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)

		Royal Courts of Justice Strand, London, WC2A 2LL
		15/11/2018

THE DEPUTY JUDGE:

1. This is an application for Summary Judgment by the Claimant, Synergy Gas Services Limited, ("Synergy") in respect of an adjudication decision dated 8th August 2018 which was made in its favour against the Defendant, Northern Gas Heating Limited, ("Northern Gas"). The amount of the decision was £74,898.07 inclusive of Value Added Tax. The Adjudicator also ordered Northern Gas to reimburse Synergy for his fees in the sum of £11,142.72.
2. The Claim Form was issued on 7th September 2018. At the date of its issue Northern Gas had failed to pay any part of the sum which the Adjudicator had found due. However, on 19th October 2018 (the last working day before the hearing in this matter) Northern Gas sent Synergy's solicitors a cheque for £45,697.79. That was received, I was told, on the day of the hearing. The covering letter provided no breakdown of the cheque tendered other than to describe it as "the admitted amount". Mr Smith proceeded with the application for Summary Judgment making plain that it was in respect of the balance.
3. The dispute between the parties was defined in the Notice of Adjudication issued on 26th June 2018 as being:

"A dispute has arisen between the parties to the sub-contract concerning the failure of the Responding Party to pay the sum of £84,760.04 to the Referring Party pursuant to the following invoices issued by the Referring Party and less interim payments made by the Responding Party in the sum of £38,068.72."

4. Three Witness Statements were put before me, the first prepared by Mr Gavin Hoccom dated 7th September 2018 in support of the application for Summary Judgment. That evidence was met by a Witness Statement from Mr Nadeem Ahmad, Managing Director of Northern, dated 1st October 2018. In response Mr Hoccom prepared a second Witness Statement dated 8th October 2018.
5. It is unnecessary to set out that evidence because the argument at the hearing did not proceed by reference the matters canvassed by Mr Ahmad in his Witness Statement. Mr Ahmad argued, in summary, that:

(i) the Decision was made in breach of natural justice in that the Adjudicator decided the dispute (a) on the basis of matters not raised by the parties (paragraph 4) and (b) without taking into account matters raised by Northern (paragraphs 7, 9 and following); and

(ii) Northern has "a substantial set-off Counterclaim against the Claimant for defective works" (as set out in paragraph 5) which Northern ought to be permitted to pursue to trial in the present proceedings (paragraph 6).

6. However, Mr Beloff in his Skeleton Argument for the Defendant made little reference to the arguments raised by Mr Ahmad. In particular, at paragraph 15 of the Skeleton Argument Mr Beloff said:

"Further the Defendant contends that, in the light of those other matters raised within the Witness Statement of Nadeem Ahmad dated 1st October 2018 that Defendant has further arguments upon which it would wish to raise in ordinary court proceedings as to why it should not be liable for the sums which the Adjudicator found due to the Claimant. It would be proportionate for those to be dealt with within the current proceedings rather than requiring the Defendant to issue new and separate proceedings. The Defendant avers that this is a compelling reason why matters should be disposed of at trial".

7. In oral argument, Mr Beloff who was without the advantage of having either a Client or an Instructing Solicitor present, made plain that whilst he could not abandon the matters canvassed by Mr Ahmad in his Witness Statement, he did not feel he could present any argument in favour of them.
8. In my judgment he was correct in that decision. For the reasons summarised by Mr Smith in his Skeleton Argument at paragraphs 23 – 33, those arguments are insufficient grounds to defeat the application for Summary Judgment. It is unnecessary for me to make any further reference to those arguments.
9. The argument raised by Mr Beloff was one of breach of natural justice, which he developed in the following way:

(i) At paragraph 17 of the Decision the Adjudicator identified various issues arising from the dispute. The second issue was identified as follows:

"At clauses 13.2, 13.4, 13.6 and 14.4 of the sub-contract, pre-conditions of Northern's ability to deduct or set off any sum for remedial works?"

(ii) At paragraph 41 of the Decision the Adjudicator found that:

"Clause 14.4 imposes strict obligations on Northern prior to recovery of costs incurred from Synergy in respect of alleged defects which occurred during the defects period".

And paragraph 43:

"In conclusion, clauses 13.2, 13.4 and 13.6 are not relevant to the issue, but at clause 14.4 notice is a pre-condition to deduction or set-off of any sum for remedial works during the defects liability period".

(iii) The Claimant did not specifically advance the argument that notice under clause 14.4 of the sub-contract was a pre-condition to deduction or set-off in its Referral Notice, Reply or Surrejoinder and it was not a point raised by the Adjudicator with the Parties prior to the issue of his Decision.

(iv) In the absence of any oral hearing, the Defendant was therefore denied the opportunity to address this point. It is clear from the paragraphs of the Decisions set out above that this was a point upon which the Adjudicator based his decision, if not "wholly or at least in part".

(v) Since that point was obviously material to the Adjudicator's conclusions and award it is one which he should have raised with the Parties. His failure to do so was therefore a material breach of Natural Justice and the Decision is this unenforceable.

10. Clause 14.4 of the Contract provides:

"during the defects liability period, if Northern Gas Heating Limited decides that any work done or materials used by the Installer are defective or not in accordance with the Applicable Rules or the relevant ECO Funding contract, Northern Gas Heating Limited shall notify the Installer that such work or materials have been rejected and specified details of the alleged defect(s). Following that rejection, the Installer shall promptly, and at his own expense, made good the defect(s) to Northern Gas Heating Limited's reasonable satisfaction. If the Installer fails to do so, Northern Gas Heating Limited may employ and pay a Replacement Installer to carry out the work or provide the materials and recover all costs incurred from the Installer".

11. Mr Beloff drew my attention to paragraph 5(b) of the Response where clause 14.4 is pleaded and then to paragraph 11(a) of the Response where there is an allegation of breach of clause 14.4 (in the sense that there is an allegation of failure to rectify defects such as to give rise to a set-off) but he points out that there is no specific reference to clause 14.4 having the construction of a condition precedent.
12. In paragraph 17 of the Decision the Adjudicator set out the issue saying at clause 17.2:

"The issues are as follows…are clauses 13.2, 13.4, 13.6 and 14.4 of the Sub-contract, pre-conditions of Northern's ability to deduct or set-off any sum for remedial works?"

13. The Adjudicator's Decision is at page 18 of the document and the Adjudicator recorded:

"I therefore make my DECISION …

Issue 2 A clause 14.4 notice is a pre-condition to deduction or set-off any sum for remedial works during the defects liability period".

He gave his reasoning at paragraph 43 of the Decision.

14. Mr Beloff had set out that argument, for the first time as far as I am aware, in his Skeleton Argument dated 18th October 2018. Mr Smith had thus been unable to consider the argument in his own Skeleton Argument. Mr Smith did not suggest that he was prejudiced by the late emergence of Mr Beloff's argument nor that he was unable to deal with it.
15. Mr Smith said that paragraph 11(a) of the Response put in issue the whole meaning and effect of clause 14.4 of the Contract when it alleged breach of the clause. It thus became incumbent upon the Adjudicator to determine the meaning of the clause. He also drew my attention to paragraph 11.2 of the Reply where it is pleaded "paragraph 11(a) of the Response is denied. Synergy has re-formatted the spreadsheet at Appendix C of the Response as a form of Scott Schedule wherein its responses to the allegations made by Northern are set out with evidence in support. For the reasons set out therein, it is denied that Northern is entitled to deduct or set off any sum from the amounts claimed in respect of the invoices referred to in paragraph 11(a) of the Response or at all".
16. Mr Smith drew my attention to references in Synergy's responses to the Scott Schedule for example at invoice number 2030 where Synergy plead in their response

"Synergy was not provided with the opportunity to inspect/remedy contrary to clause ... 14.4 of the sub-contract. In the circumstances it is denied Northern is entitled to deduct or set-off any sum". And, "Northern has not pleaded nor provided any evidence in response to Synergy's primary position … namely, Synergy was not provided with the opportunity to inspect/remedy the alleged defect in accordance with the sub-contract which is a pre-condition of Northern's ability to deduct or set-off any sum for remedial work.

17. As Mr Smith points out similar wording is there throughout the responses to the Scott Schedule. He said that the "allegation of a non-opportunity to repair sweeps up the allegations of no notice because without notice any need to repair is unknown". Furthermore, he said the references to the failure to "ever notify" cover the issue.
18. The approach to be taken to cases where breach of natural justice is argued is clear. In Carillion Construction v. Devonport Royal Dockyard [2006] BLR 15 at paragraph 85 Chadwick LJ said:

"The objective which underlies the Act and the statutory scheme requires the courts to respect and enforce the Adjudicator's Decision unless it is plain that the question which he has decided was not the question referred to him or the matter in which he has gone about his task is obviously unfair. It should be only in rare circumstances that the courts will interfere with the Decision of an Adjudicator. The court should give no encouragement to the approach adopted by DML in the present case; which (contrary to DML outline submissions to which we have referred in paragraph 66 of this Judgment) may, indeed aptly be described as "simply scrabbling around to find some argument, however tenuous, to resist payment".

It is only too easy in a complex case for a party who is dissatisfied with the Decision of an Adjudicator to comb through the Adjudicator's reasons and identify points upon which to present a challenge under the labels "excessive jurisdiction" or "breach of natural justice" It must be kept in mind that the majority of the Adjudicators are not choses for their expertise as lawyers… the task of the Adjudicator is not to act as an Arbitrator or Judge… The task of the Adjudicator is to find an interim solution which meets the needs of the case…

19. Further, in Beumer Group UK Limited v. Vinci Construction UK Limited [2016] EWHC 2283 Fraser J said:

"12. It is trite law that adjudication is a speedy process designed only to provide what is called "interim finality" on construction disputes. Parliament intended that the parties should be given a quick answer, and that quick answer should be binding on the parties until the dispute, whatever it may be, is resolved finally either by litigation or arbitration. It has been said in a case concerning what is called a statutory scheme, namely the statutory instrument entitled the Scheme for Construction Contracts (England and Wales) Regulations 1998 (SI 1998/649) by Chadwick LJ in Carillion Construction Limited v. Devonport Royal Dockyard Limited [2006] BLR 15, paragraph 86 that the "need to have the right answer has been subordinated to the need to have the answer quickly". Although made in a case under the Scheme that statement is a wide application to Adjudicators generally, whether under the Scheme or otherwise. Adjudicator's Decisions will be enforced by the Court by Summary Judgment regardless of errors of fact and/or law by the Adjudicator. Aggrieved losing parties can and should comply with the Adjudicator's decision as long as that decision was made by an Adjudicator with jurisdiction over the dispute who has conducted the adjudication fairly and in accordance with the rules of natural justice…

16. It is therefore clear that for breaches of natural justice to be sufficient to justify the Court declining to order Summary Judgment and enforcing an Adjudicator's Decision, they must be the plainest of cases; the adjudication proceedings must have been obviously unfair. Combing through what has occurred, or concentrating on the fine detail of the material before the Adjudicator, to allege a breach of natural justice, will neither be encouraged nor permitted by the Court. Adjudications are conducted very quickly, and this speed is part of the process imposed by Parliament on those who enter into construction contracts. The framework within which Adjudicators have to reach decisions has to be taken into account when complaints are made by losing parties".

20. In CG Group Limited v. Breyer Group Limited [2013] EWHC 2722 Akenhead J said at [31][e] "It behoves courts who are considering challenges on the grounds of breach of the rules of natural justice to have regard to the constraints under which Adjudicators operate when faces with what are often complex legal arguments. It should not be the case that the Court should have to carry out a relatively minute examination of all the arguments and contentions put forward by the parties in the Adjudication to seek to determine whether the final permutation in the exact form as found to apply by the Adjudicator (being one of the many open to him or her to find) was or was not specifically highlighted by a party. If the permutation as found is covered by the presented arguments, it should be a rare case for a natural justice breach to be found".
21. Here, it is plain from paragraphs 17.2, 43 of the Decision and what is said in the summary conclusion at Issue 2 that the Adjudicator was plainly of the view that the interpretation of clause 14.4 was for him to decide. The matter for me to decide is whether there was sufficient material in front of him to conclude that the parties (a) also considered it to be an issue and (b) had canvassed it in the written material put before him.
22. I accept that nowhere in the Response to the Referral or in the Reply (see in particular paragraph 11.2) is it expressly pleaded that a clause 14.4 notice is a pre-condition to deduction or set-off of any sum for remedial works during the defect's liability period. Similarly, I reject Mr Smith's argument that paragraph 11(a) of the response puts into issue the entire meaning of clause 14.4. The allegation is merely that in breach of that clause Synergy has failed to rectify defects. I would expect to see an express plea that a clause 14.4 notice is a condition precedent.
23. However, the pleadings have to be read with the Scott Schedules.
24. I accept, as Mr Smith argues, that the Scott Schedule is studded with reference by Synergy to the failure to give them any opportunity to inspect or remedy the alleged defects. That seems to me to import the allegation that it was a requirement that they be given that opportunity. Thus, given the constraints upon the Adjudicator explained by Chadwick LJ and Fraser J, I am satisfied that, to borrow the language of Akenhead J, "the permutation as found is covered by the presented arguments". Accordingly, I am not satisfied that the Adjudication proceedings were obviously unfair.
25. In the circumstances I must reject the argument that there was breach of natural justice. I must give Summary Judgment and enforce the Adjudicator's Decisions to the extent that it is unpaid. There will be Judgment for the Claimant and I invite Counsel to agree the wording of the Order.