BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
TECHNOLOGY AND CONSTRUCTION COURT
Strand, London, WC2A 2LL
B e f o r e :
| Victory House General Partner Limited
|- and -
|RGB P&C Limited
Mr Nicholas Collings (instructed by Child & Child) for the Defendant
Hearing date: 19 January 2018
Crown Copyright ©
Background to the Summary Judgment Application
"(A) Under the Contract the Employer engaged the Contractor to carry out the Works at Victory House, Leicester Square, London.
(B) The Contract sum is £6,670,000.00. The Employer has paid the Contractor £8,183,875.20. The Contractor has indicated a Final Account submission of circa 9.8m. The project has been beset with delays and has been challenging for all parties.
(C) The Contractor is seeking additional funds to that referred to in (B) above to pay for materials and subcontractors.
(D) The Employer is wary of making further payments until the transformer is installed and operational so that meaningful progress can be made to completion.
(E) The principal for the Employer's Advisers, Mr Asif Aziz, and the principal for the Contractor, Mr Jeff Britnell, are friends and would like to agree a non-confrontational approach to overcome the current issues.
(F) This Memorandum of Understanding seeks to remove commercial matters from the "critical path" and focus everyone on delivery of the project."
"To enable delivery of the attached program the Parties agree to the following stage payments:
(1) Immediate payment 13/03/17 to enable placing/paymentof all outstanding variations and sub-contractor accounts: £200,000
(2) 10th-17th April or when power on is certified: £200,000
(3) 17th May or / on receipt of all T&C certificates in preparation for PC: £200,000"
"57(a) It must first be established that the adjudicator failed to apply the rules of natural justice.
(b) Any breach of the rules must be more than peripheral; they must be material breaches.
(c) Breaches of the rules will be material in cases where the adjudicator has failed to bring to the attention of the parties a point or issue which they ought to be given the opportunity to comment upon if it is one which is either decisive or of considerable potential importance to the outcome of the resolution of the dispute and is not peripheral or irrelevant.
(d) Whether the issue is decisive or of considerable potential importance or is peripheral or irrelevant obviously involves a question of degree which must be assessed by any judge in a case such as this.
(e) It is only if the adjudicator goes off on a frolic of his own, that is wishing to decide a case upon a factual or legal basis which has not been argued or put forward by either side, without giving the parties an opportunity to comment or, where relevant put in further evidence, that the type of breach of the rules of natural justice with which the case of Balfour Beatty Construction Company Ltd v The Camden Borough of Lambeth was concerned comes into play. It follows that, if either party has argued a particular point and the other party does not come back on the point, there is no breach of the rules of natural justice in relation thereto".
"43. Edwards-Stuart J also stated in Roe Brickwork Ltd v Wates Construction Ltd  EWHC 3417 (TCC) at  that "there is no rule that a judge, arbitrator or adjudicator must decide a case only by accepting the submissions of one party or the other. An adjudicator can reach a decision on a point of importance on the material before him on a basis for which neither party has contended, provided that the parties were aware of the relevant material and the issues to which it gave rise had been fairly canvassed before the adjudicator".
44. In my judgment the latter passage of Edwards-Stuart J aptly summarises the position here. The adjudicator decided a point of importance on the basis of the material before her, and on a basis for which neither party had contended and she was entitled to do so. ...She was not bound to accept only one of the two alternatives put to her by the parties. Questions of contractual interpretation in particular will often (if not usually) be capable of more than two possible answers, and so the correct answer (as the adjudicator may see it) may not have been expressly proposed by either one of the parties. That does not mean that by choosing a different answer, the adjudicator is breaching natural justice by failing to notify the parties of this and inviting further submissions…".
(i) The parties were aware from the outset that a central question in the Adjudication concerned the true and proper construction of the MOU. They each made detailed submissions on this issue in the various documents I have referred to above.
(ii) The Adjudicator's questions provided to the parties by email on 24 October 2017 made it clear that he was inviting submissions as to the purpose, scope and effect of Recital D.
(iii) RGB responded to the questions posed. Whilst it asserted as its primary case that Recital D was merely factual background, in my judgment it also sought expressly to grapple with the question posed in its answer at 3(b). I do not read this answer as having limited ambit, as was submitted by Mr Mort QC, and nor do I read it as being on all fours with VH's position. I certainly do not see how it could be said that the parties were 'ad idem' in responding to Question 3(a) and (b) and in this regard, I accept the submissions of Mr Collings on behalf of RGB. It seems that the Adjudicator understood RGB's answer at 3(b) to be providing a clear response to Question 3(b) – see footnote 14 of the Decision. I note in passing the evidence of Mr Bate, on behalf of VH, at paragraphs 7 and 16 of his witness statement to the effect that the relevant paragraphs of the Decision "were based on a submission by the Defendant that had not been made by it in any of its statements of case nor in any of its witness statements" and that he had not understood the process of responding to the Adjudicator's questions as involving new submissions. Insofar as this evidence was intended to seek to draw a distinction between the formal documents in the Adjudication and the answers to the Adjudicator's questions, I reject any such distinction. Mr Mort QC did not rely on this point in his oral submissions; advisedly perhaps as it appears to be an acknowledgement that the Defendant did in fact expressly address the question posed.
(iv) VH did not respond directly to the question posed (whether in the answer to Questions 3(a) and (b) or in paragraph 3.4 of its Response). Instead, it chose to reassert the factual background reflected in the Recital. This was its own decision and whilst it may regret that decision, it seems to me that it cannot now complain that it did not have an opportunity to address the point.
(v) Even assuming that VH did not understand the significance of the questions posed by the Adjudicator, once it received RGB's response, which Mr Bate appears to have recognised went beyond its previous submissions, it should have been clear to VH that RGB had made an alternative submission on the assumption that Recital D had operative effect. VH could have sought the Adjudicator's permission to respond to this point, but it did not do so. I do not regard the Adjudicator's failure to respond to the enquiry made on 2 November 2017 as taking the matter any further. It was for VH to decide whether it wished to seek permission to make further submissions.
(vi) In my view, the circumstances of this case thus fall within the guidance given by Akenhead J at paragraph 57(e) of Cantillon Ltd v Urvasco Ltd  EWHC 282 (TCC)  BLR 250, to the effect that "if either party has argued a particular point and the other party does not come back on the point, there is no breach of the rules of natural justice in relation thereto". The Adjudicator did not go off on a frolic of his own in the Decision and this is not a case in which he decided a point of importance on a basis for which neither party had contended. His Decision was made against the background of having posed a specific question about the purpose, scope and effect of Recital D; a question which both parties had the opportunity to answer. RGB's answer to Question 3(b) appears to have formed the starting point for his analysis. Even if I were wrong about that, the point raised by the Adjudicator in his Decision was one of contractual interpretation and he was, in my judgment, entitled to arrive at a conclusion that did not necessarily reflect the submissions made by the parties for the reasons clearly identified by Fraser J in AECOM Design Build Limited v Staptina Engineering Services Ltd  EWHC 723 (TCC).