Lee v Chartered Properties (Building) Ltd

This claim arises out of an adjudicator’s decision dated 16 November 2009 in favour of the Defendant, Chartered Properties (Building) Ltd (“Chartered”) against Lorraine Lee. By that decision Ms Lee was to pay £79,929.30 plus interest within seven days. Instead of seeking to enforce the decision in the usual way, Chartered went down the route on 8 January 2010 of serving a Statutory Demand on her with a view to making her bankrupt. She applied on 25 January 2010 to have that Demand set aside on the basis that she was disputing the validity of the decision. On 7 April 2010, Ms Lee issued proceedings in the TCC to that effect. Ms Lee has throughout represented herself and, allowing for the fact that she is not, apparently, legally qualified, she has presented her arguments in writing and orally in a coherent, comprehensible and articulate manner. She makes a number of challenges to the validity of the decision, the most relevant being related to whether a settlement of the various claims and cross claims was achieved prior to the adjudication reference, whether the adjudicator was properly appointed and whether the adjudicator produced his decision within the requisite time period.

By a contract dated 28 January 2008, Ms Lee engaged Chartered to carry out refurbishment works on the basement and ground floors at 3, Lyndhurst Road, London NW3. The Contract was in the standard JC T Minor Works Building Contract Form (2005) and the Architect was named as David Mercer of DVM Architects. The Contact was £239,662.45 and the works were due to be carried out between 21 January and 1 August 2008. Article 6 provided for adjudication. The adjudication clause provides that if a dispute or difference arises and a party wishes to refer it to adjudication, the statutory Scheme for Construction Contracts should apply and that the RIBA should be the nominating body for the appointment of any adjudicator.

The works duly commenced in January 2008 and were certified to be practically complete on 17 September 2008. The Architect issued his Interim Certificate No. 8 in November 2008 which released retention, certifying payment of just over £6000. Ms Lee provided a notice of proposed deductions which led to her declining to pay the certified sum. On 21 January 2009 Chartered submitted its final account. The total net sum claimed after allowing for sums previously paid was just over £79,000 plus VAT. Ms Lee has said in her Witness statement of 25 May 2010 that she discussed the final account with the Architect on the 3 February 2009 and found it to contain numerous errors and duplicate demands for payment and was generally inflated. She then left it to the Architect to discuss matters with Chartered.

Although the detailed history of these discussions is not before the Court, it appears that the Architect’s and Chartered’s discussions got to a stage at which Chartered was prepared to drop its claim provided that Ms Lee dropped her cross claims against it. The Architect relayed this to Ms Lee in early May 2009 who e-mailed him on 7 May 2009 as follows:

“Paul [Ms Lee’s husband] told me that you had a conversation with Ian Reeves the other day.

If he will put in writing to you that Chartered… will not pursue any further payments for work undertaken at 3 Lyndhurst Road, I will write to you confirming that we will not action any claim against his company for monies we believe are due to us.”

This e-mail was copied on that day to Chartered by the Architect. The reply from Mr Reeves of Chartered was dated 8 May 2009:

“I am happy with this based on the following. That both letters are sent to your office and that you effect the exchange and witness that the letters have been exchanged and agreed by both parties.”

Although little if any communication took place for 2 to 3 months after this, so far as I can ascertain, and, although the letters referred to in these e-mails were not written or exchanged, Chartered purported to refer the dispute between the parties to adjudication. The dispute was said to have been caused by the failure of the Architect to issue written instructions, payment certificates and extensions of time and failing to ascertain the value of the final account. Ms Lee’s immediate reaction by e-mail on the same day was to refer to Chartered’s e-mail of 8 May 2009 to the effect that neither party would pursue the other for any alleged outstanding monies. Mr Reeves wrote to Ms Lee to the effect that he had chased the Architect to organise an exchange of letters at his office but that he was ignored. Ms Lee replied to the effect that as far as she was concerned the parties "had an agreement in place, confirmed in writing by both parties”; the letters were still to be exchanged but that was a formality. She asked why, if there was no response from the Architect, Mr Reeves had not contacted her directly. Mr Reeves replied on 21 August 2009 that he had asked Mr Mercer to prepare a letter which both parties could sign but that he had been ignored. He said that he would be prepared to consider a settlement if his costs in the sum of £20,000 were paid. Mr Mercer later wrote to Ms Lee on 8 September 2009 in the following terms:

“I would like to respond to the allegations raised by Chartered Properties in their referral notice. I would first however like to record my surprise and disappointment that Chartered should have precipitated Adjudication action when I firmly believed that both parties had agreed to a settlement where there was no financial implication on either side. I have received no correspondence from Chartered to the effect that they were dissatisfied with the agreement, which both parties had actually agreed to by way of e-mail. I naturally assumed that as agreement in principle had been reached, a formal exchange of letters was not a top priority for either side.”

An adjudicator was appointed by the RICS but he resigned when he realised that it was the RIBA who was supposed to have appointed. Chartered served a second notice dated 18 September 2009 referring the dispute to adjudication and Mr Kevin Slegg but this adjudication was abortive because Chartered failed to serve the Referral Notice on time.

On 30 September 2009, Chartered sent to Ms Lee a third notice that it was intending to refer the dispute to adjudication. On the same day, Chartered delivered to the RIBA an application for an adjudicator to be nominated. There is an issue between the parties (to which I will return below) as to whether that application was delivered before the third notice was sent to Ms Lee. Mr Slegg was again nominated by the RIBA. Ms Lee e-mailed Mr Slegg on 5 October 2009 as follows:

“There are a number of areas of concern I wish to raise prior to the adjudication process starting in earnest as these, I believe, do have an implication as to whether or not the process should continue.

In the Notice of Adjudication dated 30th September 2009, the Referring Party has failed to state when the dispute arose. I understand from the published guidelines on this matter, this document must adhere to certain mandatory statements and this Notice fails to do so.

Secondly, the Notice of Adjudication dated 30th September 2009, lists 8 items which the Referring Party alleges are in dispute. In their Notice of Adjudication dated 17th August 2009, the exact number of items and exactly the same alleged disputes were listed.

Notwithstanding the fact that the Referring Party aborted the first Adjudication process, the matter had gone far enough the matters to be looked at closely by the Adjudicator, including the service of both the Referral Notice and Response from me and a number of directions given by the Adjudicator in relation to certain matters. It is therefore my contention that the 8 items listed in this current Adjudication have been subject of a previous Adjudication.

Furthermore, of the 8 items listed as allegedly being in dispute, none are and the Notice of Adjudication fails to illustrate where any dispute has arisen.

On the basis of the above facts, I must inform you that for the 3rd time, the Referring Party has failed to follow the procedures laid down for the process of Adjudication to take place and I therefore respectfully suggest that the matter cannot proceed.

I await your reply and in the meantime reserve my position as to jurisdiction in this matter.”

The Adjudicator’s decision sets out at least parts of the Referral. In her Reply to Referral Notice, Ms Lee referred to the settlement agreement which she said had taken place in early May 2009. She then addressed the merits of the claim made against her in some detail concluding that, allowing for various sums said to be due to her, the sum of over £32,000 was due to her. It needs to be borne in mind that, although Ms Lee had some limited legal advice, said to have cost about £500, she conducted the proceedings before the adjudicator herself.

The adjudicator e-mailed the parties on 3 November 2009:

“Under the current timetable I am due to reach my Decision by Monday 9 November 2009. However, I would be grateful if the Parties would agree to extend this until Friday 13 2009.”

Ms Lee responded on the same day confirming her agreement to an extension to Friday 13th November 2009. I understand that Chartered agreed also. However on 12 November 2009, he wrote again by e-mail to the parties in the following terms:

“As you know I am due to reach my Decision in respect of the above dispute tomorrow.

I confirm that I anticipate finalising my Decision by mid-day tomorrow in accordance with the current timetable.

However, there will still be items that require typing and then allowing for reading-over of the Decision I consider it will not be in a format to be e-mailed over to the Parties until possibly Monday.

If the Parties have any objection to this they should say so by return.”

However at 2.48 pm on 13 November 2009, the Adjudicator sent to the parties an e-mail confirming:

“…that I have now reached my Decision on the matters before me.

As stated yesterday this is currently being typed and I anticipate it will be issued on Monday.”

The Adjudicator dispatched and issued his decision fairly late in the afternoon on 16 November 2009 but immediately above his signature the following words appear:

“Made the 13 November 2009 under my hand.”

He found that that sums of £39,265.09 (for the final account), £6600 (VAT) and £2093.18 (interest) were due less £1730.64 to Chartered, plus £5508 costs and that these sums were due from Ms Lee, together with £21,246.75 in respect of 95% of his fees. None of these sums have been paid by Ms Lee.

Chartered and its legal advisers were clearly frustrated following what they considered were tactical attempts by Ms Lee to avoid the impact of the Statutory Demands served on her by flag-posting her intention to challenge the Adjudicator’s decision in the TCC and later, after she had issued her proceedings in the TCC, when they thought that she was delaying matters. I have no reason to believe that she was delaying matters and indeed she has responded fairly and promptly to directions issued by the Court to bring this matter on for hearing.

Following the service of her reasonably lucid Particulars of Claim in late May 2010, Chartered served its Defence on 3 June 2010. This had been preceded by a Counterclaim in effect seeking to enforce the Adjudicator’s decision. Each party has submitted a comprehensive witness statement which I will not set out in any detail. Essentially, Ms Lee seeks to argue that the decision is unenforceable and invalid for a number of reasons:

Both parties have proceeded to seek relief on a summary basis, having regard to witness statements and other documentary evidence put before the Court. CPR Part 24 makes it clear that a summary judgement may be given against the party if it has no real prospect of success on its claim or defence as the case may be and if there is no other compelling reason why the case or issue in question should be disposed of at a trial.

This issue is fact dependent. The Scheme for Construction Contracts, expressly incorporated into the adjudication clause in this case, provides by Clause 1 for the referring party to give its notice of adjudication in writing to every other party to the contract. Clause 2 then states:

“Following the giving of a notice and subject to any agreement between the parties to the dispute as to who shall act as adjudicator-

…(b) if no person is named in the contract [as adjudicator], and the contract provides for a specified nominating body to select the person, the referring party shall request the nominating body named in the contract to select the person to act as adjudicator…”

It is common ground that these provisions need to be followed to create a validly nominated adjudicator. Therefore, simply from the wording, what has to happen is:

It is common ground between the parties on the facts that the notice of adjudication was sent and communicated by Chartered to Ms Lee at 3.41 pm on Wednesday 30 September 2009, that the request for nomination of an adjudicator was received by the RIBA on that day at some time and that the RIBA office closed at 5 pm. There is and remains a factual issue between the parties as to whether Chartered "jumped the gun" and lodged its request to the RIBA for a nomination before 3:40 pm:

Ms Lee points to the discrepancies between these various accounts by Mr Reeves. I have formed the view that I cannot summarily resolve the real factual doubt which exists:

There is now well established authority about, in broad terms, how and when a dispute may be said to have arisen. The law relating to how and when a dispute arises has was considered in this Court and the Court of Appeal in Amec Civil Engineering Ltd –v- Secretary of State for Transport. At first instance, [2004] EWHC 2339 (TCC), Jackson J derived seven propositions from the authorities on this topic:

I have no doubt that a dispute had arisen by me time that Chartered served its notice of adjudication on 30 September 2009:

Essentially, Ms Lee argues that, as the Scheme talks about referring to adjudication only "the dispute", only one dispute can be referred to adjudication, in the absence of express agreement between the parties (and she is right about that) and that on analysis more than one dispute was referred to and adjudicated upon by the adjudicator. In my view, this argument is based on a misconception by her. Although the notice of adjudication dated 30 September 2009 talks about the dispute having “been caused by the failure of the Architect to” issue written instructions, certificates and extension of time and to ascertain the final account value and the failure of Ms Lee to give full possession of the site and pay certified monies and VAT, the underlying dispute is obviously the disputed final account; it matters not, at least in the context of this case, what the causes of the dispute really were. The "bottom line" was that Ms Lee through her Architect was arguing that the final account was worth some £63,000 less than what Chartered was claiming it was worth and that any balance due was subject to cross claims to which she believed that she was entitled. The fact that within the overall dispute there are numerous issues does not mean that there is more than one dispute. Parliament can not have intended in the Housing Grants, Construction and Regeneration Act 1996 and in the statutory Scheme that the word “dispute” should be construed anything other than reasonably broadly; if that was not the case, and if every sub-issue was to be treated as a separate dispute, that would be a totally unrealistic approach in the context of construction works. One can take an example where there is a dispute about the cost of a variation; that can and often does break down into three or four issues such as what is the basis for valuation (e.g. price related or cost plus), what was the quantity of extra work done and what is the appropriate rate for the work. It would be frankly ridiculous if Parliament had intended that there should be three adjudications to deal with all the different elements. Here, the dispute was about the final account and whether any appropriate cross claims could be legitimately set against that final account and it was that dispute, which was in reality a single dispute, which was to be referred to adjudication pursuant to the notice of 30 September 2009.

There can not be a referable dispute in relation to issues or claims in respect of which the parties have settled or compromised as they are no longer capable of being properly disputed. I have formed a clear view that the arguments and evidence raised by the parties point strongly to there being a triable issue as to whether the parties have settled their respective claims and cross claims. My reasons are as follows:

In essence, Ms Lee argues that, because the Adjudicator failed adequately to consider her jurisdictional challenges, he was in breach of the rules of natural justice. I disagree because he had no authority or jurisdiction to decide his own jurisdiction. At most, he had the right to investigate his own jurisdiction and was not obliged to consider or even rule upon jurisdictional challenges.

She also complains that, because the adjudication was, she says, an "ambush", in effect the adjudicator should have stood down. In my judgement, this is not a justified complaint. There clearly was a significant and long standing dispute about the final account and indeed about deductions from the final account which Ms Lee wished to make. She could always call upon her Architect to prepare and assist her in the preparation of her defence; indeed, as appears from a four page letter to her dated 8 September 2009, he did provide her with detailed advice about the complaints which had been made about him. I am satisfied that it can hardly be said that the third attempt on the part of Chartered over a period of six weeks to have the same dispute referred to adjudication gave rise to any “ambush” on Ms Lee. It is noteworthy and of some credit to her that she appears from her written submissions to the Adjudicator to have prepared a comprehensible and comprehensive defence which led to a substantial reduction in the value of the final account. The Court must bear in mind that Parliament has dictated that, if and as soon as there is a recognisable and crystallised dispute, either party has the right to refer it to adjudication. It will be an exceptional case in those circumstances for it to be established that an adjudicator, who then proceeds in good faith and within the statutory or agreed time constraints to listen to and address the contentions and evidence of both parties, can be criticised or have his or her decision impugned on the grounds of a failure to observe the rules of natural justice. I do not say that it can never happen but I do not see that this case get anywhere near establishing that such a breach occurred.

This ground of challenge raises the most interesting issues and is one which can be resolved on the evidence before the Court. The Scheme provides:

“19.

(1) The adjudicator shall reach his decision not later than - 

(a)

twenty eight day days after the referral notice mentioned in paragraph 7(1), or

(b)

forty two days after the date of the referral notice if the referring party so consents, or

(c)

such period exceeding twenty eight days after the referral notice as the parties to the dispute may, after the giving of that notice, agree.

(2)

Where the adjudicator fails, for any reason, to reach his decision in accordance with paragraph (1)

(a)

any of the parties to the dispute may serve a fresh notice under paragraph 1 and shall request an adjudicator to act in accordance with paragraphs 2 to 7; and

(b) if requested by the new adjudicator and insofar as it is reasonably practicable, the parties shall supply him with copies of all documents which they had made available to the previous adjudicator.

(3)

As soon as possible after he has reached a decision, the adjudicator shall deliver a copy of that decision to each of the parties to the contract.”

The following observations can be made:

The evidence unequivocally establishes that the Adjudicator had reached his decision no later than 2.48 pm on Friday, 13 November 2009; his e-mail of that date establishes that and the Decision itself expressly confirms that the decision was made on or by 13 November 2009. The Decision itself identifies that what he was doing on 16 November 2009 was issuing or delivering it on that day, which is what he did by e-mail, timed at 4.57 pm.

There is a substantial amount of authority about the timing of adjudicators’ decisions. Those up to that December 2006 were summarised in the judgement of HHJ Coulson QC (as he then was) in Cubitt Buildings & Interiors Ltd v Fleetglade Ltd [2006] EWHC 3413, starting at Paragraph 69. He quoted with apparent approval the dictum of HHJ Toulmin CMG QC in Bloor Construction (UK) Ltd v Bowmer & Kirkland (London) Ltd [2000] EWHC 764 (TCC), addressing a contractual scheme of adjudication which had comparable requirements to the statutory scheme, who had said albeit obiter:

“In his second witness statement, dated 28th March, 2000 (three days before the hearing), Mr Bloor said that, at a meeting between the parties and the Adjudicator on 4th February, 2000, he understood the Adjudicator to be saying that he would reach his decision on 9th February, 2000 and would communicate it to the parties on 11th February, 2000. If this case had been persisted in, I should have concluded that the word "forthwith" in clause 41A.5.3 meant what it said and required that the process of communicating the decision should have started immediately after the decision had been reached; i.e. that the decision has two elements: first, reaching the decision and, secondly, sending that decision to the parties. Clearly, if the decision was sent only by post, it would not be received immediately. In this case it was sent by fax on 11th February, 2000. In the absence of consent to an extension of time by the party referring the dispute (Bloor), the decision was rendered out of time. This issue and its consequences have not been decided by a court, but the Scheme lays down in paragraph 19(2) that, where the Adjudicator fails for any reason to reach his decision, any party to the dispute may serve a fresh notice for a new Adjudicator to act, i.e. a new Adjudicator must be appointed (in the absence of agreement between the parties) and the adjudication starts again.”

This was quoted with approval by Lord Wheatley in the Scottish case of St Andrews Bay Development Ltd v HBG Management Ltd [2003] Scot CS 103.

HHJ Coulson QC in Cubitt reviewed a decision by HHJ Seymour QC in the TCC in Simons Construction Ltd v Aardvark Developments Ltd [2004] 1 BLR 117 which was criticised in a Scottish Inner House decision, Ritchie Brothers (PWC) Ltd v David Philp (Commercials) Ltd (24 March 2005), and said in the Cubitt judgment at Paragraphs 75 and 76:

“75.

For what it is worth, I expressed the view in Hart (which I now repeat) that the decision in Ritchie seemed to me to be right. Adjudicators do not have the jurisdiction to grant themselves extensions of time without the express consent of both parties. If their time management is so poor that they fail to provide a decision in the relevant period and they have not sought an extension, their decision may well be a nullity, as in Ritchie. And the significance of the adjudicator's default in such circumstances should not be underestimated. For example, as demonstrated by the terms of the contract in this case, an adjudicator's failure to comply with a timetable might irredeemably deprive one party from its right to challenge a Final Certificate. I regard certainty in adjudication as vital. I respectfully agree with what Lord Nimmo Smith said in his concurring judgment in Ritchie:

"If certainty is an objective, it is not achieved by leaving the parties in doubt as to where they stand after the expiry of the 28 day period".

76.

Accordingly, on the basis of these reported decisions I derive the following principles.

(a)

There is a two-stage process involved in an adjudicator's decision, which is expressly identified in clause 41A. Stage 1 is the completion of the decision. Stage 2 is the communication of that decision to the parties, which must be done forthwith (see Bloor and Barnes & Elliott). Thus I reject Mr Steynor's argument that a decision is not a decision until it is communicated: that seems to me to be contrary to clause 41A, and also contrary to the authorities cited above.

(b)

An adjudicator is bound to reach his decision within 28 days or any agreed extended date (see Barnes & Elliott and Ritchie).

(c)

A decision which is not reached within 28 days or any agreed extended date is probably a nullity (see Ritchie).

(d)

A decision which is reached within the 28 days or an agreed extended period, but which is not communicated until after the expiry of that period will be valid, provided always that it can be shown that the decision was communicated forthwith: see Bloor and Barnes & Elliott.”

I respectfully agree with these observations.

HHJ Thornton QC considered these cases again in Mott MacDonald Ltd v London & Regional Properties Ltd [2007] EWHC 1055 (TCC) in which the decision dated 13 December 2006 was sent by post and received by the parties on 14 December 2006 and, amongst others, and issue was taken as to whether there had been delivery within time. The judge said:

“80.

4.4 Issue 9 - Was a copy of the decision delivered to each of the parties as soon as it was reached?

81.

The decision was not delivered to each of the parties as soon as it was reached. There were three reasons why the decision was not delivered to the parties on the day it was reached on Friday 8 December 2006 but was instead received on Thursday 14 December 2006. Firstly, the adjudicator imposed a pre-condition that the decision would not be released until MM paid his fees; secondly, the adjudicator implemented that condition and did not release the decision for 5 days whilst awaiting payment; and thirdly, the adjudicator failed to send the decision by fax, despite his direction that all communications in the adjudication should be sent in this way, but only sent it by first class post so that it arrived one day after it had been sent. In the context of the scheme rules, "delivery to each of the parties" means getting the decision into their hands rather than dispatching it to them.

There can be no doubt that the parties did agree that the Adjudicator had an extension to reach his Decision until and including Friday 13 November 2009. That is confirmed in the body of the decision itself as well as by his e-mail to the parties of 12 November 2009. What he was indicating was that by reason of typing and for proof reading purposes it would not be in a format to be e-mailed until possibly the following Monday, 16 November 2009. The extension up to 13 November 2009 was agreed expressly with regard to the reaching of the Decision and, indeed, as expressly confirmed by the Adjudicator, he had reached his Decision by or on that date. The Adjudicator was not asking for an extension of time for the reaching of his Decision but in effect he was asking for some additional time to issue and deliver his Decision. Given that the Scheme required him to deliver a copy of the decision as soon as possible after reaching his Decision, he was asking for relief from that obligation.

Therefore, the only issue is whether in all the circumstances it can be said that he delivered a copy of that Decision "as soon as possible after" he reached it, that is, no later than 2.48 p.m. on 13 November 2009. Whilst Mr Reeves said to the adjudicator that he had no objection, there was no agreement or even any expressed non-objection by Ms Lee and, indeed, there is no evidence that she actually saw the e-mail on that day. There is simply no evidence as to why some three days or 74 hours were required by the Adjudicator to deliver his Decision. Mr Slegg is an Associate Director of the nationally and internationally known firm of quantity surveyors Cyril Sweett and clearly has extensive experience in dispute resolution in general and in adjudication in particular. It is a not unreasonable assumption to make that within such a large firm, prompt typing could have been arranged and Mr Slegg could have set aside time for proofreading with a view to communicating the decision within a very much shorter period than three days, even though the weekend was looming. There seems to be no obvious good reason why with some effort and application the decision could not have been communicated on 13 November; there is no obvious explanation as to why virtually the whole of the working day of 16 November was required before the Decision was sent out. The Decision itself suggests in its use of the words "made the 13 November 2009 under my hand" that he had actually drafted the decision by that time. If the Decision (which would be unlikely and somewhat unusual) had been drafted in long hand, there is no good reason why it could not have been faxed or scanned and e-mailed over to the parties. The large bulk of the communication between the parties had been by e-mail which, of course, is an instantaneous method of communication.

I am satisfied that a copy of the Decision was not delivered by Mr Slegg as soon as possible after he had reached his Decision. It therefore follows that the Decision is unenforceable.

Although Counsel for Chartered did not orally make a great issue about it, she argues in her written submissions in dealing with the "more than one dispute" challenge that Ms Lee did not raise an objection or jurisdictional challenge on the basis that more than one dispute was referred nor did she make a general reservation of jurisdiction during the Adjudication; therefore she says, apparently only in this context, that Ms Lee "consented and/or gave ad-hoc jurisdiction to the Adjudicator to determine the matters contained in the Referral and/or she waived or is now estopped from denying the same". She does not make the same point about the other jurisdictional challenges and it is strictly speaking unnecessary to deal with this argument as relating to the "more than one dispute" challenge as I have rejected the challenge on substantive grounds. Having said that, I bear in mind that Ms Lee was acting in person before the adjudicator (subject to some relatively minimal behind-the-scenes legal support); her e-mail of 5 October 2009 (set out above) does in the last sentence reserve her position generally about jurisdiction, albeit that she also raises three specific points earlier in the e-mail.

The effect of the above is that Ms Lee has established that the Decision of the Adjudicator made on 13 November 2009 and issued on 16 November 2009 is unenforceable by reason of its late delivery. She has also established triable issues, in so far as it might be necessary otherwise, firstly, in relation to whether the appointment of the adjudicator was valid and in particular whether the request to the RIBA preceded the giving of the notice of adjudication to Ms Lee, and secondly, in relation to whether the parties had settled their claims and cross-claims in May 2009.