying to identify what terms were agreed, at least where a contract is either wholly or partly oral or when one cannot otherwise identify the terms from the contract itself: see Wilson v Maynard Shipbuilding Consultants AG Ltd [1978] QB 665, Maggs v Marsh [2006] BLR 395, and BVM Management Ltd v Yeomans [2011] EWCA Civ 1254. Here the allegation is that there was a contract made partly in writing (by the sub-contract order) and partly by conduct amounting to acceptance. It seems to me to be unsafe to rely upon subsequent conduct in those circumstances, for the same reasons as underpin the general rule: the parties may have misunderstood whether or not their conduct has in fact amounted to contractual acceptance, in which case their subsequent conduct is unreliable as a guide. What the Court needs to identify is conduct that amounted to contractual acceptance.
33. I accept that the three documents on which Chalcroft relies are consistent with the sub-contract order being the operative source of the parties' contractual obligations. I also accept that merely continuing with the works after receipt of the sub-contract order would not of itself be sufficient to constitute acceptance by conduct because it would be equally consistent with continuing to perform under previous arrangements: see Jayaar Impex Ltd v Toaken Group Ltd [1996] 2 Lloyd's Rep 437, 446. Ever since Brogden v The Metropolitan Railway Co (1877) 2 App. Cas. 666 what has been required is conduct which is clearly and necessarily referable, and only referable, to the offer which is said to have been accepted. In the present case, the references to pay less notices are equivocal since they would be a feature of any construction contract to which the Scheme applied. Similarly the reference to "a mechanism of the contract" is not, to my mind referable only to the sub-contract order: it appears to me in context to be consistent with a person in Mr Saggers' position saying that, if it was being said that RMP was out of time, it needed to apply under the contract for an extension. It does not refer expressly to the sub-contract order and is a statement that could, to my mind, have been made even if the sub-contract order had not been sent and received.
34. The only references in the emails which may be referable only to the sub-contract order are the reference to "the order we received in mid-April 2015" in the email of 18 June 2015 and the statement "… which is the mechanism chosen in Chalcroft's order …" in the email on 1 July 2015 Bearing in mind that the burden of proving acceptance is on Chalcroft, this is slight evidence even taken at its highest.
35. In addition, Ms Stratton's witness statement for Chalcroft asserts that RMP's May 2015 Application for Payment included "the variations agreed in the sub-contract order." Even if this is correct, the first page of the variations claimed in the Application for Payment [C420] is headed "Application for Payment – March 2015", which suggests that the same format was being used before the sub-contract order was issued. Without further information I am not satisfied that the claiming of variations in the May 2015 adds anything. However, this highlights a concern that arises generally in this area of the case, which is that I am not confident that the Court has the full picture on this application. One response would be to say that, the burden being on Chalcroft to show acceptance by conduct, Chalcroft has not satisfied the burden and fails. However, in the context of a summary judgment application, the better course is to consider whether at a full part 8 trial of the issue other documentation or evidence might be forthcoming or further submissions made that may reasonably cause the Court to conclude that the sub-contract order had been accepted by conduct. Although I have very considerable reservations, I do not think I can go so far as to say that the position is not reasonably arguable.
36. RMP accepts that, if Chalcroft's contractual interpretation were to be correct, it is reasonably arguable that the sub-contract order makes provision for payment which means that the Adjudicator's substantive decision was wrong.

Summary on alternative contractual routes

37. I can summarise my conclusions on the different contractual routes proposed by Chalcroft as follows:

i) It is reasonably arguable that the parties proceeded on the basis of the promised Letter of Intent and subsequently on the basis of the Letter of Intent plus the emails of the 18 December 2014. Under either of these routes, the Scheme would have applied with no specified nominating body, so that the procedural route to adjudication would have been the same as if the 5 December 2014 email formed the basis of the contract. For the reasons set out in [17] the Scheme provisions for payment apply so that there should have been no substantive difference in the Adjudicator's decision on the absence of a valid pay less notice;

ii) It is (just) reasonably arguable that RMP accepted the April 2015 sub-contract order by conduct. The Scheme would have applied with no specified nominating body, so that the procedural route to adjudication would have been the same as if the 5 December 2014 email formed the basis of the contract. It is reasonably arguable that, if operative, the sub-contract order makes provision for payment which means that the Adjudicator's substantive decision was wrong.

The Application and Adjudication

38. On 4 August 2015 RMP issued interim application for payment no. 8 in the gross sum of £1,018,760.57 plus VAT. The net sum outstanding was £258,760.57 plus VAT. Under the Scheme that became the due date for payment. No payment notice was served. Chalcroft served a pay less notice on 25 August 2015. It is common ground that 25 August 2015 was too late if the Scheme dates applied. Chalcroft did not pay.
39. On 21 September 2015 RMP gave notice of adjudication. It identified the relevant construction contract by stating that "On or around 5 December 2014 [Chalcroft] entered into a contract with RMP (the "Contract") whereby RMP was contracted … to carry out the groundworks at [the Shell site]." The Dispute being referred was stated to be "in respect of RMP's entitlement to payment for works which it has carried out under the Contract."
40. The Referral Notice was served on 28 September 2015. The dispute was defined as being "in respect of RMP's entitlement to sums due for works carried out under the Contract", which was defined as set out at [10] above. Chalcroft disputed RMP's definition of the Contract, while accepting that there was a construction contract in existence: it proposed the alternative analyses discussed above. The Adjudicator made a non-binding finding on jurisdiction accepting RMP's case on the operative contract. He then proceeded to find for RMP in the adjudication because, applying the 5 December contractual route and the Scheme, there had been no pay less notice.

Should the adjudicator's decision be enforced?

41. Both parties referred, without apparent disapproval, to Purton v Kilker [2015] EWHC 2624 (TCC). In Purton the Defendant resisted enforcement of the Adjudicator's decision on the basis that the contract giving the Adjudicator jurisdiction had been mis-described. It submitted that the reference to adjudication must correctly identify the contract, to which the referrer is a party and under which the dispute arises, in all material particulars. This submission was rejected. In the course of giving reasons for the decision, I said:

"… it is necessary first to distinguish between a case where a contract is relied upon but is incorrectly identified in one or more particular respects, and a case where it can be said that the contract relied upon never existed or that the dispute being referred did not arise under the contract relied upon.

23 The first of these alternatives can be addressed shortly. The jurisdiction to refer is dependent upon the existence of a construction contract and a dispute arising under it. It is not dependent upon identifying each and every term with complete accuracy so that the process of referral becomes a formalistic obstacle course akin to 18th century forms of action, where one slip may put a party literally out of court. Bearing in mind the intention that the adjudication system should provide quick and effective remedies for contracting parties, equally accessible to those who are legally represented and to those who are not, an approach which deprived adjudicators of jurisdiction where a dispute has been referred that has arisen under a construction contract because of any error in its characterisation, would as a matter of legal policy be unacceptable.

24 Taking the second alternative, a situation could arise where the referral asserts that a dispute has arisen under Contract A, but it is shown that Contract A does not exist and there was no contract. This, in essence, was Kilker's primary position in the present case and I have rejected it on the facts, although it is common ground (and I agree) that if there is no construction contract, there is no jurisdiction under s. 108(1) of the Act. There is, however, an intermediate position between there being no contract at all and there being a contract which is alleged but mis-described in some respect or respects by the Claimant, so that it can be said that the contract as described is not the contract under which the dispute arose but is (or would be) another contract altogether.

25 It is in this intermediate case that Mr Selby's submission about approbating and reprobating requires closer attention. He founds it upon the decision of the Court of Appeal in Banque Des Marchands de Moscou v Kindersley [1951] Ch 112 where Lord Evershed MR (with whom Singleton and Jenkins LJJ agreed) said:

"The phrases "approbating and reprobating" or "blowing hot and blowing cold" are expressive and useful, but if they are used to signify a valid answer to a claim or allegation they must be defined. Otherwise the claim or allegation would be liable to be rejected on the mere ground that the conduct of the party making it was regarded by the court as unmeritorious. From the authorities cited to us it seems to me to be clear that these phrases must be taken to express, first, that the party in question is to be treated as having made an election from which he cannot resile, and, second, that he will not be regarded, at least in a case such as the present, as having so elected unless he has taken a benefit under or arising out of the course of conduct which he has first pursued and with which his present action is inconsistent."

42. After considering the decision of HHJ Havery QC in Redworth Construction Ltd v Brookdale Healthcare Ltd [2006] BLR 366, I referred to and cited from the decision of Akenhead J in Nickleby FM Ltd v Somerfield Stores Ltd [2010] EWHC 1976 (TCC). In Nickleby there was a construction contract and, because there was no provision in the contract for adjudication, the Scheme applied. In expressing doubts as to the correctness of the decision in Redworth, Akenhead J said:

"Whether the Redworth Construction decision was rightly decided or not on this point, one needs to examine in any event with care whether a materially different case on jurisdiction is being mounted in the court proceedings compared with that raised before the adjudicator. It must also be relevant to consider whether at least in a clear case the adjudicator with the correct and full information before him would have reached the same conclusion that he did. It will also be relevant to consider whether the adjudicator in fact and in reality actually did have jurisdiction. If he or she did have jurisdiction to decide the dispute referred to adjudication, and if he or she with the full information available would have inevitably concluded that there was jurisdiction, I can not see why the adjudication decision should not be enforced in those circumstances."

43. At [28] of Purton I said:

"28 I respectfully agree with the reasoning of Akenhead J in these passages. At least in a case where there can be no doubt that the adjudicator, if properly informed, should and would have concluded that he had jurisdiction and the proper basis of jurisdiction does not make a difference to the substantive outcome, the Court should not shut out a Claimant who comes to the court to enforce the adjudicator's decision. There are two reasons for this conclusion, one based on principle and one on pragmatism. In principle, if the adjudicator as a matter of fact had jurisdiction and came to an unimpeachable substantive conclusion which is not affected by the correctly-understood route to jurisdiction, the Claimant has not secured a benefit by his choice of the wrong route to that end since the outcome is unaffected. One of the pre-requisites identified by Lord Evershed MR is therefore lacking. The pragmatic reason is that to hold otherwise would encourage the taking of points which, while technically fascinating, are entirely lacking in merit and inimical to the spirit of the adjudication scheme as a whole."

44. In Purton it was not necessary to consider what the position would be if (a) the Adjudicator, if properly informed, should and would have concluded that he had jurisdiction but (b) the proper contractual basis of jurisdiction could make a difference to the substantive outcome. That question is raised on the present case because of the background as I have described it above. There is no decision directly on the point. It needs to be decided on the basis of legal policy in the context of previous decisions.
45. Since the earliest days of adjudications under the Act the Courts have, when considering whether to enforce adjudicators' decisions, drawn a clear distinction between questions going to the jurisdiction of the adjudicator and questions about whether the adjudicator (having jurisdiction) has reached the correct substantive answer. The legal policy, derived from the terms of the statute, has been that reasonably arguable challenges to the adjudicator's jurisdiction may be a reason for not enforcing a decision, but the mere assertion that he has misunderstood the factual or legal basis for his or her substantive decision is not. Thus in Sherwood & Casson Ltd v MacKenzie [2000] 2 TCLR 418, HHJ Thornton QC summarised the approach as follows:

"1. A decision of an adjudicator whose validity is challenged as to its factual or legal conclusions or as to procedural error remains a decision that is both enforceable and should be enforced.

2. A decision that is erroneous, even if the error is disclosed by the reasons, will still not ordinarily be capable of being challenged and should, ordinarily, still be enforced.

3. A decision may be challenged on the ground that the adjudicator was not empowered by the HGCRA to make the decision because there was no underlying construction contract between the parties or because he had gone outside his terms of reference.

…"

46. To similar effect, at [80] of Carillion Construction v Devonport Royal Dockyard Ltd [2005] BLR 310 Jackson J stated principles that were endorsed in the Court of Appeal and have been repeated and relied upon many times since:

"1. The adjudication procedure does not involve the final determination of anybody's rights (unless all parties so wish).

2. The Court of Appeal has repeatedly emphasised that adjudicator's decisions must be enforced, even if they result from errors of procedure, fact or law; ...

3. Where an adjudicator has acted in excess of his jurisdiction or in serious breach of the rules of natural justice, the court will not enforce his decision: …

4. Judges must be astute to examine technical defences with a degree of scepticism consonant with the policy of the 1996 Act. Errors of law, fact or procedure by an adjudicator must be examined critically before the court accepts that such errors constitute excessive jurisdiction or serious breaches of the rules of natural justice: see Pegram Shopfitters …"

47. This general approach has been repeated consistently: see, for further examples, Coulson on Construction Adjudication, 3^rd Edn at 15.02-15.04. One authority cited there emphasises the point and is relevant to the present case. In C & B Scene Concept Design Ltd v Isobars Ltd [2002] BLR 93, the Court of Appeal assumed that the learned recorder had made errors of law in reaching his decision but upheld the award. In doing so, Sir Murray Stuart-Smith (with whom Potter and Rix LJJ agreed) said:

"It is important that the enforcement of an adjudicator's decision by summary judgment should not be prevented by arguments that the adjudicator has made errors of law in reaching his decision, unless the adjudicator has purported to decide matters that are not referred to him. He must decide as a matter of construction of the referral, and therefore as a matter of law, what the dispute is that he has to decide. If he erroneously decides that the dispute referred to him is wider than it is, then, in so far as he has exceeded his jurisdiction, his decision cannot be enforced. But in the present case there was entire agreement as to the scope of the dispute, and the Adjudicator's decision, albeit he may have made errors of law as to the relevant contractual provisions, is still binding and enforceable until the matter is corrected in the final determination."

48. Pegram Shopfitters Ltd v Tally Weijl (UK) Ltd [2004] 1 WLR 2082 was relied upon by Chalcroft and was cited by Jackson J as one of the authorities underpinning his statements of principle in Carillion. In Pegram the decisions of the adjudicator and the judge were set aside because they had proceeded on the basis that it was agreed that the relationship of the parties was governed by a written construction contract. In fact the Defendant's case was that either there was a written contract that incorporated a JCT Standard Form of Contract or that there was no written contract at all. This mattered because the Adjudicator had been appointed pursuant to the statutory Scheme, which was inapplicable if the JCT Terms applied or if there was no written construction contract at all. It is clear from [29] and [32] of the judgment of May LJ that the mistaken belief that the parties were agreed about their relationship being governed by a written construction contract went to the adjudicator's jurisdiction and was fatal to it: "… the only circumstance in which the adjudicator would clearly have had jurisdiction was if the claimant's contentions as to the contractual terms were correct"; and it was at least reasonably arguable that they were not. However, in the course of his judgement, May LJ also referred (at [24]) to the fact that the alternative contractual arrangements being put forward by the parties led to a substantive difference of £71,000 in the claimant's entitlement to be paid. He referred again to this point at [32] saying:

"The fact that adjudication under the Scheme and adjudication under a JCT Prime Cost Contract would be similar procedures does not overcome the twin difficulties that [the adjudicator] was appointed under the Scheme, and that a sufficiently secure identification of the contractual terms was intrinsically necessary to the proper performance of his adjudication task."

49. Chalcroft relies upon this passage to support a submission that a possible difference in substantive outcome makes it essential that the contractual route to adjudication be correctly identified by the party seeking adjudication of a dispute and that failure to identify the contractual route correctly should be a bar to summary enforcement. I note at once that Chalcroft's submission goes well beyond what May LJ actually said; and that, if that was what May LJ meant, it was not necessary to the decision in Pegram which was that there was a properly arguable jurisdictional objection arising from the different procedural routes (or the complete lack of a procedural route) that would be the consequences of the various proposed contracts.
50. The distinction between jurisdictional challenges to enforcement and challenges alleging substantive error suggests that the issue in this case should be approached in two stages. The first question is whether the Adjudicator had jurisdiction. The answer to that question is that he did, on any contractual route being proposed by either party. He had jurisdiction and was to be appointed under the Scheme, on any contractual route being proposed by either party. That distinguishes the present case from Pegram. Chalcroft's only point on jurisdiction is that RMP has not properly identified the contract that gives rise to the Scheme route to jurisdiction. This objection is similar to but not precisely the same as the objections being raised in Purton. Chalcroft says that a contract pursuant to the 8 December 2014 Letter of Intent (with or without the 18 December emails) or pursuant to the April 2015 sub-contract order is a different contract to that which RMP has identified (i.e. a contract made on or about 5 December, subsequently defined as being founded on the 5 December email).
51. It may be linguistically and even technically correct to describe Chalcroft's various alternative formulations as different contracts from the contract alleged by RMP. But that difference should not, in my view, be determinative when it is remembered that the Court is concerned with one contracting process, with the only question being which party has correctly identified where in that process the relevantly binding contract was formed. Thus the email of 5 December looked forward to the prospect of a letter of intent and placing of a formal order. The same may be said of the Defendant's first proposed contract, the Letter of Intent, which in its turn raised the prospect of a formal order for the whole of the works package in due course. And if the April 2015 sub-contract order was in fact the relevant contract, it may be described as the final stage of a process which involved the great majority of the works being done before its issue and, in all probability, on some terms that were superseded by the sub-contract order. Where it is agreed that each of the alternatives was sufficient to found jurisdiction under the identical route of the Scheme, it seems to me that to rule RMP out of court because it may have misidentified the contractual provisions that would give the Adjudicator jurisdiction under the Scheme is once again to return to the formalistic obstacle course against which I protested at [23] of Purton. Once again I bear in mind that the adjudication system was and is meant to provide quick and effective remedies to parties, equally accessible to those who are legally represented as to those who are not; and I bear in mind that the system now covers not only written contracts but also oral contracts which increases the likelihood that they may be mis-described.
52. I would therefore hold that the Adjudicator had jurisdiction because, however the contractual arrangements between the parties are correctly to be described, they mandated the use of the Scheme and he was properly appointed by the Scheme's procedure.
53. In reaching this conclusion I do not ignore the possible difference in substantive outcome that could arise from identifying the contract correctly. But it seems to me to be consistent with the legal policy and authority that I have summarised above to treat these substantive differences as going not to jurisdiction but to substantive outcome only. Once that approach is adopted, the present case is to be treated as one where the Adjudicator had jurisdiction to resolve the dispute that was referred to him (namely, how much was owing under interim application number 8) and addressed the correct question without bias, breach of natural justice or any other vice that would justify overturning his decision. If, which cannot be resolved now, he has made an error of law in referring to the wrong contractual provisions when deciding the substantive question that was referred to him, that falls within the category of errors of procedure, fact or law which the Court of Appeal has repeatedly emphasised should not prevent enforcement.

Conclusion

54. For these reasons, RMP is entitled to enforce the award and is entitled to summary judgment in the sum of £318,529.30 (including the Adjudicator's fee and VAT), plus interest of £7,231.15 as of the date of judgment and continuing at the daily rate of £60.26 awarded by the Adjudicator until further order.