Brown & Anor v Complete Buildings Solutions Ltd

This appeal from the judgment of HH Judge Raynor QC raises a short issue as to whether an adjudicator (appointed under the terms of a building contract) had jurisdiction to decide a dispute between the parties. The Appellants’ contention is that he had no jurisdiction because he was being asked to adjudicate the same or substantially the same dispute as had been decided by another adjudicator in an earlier adjudication. The Respondent contends, as the Judge found, that he did have jurisdiction.

By the terms of a JCT Minor Works Building Contract (2011 Edition) dated 22 December 2011 (‘the Contract’) the Respondent agreed with the Appellants to demolish a dwelling house (at Ashtead in Surrey) and to build a new house for a price of £496,578, or such other sum as might become due under the contract.

The Architect certified practical completion on 9 April 2013, and issued a Certificate of Making Good Defects on 25 October 2013.

On 31 October the Architect issued a ‘Final Certificate’ under the contract and, on 20 December 2013, the Respondent sent a letter claiming that a final payment of £115,450.50 was due.

The sum was not paid and a Notice of Adjudication was sent on 7 February 2014 (‘the First Adjudication Notice’).

Section 7 of the Contract was headed ‘Settlement of Disputes’, and clause 7.2 provided:

If a dispute or difference arises under this Contract which either Party wishes to refer to adjudication the Scheme shall apply except that for the purposes of the Scheme the Adjudicator shall be the person (if any) and the nominating body shall be that stated in the Contract Particulars.

No Adjudicator was named in the Contract Particulars but on 10 February 2014 the nominating body appointed Mr CJ Calcroft as Adjudicator under the terms of clause 7.2.

The Respondent accepted that the Architect’s ‘Final Certificate’ was uncontractual in that it was not issued in accordance with Clause 4.8.1 but relied on clause 4.8.4 of the Contract which provided:

If the final certificate is not issued in accordance with clause 4.8.1,

1.

the Contractor may give a payment notice to the Employer with a copy to the Architect/Contract Administrator stating what the Contractor considers to be the amount of the final payment due to him under this Contract and the basis on which the sum has been calculated and, subject to any notice under clause 4.8.4.3, the final payment shall be the final amount.

…

3.

If the Employer intends to pay less than the sum specified in the Contractor’s payment notice, he shall not later than 5 days before the final date for payment give the Contractor notice of that intention … and the payment to be made on or before the final date for payment shall not be less than the amount stated as due in the Employer’s notice.

Clause 4.8.5 established that where the Employer did not give a counter notice under clause 4.8.4.3 it was obliged to pay the Contractor the sum stated as due in the Contractor’s notice.

On 1 April Mr Calcroft issued his Adjudication (‘the First Adjudication’). He concluded (as was common ground) that the ‘Final Certificate’ issued on 30 October 2013 was ineffective; but also found that the Respondent’s letter of 20 December 2013 was not a valid payment notice for the purposes of Clause 4.8.4.1. His reasons for reaching this conclusions were (a) it was based on the ‘Final Certificate’ being issued late, whereas it was in fact invalid (§§60-64), and (b) the terms of the 20 December letter did not comply with clause 4.8.4.1 in view of the way it was expressed: it did not make clear that it was (i) a notice (ii) issued pursuant to clause 4.8.4.1 (§72). He found that, since no payment notice had been served, no sum was payable.

On the same day, 1 April 2014, the Respondent sent a letter described as a ‘notice pursuant to Clause 4.8.4.1 of the Contract’ and, on 24 April, issued a Notice of Adjudication (‘the Second Adjudication Notice’).

Although Mr CJ Hough was appointed Adjudicator on 29 April, the Appellants disputed his jurisdiction, essentially on the basis advanced later before Judge Raynor QC and this Court: namely, that Mr Hough was being asked to decide the same, or substantially the same, dispute as had been decided by Mr Calcroft in the First Adjudication. On this basis they declined to participate in the adjudication and did not serve a notice under clause 4.8.4.3.

It is common ground that the Scheme referred to in clause 7.2 is the Scheme for Construction Contracts (England and Wales) Regulations 1998 (1998/SI/649) of which Regulation 9.2 provides:

An adjudicator must resign where the dispute is the same or substantially the same as one which has previously been referred to adjudication, and a decision has been taken in that adjudication.

Mr Hough issued his decision (‘the Second Adjudication’) on 27 May 2014. He found that the dispute he was being asked to decide was not the same or substantially the same dispute as had been referred to Mr Calcroft. He found that Mr Calcroft had decided that no certificate had been issued in accordance with Clause 4.8.1 and that this decision was binding on both the parties and him. However, he also decided that the 1 April 2014 notice was an effective notice under Clause 4.8.4.1 and the Appellant’s refusal to make payment created a dispute which was not the same or substantially the same as the one previously referred to Mr Calcroft and decided by him.

On this basis, having noted that the Appellants had not given a counter notice under Clause 4.8.4.3, he decided that the Appellants were obliged by the terms of the Contract to pay £115,440.46 to the Respondent within 7 days, with interest of £817.70 up to the payment date and thereafter at a rate of £17.90 per day. The Appellants were also ordered to pay the Adjudicator’s fees of £1,944.

The sum was not paid, and on 11 June 2014 the Respondent began proceedings in the Manchester District Registry (TCC), and was granted permission to issue an application for Summary Judgment. The Appellants applied for an adjournment, coupled with an application to transfer the proceedings from Manchester to London, although without the requisite fee.

On 10 July 2014 Judge Raynor QC refused the application to adjourn, gave judgment in the Respondent’s favour in the sum of £118,500, with costs summarily assessed at £6,000, but stayed execution of the judgment until 8 August 2014, with a requirement that any application to set aside be issued by then.

On 31 July the Appellants applied to set aside the Order of 10 July and to transfer the hearing to London. On 14 October 2014, the Appellants’ application to set aside the 10 July Judgment was dismissed by Judge Raynor QC in a fully reasoned judgment, and they were ordered to pay costs, summarily assessed at £5,750.

It is from this judgment that the Appellants appeal with the limited leave of the Single Lord Justice.

Although a number of decisions were referred to by the parties the applicable principles are conveniently summarised by Coulson J in Benfield Construction Ltd v. Trudson (Hatton) Ltd [2008] EWHC 2333 (TCC) at [34], adopting the summary set out by Ramsay J in HG Construction Ltd v. Ashwell Homes (East Anglia) Ltd [2007] EWHC 144 (TCC) at [36].

(a)

The parties are bound by the decision of an adjudicator on a dispute or difference until it is finally determined by court or arbitration proceedings or by an agreement made subsequently by the parties.

(b)

The parties cannot seek a further decision by an adjudicator on a dispute or difference if that dispute or difference has already been the subject of a decision by an adjudicator.

(c)

The extent to which a decision or a dispute is binding will depend on an analysis of the terms, scope and extent of the dispute or difference referred to adjudication and the terms, scope and extent of the decision made by the adjudicator. In order to do this the approach has to be to ask whether the dispute or difference is the same or substantially the same as the relevant dispute or difference and whether the adjudicator has decided a dispute or difference which is the same or fundamentally the same as the relevant dispute or difference.

(e - sic) The approach must involve not only the same but also substantially the same dispute or difference. This is because disputes or differences encompass a wide range of factual and legal issues. If there had to be complete identity of factual and legal issues then the ability to readjudicate what was in substance the same dispute or difference would deprive clause [9.2] of its intended purpose.

(f)

Whether one dispute is substantially the same as another dispute is a question of fact and degree.

The reference to ‘fact and degree’ derives from the observations of Dyson LJ in Quietfield Limited v. Vascroft Construction Limited [2006] EWCA Civ 1737.

45.

Paragraph 9(2) provides that an adjudicator must resign where the dispute is the same or substantially the same as one which has previously been referred to adjudication and a decision has been taken in that adjudication. It must necessarily follow that the parties may not refer a dispute to adjudication in such circumstances.

46.

This is the mechanism that has been adopted to protect respondents from having to face the expense and trouble of successive adjudications on the same or substantially the same dispute. There is an analogy here, albeit an imperfect one, with the rules developed by the common law to prevent successive litigation over the same matter: see the discussion about Henderson v Henderson (1843) 3 Hare 100 abuse of process and cause of action and issue estoppel by Lord Bingham of Cornhill in Johnson v Gore Wood & Co (a firm) [2002] 2 AC 1, 30H-31G.

47.

Whether dispute A is substantially the same as dispute B is a question of fact and degree. If the contractor identifies the same Relevant Event in successive applications for extensions of time, but gives different particulars of its expected effects, the differences may or may not be sufficient to lead to the conclusion that the two disputes are not substantially the same. All the more so if the particulars of expected effects are the same, but the evidence by which the contractor seeks to prove them is different.

48.

Where the only difference between disputes arising from the rejection of two successive applications for an extension of time is that the later application makes good shortcomings of the earlier application, an adjudicator will usually have little difficulty in deciding that the two disputes are substantially the same.

Mr Sampson’s central submission was that Mr Hough was being asked to determine the same or substantially the same dispute as Mr Calcroft had been asked to determine. The same sum of money was in issue in both disputes and the only difference was that in the First Adjudication there had been no valid Clause 4.8.4.1 notice, while in the Second Adjudication the Respondent’s case was advanced on the basis of contractual notice under clause 4.8.4.1. In the words of Dyson LJ in the Quietfield case, the Respondent was, Mr Sampson argued, avowedly but impermissibly trying to ‘make good the shortcomings’ in the earlier application.

As was made clear from the recent decision of this Court in Matthew Harding (trading as M J Harding Contractors) v. Paice and Springhall [2015] EWCA Civ 1281, Jackson LJ at [57],

It is quite clear from the authorities that one does not look at the dispute or dispute referred to the first adjudicator in isolation. One must look at what the first adjudicator actually decided. Ultimately it is what the first adjudicator decided which determines how much or how little remains for consideration by the second adjudicator.

The terms of paragraph 9.2, the approach in the Quietfield case of both May LJ at [32] and Dyson LJ at [48], and that of Jackson LJ in the Harding case at [57], indicate that the starting point is the Adjudicator’s view of whether one dispute is the same or substantially the same. This has often been described (see for example in the Quietfield case at [47]) as being ‘a question of fact and degree’; and it is important that the Court gives due respect to the adjudicator’s decision, see for example, Carillion Construction Ltd v. Devonport Royal Dockyard Ltd [2005] EWCA Civ 1358, Chadwick LJ at [85].

In my view Mr Hough was both entitled and correct to conclude that he was not considering the same or substantially the same dispute as Mr Calcroft. He recognised that both parties were bound by the express finding in the First Adjudication that the ‘Final Certificate’ was ineffective and that the letter of 20 December 2013 did not constitute a valid notice under Clause 4.8.4.1. Mr Hough was being asked to decide whether a different notice served 4 months later had different consequences. Although both adjudications were dependent on the ineffectiveness of the ‘Final Certificate’ and claimed the same sum, the Respondent was not seeking the redetermination of any matter that had been decided by Mr Calcroft. The ‘Relevant Event’ was the Respondent’s Clause 4.8.4.1 notice of 1 April 2013. Self-evidently neither this notice nor the consequences which flowed from it (the entitlement to be paid if no counter notice were served) gave rise to disputes which had been referred to Mr Calcroft. The Respondent was not making good a shortcoming in the earlier letter; it was approaching its claim via a new and different route, one which relied on the letter of 1 April and thereby raised a different dispute.

As Judge Raynor QC put the matter in [68] of his judgment:

… what was decided in the First Adjudication was the ineffectiveness of the notice given in December 2013. That was not raised at all as an issue in the Second Adjudication.

The analysis might have been different if the Respondent had tried in some way to cure a defect in the earlier notice so as to rely on it, but that was not the position here. It was the new notice and only the new notice which founded the Respondent’s entitlement to be paid.

For these reasons, which are effectively the same as those given by Mr Hough and Judge Raynor QC, I would dismiss the appeal.

I agree.

I also agree.