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

IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
TECHNOLOGY AND CONSTRUCTION COURT (QBD)

		11th October 2018

Andrew Singer QC:

Introduction

1. These proceedings were commenced by the Claimant (to whom I shall refer throughout as "ECA") as a Part 8 Claim on 3^rd May 2018 to enforce an Adjudicator's Decision dated 6^th August 2017. The Adjudicator's Decision was as to what the parties have called the Benchmarking Dispute and arose under a PFI Framework Agreement for the provision of care home services for the Defendant (to whom I shall refer throughout as "Ealing") dated 31^st March 2005.
2. The Adjudication Decision was the subject of a Notice of Dissatisfaction by Ealing on 24^th August 2017. No proceedings have yet been taken by Ealing pursuant to that Notice as at the date of this trial, although draft Particulars of Claim had been settled in early December 2017 by Mr Williamson QC who also appeared on behalf of Ealing at the CMC and trial. Mr Hughes QC and Mr Hennessey appeared for ECA at the CMC and trial. I am grateful to Counsel for their submissions.
3. The Notice of Dissatisfaction has given rise to what has been referred to in this trial as the "underlying dispute" as to the merits of the Adjudication Decision. This judgment does not deal in any way with the underlying merits of the parties' positions in the Benchmarking Dispute. References in brackets and bold are to the trial bundles/tabs/pages.

Procedural Issues

4. At the CMC I ruled, after hearing argument, that the matter would remain as a Part 8 Claim and that issues as to cross-examination of witnesses of facts would be addressed in the parties' respective Skeleton Arguments and resolved at the hearing. By the commencement of the hearing it was clear that contentious issues of fact did exist and Ealing, through Mr Williamson QC, intended to cross-examine two of ECA's witnesses. Ealing had also served a witness statement from Jacqueline Yates, its Head of Older Adults' Services and Adult Support (although she was not in the event called to give evidence). In those circumstances, the Part 8 procedure was no longer appropriate and I ruled and directed that the hearing would now be heard as a Part 7 Claim (see CPR Part 8.1(3): "The court may at any stage order the claim to continue as if the Claimant had not used the Part 8 procedure and if it does so the court may give any directions it considered appropriate"). Mr Williamson QC reserved Ealing's position as to whether the Court could so rule, but without suggesting any prejudice which may have arisen as a result of the ruling. The matter continued as a Part 7 trial. In addition, some further without prejudice correspondence was added to the trial bundle by agreement of the parties and was referred to by both parties during the trial.
5. I have read the documents in the trial bundle including witness statements and considered all the written and oral submissions of both parties' Counsel.

Relevant Contract Terms

6. Clause 14.1.9 of the Project Agreement provides as follows:

"If the result of the Benchmarking in respect of the Tested Services is agreed (or, following referral to the Disputes Resolution Procedure, determined) such that the difference between the aggregate cost of the Tested Services derived from the process described in Clause 14.1.5 and the Initial Tested Services Costs is 10% or greater of the Initial Tested Services Costs then either party shall (provided that it serves notice on the other party within 5 Business Days of receipt of the results of the Benchmarking by the Council) be entitled to require that Tested Services shall be Market Tested in accordance with Clause 14.2."

Clause 14.2.2 provides:

"Following receipt by the relevant party of the notice referred to in Clause 14.1.9 the parties shall meet together as often as may be necessary:

(a) to discuss and seek to agree upon –

…

(ii) the form and requirements of the tender documents to be delivered to Prospective Tenderers including information to be requested from the Prospective Tenderers (the 'Tender Requirements')"

Clause 14.2.5 provides:

"No later than 3 months following the notice given in Clause 14.1.9, the Service Provider shall prepare and deliver to the Council a draft of a market testing proposal setting out:

(a) the output specification, and

(b) the Service Provider's proposed:

(i) Tender Requirements;

(ii) Tender Validity Period; and

(iii) Evaluation Criteria,

for the Tested Services ('Market Testing Proposal').

The draft Market Testing Proposal shall incorporate all of the matters agreed upon by the parties at the relevant Market Testing Meetings as well as any Relevant Event agreed or determined pursuant to Clause 14.2.6."

Clause 14.2.6 provides:

"The parties shall (subject to the requirement in Clause 14.2.7) seek to agree upon the content of the draft Market Testing Proposal to the extent not already agreed in the Market Testing Meetings or as a result of any Relevant Event occurring thereafter. If the parties are unable to agree the draft Market Testing Proposal within 14 days of the Council's receipt thereof or if the Council reasonably considers that the Service Provider has made a material omission in the draft Market Testing Proposal the matter shall be referred to the Disputes Resolution Procedure for determination." (A/6/28-30)

The Disputes Resolution Procedure appears at Schedule 15 of the Project Agreement (A/6/124). Paragraphs 1 to 3 provide:

"1. Any dispute or difference arising in relation to any aspect of the Agreement for the purpose of this Schedule 15 (a 'Dispute') shall be resolved in accordance with this Schedule 15.

2. If a Dispute other than a Construction Dispute arises in relation to any aspect of this Agreement the Service Provider and the Council shall first consult in good faith in an attempts to come to an agreement in relation to the disputed matter.

3. If the Service Provider and the Council fail to resolve the Dispute through such consultation within 7 days or one party notifying the other that it considers there to be a Dispute or the Dispute in question is a Construction Dispute, either party may give written notice to the other requiring the Dispute to be referred to an adjudicator ('Adjudicator') appointed in accordance with the Adjudication Rules (or such other version of the Rules as the parties may agree) an the provisions of such Rules shall (save to the extent they apply to Schedule 14) apply to the conduct and the determination of the Dispute provided always that the Adjudicator shall be obliged to give reasons for his decision."

The Facts

7. I make the following findings. Consistent with this matter having commenced as a Part 8 claim the majority of the findings are not controversial between the parties and are found in correspondence and documents exchanged between the parties and their respective solicitors.
8. The parties entered into a PFI Framework Agreement dated 31^st March 2005 ("the Project Agreement"). The relevant terms of the Project Agreement are at paragraph 6 above.
9. Mr Graeme Doctor, whose witness statement was confirmed in his oral evidence for ECA, explained that ECA is co-owned as to 83% of its shares by a company of which he is a director called Kajima and another investment company called Infra-Red. Kajima manages the Project Agreement for ECA which is an SPV. I was told that this is a typical arrangement in the PFI community. The other 17% of shares are held by Optivo which is the company actually performing the services under the Project Agreement.
10. The Project Agreement is to last for more than 27 years and during its currency there is a procedure called Benchmarking which essentially seeks to protect both parties against rises or falls in the cost of providing the services. Benchmarking is carried out after the first 7 years of the Project Agreement and thereafter at 5 yearly periods. After Benchmarking, in certain circumstances the parties are entitled to Market Testing of the cost of the services. In June 2017 ECA referred a Dispute arising out of the Benchmarking Exercise undertaken in March of that year to Adjudication. The Adjudicator appointed was Mr Simon Tolson. He reached his decision on 6^th August 2017. In summary, he decided that the Benchmarking Exercise was validly undertaken, this led to the grant of a declaration that the difference between the aggregate cost of the Tested Services and the Initial Tested Services Cost was in the Adjudicator's opinion 10% or greater and that ECA or Ealing were entitled to require that the Tested Services be Market Tested accordingly.
11. On 10^th August 2017 ECA invoked the Clause 14.1.9 procedure and proposed a Clause 14.2.2 meeting [C/11/1].
12. On 16^th August 2017 Ealing proposed a meeting on 30^th August [C/11/3].
13. On 24^th August 2017 Ealing served a Notice of Dissatisfaction [B/6/415]. The Notice included the following:

"Notwithstanding the Council's dissatisfaction, I acknowledge that the Project Agreement obliges the parties to continue to comply with their obligations which (without prejudice to its position that market testing has not been triggered) includes progressing the market testing. As is clear, the Council is complying with this obligation and has agreed a meeting on 30 August 2017 to discuss the market testing. However, in view of the Council's position as set out above it is clear that any costs that the parties incur as part of this process are at risk of being wasted given the Council's intention to challenge the Adjudicator's Decision. In the circumstances, in order to avoid any wasted costs in respect of this matter I suggest that we agree to pause the market testing process pending final determination of the issues by the Court. If this is not agreed and the Council succeeds in its challenge it will seek to recover from you all costs and all losses associated with the market testing process.

Please can you confirm by return your agreement to the same."

14. On 13^th September 2017 Kajima on behalf of ECA and Optivo responded rejecting the Council's suggesting to suspend Market Testing indefinitely. This letter (C/11/6-7) included at Paragraphs 5 and 6 the following

"I can confirm that in accordance with its obligations under the Project Agreement ECA is now in the process of preparing a draft of the Market Testing Proposal and will share this with the Council in advance of 10^th November 2017 being the latest date on which ECA can issue the Market Testing Proposal to the Council in accordance with Clause 14.2.5 of the Project Agreement.

If no court proceedings are issued and served by the Council by 10 November 2017 we shall consider this is confirmation that the Council is not intending to challenge the Adjudicator's Decision."

15. On 12^th October 2017 the parties held a preliminary meeting as to Market Testing.
16. On 10^th November 2017 ECA produced its Proposal for Market Testing under Clause 14.2.5 [C/11/8]. In Section 1 "Introduction" the following appears:

"Clause 14.2.6 of the Project Agreement states that if the Council and ECA are unable within 14 days of the Council's receipt of the draft Market Testing Proposal or the Council considers that ECA has made a material omission in the draft Market Testing Proposal the matter shall be referred to the Dispute Resolution Procedure for determination."

17. On 23^rd November 2017 Ealing asked for an extension to 8^th December to comment pursuant to Clause 14.2.6 of the Project Agreement.
18. On 8^th December 2017 CMS, Ealing's solicitors, sent a letter which was the catalyst to these proceedings. It reads as follows [C/11/61-75]:

"As you are aware, we are instructed on behalf of the Council in relation to the above matter.

We write further to the Council's Notice of Dissatisfaction (pursuant to the Project Agreement, Schedule 15, Paragraph 6) dated 24 August 2017 ('Notice'). By the Notice the Council confirmed its intention to challenge the decision of Mr Simon Tolson received by the parties on 6 August 2017.

On issue of the Notice the Council invited you to suspend the market testing process that you had indicated you intended to pursue on the basis that (among other things), if the Council's challenge was successful, any such market testing is invalid and of no contractual effect. You nevertheless continued with the process and without prejudice to its position that the market testing has not been triggered the Council has continued to act in compliance with its obligations under the Project Agreement in this regard.

The Council does not accept that you have undertaken a valid Benchmarking process and it intends to challenge Mr Tolson's decision. Accordingly, it has instructed specialist Counsel to settle Particulars of Claim and these are attached. In accordance with its obligations under the Civil Procedure Rules the Council is prepared to discuss the issues raised in the Particulars prior to issuing the claim in the hope of saving both parties the costs and inconvenience of protracted legal proceedings.

Please confirm by Friday 5 January 2018 whether you agree to mediate the dispute.

In view of the Council's position it is clear that continuing with the Market Testing pending final determination of the issues referred to above (or agreement of the same between the parties), is a wasteful endeavour. Please confirm your agreement to pause the Market Testing process. Please note that should you decide to continue with the Market Testing:

1. You do so at risk regarding any wasted costs;

2. The Council stipulates that the tender information contained on its face the following text: 'ECA's right to undertake this market testing process, and the validity of such process, is the subject of a legal challenge by the Council'; and

3. The Council reserves the right to make further comments in relation to the Market Testing Proposal."

As the letter noted, attached to it were draft Particulars of Claim challenging the merits of the Adjudicator's Decision. As noted at paragraph 2 above, no proceedings have yet been commenced as to that underlying dispute.

19. The words in bold at sub-paragraph 2 of the second page of the letter are referred to by the parties variously as a "Health Warning" or "Qualification" and the amended Declaration sought by ECA is that it is entitled to proceed to Market Testing without the requirement for the insertion of the Qualification. The Declaration as sought in the Amended Particulars of Claim included in brackets further wording "(or any qualification to similar effect)". Mr Hughes QC for ECA accepted in his closing submissions that those words added nothing and should be deleted from the Declaration sought.
20. On 21^st December 2017 Addleshaw Goddard, ECA's solicitors, replied to CMS' letter of 8^th December 2017. They did not refer expressly at that stage to the Health Warning/Qualification. Paragraph 16 of the letter did however provide [C/11/79]:

"Please therefore confirm by Friday 5 January 2018 the basis upon which the Council considers the proposed mediation would proceed (including the items to be discussed as part of any mediation) and whether or not the council is prepared to move its commercial position from that adopted in the Adjudication and as now set out in the Draft Particulars."

21. CMS replied on 11^th January 2018 [C/11/82]. Paragraph 1.2 of that letter stated:

"….It must have anticipated, in view of the Council's position, that the Dispute would either need to be resolved by agreement between the parties or by the court."

The letter set out some observations and answers to the reservations in the letter of 21^st December 2017 and sought confirmation of whether ECA was amenable to mediation by 19^th January 2018.

22. As part of its opposition to Ealing's application to stay these proceedings to a further adjudication, ECA argued that this letter and the reference to a Dispute needing to be resolved by the Court amounted to an agreement that this current Dispute should be resolved by the Court. I reject that submission on the facts. It seems clear to me that the letter is no more than a general expression of the view as to the need for the Dispute, that is the underlying Dispute, to be resolved by the Court rather than this particular Dispute which, of course, was not issued until some almost four months after 11^th January 2018.
23. On 25^th January 2018 Addleshaw Goddard wrote without prejudice [C/42] as follows:

"4. However, ECA and Optivo would be willing to partake in a mediation if certain conditions were agreed by the Council in advance; namely that the Council agreed that it was willing to explore alternative commercial solutions to the Dispute as part of the mediation; and that the Council can provide assurances that an individual of the appropriate level of seniority will be in attendance at the mediation with the authority to discuss and if necessary agree to alternative commercial solutions to the Dispute."

Addleshaw Goddard then sought the Council's confirmation that they were agreeable to proceeding with the mediation in that way.

24. There was further without prejudice correspondence on 28^th February 2018 from CMS and a reply on 16^th March 2018 from Addleshaw Goddard. The latter reply made it clear that a willingness to consider appropriate commercial solutions and avoid seeking enforcement of the Adjudicator's Decision had to be on the basis that a meeting was arranged by 6^th April and a timetable for mediation was agreed by the parties which resulted in a mediation taking place by 30^th April 2018. CMS replied on 23^rd March 2018 saying that for various reasons the Council was not in a position to hold a meeting before the end of April but was open to a commercial meeting in early May.
25. There was no response to that letter until 3^rd May 2018 when the Part 8 proceedings were issued and Addleshaw Goddard replied under cover of a "without prejudice save as to costs" letter to the letter of 23^rd March 2018. Notwithstanding that proceedings had then been issued, ECA indicated that they were willing to propose a stay in the proceedings of four to six weeks for discussions to take place and considered that that was ample time to facilitate such discussions.
26. Some criticism was made at the trial of ECA's failure to respond more quickly to the letter of 23^rd March 2018. In his oral evidence to me, Mr Doctor suggested that the reason for that was because of the proximity of the local elections on 4^th May and a desire not to stir up any trouble with Councillors who were unhappy with the project as a whole. It seems to me that Mr Doctor's evidence on this particular aspect of the matter was rather in the form of an attempt to justify the delay after the fact as opposed to an accurate recollection of the reasons for the delay at the time. It seems to me, on the balance of probabilities, much more likely that by the end of March 2018 both ECA and Optivo had lost patience with Ealing and had decided that proceedings were the only way to move out of what Mr Doctor, accurately in my judgment, described as "limbo".
27. Whilst not accepting Mr Doctor's explanation for the delay in responding, it does not seem to me that the delay is of itself of any significance in the context of these proceedings.
28. CMS wrote to Addleshaw Goddard on 15^th May 2018 referring to the Part 8 Claim and stating:

"The Council does not contend that ECA is prohibited from proceeding to Market Testing. It is wholly inappropriate for ECA to issue proceedings seeking a primary declaration (ie that it is entitled to proceed to market testing) that it knows the Council does not dispute. Clearly, ECA is not entitled to such a declaration."

There was then an invitation for ECA to discontinue the Part 8 proceedings on the basis that the primary Declaration sought was not disputed [C/21].

29. On 20^th June 2018 [C/26] Addleshaw Goddard responded further to the letter of 15^th May 2018. At Paragraph 4 they state:

"… our client's position is that your client's failure to act upon its Notice of Dissatisfaction (for a period of now approaching ten months) and its unilateral insistence that any Market Testing Proposals carry a 'health warning' advising of threatened legal action constitute a clear breach of its obligations under the Project Agreement and act to prevent a proper Market Testing Exercise from being carried out."

Paragraph 5 stated:

"For the avoidance of doubt, the Declaration therefore sought by our client - that it is 'entitled to proceed to Market Testing in accordance with the Project Agreement' (emphasis added) - would have the effect of (a) allowing our client to issue Market Testing Proposals free from any 'health warning'; and (b) finally determining the subject of your client's Notice of Dissatisfaction."

30. By a further letter from CMS of 25^th June 2018 [C/29] at Paragraphs 4 and 5 the following was stated:

"4. We repeat the Council's position as set out in our letters of 15 May and 21 June - the Council does not dispute the Declaration that your client seeks in the terms set out in the Part 8 Claim. As we confirmed previously, the Council does not agree with your interpretation of the effect of those Declarations as set out at Paragraph 5 of your 20 June letter.

5. In response to the 'specific question' first raised in your 22 June letter (which was not raised in your previous letters), we confirm that the Council's position in respect of the 'health warning' is unchanged; it is entitled to the same. However, we do not see that this is relevant to the primary declaration that your client seeks in its Part 8 Claim which does not relate to a 'health warning' but to whether ECA is entitled to proceed to Market Testing."

31. The Part 8 proceedings,issued on 3^rd May 2018 included a witness statement from Sarah Denise Wilson, a solicitor at Addleshaw Goddard [A/4]. Ms Wilson also gave oral evidence at the trial and confirmed the contents of her statements. At Paragraph 31 of her first statement Ms Wilson referred to the letter of 8^th December 2017 and the stipulation required. At Paragraph 32 Ms Wilson states:

"ECA was therefore in a position where it clearly could not proceed with the Market Testing process given that the above disclaimer required by the Council would significantly prejudice the fairness and the likelihood of success of the Market Testing project as the disclaimer would clearly deter any potential bidders: the Council was and is still effectively preventing ECA from complying with its obligations under the Project Agreement and unreasonably frustrating the operation of the Project."

32. When I read the Part 8 Claim before the CMC on 29^th June 2018 it seemed to me clear that the relief sought by ECA was in reality a declaration that the Health Warning/Qualification should not be included in any tender information to potential bidders. It was also clear that the letter of 8^th December and the Health Warning/Qualification were not going to be acceptable to ECA and would have obvious adverse consequences on any Market testing were they to be added.
33. That was clear to me on a fair reading of the contents of the Part 8 Claim and Ms Wilson's witness statement.
34. After some argument and a short adjournment of the CMC an Amended Part 8 Claim Form was drafted by ECA to make the position unarguably clear and to delete some unnecessary averments and I granted permission for it to be relied upon.
35. It was also confirmed at the CMC and noted in the Order which I made at the conclusion of the CMC [C/13] that it was not part of these proceedings to challenge either the Defendant's right to challenge the merits of the Adjudicator's Decision or that the Defendant was time-barred from issuing any proceedings in relation to any such challenge. It follows that the suggestion at Paragraph 5(b) of Addleshaw Goddard's letter of 20^th June 2018 that the Declaration would have the effect of finally determining the subject of the Notice of Dissatisfaction was not being pursued nor, in my judgment, could it be pursued in the context of these proceedings.
36. It should be noted that since late April 2018 Ealing has been paying ECA the increase in price of 2.8% for which it contended in the adjudication (that was rejected by the Adjudicator) and ECA has accepted those monies on a without prejudice basis.
37. Mr Doctor's evidence in his witness statement [C/12] includes at Paragraph 7(a) that the Council has not provided any substantive comments on the Market Testing Proposal. In addition, he points out at Paragraph 7(b) that ECA are continuing to make a significant loss notwithstanding the payments made since April and "cannot afford to indulge the Council's delay and prevarication." At Paragraph 13(a) Mr Doctor states that the Council has never provided any firm commercial proposals or agreed a date for any meaningful commercial discussions to commence. That is wholly consistent with the correspondence. At Paragraph 13(c) he states that unless and until the Council commences proceedings pursuant to its Notice of Dissatisfaction ECA requires to be able to proceed with Market Testing without the "health warning". I will return to that issue later in this judgment. Commenting on the application for a stay, he stated :

"For it now to be said by the Council that this disagreement has to go back to the Adjudicator when the matter is before the Court as a straightforward decision, I consider that this would be an irresponsible waste of both the parties' time and money."

38. In his oral evidence, Mr Doctor said in re-examination what is, to my mind, clearly and obviously the position that no bidder would bother to reply to an invitation to tender which included the "health warning". In Mr Doctor's words, it would be "commercial suicide" and "I would not touch it with a barge pole." Whilst it is true that in the correspondence of December 2017 and January 2018 no specific objection was taken to the "health warning", nevertheless, it seems to me to be quite clear as I have noted at paragraphs 32 and 33 above that the stipulation as to the insertion of the "health warning" raised on 8^th December 2017 would have been known by Ealing as being unacceptable to ECA and as being a bar to the prospect of any bidder responding to the invitation to tender.
39. I also accept that ECA does not intend to mislead any prospective tenderers as to the existence of a Notice of Dissatisfaction and that it will explain the state of the Adjudication Decision and the Notice properly and that the existence of the Notice (without proceedings) will not deter bidders. I further accept that if the "Health Warning"/Qualification" is not to be part of the invitation to tender then ECA would consider issuing the tender and I accept Mr Doctor's evidence at Paragraph 13(b) of his statement that the insistence on the imposition of the same makes it commercially impossible for ECA to conduct Market Testing. The Adjudicator having declared that ECA were entitled to proceed to Market Testing, it follows that the insistence of the addition of the "Health Warning/Qualification" amounts to a failure to comply with the Adjudicator's Decision.
40. Ealing allege that there was an agreement in principle to mediate. As noted above, Mr Doctor rejects that suggestion and I accept his evidence which is wholly consistent with the correspondence between the parties. No firm proposals were ever made to ECA and there was no agreement in principle to mediate.

Relevant Legal Principles

41. The legal principles are not in dispute. So far as the stay application is concerned, I gratefully adopt the approach of HHJ Coulson QC (as he then was) in DGT Steel & Cladding Ltd v. Cubitt Building & Interiors Ltd [2007] EWHC 1584 (TCC). At Paragraph 12 the Learned Judge stated:

"I derive from the authorities noted above the following three principles which seem to me to be relevant and applicable to contracts containing a binding adjudication agreement:

(a) The court will not grant an injunction to prevent one party from commencing and pursuing adjudication proceedings, even if there is already court or arbitration proceedings in respect of the same dispute: see Herschel v. Breen.

(b) The court has an inherent jurisdiction to stay court proceedings issued in breach of an agreement to adjudicate (see Cape Durasteel) just as it has with any other enforceable agreement for ADR (see Channel Tunnel Group, Cott and Cable & Wireless).

(c) The court's discretion as to whether or not to grant a stay should be exercised in accordance with the principles noted above. If a binding adjudication agreement has been identified, then the persuasive burden is on the party seeking to resist the stay to justify that stance: see Cott and Cable & Wireless."

At Paragraph 21 the Learned Judge stated:

"Accordingly, even if I was wrong in my construction of Clause 19 and it was not a mandatory adjudication provision, Cubitt would still be entitled to assert their right to have any dispute referred, in the first instance, to adjudication. Because there was a binding adjudication agreement, they would still be entitled to at least ask the court for a temporary stay of the court proceedings. It would then be a matter of discretion as to whether or not the stay was granted. Therefore, after all this, it seems to me that perhaps the only substantive difference between the two potential situations (a mandatory agreement to adjudicate or one that is merely optional) is that if, as I have found, the adjudication provisions were mandatory, the court is likely to be even more willing to exercise its discretion in favour of a stay than would be the case if there was a simple right to adjudication."

42. As to the principles on which a declaration may be granted in the Court's discretion, I adopt, again gratefully, the guidance given by O'Farrell J in the recent TCC decision of Office Depot International (UK) Ltd v. UBS Asset Management (UK) Ltd and Others [2018] EWHC 1494 (TCC) (" Office Depot") . At Paragraphs 47 to 49, O'Farrell J noted:

(a) that declaratory relief would only be granted where there is a real dispute between the parties;

(b) that declaratory relief will only be granted where the terms of the declaration sought are specified with precision; and:

"As between the parties to a claim, the court can grant a declaration as to their rights or as to the existence of facts or as to a principle of law where those rights, facts or principles have been established to the court's satisfaction. The court should not, however, grant any declarations merely because the rights, facts or principles have been established and one party asks for a declaration. The court's power to grant relief is discretionary. The court has to consider whether in all the circumstances it is appropriate to make such an order: Financial Services Authority v. Rourke [2001] EWHC per Neuberger J:

'It seems to me when considering whether to grant a declaration or not, courts should take into account justice to the claimant, whether the declaration would serve a useful purpose and whether there are any special reasons why or why not the court should grant the declaration.'"

43. On the basis of those agreed legal principles, I now turn to the issues between the parties.

The Parties' Respective Positions

44. ECA seeks the Court's Declaration that:

"It is now entitled to proceed to Market Testing without the requirement for the insertion of the qualification in accordance with the Project Agreement."

Although ECA sought an alternative Declaration, it accepts that no such alternative Declaration is appropriate.

45. Ealing seeks an order staying the proceedings to adjudication on the basis that the Dispute before the Court is not as to the enforcement of the Adjudicator's Decision but is a Dispute as to the Market Testing Proposal and therefore must be adjudicated before any Court proceedings can be taken. That point was first made at the CMC on 29^th June 2018 by Mr Williamson QC and has been pursued at trial as part of the proceedings rather than as a preliminary argument or earlier application.
46. In any event, if a stay is not granted Mr Williamson QC seeks the dismissal of the action on the basis that the Court should not make the Declaration sought for a number of reasons.

The Application for a Stay to Adjudication

47. On behalf of Ealing, Mr Williamson QC seeks an order staying this matter to adjudication. The basis of that application is that Mr Williamson QC submits that the dispute between the parties is as to the entitlement or otherwise of Ealing to comment on the draft Market Testing Proposals engaging the Clause 14.2 process and that is a matter which is the subject of a mandatory adjudication clause, namely Clause 14.2.6. In particular, Mr Williamson QC contends that the letter of 8^th December 2017 from CMS is part of the Clause 14.2.5 process commenced by ECA in August 2017 and the "Health Warning/Qualification" at bullet-points 2 and 3 are comments on the draft Market Testing Proposal and as they are disputed then Clause 14.2.6 and the mandatory stay to adjudication applies.
48. Mr Hughes QC for ECA argues that the dispute is not a Market Testing Proposal dispute at all, but a dispute as to the effect of the Adjudicator's Decision and that the "Health Warning/Qualification" and letter of 8^th December 2017 was not in reality a comment on the Market Testing Proposal but a stipulation as to how the process as a whole was to be approached. He points out, as did Mr Doctor in his evidence, that there has been no substantive comment as to the content of (my underlining) the Market Testing Proposal at all and that is what Clause 14.2.6 requires.
49. In my judgment Mr Hughes QC's argument is correct and Mr Williamson QC has failed to demonstrate (the burden of showing that the Dispute is within the clause being on Ealing) that the dispute before me is caught by the mandatory provisions of Clause 14.2.6. The "Health Warning/Qualification" is in no way a comment on the Market Testing Proposal and the letter of 8^th December 2017 does not, on a fair reading, constitute any form of comment or a Clause 14.2.2(a)(ii) letter. Nor is it, on an objective reading, a Tender Requirement. It is, as per CMS' letter, a "stipulation" as to the wording on the front of the Requirements. Simply because as a matter of timing the letter of 8^th December postdates the draft Market Testing Proposal does not mean that it is automatically to be accepted as a part of that process and in particular as a "comment" on the substance of the proposal. I have also accepted Mr Doctor's uncontradicted evidence as to the lack of any substantive comment on the Market Testing Proposal since November 2017. I would decline to order a stay for that reason.
50. In any event, I would have exercised my discretion not to order a stay (the burden in that regard being on ECA). First, because the matter is before me and has been fully argued. The effect of ordering a stay is to mean that all those costs and time would be wasted and further costs and time expended in a further hearing before an Adjudicator. The parties now have my judgment on the substantive issue rather than having to wait for a decision from an as yet un-appointed Adjudicator. To order a stay in these circumstances seems to me to fly in the face of common sense and proportionality. I agree with Mr Doctor's witness statement at Paragraph 13(c) which I have quoted at paragraph 37 above. I do not accept that refusing to order a stay in the particular circumstances would make the provision of Clause 14.2.6 nugatory. They simply do not trump the factors counting against a stay, in my judgment, as a matter of discretion in this factual situation. Second, it seems to me highly likely that whatever the result of a further adjudication, a Notice of Dissatisfaction will be sent leading either to a similar state of "limbo" to that in the current situation or a hearing of precisely the matters I have heard in a further Court hearing. Third, the delay in making the application to stay and the general delay in acting on the Notice of Dissatisfaction count against Ealing. I should note that Mr Hughes QC's ground (3)- waiver, was withdrawn by him in closing and ground (2)- agreement to go to Court, which was not pursued with any real enthusiasm, is not made out on the facts as conceded by Mr Doctor in cross-examination and, as I have already found.

The Substantive Application

51. ECA seeks a declaration from the Court on the following terms, namely that it is entitled to proceed to Market Testing without the requirement for the insertion of the qualification. The question of alternative declarations does not now arise.
52. I have already decided in refusing the stay application that the dispute before me does not arise out of the Market Testing Process set out in the Project Agreement at Clause 14.2.
53. The dispute is, therefore, one arising out of the Adjudicator's Decision and is, in effect, a claim for a Declaration that the Decision is binding on Ealing and as to particular consequences of that Decision.
54. Mr Hughes QC submits that the agreed legal principles set out above give rise to five factors, all of which he says are answered in favour of granting the Declaration sought. In summary, he says there is clearly a real dispute between the parties, there is a precisely specified form of Declaration sought, the balance of justice favours granting the relief sought, there is a useful purpose in so doing and no special reasons exist for refusing to grant the relief sought.
55. In answer to the substantive claim, Mr Williamson QC submits that the Court should refuse to grant the Declaration sought. First, he argues that the Court should not grant a discretionary remedy when the parties had agreed in principle to mediate and/or to resolution by commercial discussions.
56. The difficulty with that submission, as I have already noted, is that there was no such agreement even in principle. As at 3^rd May 2018 when the proceedings commenced and as at 23^rd July 2018 when the trial started, the position is as per Mr Doctor's evidence and on the correspondence, that an essential prerequisite for ECA's attendance at any mediation/commercial discussion had not been made out, namely the provision by Ealing of firm commercial proposals. I accept as accurate Mr Doctor's characterisation of what had occurred before 3^rd May 2018 as "fluff". I also accept Mr Hughes QC's submission that the existence of proceedings is no bar to the parallel track of negotiations/mediation as per the letter of 11^th July 2018 from Kajima [C/34].
57. Second, Mr Williamson QC submits that the Declaration sought avoids the underlying and real dispute between the parties, namely whether the Adjudicator was right. That dispute is not before me. It is not before any Court because Ealing, having served a Notice of Dissatisfaction in August and draft Particulars of Claim in December, has not yet issued any proceedings. In his closing submissions Mr Williamson QC sought to argue that once the Notice was issued either party could bring proceedings, in the case of ECA for a Declaration that the Adjudicator was right. When this was remarked upon by Mr Hughes QC in his submissions, Mr Williamson QC made clear that he was not making any formal concession. I do not need to decide whether Mr Williamson QC's submission is correct or not, but I do note that it is not part of Ealing's case that ECA is entitled to bring proceedings to validate the Adjudicator's Decision. Only the current dispute between the parties, i.e. the "Health Warning/Qualification" dispute, can be determined, and provided the factors identified by O'Farrell J are made out in my view there is no reason not to grant the relief sought because there is another underlying issue between the parties which is not yet before a Court. In effect, Mr Williamson QC's submissions amount to saying that the relief sought is unhelpful, largely because it is said that the existence of the Notice of Dissatisfaction is of itself enough to deter potential bidders. However, I have accepted Mr Doctor's evidence that the existence of a Notice is not sufficient to deter bidders, whereas the insertion of the "Health Warning/Qualification" would be "commercial suicide". So that objection fails on the facts.
58. It is further submitted that if the Court grants the relief sought it would in effect be allowing the full facts to be withheld from tenderers. In my judgment, the Court will be doing no such thing. The Court would merely be stating what is not permitted to be inserted into the tender information. Mr Doctor made clear, and I accept, that tenderers would be told about the Notice and the lack of an ongoing legal process, and in any event it seems likely that most tenderers will have most if not all of the background already within their knowledge.
59. I agree with Mr Hughes QC's closing submission in response to that of Mr Williamson QC that there is a great deal of difference between serving a Notice and pursuing a legal challenge. Ealing has done the first and not the second. It follows, therefore, that the "Health Warning/Qualification" contended for is itself inaccurate and were it allowed to stand, tenderers might be misled.
60. I am satisfied that Mr Doctor's evidence and ECA's position as to the effect of the "Health Warning/Qualification" is correct. It would and so far has frustrated ECA from having the benefit of the Adjudicator's Decision that Market Testing should proceed. Market Testing will not proceed if the stipulated "Health Warning" is inserted and hence has not proceeded to date. The stipulation demanded, therefore, amounts to a refusal to comply with the claim pending the outcome of any proceedings after the issue of the Notice of Dissatisfaction. Granting the Declaration sought would have a useful effect. It would allow ECA to continue the Market Testing process and, therefore, give effect to the Adjudicator's Decision. It is possible (although no more than possible) that the grant of the Declaration will also spur Ealing into deciding to issue its own proceedings or resolving the underlying dispute. However, whether or not that does happen is a matter which does not of itself mean that the Declaration sought should not be granted. Mr Williamson QC's submission that the relief sought is unhelpful is, therefore, rejected. I accept Mr Hughes Q.C.'s submissions as to the substantive matter.
61. For all these reasons, therefore, I am persuaded that the factors identified by O'Farrell J in Office Depot do exist and that it is appropriate that the Court should, in its discretion, grant the Declaration sought which is precise in its terms and no special reason exists to the contrary.
62. I will hear the parties on any consequential issues if they cannot be agreed.

ANDREW SINGER QC