Royal Courts of Justice
Strand, London, WC2A 2LL
Before :
Mr Justice Akenhead
Between :
ESTOR LIMITED | Claimant |
- and - | |
MULTIFIT (UK) LIMITED | Defendant |
Alexander Hickey (instructed byFenwick Elliott) for the Claimant
Paul Stafford (instructed by Blakemores) for the Defendant
Hearing dates: 7 August 2009
Judgment
Mr Justice Akenhead :
Introduction
In these proceedings, there are competing applications between the parties arising out of an adjudicator's decision made on 1 July 2009. The issues which arise all relate to whether or not the adjudicator, Mr Slegg, had jurisdiction to do what he did. The primary issue relates to who the parties to the relevant contract were.
The factual background
From the evidence put before the Court, Estor Ltd (“Estor”) was the holding company for what has been called the Ginger Group, which is a group of companies which operate hair dressing and beauty treatment salons. Mr Keith Warner effectively owns and runs Estor and the other Ginger companies. The group currently owns or franchises 10 salons in the United Kingdom and abroad. In the past, he has set up new companies for new ventures. Thus it is that he set up Ginger Westfield Ltd ("Ginger Westfield") for the purposes of setting up shop in the Westfield White City complex in London. The premises that were acquired required substantial fitting out works.
By a contract made in late September 2008, a company called Hub Design Ltd ("Hub") was employed to do these fitting out works. The price was £129,500 plus VAT and a contract ran into some seven pages but it was in a relatively simple form. The contract was signed by Mr Warner "of the Ginger Group" and the front page of the contract identifies "The Ginger Group" in effect as the employer.
There is no doubt that Mr Warner was anxious to ensure that the fitting out works were completed in the last week in October 2008 so that there could be a formal opening at that time. Accordingly work started in late September 2008. Hub subcontracted a sizeable part but not all of the works to Multifit (UK) Ltd ("Multifit"). Multifit’s written quotation to Hub for the works was in the sum of £82,635. That quotation was based on drawings received but specifically excluded works to the resin floor and kitchen areas, which were to be done by other contractors.
Matters did not proceed smoothly. At a meeting held on 17 October 2008, attended by Mr Warner, four other Ginger Company employees, four Hub representatives and Messrs Khan and Singh of Multifit, Mr Warner outlined what he thought was wrong and indicated that he had lost all faith in Hub. Hub offered to leave the job; at that stage, as indicated in Mr Warner's statement in the adjudication, Messrs Khan and Singh indicated that they would be prepared to "finish the job for us". It is common ground that no agreement was reached at this meeting.
Multifit was never provided with a copy of the Ginger Group’s contract with Hub. Over the following few days, there was some communication between Hub and Mr Warner about the state of the accounts between them and some talk of a possible novation but Multifit was not made aware of this.
On 20 October 2008, Multifit e-mailed to Mr Warner its quotation:
“Can you please [review] this and send me [an] order confirmation by return e-mail. I have also attached our company account form and my first quote to hub design.
I have also given Alan a cheque for £7850 plus vat (Total £9223.75p inc) for his payment for the manufacturing.
We still owe him £7050 plus Vat just to make sure that he can complete on time (originally not in our contract)
Summary of Works:
Main contract Value £82,635 plus Vat
Extras:
1. Plying floor areas £2660.00
2. Main shop £1200.00
3. Fire alarm £7000.00
4. Safety Beacon on back fire doors £500.00
5. Armour colour to visual wall areas only £5200.00
6. Plumbing costs to form changes and fit extra back wash and additional chemical pump £1265.00
7. Extra shot fitting costs due to changes in existing fire lobby £1450.00
8. Extra cost to move location of the fire alarm panel £250.00
9. Total costs of the bling ceiling feature £14,900.00 (excluding payment made by hub design
10. Specialist fittings required to the bling feature supplied by multifit £96.00
Total cost £117,156+ VAT
Balance paid so far from Hub design to Multifit UK Ltd £46,545.00 + Vat
Total remaining £70,611.00 plus VAT
Items Not allowed for:
• payment of Air conditioning.
• cost of the resin flooring.
• Cost of armour colour if applied on all wall areas.
• Any final connection charges for any services supplying unit 2025
• Supplying Chelsea Artisan specialist glass."
There was then a meeting between Mr Warner and the Multifit representatives on either 20, 21 or 22 October 2008 (the date probably does not matter). There had clearly been some concern as to the creditworthiness of the Ginger Group company. Mr Warner was asked and agreed to have Estor’s bankers provide a credit reference. Although the form provided by Multifit is headed "Application for Credit Facilities", it is clear that the purpose of it was to enable Multifit to obtain a credit reference. The form identifies the VAT and company registration numbers of Estor. There are two arguably relevant entries:
“I/We consent to My/Our Bankers providing a Credit Reference on me/us on an ongoing basis
I/We hereby apply for credit facilities to be granted to me/us and confirmed that we will comply with your Trading Terms and agreed to be bound by your standard terms and conditions of sale”
It was accepted by Multifit’s Counsel that the second of these two entries was immaterial as both parties knew that Mr Warner did not want credit facilities.
There is some issue between the parties as to what was said or understood at this meeting as to who Multifit’s contract was to be with. Messrs Khan and Singh say that they had done a credit check on Ginger Group Ltd and that it was adverse. This was, they say, raised with Mr Warner who rang his accountant and passed on his advice that the contract and credit facilities had to go through Estor. Later, they found that Estor had acceptable credit. Mr Warner however says that at the meeting Multifit wanted some comfort that he could pay for the work and he said that he told them that the creditworthiness of the Ginger Group as a whole would be clear from a search of Estor; he said that it was never the intention that a contract would be entered into between Estor and Multifit. He said also that he made it clear that he needed them to complete all of the remaining works. There was no discussion about the resin flooring.
By email of 23 October 2008, Mr Warner replied to Multifit’s email of 20 October 2008 (see above):
“…that’s fine can you carry the work out from the [revised] quote. thank you. if have any problems just call me”
There was no hint or indication in that email as to which company was accepting Multifit’s quote.
Thereafter, Multifit carried out the work or at least that which it was employed to do, by the end of October 2008.
Multifit was paid money for the work which it did. It remains somewhat unclear as to which company paid Multifit. In November 2008, Multifit prepared a Statement of Account addressed to “The Ginger Group Ltd” which identified 5 payments from “Estor/The Ginger Grp”. Estor’s Bank statements identify Chaps transfers which are ambiguously represented as being to “Ginger Westfield…Multifit…” which could mean that the payments went direct to Multifit or through Westfield. A later bank statement of Westfield showed a payment being made to Multifit by Westfield in December 2008.
There was an issue as to defects in particular about the resin flooring which had been done by one of Hub’s subcontractors, CT Flooring, but Mr Warner believed that Multifit had assumed responsibility for this work. Multifit had paid this subcontractor but, it was said, simply at Mr Warner’s direction.
On 3 April 2009, Multifit produced a Notice of Adjudication addressed to Estor and on 9 April 2009 purported to serve its Referral to Adjudication. Mr Slegg was duly appointed adjudicator but, due to doubts about whether the Notice of Adjudication was served, Mr Slegg resigned.
The Adjudication
On 12 May 2009, Multifit served on Estor its Notice of Adjudication in which it claimed £37,624.05 inclusive of VAT. Mr Slegg was again appointed as adjudicator. Multifit’s Referral to Adjudication was dated 21 May 2009. The issues were broadly:
Was the contract between Multifit and Estor, Ginger Group Ltd and Westfield? If so, was it in writing for the purposes of the Housing Grants and Regeneration Act 1996 (“HGCRA”)?
Was Multifit responsible for the resin flooring?
Were there defects in the resin flooring and elsewhere for which Multifit was liable?
Costs.
The first issue was obviously a jurisdictional issue. It is accepted that Estor reserved its position about the adjudicator’s jurisdiction.
In his decision dated 1 July 2009, the adjudicator decided as follows:
There was a contract between Multifit and Estor; in this context, he provided some detailed reasoning. He was impressed by the fact that the credit check was agreed to be done on Estor and he believed that no explanation had been offered as to why someone should “obtain a credit check on another and then contract with a different party that it knew had a poor credit rating”. He formed the view that the contract was evidenced by the emails of 20 and 23 October 2009, Multifit’s quotation of 23 September 2008, the credit reference form signed by Mr Warner and Multifit’s Terms and Conditions referred to in that form.
There was no novation of the contract, by which Multifit was substituted for Hub.
As for the resin floor, he found on a balance of probabilities that CT Flooring was a sub-contractor of Multifit, that the contract between Multifit and Estor originally did not include the work but somehow thereafter Multifit became responsible for it and that Multifit was responsible to Estor for it.
None of the defects were proved on a balance of probability.
£37,624 inclusive of VAT was due to Multifit.
So far as costs were concerned, he decided that Estor should pay £6,240 for Multifit’s costs. In respect of his fees and expenses, he had an invoiced sum of £22,907.25, which he ordered Multifit to pay; of that sum, he ordered Estor to pay £17,760 exclusive of VAT. He had presented a bill after the abortive adjudication on 15 May 2009 in the sum of £4,347inclusive of VAT for time spent. He wrote to the parties saying that there was an “overlap” between his work on the abortive adjudication and the later one and in effect said, that where there was an overlap he proposed to take it into account. In effect, what he was saying was that, where there was work which he had done on the abortive adjudication which did not have to be duplicated second time round, he would take it into account but, where the time on the abortive adjudication was wasted, Multifit would have to bear it.
These proceedings
Estor did not pay out on the decision but issued its own proceedings seeking declarations that there was no contract in writing between Estor and Multifit and that accordingly Mr Slegg’s decision is unenforceable. Pleadings were exchanged.
There are two applications before me, the first being Estor’s application for the declarations claimed and the second being Multifit’s for summary judgement on its Counterclaim for the enforcement of the adjudicator’s decision.
Estor make five points:
There was no construction contract between Estor and Multifit.
There was no construction contract in writing as required under Section 107 of the HGCRA.
The adjudicator decided that there was a different contract from that identified by Multifit in the Notice of Adjudication or Referral Notice.
The adjudicator decided that Multifit’s terms and conditions were applicable and there were unwritten terms in respect of the resin floor.
The adjudicator had no jurisdiction to decide that Estor should pay the lion’s share of the costs or at least any part of his fee for the abortive adjudication.
This was opposed and challenged by Multifit which argues that there is simply no realistic defence to its application for summary judgement.
The law
Whilst the Court is constrained to consider astutely complaints that an adjudicator had no jurisdiction, the Court will need to be satisfied that it is only if Estor “advanced a properly arguable jurisdictional objection with a realistic prospect of succeeding upon it that [it] could hope to resist the summary enforcement of an adjudicator’s award against” it (see Simon Brown LJ as he then was in Thomas Frederic’s (Construction) Ltd [2004] BLR 23 at Paragraph 32). It is common in the TCC that, if the jurisdictional point raised is simply a matter of law, for instance of contractual or statutory construction, the Court will be able to deal with the matter summarily even if there are proper arguments about jurisdiction.
The position is different, however, if the jurisdictional challenge is dependent upon fact and evidence. CPR Part 24.2 permits the Court to give summary judgement against the defendant if it considers that the defendant "has no real prospect of successfully defending the claim or issue". The question for consideration in the current case is therefore, since the issues are largely factual, whether, on the evidence before the court, it is satisfied that Estor has no or a realistic prospect of establishing that the contract was not between Estor and Multifit and that there were oral terms agreed which effectively prevent any contract between Estor and Multifit being a construction contract in writing.
It has been established, since RJT Consulting Engineers Ltd v DM Engineering (Northern Ireland) Ltd [2002] EWCA Civ 270, that all the express terms of a construction contract must be in writing to qualify under the HGCRA. In Allen Wilson Joinery Ltd v Privetgrange Construction Ltd [2008] EWHC 2802 TCC, it was held that a construction contract did not cease to qualify simply because there were implied terms.
However, on a summary application before the Court, there must at least be some credible evidence that there actually was some material oral agreement. Put another way, there must be some evidence before the Court that the representatives of the parties to the contract agreed some oral term or terms which is or are not in or not evidenced in writing to set up a valid argument that the contract as a whole is not a construction contract in writing under the HGCRA.
Discussion
In reviewing the evidence before the Court, I am conscious that, although there are in these proceedings written statements from solicitors on each side which do not as such verify their respective clients’ witness statements submitted in the adjudication, each party has proceeded before me on the basis that I can treat their clients’ statements as evidence in these proceedings.
I have formed the view that there is, just, what can be described as a realistic prospect of Estor establishing that it was not the company which entered into the contract with Multifit. On the one hand, there is evidence from Mr Warner which effectively denies that he agreed that Estor was to be the contracting party; it is supported by somewhat ambiguous evidence that payments to Estor were made by Westfield albeit funded by Estor. Against that, there is the credit reference which strongly suggests that Estor was intended to be the contracting party or at least possibly some kind of guarantor, coupled with the evidence of Messrs Khan and Singh that it was expressly agreed that Estor should be the contracting party; the payment regime was not necessarily inconsistent with that, with the funds being channelled through Westfield (if that is what happened). If the agreement was with Estor, it is highly probable that it was evidenced in writing by the signed credit reference application.
This issue can only be resolved by oral evidence. Essentially, I can not determine whose recollection is correct or who is telling the truth. Mr Warner’s evidence about why he agreed to a credit reference for Estor is not so incredible that it can be dismissed summarily, even though one is not at all surprised that the adjudicator (apparently) without hearing oral evidence reached the view that he did.
As for the other matters relied upon by Estor as seeking to show that there are triable issues as to whether there were matters agreed orally, there simply is no evidence at all from Mr Warner that he or anyone else agreed anything else orally with Messrs Singh and Khan. I expressly asked Estor’s Counsel to point out to me any evidence that the resin floor was the subject of any oral agreement and he could not do so. I do not blame the adjudicator in effect for inferring, without oral evidence, that there must have been some later agreement although I do not consider that the inference, objectively and necessarily, arises. He was not wrong to conclude that the actual agreement reached by the exchange of emails did not include for the resin floor; indeed, the quote expressly excludes it at least from the pricing and there in nothing in the quote itself to infer that Multifit was taking on the responsibility for the resin flooring.
It was argued that the quote of 20 October 2008 gave very little detail and there must have been more agreed. However, Mr Warner does not condescend to give evidence about that. That is perhaps not surprising as he was desperate after Hub’s demise for Multifit to get on with the work. It is more likely than not that he was happy for Multifit, as being Hub’s former sub-contractor for the large bulk of the work, to finish off what at least Multifit had undertaken as sub-contractor to do plus some specific extras, albeit now in a main contractor capacity. It may be thought slightly odd that there were no discussions about specifications but, given the timing of Hub’s demise, the major involvement of Multifit in any event up to that time and the fact that Multifit’s quote to Hub was based on drawings, it is not surprising that Mr Warner simply trusted Multifit to do what they were employed to do. If no specifications were orally agreed, implied terms as to suitability, merchantability and reasonable care could be deployed.
It was argued that there was oral evidence that at the meeting of 20 October 2008 Mr Warner said that he wanted Multifit to complete Hub’s work. It is accepted that no agreement was reached at that meeting; the contract is primarily contained in or evidenced by the emails of 20 and 23 October 2008 together with attachments to the first of these: whatever works were agreed to be done, they are to be construed from those documents albeit that they may be construed in the factual matrix which existed. The factual matrix does not have to be evidenced in writing.
It was said initially that there was or must have been a novation which was not evidenced in writing. That argument was, properly, abandoned, by Estor through its Counsel. There is no evidence that any novation was achieved, let alone orally.
As for the next two points argued by Estor, namely that the adjudicator decided that there was a different contract from that identified by Multifit in the Notice of Adjudication or Referral Notice and that Multifit’s terms and conditions were applicable, these do not assist Estor. It is correct to say that the Notice of Adjudication and Referral Notice do assert that the contract was set out in the emails of 20 and 23 October 2008 and the credit reference of 22 October 2008 signed by Mr Warner. The adjudicator purported to decide that the contract was evidenced by those three documents, the quotation dated 23 September 2008 from Multifit to Hub sent with the first of those emails and Multifit’s Terms and Conditions as referred to in the credit reference form.
Subject to the issue as to whether the contract terms were in writing, there is no issue that the contract was otherwise a construction contract under the HGCRA, albeit a simple one. The contract was at least contained in the emails in question and, subject to the issue as to writing, that contract gave to the adjudicator jurisdiction. If he “got it wrong” in his decision that other documents also evidenced the contract, that does not undermine his jurisdiction. In any event, the adjudicator did not obviously “get it wrong” in finding that the earlier Multifit/Hub quotation was incorporated as it was expressly referred to in and sent with the email of 20 October 2008. As is now accepted by Multifit’s Counsel, in all probability the Multifit Terms and Conditions were probably not incorporated, even if the credit reference form was, because the terms and conditions under that form were only to be incorporated if credit facilities were being sought by Estor and they were not. The fact that the adjudicator simply was wrong is neither here nor there. The point becomes even more irrelevant in circumstances where those terms and conditions are not placed before the Court; consequently it can not even be demonstrated that any or any material terms were added.
Provided that the adjudicator had jurisdiction under a written construction contract, it does not affect his jurisdiction if, within the accepted jurisdiction, he or she decides that the undoubted construction contract contained more terms than those referred to in the Adjudication or Referral Notices. Accordingly, these points were unjustified.
That therefore leaves an arguable issue on who the contract was with. I cannot decide that issue on a procedural hearing such as this particularly where the only relevant material is the adjudication statements of the parties and exhibited documentation. In logic, if the construction contract was between Multifit and a company other than Estor, the adjudicator would not have jurisdiction to decide issues between Multifit and Estor. If however his view that the contract was with Estor was right, he had jurisdiction. There would be a good argument that the identity of Estor was evidenced in writing for the purposes of Section 107 of the HGCRA by the credit reference application form signed by Mr Warner as Estor. Even if the credit reference was not a contract document or one which evidenced the contract, that would not matter because extrinsic oral evidence would be admissible to resolve any ambiguity in the written contractual documentation about who the contract was with. Section 107 does not impact on those types of case, in the same way as the factual matrix, which a tribunal may need to be looked at, does not need to be evidenced in writing.
Counsel for Multifit argued on the basis of Lord Justice Ward’s observation in Assicurazione Generali SpA v Arab Insurance Group [2003] 1 WLR 577 that particular weight should be given to the adjudicator’s factual findings as to what the contract was. The Assicurazione Generali is of no real assistance by analogy or otherwise. It laid down how the Court of Appeal should approach the factual findings of lower courts. The TCC does not usually review the factual findings of adjudicators. However, where there is an issue as to the adjudicator’s jurisdiction to give a decision, his or her views on the jurisdictional issue are no more than of interest, albeit depending on that view it may be a persuasive one. It would be otherwise if the parties had given the adjudicator jurisdiction to decide the jurisdictional issue, which is not the case here. The fact that the TCC is constrained to be cautious in considering jurisdictional challenges in adjudication enforcements does not overcome the test for summary judgement: is there a properly arguable jurisdictional objection with a realistic prospect of succeeding upon it?
The Court on any application does have a discretionary power under the CPR (as under the old Rules of the Supreme Court) to impose conditions on granting leave to defend on an application for summary judgement. Where, as here, the defendant to such an application (Estor) establishes enough to show a realistic prospect of establishing its defence on a relevant aspect of the case, leave to defend on that aspect should be given but if, as here, the Court considers that the defence is at the weaker end of the scale, it can and often should impose a condition on the leave to defend that the defending party should pay money into court.
That is the course which is appropriate here. The total claim is £61,624.05 and an appropriate amount to require Estor to pay into court is £35,000. I select that figure because at over 50% it reflects the relative scepticism on the available evidence which I feel about the strength of Estor’s case on the issue of with whom the contract was and the fact that based on the documents and written evidence before the adjudicator his conclusion was not implausible in the absence of cross examination.
The only remaining issue relates to whether the adjudicator’s apparent inclusion in the award of his fees to be paid by Estor some of his fee for the earlier abortive adjudication was in excess of jurisdiction and if so does that render the whole decision unenforceable or merely that part of the decision which is in excess of jurisdiction. I do not consider that the issue arises:
There is no disagreement between the parties that the adjudicator had jurisdiction to decide which party should pay his fees and in what proportions.
Arithmetically, he has ordered Multifit to pay the whole of his bill of £22,907.25. Presumably and predictably he knew that Estor would not pay initially; of this, he ordered Estor to pay to Multifit £17,760, which excluded VAT. Thus, Multifit had to pay a net £5,147.25 of his bill itself. The total bill was broken down as to £19,215 plus £2882.25 VAT. Therefore, in fact he required Multifit to be responsible for £1455 net of VAT of his bill although in his decision he says that Multifit should bear only £1365 plus VAT. Thus, he appears in one sense to have put down to Estor’s account £2,325 of his account for the abortive adjudication (£3,780-£1,455), which at his rate of £210 per hour equates to about 11 hours.
It seems clear that what the adjudicator did was to assess what part of his bill was abortive and charge Multifit with that. He decided that some time spent on the abortive adjudication should be capable of being the subject of his order against Estor because that time would otherwise have had to have been spent again and in the ordinary course of events that was fair. Put another way, he was saying that 11 hours’ worth of his time on the abortive adjudication was hours worked which he did not have to do a second time round but which he would have had to do for the purposes of the second adjudication.
This is not an issue of jurisdiction at all. The adjudicator had a discretion under the jurisdiction which he had (subject to the issue of who the contract was with). He exercised it and allowed within the ambit of fairness a reasonable amount to be borne by the losing party. The losing party loses no more than it would have done if the abortive adjudication had not taken place. There can be no challenge about the amount of hours worked so far as this enforcement is concerned; that can be taken up with the adjudicator.
Even if I was wrong, the adjudicator’s decision would still be enforceable save in respect of the identifiable part of his decision upon which on that premise he did not have jurisdiction, namely £2,325; he would simply have included a clearly identifiable element on which he did not have jurisdiction. It is no different from a decision in which two sums are awarded to a claimant and on one of them the adjudicator had no jurisdiction. The Court will usually enforce the part of the decision in respect of which he had jurisdiction. I do not in this regard consider that my observations in Cantillon v Urvasco [2008] EWHC 282 TCC (Paragraph 63) were wrong or need distinguishing: here, if the adjudicator had no jurisdiction over the fees for the abortive adjudication, it could be said that the dispute about that fee was a separate dispute, the decision upon which was severable and separable from the rest of the decision.
Decision
It follows from the above that there is leave to defend to Estor, upon Multifit’s application for summary judgement on its Counterclaim for the enforcement of the adjudicator’s decision, only on the issue as to whether the contract was between Estor and Multifit. That will be on terms that £35,000 is paid into court by no later than 28 August 2009; if it is not paid, there will be judgement for Multifit as counterclaimed. Costs are to be in the cause. Directions for a quick trial will be given to seek to have the matter resolved in October 2009.