Camillin Denny Architects Ltd v Adelaide Jones & Co Ltd

Camillin Denny Architects Ltd (“CDA”) were retained in early 2008 to provide architectural services in relation to an extensive refurbishment and extension project at a Grade one listed building at 10 Hertford Street, Mayfair, London (“the Premises”). CDA seeks to enforce the decision of an adjudicator, Chris Calcroft, issued on 26 June 2009, in which it was decided that the Defendant, Adelaide Jones and Company Ltd (“AJ”) should pay them £76,905.27, plus interest and compensation of £556.92 per day with interest continuing at the rate of £23.76 the day after 3 July 2009 until payment, £20,277.63 for CDA's costs and £11,946.37 plus VAT for the adjudicator's fees.

Issues arise as to whether or not there was a novation whereby AJ was replaced by another company, Euro Constructions and Building Ltd (“Euro Constructions”) thus rendering a decision by an adjudicator as between AJ and CDA unenforceable, whether in truth the contract was or became one between CDA and an Indonesian gentleman, Mr Lohia, and as to whether the adjudicator was biased amongst other things in relation to his decision about costs.

At all material times, the Premises were owned by Dorset Assets Ltd (“Dorset”) a company incorporated in the Bahamas. The official Land Registry entry indicates that this company acquired the Premises on 24 January 2008. I was told that this company was owned or controlled by Mr Lohia, although there is no evidence to this effect.

It is accepted, now, by both parties that CDA was employed by AJ contractually in February 2008. That contract was contained in or evidenced by CDA's letter dated 1 February 2008 to AJ and AJ's letter in response dated 4 February 2008. In the former letter, the Client was expressly identified as AJ; in the latter, AJ expressly say that the "contract for your appointment will be between" AJ and CDA. It was initially argued by Mr Zaiwalla that CDA acted as an agent for an undisclosed principal but he, orally, abandoned that argument; that was a proper concession for him to have made.

The services to be provided by CDA involved the provision of architectural services, including feasibility, design, tender and construction phases. It did not include contract administration or management of the project on site. The fee was to be £425,000 excluding VAT and disbursements but, if the total project cost increased by more than £200,000, that fee would be adjusted by reference to a percentage of 8% of the total project cost. AJ were to be the project managers for the development and, as they indicated in their letter of 4 February 2008, they were retained by Dorset.

There clearly was some discussion in the early stages about the possibility of a novation. For instance, in Mr Camillin’s e-mail dated 27 February 2008 he refers to a conversation with a Mr Anand who was associated with Mr Lohia:

“…he informed me that they are moving our appointment to another company-one of Mr Lohia’s companies. He will e-mail to Hazel the new contact details…”

At some stage, CDA started to invoice Euro Constructions. This was a company which was apparently not in existence at that time but which it was thought might be the vehicle by which the development was to be pursued. It was a company which apparently was to be registered in Singapore. On 21 July 2008 AJ wrote to CDA as follows:

“I have been forwarded your latest invoice dated 30 June 2008 by Mr Anand on 17 July 2008… made out to Euro Constructions and Buildings Ltd. Whilst I am writing to you formerly regarding the new contract arrangements I would like to clarify that all correspondence in relation to this property must be sent to Adelaide Jones in the first instance including applications for payment…”

This was responded to by Mr Camillin by e-mail on 21 July 2008 to this effect:

“Apologies for not sending the invoice direct to Adelaide Jones, we were confused by your previous letter to us requesting that our future invoices be sent to this new company, in fact I telephoned you and asked for the details of who to send our invoices to and you sent me the e-mail dated 7 July entitled ‘Address for invoices’ with the address of Euro Constructions attached… We will ensure that future invoices are also copied to Adelaide Jones…”

By letter dated 24 July 2008, AJ wrote to CDA as follows:

“I have now received confirmation from Dorset… that the new structure of the company has been formed. This will necessitate new contracts being entered into between yourself and Euro Constructions and Buildings Ltd of [Singapore]…

You will recall that I forwarded to you amendments to your contract suggested by the solicitor acting on behalf of Dorset… and I would be grateful if you could incorporate as many of the amendments within the new version of your contract (see attached). Furthermore, I would be grateful if you could insert the following clause into your contract either by way of a signed letter or within the main body of the text as follows:

“The liability and warranty for services will continue to be effective from 4^th February 2008"

Please be advised that payments for the remainder of your fees will be paid by Euro Constructions…You should issue your invoices made out to Euro Constructions …

The contract will need to be signed by Director of Euro Constructions… and he is currently in the UK at the moment and therefore if you can issue your contract as soon as possible it will then be possible to finalise the arrangement.

The date of the Agreement should be the same as the original agreement…”

Mr Nimba of AJ followed that up with e-mails on 29 July 2008 asking CDA if the contract had been agreed and how they were getting on "with the revised contract". Mr Camillin of CDA replied on 30 July 2008 that they would "update" their appointment and forward a copy of it. This exchange suggests that no agreement had been reached at least at this stage.

Mr Camillin then sent to Mr Anand on 30 July 2000 a letter "regarding the additional fees agreed with Mr Lohia for the Contract Administration and coordination aspects of the project." It seems that Mr Lohia was considering a disengagement from AJ so as to employ CDA to provide the contract administration and project management services. The attached letter was dated 1 February 2008 and was addressed to Euro Constructions in Singapore; the total fee was £130,000 higher than the contract with AJ. This letter purported "to confirm the additional fees agreed with the Client on this project in relation of the Contract Administration elements of the Construction phase and coordination with the Interior Designer for the interior finishes and fittings"; this reflected the wording of the original 1 February 2008 letter. It was said that "this additional fee does not affect our existing terms and conditions as set out in our appointment letter dated 1 February 2008".

On the following day, Mr Camillin sent to Mr Nimba of AJ the "amended appointment letter as discussed". However this letter also dated 1 February 2008, and addressed to Euro Constructions in Singapore, was, in substance, identical to the original letter actually sent by CDA to AJ on 1 February 2008. The fee was £425,000 as before and site management and contract administration was excluded.

By this time, CDA were, as the correspondence revealed, becoming very anxious and concerned that invoices already presented were not being honoured.

It seems clear that the proposed contractual re-arrangements had not been effected or finalised by this stage because Mr Anand e-mailed Mr Camillin on 5 September 2008 as follows:

“Euro Constructions contract is expected to be finalised next Friday though I am trying my level best to get it done before that. I would appreciate if you could hold the invoice till that time."

This e-mail was sent in response to an e-mail from Mr Camillin calling urgently for payment of outstanding fees.

There was then a meeting attended by Mr Lohia and Mr Anand and Mr Camillin on 12 September 2008 in which it is absolutely clear that discussions were still proceeding about fees and fee levels:

“1.

Mr Lohia asked CDA to review their fees for the completion of the project. MC responded by saying that it would be worth waiting until the tenders are returned and contractor appointed in order to enable the final construction figure to be reviewed against our appointment and incorporate any additional fee.

3.

Mr Lohia commented that the appointment identifies an 18 month period, he questioned whether the fees of the ongoing service would be pro rata the current fee. MC responded by saying that the continuation fee would be based on the current appointment which is based on an 8% of construction value fee.

8.

Mr Anand commented that they are still reviewing the contract administration element of the works, and could not confirm the revised appointment for CDA at this stage. The new company set up by Dorset Assets has not been completed and it is affecting the payment of consultant fees…”

It seems that further work was done by CDA and invoices were sent to Euro Constructions. It appears that no agreement was reached as to whether or not CDA should provide contract administration services. No contract was signed and there was (before or during the hearing) no evidence that Euro Constructions became incorporated or otherwise legally able to enter into contracts at any time. There came a time in February 2009 when AJ purportedly on behalf of Euro Constructions terminated the engagement of CDA; the letter by which this was done was apparently dated 17 February 2009 but has not been put before the Court.

At the very least, one can conclude from the history of the events as follows:

Following the termination of CDA's appointment, there followed some correspondence between the solicitors for CDA and AJ. Although little of the correspondence and documentation relating to the adjudication has been put before the Court, CDA gave Notice of Adjudication dated 23 April 2009 and, following an application by CDA to the RIBA, the nomination of Mr Calcroft as adjudicator was made. The total claim by CDA was for £131,161.13 inclusive of VAT, plus interest and costs. A Referral Notice, a Response, a Reply, a Rejoinder, a Response to Rejoinder, Additional submissions and submissions on costs were lodged by the parties. Evidence was given in written form.

There were also exchanges about the adjudicator's jurisdiction. On 5 May 2009, AJ’s solicitors wrote to the adjudicator reserving their position on jurisdiction. The basis of the jurisdictional challenge was then as it is now that there had been in effect a novation whereby Euro Constructions was substituted for AJ in August 2008, which novation was backdated to 1 February 2008. It was therefore said that the adjudicator had no jurisdiction to resolve a dispute between AJ and CDA because by mutual agreement AJ had been replaced by Euro Constructions. It was made tolerably clear that AJ was not agreeing that the adjudicator had jurisdiction to decide whether he had jurisdiction. Confusingly, in the same letter, they wrote as follows:

“Our client has no objection to you deciding this issue and they believe it is necessary that you should do so first before further time and costs are incurred. However, you will appreciate that it will be quite wrong for our client to give you jurisdiction to do so by agreement when the natural forum the deciding this issue would be the law courts.

In the circumstances, we ask that you decide the issue first as a preliminary issue, without prejudice to our client's position and that our client will participate in the proceedings before you under protest…”

Mr Camillin submitted a witness statement in the adjudication which was dated 24 April 2009; I infer that this was served at the latest with the Referral Notice. That statement specifically addresses the issue as to whether or not there was some type of novation; the adjudicator was also provided with relevant documentation on the topic, as appears from his decision. This was because that issue had arisen and was in effect part of the dispute between AJ and CDA.

The Adjudicator issued his decision in two stages, the second stage being one in which he invited submissions on costs. In that context, AJ's solicitors submitted detailed submissions under cover of their letter to the adjudicator of 23 June 2009. There was no hearing. Material parts of his decision of 26 June 2009 are as follows:

The decision of the adjudicator not having been honoured, CDA issued proceedings on 8 July 2009 to enforce it. That was supported by a statement of Mr Stevenson of CDA's solicitors.

Mr Justice Ramsey gave directions on 9 July 2009 ordering AJ to serve and file its evidence by 23 July 2009 with CDA to serve responsive evidence by 30 July 2009. Mr Zaiwalla provided a witness statement which amongst other points made the following main points:

That witness statement was responded to on 30 July 2009 by a statement from Mr Camillin, who unequivocally stated that, although a substitution of Euro Constructions was mooted, he never received any written response to the 2008 communications from Euro Constructions or anyone acting on its behalf. He says that no novation was entered into and he attaches more documentation than had been exhibited to Mr Zaiwalla’s statement.

The hearing took place on 5 August 2009. The skeleton was provided by CDA's Counsel but none was provided by Mr Zaiwalla. AJ provided on the morning of the hearing a signed witness statement from Mr Nimba of AJ, a draft having been faxed the previous evening. Although there was no good excuse put forward by Mr Zaiwalla (it having been said merely that Mr Nimba had been busy), I allowed the statement to be put in. Mr Nimba made a number of points:

Mr Zaiwalla at the hearing added an alternative argument to the novation with Euro. He said that everyone knew that it was really Mr Lohia who was the client and he should be treated as having been the party with which in truth CDA contracted or novated.

At the conclusion of the oral hearing, I conveyed to those present my decision which was in favour of CDA, indicating that I would give my reasoned judgement over the following two days. Notwithstanding this, the court later received a fax from Mr Zaiwalla's firm which suggests with some supporting documentation that an entity called “Euro Singapore” is a finance/marketing office of “Euro Construction Building Ltd” of the British Virgin Islands. A partly illegible share certificate of a company called Cailyn Services Ltd issued to a Mr Aggarwal was provided; Cailyn is said to have changed its name to Euro Construction Building Ltd and Mr Aggarwal is said to be an employee of Mr Lohia. None of this is supported by a witness statement.

It is well established that these courts will not enforce an adjudicator's decision which he or she had no jurisdiction to make. Similarly, where the issue as to whether or not there was jurisdiction is one which, based on credible evidence, can not be determined summarily, the Court will order a trial of the issue. However, a number of authorities have indicated that courts should be cautious in their consideration of jurisdictional challenges particularly where they may be challenges which on analysis do not go to jurisdiction at all. For instance I raised with Mr Zaiwalla the case of Carillion Construction Ltd v Devonport Royal Dockyard Ltd [2006] BLR 15, in which the Court of Appeal (Sir Anthony Clark MR and Lords Justice Chadwick and Moore-Bick) stated the following:

In Air Design (Kent) Ltd v Deerglen (Jersey) Ltd [2008] EWHC 3047 TCC, the Court had to consider the circumstances where the substance of the dispute overlaps with the possible jurisdictional challenge. That was a case in which there were arguably four contracts between the parties, all of which were related to the same project. The issue arose as to whether or not the adjudicator had jurisdiction to resolve disputes arising in one adjudication but in relation to the four contracts; there was an issue which was partly factual and partly legal as to whether the three subsequent agreements were simply variations of the first. The Court said at Paragraphs 22 to 24:

“22.

However, there are two further factors which effectively override considerations as to whether or not there were one, two, three or four contracts between the parties which establish that the Adjudicator was acting within his proper jurisdiction:

(a)

The substantive decision-making process upon which the Adjudicator had to embark in relation to the disputed claim put before him necessarily involved a consideration of whether there was more than one contract. It was thus within his jurisdiction to decide in effect that there was one contract, albeit one that may have been varied by agreement.

(b)

It was thus a part of his jurisdiction to decide whether or not and if so to what extent the Basebuild Contract had been varied by the CPA and BMS Arrangements and indeed whether there were yet further variations ordered to the Basebuild Contract. There may be cases, and this is clearly one, where substance and jurisdiction overlap so that it is within the Adjudicator's jurisdiction to decide as matters within his or her substantive jurisdiction whether there have been in effect variations to the contract pursuant to which he or she has properly been appointed Adjudicator. It cannot then in those circumstances be a valid challenge to his or her jurisdiction that upon analysis he or she may be wrong as a matter of fact or law in determining that such variations were made to the originating contract as opposed to a series of later legally unconnected contracts.

(c)

The Supplementary Agreement is one which recognises in a way which has contractual effect that the parties were treating their contractual relationship as being in one "main contract". The total of the three sums agreed originally to be due with regard to the Basebuild, CPA and BMS Works are said to be a "contract sum"; the variations are being treated as a single variation list to be addressed; maintenance and defects liability obligations are being treated as arising in effect as a unified obligation. It is this one "main contract" which is effectively being varied. Thus, whatever the arrangement or arrangements contractually were before, as from the Supplementary Agreement the parties clearly agreed to treat their contractual relationship as stemming from one contract.

23.

I have therefore formed the view that the Adjudicator did have jurisdiction to rule on all the matters which he did decide in his Decision. Whether he was right or wrong to find or make the assumption that there was effectively one contract which was varied and whether he was wrong as a matter of fact or law in any other part of his decision is immaterial. Any such errors do not mean that he does not have jurisdiction. Even if I was wrong about that conclusion, then my analysis that effectively the CPA and BMS Arrangements and the Supplementary Agreement were simply variations of the Basebuild Contract would apply.

24.

Additionally, the adjudication clause is drawn widely and relates to "a dispute or difference [arising] under this Sub-Contract". In the Fiona Trust case [2007] UKHL 40, the House of Lords adopted a pragmatic and commercial approach to construing arbitration clauses. Lord Hoffmann said at Paragraph 13:

"In my opinion the construction of an arbitration clause should start from the assumption that the parties, as rational businessmen, are likely to have intended any dispute arising out of the relationship into which they have entered or purported to enter to be decided by the same tribunal. The clause should be construed in accordance with this presumption unless the language makes it clear that certain questions were intended to be excluded from the arbitrator's jurisdiction."

Whilst it could be argued that, if there were entirely separate contracts between the same parties which had obviously different dispute resolution clauses, there should be separate dispute resolution processes, in the current case all the disputes could properly be said to have arisen under the Basebuild Contract and the commercial parties could properly be said to have intended to have agreed to the adjudicator appointed under that contract to have jurisdiction to determine the value of sums due under that contract and any variations to that contract.”

That was a case in which there could be no doubt that the adjudicator was properly appointed under the first contract and there could be no argument that, in that capacity, he had jurisdiction to decide whether later "contracts" were simply variations of the first contract or stood on their own entirely separately as contracts in their own right. I am not convinced that this case is authority for any proposition other than that there may be cases in which adjudicators properly appointed have jurisdiction to resolve jurisdictional issues if and to the extent coincidentally those issues are part of the substantive dispute referred to adjudication.

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 there is no or a real prospect of establishing that there was novation.

If there was no novation whereby Euro Constructions was substituted for AJ, the contract of 1 February 2008 between CDA and AJ, which it is now accepted existed, would subsist and the adjudicator would necessarily have jurisdiction to decide in effect that there was no such novation if the point was raised by AJ. Mr Zaiwalla at one stage argued that, even if there was no novation, the contract between AJ and CDA had lapsed and there was no operative adjudication clause. However, he conceded, properly in my view, that, even if that contract had come to an end, the dispute resolution procedures (in this case, adjudication and arbitration) would survive to enable disputes to be resolved.

This was a case in which there was a contractual arrangement for adjudication, albeit that this was a construction contract within the meaning of Section 104 (1) and (2) of the Housing Grants, Construction and Regeneration Act 1996 (“HGCRA”). The HGCRA, in the absence of suitable contractual arrangements for adjudication, would otherwise have imposed statutory rights on the parties to refer disputes to adjudication. It is not been suggested that the adjudication arrangements set out in the RIBA Standard Form of Agreement for the Appointment of an Architect (expressly incorporated into the contract between CDA and AJ) was anything other than compliant with the HGCRA. It is necessarily implicit in the adjudication requirements of that Standard Form (Clause 9.2) that adjudication has to be between the two parties to the contract.

It follows from this that where there has been a clear unqualified and fully retrospective novation by which a new party is substituted for an original party to a contract, it is the new party which can itself seek adjudication and it is against the new party that the other party must seek adjudication or, later, arbitration.

It is therefore necessary to consider whether there is any realistic prospect on the evidence placed before the court of AJ establishing that there had been a clear unqualified and fully retrospective novation whereby it had been replaced by Euro Constructions or by Mr Lohia. I received on the morning of 6 August 2009 by fax an application for leave formally to introduce the evidence and sent on 5 August 2009 after the hearing closed. That application is opposed. I am not prepared to give leave because the application is made in effect after the “12th hour” and is therefore very late; it is made after the Court has communicated its decision; in any event, it is not verified by any witness statement. I will however consider AJ's position even if I had allowed this late application.

I have formed the view that on the evidence placed before the court there is no realistic prospect of AJ establishing that there was an effective novation. My reasons are as follows:

It is a surprising fact that, given the defence mounted in the hearing, an offer was made, albeit in the context of costs protection and albeit at very late stage, to pay CDA £100,000 plus VAT. This certainly does not assist the merits of AJ's position, to the extent that merits are important on any jurisdictional challenge.

Accordingly, it has been established that AJ, on the evidence placed before the court (whether or not taking into account the evidence, such as it was, submitted after the hearing), does not have a realistic prospect of establishing its jurisdictional challenge on the facts.

It is unnecessary to set out in any detail what the law and practice is in this context on the enforcement of adjudication decisions. Adjudicators are required in the context of an adjudication procedure either agreed by the parties or laid down by the HGCRA to act fairly and in accordance with the rules of natural justice. Where there are material failures on the part of adjudicators to act in that way, these courts will not enforce their decisions. Again, the courts are constrained to see that challenges on this basis are not "dressed up" as challenges as to fairness when in reality they are simply complaints that the relevant adjudicator got the facts or law wrong. It has been laid down in cases such as Bouygues UK Ltd v Dahl-Jensen UK Ltd [2000] EWCA Civ 507 that, provided that the adjudicator has asked himself or herself the right question, the Court will not interfere to prevent enforcement of the decision even if the answer is factually or legally wrong.

The complaint of bias or failure to apply the rules of natural justice is simply not established:

CDA should be entitled to interest at the same rate ordered by the adjudicator until payment in relation to the invoiced sums which he found to be due; a daily rate of £23.76 was ordered and should be paid until payment is made.

So far as the sum awarded and due in respect of CDA's legal costs and expenses, £20,277.63, interest is allowable as a matter of discretion at a rate of 4% per annum as from 3 July 2009. Since CDA paid all of the adjudicator's fees, interest should be paid at the rate of 4% per annum from 3 July 2009 until payment on the sum of £13,738.32 being that part of the adjudicator's fees which should have been paid by AJ but was paid by CDA.

There can be no doubt that CDA has been wholly successful in its application for summary judgement. Subject to the issue as to whether or not an effective without prejudice save as to costs offer was made prior to the hearing by AJ, there can be no doubt that CDA would be entitled to its costs.

In respect of the invoice claims, CDA was found to be due and was entitled to judgement in the sums of £7272.31 and £11,092.21 (both including VAT), £50,905 plus VAT (totally £58,540.75), plus interest of £556.92. In addition, CDA was entitled to its own costs in the sum of £20,277.63 and £11,946.37 plus VAT (totalling £13,738.32). The total due exclusive of interest since 3 July 2009 is therefore £111,478.14. Interest on the invoiced sums from 1 July 2009 would add 32 days times £23.76, namely £760.32. Discretionary interest on the balance would add 32 days at £3.72, namely £109.04. The total due excluding costs is therefore £112,347.50.

CDA’s solicitors in a letter dated 24 July 2009 offered on a without prejudice save as to costs basis to settle the case in effect for £104,715 subject to agreement by 28 July 2009 with payment to be on 30 July 2009. That was not accepted. AJ’s solicitors offered to settle for £75,000 plus VAT on 25 July 2009. That was not accepted. AJ then offered on 2 August 2009 to settle for £75,000 payable within seven days by Euro Constructions and £20,000 in four monthly instalments of £5000 a month by AJ. This was not expressed to be "plus VAT". On 3 August 2009, CDA’s solicitors offered to settle for £118,500 inclusive of VAT and costs in full and final settlement of all claims relating to the project. On 3 August 2009, AJ offered to settle for £95,000 plus VAT (equivalent to £109,250) with the same instalments as before. Later that afternoon, AJ offered to settle for £100,000 plus VAT (equivalent to £115,000), but with £25,000 of that plus VAT payable in monthly instalments of £5000. That was not accepted.

The only real issue to consider in this context is whether CDA has "beaten" that final offer. On the basis of this judgement, CDA was entitled to just over £112,000, including interest up to 3 August 2009 plus at the very least its reasonable costs on a standard basis. In the ordinary course of events, CDA would be entitled to be paid on the judgement within 14 days. CDA's costs were said to total £11,066 and even on a standard basis reduced by, say, one third that would produce a further entitlement to some £7800.

In all the circumstances I do not consider that AJ's latest offer was sufficient. The effect of my judgement is that CDA would have been entitled, say up to 4 August 2009, to between £118,000 and £120,000, payable within 14 days by AJ. AJ’s latest offers involved payment by an offshore company which may or may not have any assets. It is surprising that towards the end of July 2009 AJ did not accept the settlement all inclusive of some £104,000. Given that the offer which AJ eventually made exceeded CDA’s figure, it is perhaps less surprising that CDA did not accept AJ’s later figure because it is clear that by then costs had gone up.

Balancing all these factors up, I am of the view that, although the Claimant has "beaten" AJ's latest offer, and although the effect of this judgement is to produce a sum greater than that which they were prepared to settle for in the last week in July 2009, justice is best done by awarding the Claimant simply its costs on a standard basis. CDA has only beaten the latest offer by a few thousand pounds and had been prepared to settle for less than AJ’s latest offer. Counsel for CDA accepted that, in the light of various challenges to the amounts, a reduction of approximately one third would not be challenged. Accordingly, against the Statement of Costs, I now fix the sum by way of summary assessment at £8000.

I see no reason why the sums due under this judgement should not be paid within 14 days. It is clear from the offers which have recently been made that there is a substantial amount of money available. No evidence has been put before the court relating to any inability to pay.

There will be judgement for CDA in the sums indicated; the interest should be adjusted to 11 August 2009 when I will formally hand down judgement.