Forest Heath District Council v ISG Jackson Ltd

This is a claim made under CPR Part 8 in which the Claimant (“the Council”) seeks a declaration against the Defendant (“Jackson”) so as to obtain a final determination of an issue which has previously been determined by an Adjudicator.

By a Notice of Adjudication dated 29 April 2009 Jackson referred a dispute concerned with extension of time to adjudication. That dispute arose out of a contract between the Council and Jackson for the construction of a community sports centre, including two pools, at Newmarket Upper School in Suffolk.

Jackson set out in the Referral, at issue 2, its claims for delays to the Pool Works and appended at Tab 11 a delay claim in respect of Birdcage Scaffold Delays for which it sought an extension of time of 29 weeks.

The Adjudicator produced a decision dated 22 July 2009 (as amended on 27 July 2009) in which he determined that the net delay to the Pool Hall and likely delay to the Date for Completion was 24 weeks and 3 days. He said at paragraph 158:

“I am persuaded that the change to a site painting philosophy for the pool hall steelwork resulted in the requirement for a Birdcage Scaffold in the pool hall to carry out the protective paint finish.

In addition, I am persuaded that the root cause of this change in philosophy was the late finalisation of the steelwork design.

In my view the delay caused by the requirement for the Birdcage Scaffold is an Employer responsible event, and as such is a Relevant Event under the Contract”.

The Council commenced Part 8 proceedings on 18 December 2009 in which they now seek a declaration in the following terms:

“ that the decision to paint the pool hall steelwork on site rather than off site was taken by the Defendant in October 2006 and was not taken as a result of the late finalisation of the steelwork design.”

When the proceedings were served on Jackson, their solicitors, Prettys, wrote on 5 January 2010 to say that there were substantial factual issues and so Part 8 proceedings were inappropriate for the claim. Jackson contended that the Court should not and could not make the declaration sought.

The evidence which was submitted for the hearing of the Part 8 Claim consisted of a witness statement from Christopher Houldsworth, a partner in William Saunders Partnership LLP, the Architect on the project, on behalf of the Council; witness statements from James Whitworth Jackson’s Site Manager for the Project and from Richard Mason, Jackson’s Project Manager for design for the Project from March 2007, on behalf of Jackson and witness statements in reply from Matthew Newton, a Senior Technician Engineer with WSP UK Limited (“WSP”) the consulting engineers for the project and from Stephen Adkins who has experience in the construction industry and was employed to assist the Council in resolving the dispute, on behalf of the Council. Finally a further witness statement was produced by Mr Mason but Jackson did not, in the event, rely upon it.

On 21 March 2007 the Council and Jackson entered into a formal agreement for the construction of the community sports centre (“the Contract”). The Contract was in the JCT Standard Form of Building Contract (1998 Local Authority with Quantities Edition). The Pricing Schedule for the Contract included Provisional Sums for the works, together with Preliminaries and sums for Dayworks. The tender for the Contract was the subject of a two stage process. Under the Contract the date for Possession was 28 February 2006 and the date for Completion was 19 June 2007.

During design team meetings in 2005 there was a discussion about the design of the steel frame for the Pool Hall. At a meeting on 6 December 2005 the consulting engineer, WSP, proposed a site applied three-coat paint finish to the steel beams over the Pool Hall. Jackson expressed a preference for the beams to be pre-finished. At the end of the meeting there was an action for Jackson to discuss the implications of using pre-finished steelwork with subcontractors and ascertain any impact on delivery times.

At a meeting in 19 December 2005 WSP were noted as issuing steelwork drawings to Jackson at that meeting, for procurement purposes. It was also noted that in relation to the pre-finished/site painted steelwork WSP had no fixed views on the matter, as the paint specification remained the same. Jackson were to discuss pre-finishing with fabricators.

By January 2006 Jackson were highlighting the urgent need for authority to place orders for steelwork and they noted that a steelwork order needed to be placed by 3 February 2006 for a 28 February 2006 date for start on site.

A specification for civil and structural works, dated 31 January 2006, was produced by WSP. It included at paragraphs 640 and 640(A) a specification for painting the steelwork in swimming pool areas on the basis that there was either to be a three-coat system (paragraph 640) or a shop applied system (paragraph 640(A)).

There was then a hiatus on the site when asbestos and contamination was discovered there which caused a substantial delay to the works, assessed by the Adjudicator at 26.6 weeks. A revised specification for civil and structural works, dated 17 July 2006, was produced by WSP. The relevant paint specification at paragraphs 640 and 640(A) was unchanged. On 3 August 2006 Jackson issued an Information Required Schedule which set out, in relation to the steel frame, that the date for final design for the sub-contract order was 1 August 2006 so that works could commence on site on 25 October 2006 for gridlines 1 to 7 and 16 February 2007 for gridlines 7 to 15, the pool area. The schedule indicated that the “Date Received” for the information was 1 August 2006 which, with a 12 week period for steel, led to the start date of 25 October 2006.

Jackson selected Four Bay Structures Limited (“FBS”) as the steelwork sub-contractor. On 20 September 2006 there was a site progress meeting. Paragraph 6.4 of the notes of the meeting state that Jackson said that, due to the delay to start on site, FBS had issued a letter requesting approval to purchase all steelwork at that time to remove the likely increase in steel costs in the future. The Council are noted as saying that, provided insurances were in place and purchase of steelwork verified, they would be satisfied with this arrangement in principle and Jackson were to progress, with an action date of 18 October 2006. In paragraph 7.1 of the notes of that meeting WSP are noted as stating that secondary steelwork drawings were issued earlier in September 2006 and were currently under review with the architects. It is about this time that Jackson say that the decision was taken to change to site painting from pre-finished steelwork.

On 5 October 2006 Jackson sent WSP a letter from FBS dated 26 September 2006 in which FBS proposed a paint specification based on the use of Leigh Paints. At that stage Jackson said that it was FBS’ intention to use the paint for gridlines 1 to 7 and then only as an undercoat on gridlines 7 to 15, the steel being painted by another contractor in the pool area.

On 6 October 2006 FBS wrote to Jackson to say:

“1.

The original steel frame scheme was drawn and issued for approval on 3^rd August 2006.

2.

Comments regarding this issue were not received from WSP until 27^th September 2006, which we are now in the process of looking at and subsequent changes are being actioned as necessary.

Further details of the paint specification were provided by FBS and on 17 October 2006 WSP revised specification clauses 640 and 640(A). On 24 October 2006 FBS confirmed an instruction to proceed with the paint specification contained in a letter from FBS of 13 October 2006.

On 18 October 2006 at a site meeting it is stated that FBS still believed that they would still meet the original completion date (paragraph 4.3) and at paragraph 6.1 it is stated: “[WSP] have still not received a revised drawing following comments on [FBS] drawings. [Jackson] to chase [FBS].”

Jackson proceeded to carry out the painting of the steelwork in situ and in order to do so erected a Birdcage Scaffold in the Pool Hall. In the referral they claimed 29 weeks for delays associated with the Birdcage Scaffold and relied on clause 25.4.5, compliance with Architect’s Instructions.

In these proceedings Miss Rachel Ansell, who appears for the Council, submits that, on the above facts, which she says are not in dispute, the only question for the court is whether the decision made by Jackson to paint the steelwork after erection on site was made because of the provision of late design information. She submits that it was not. She says that:

She submits that the decision to apply the top coat on site had nothing to do with the provision of late design information and there is no documentation to show this. Rather, she contends that Jackson re-assessed the risks of installing pre-finished steelwork and decided that, rather than “touching up” the damage which might be caused to a pre-finished topcoat, they would apply the topcoat after erection of the steelwork was complete. She refers to a subsequent email sent by Mathew Newton on 21 August 2007 in which he refers to a conversation with Jackson personnel in which they confirmed that this was the reason.

She submits that the Council is entitled to the declaration sought. She says that the decision to paint the Pool Hall steelwork was, on the facts set out by Jackson, made in about September 2006 and was not taken because of late finalisation of the steelwork design.

She submits that the factual analysis shows that this is an appropriate matter for Part 8 proceedings because the Council seeks the court’s decision on a question which is unlikely to involve a substantial dispute of fact. She says that the extension of time granted by the Adjudicator and the consequential financial claims made by Jackson form a large part of the remaining issues between the parties at a stage when they are seeking to conclude final account negotiation and the court’s decision on this matter would assist the parties in settling matters.

Mr Piers Stansfield, who appears on behalf of Jackson, submits that there are disputes of fact and that the resolution of the issues relevant to the declaration require findings on those disputed facts. He submits that, in any case, even if the finding in the Adjudicator’s decision were to be changed that would not affect the fact that there is a temporarily binding decision from the Adjudicator. In addition, he contends that the dispute between the parties will not be narrowed by a decision on this issue because Jackson relies on other grounds for delay caused by the Birdcage Scaffold as well as concurrent delay caused by the increase in work scope over and above that in the provisional sums. In summary he says that there are disputes of fact and there would, in any event, be no useful purpose in making the declaration.

I consider, first, the proper scope of Part 8 proceedings for a declaration and whether this claim falls within it.

As set out in CPR rule 8.1(2)(a) a claimant may use Part 8 procedure where “he seeks the court’s decision on a question which is unlikely to involve a substantial dispute of fact.” It is clear that substantial disputes of fact require the procedure appropriate to Part 7 proceedings.

Where the claim is for a declaration, the court also retains a discretion whether to grant that relief. As Neuberger J said in Financial Services Authority v Rourke [2002] CP Rep 14:

“Accordingly, so far as the CPR are concerned, the power to make declarations appears to be unfettered. As between the parties in [this action], it seems to me that the court can grant a declaration as to their rights, or as to the existence of facts, or as to a principle of law, where those rights, facts or principles have been established to the court’s satisfaction. The court should not, however, grant any declarations merely because the rights, facts or principles have been established and one party asks for a declaration. The court has to consider whether in all the circumstances, it is appropriate to make such an order

…

It seems to me that, when considering whether to grant a declaration or not, the court should take into account justice to the claimant, justice to the defendant, whether the declaration would serve a useful purpose and whether there are any other special reasons why or why not the court should grant the declaration.”

As set out by Pumfrey J in Nokia Corporation v Interdigital Technology Corporation [2006] EWHC 802 (Pat) at [20] the relevant principles in relation to negative declarations may be summarised as follows:

“i)

The correct approach to the question of whether to grant negative declarations was one of discretion rather than jurisdiction. ii) The use of negative declarations should be scrutinised and their use rejected where it would serve no useful purpose, but where such a declaration would help ensure that the aims of justice were achieved, the court should not be reluctant to grant a negative declaration.

iii)

Before a court can properly make a negative declaration, the underlying issue must be sufficiently clearly defined to render it properly justiciable.”

In the TCC the ability of a party to obtain a declaration on a point of law where there is little dispute of fact, can be a useful means of resolving an important issue between the parties, which, for instance may assist the parties in resolving a complex dispute by negotiation or ADR. In the context of adjudication, the resolution of an issue as to jurisdiction may provide a means of avoiding wasted costs of an adjudication: see section 9.4 of the TCC Guide. In addition, in appropriate cases, a declaration under Part 8 might permit a party to obtain a final determination of the dispute which was the subject of a temporarily binding decision by the Adjudicator or allow the parties to resolve their differences on the basis that a finding by the Court has shown that an essential part of the Adjudicator’s decision was wrong.

This court is also prepared to deal with certain limited factual issues which might arise on a Part 8 claim and does so by way of a hybrid procedure involving an element of fact finding. In those cases a short hearing can dispose of any disputed fact based on a decision after hearing oral evidence: see the observations of Coulson J in Vitpol Building Service v Michael Samen [2008] EWHC 2283 (TCC) at [18(b)].

I now turn to deal with the application in the case.

The declaration essentially seeks a determination of the issue of why Jackson made the decision to change from a pre-finished to a site applied paint system. The essence of the Council’s case is that it could not have been, as the Adjudicator found, because of the late finalisation of the steelwork design because Jackson had the steelwork design by 1 August 2006.

Mr Whitworth, who was involved as a senior site manager for the project from August 2005 to October 2007, sets out at paragraphs 7 to 10 of his witness statement his evidence in relation to the Pool Hall steelwork. He says:

“7.

By September 2006 the project was already in substantial delay, as a result of contamination issues (asbestos and hydrocarbons). Despite this delay, the steelwork design had been provided late and was incomplete.

8.

At the Site Progress Meeting held in 20 September 2006, as I recall, there was a general consensus between those present that the urgency to procure the steelwork was the overriding consideration. The consideration as to whether the steelwork would be painted offsite or on site was discussed but very much secondary. It was accepted that the instruction to place the order for the steelwork at that point in conjunction with the urgency to deliver to site, the incomplete design and uncertainty as to the paint specification made on site painting inevitable.

9.

The reasons why the order for the steelwork was placed by Jackson, without shop painting of the top coat was that:

(1)

There was a pressing need, as a result of late design information relating to the steelwork, to procure steelwork and to deliver it to site as the erection of the steelwork in Grids 1-7 (non-pool hall area) was the first steel operation on the critical path

(2)

The design of the steelwork was incomplete making variations inevitable. It appeared it was likely that some form of access would be required after the initial erection of steelwork to deal with changes;

(3)

At the time the instruction to order the steelwork was given (20 September 2006) there was uncertainty as to the paint specification generally. As a consequence, the top coat colour for the steelwork had not been specified.

There was an additional factor that may have encouraged the Council to instruct Jackson to place the order in September 2006, namely the rising price of steel due to high demand from China and the Far East.

It can be seen from this that there is an allegation that the steelwork design information had been provided late and was incomplete. He says that the reason for the order for the steel work being placed by Jackson without shop painting of the top coat was the urgent need to procure steelwork, the inevitability of variations to the steelwork and uncertainty as to the paint specification. That is a signed statement with a statement of truth.

On Miss Ansell’s submissions this conflicts with the statement in the meeting of 19 December 2005 that the steelwork design had been issued and it conflicts with Jackson’s Information Required Schedule of 1 August 2006. However it is evident that, for whatever reason, design approval of the steelwork was still continuing in September, according to the letter from FBS of 6 October 2006 and there was a need at the meeting of 20 September 2006 to have approval to order the steelwork.

In my judgment it is quite apparent that there is a dispute as to whether there was late steelwork design information. There is also a dispute as to the impact of any late steelwork design upon the decision by Jackson to carry out painting of the steelwork on site rather than pre-finish the steelwork. That decision is not dealt with in the documents and it is not clear how, when or why that decision was taken from the documents exhibited in these Part 8 proceedings. At present there is only the witness statement of Mr Whitworth which has not been tested by cross-examination.

I do not consider that there is a limited factual dispute which can be resolved under Part 8 or by means of a hybrid Part 8 procedure involving a short hearing.

What is required is a more detailed statement or pleading of Jackson’s case than the case that can be gleaned from paragraphs 7 to 10 of Mr Whitworth’s witness statement. It is necessary to know what steelwork design was late, when that steelwork design was produced and when, how and why the decision was made to carry out painting of the steelwork on site rather than for it to be pre-finished. At present there has been limited documentation put before the court and I consider that a proper determination of that issue would require disclosure of documents, showing what was done and when in relation to steelwork, including correspondence with FBS and any other party, in particular, in relation to the decision to paint the steelwork on site. I do not consider that it would be satisfactory for the Court merely to direct that there should be cross-examination of the relevant witnesses without disclosure of the relevant material. Inevitably without that material, in answer to questions there would be statement to the effect that there are documents which support certain facts. Without disclosure, those documents would not have been provided to the other party or be before the court.

In addition, in any event, I would have been reluctant to exercise my discretion to make a declaration in this case for the following reasons. It is clear that even if I made a determination in favour of the Council, it would not lead to a final determination of the dispute in the Adjudicator’s decision. I could not make any determination of the appropriate extension of time. I could only say whether the change to site painting of the steelwork, for which the Adjudicator granted the extension of time, was or was not caused by late finalisation of the steelwork design. However, that issue necessarily draws into the dispute the question of what was the cause of the change to site painting of the steelwork, if it was not late finalisation of the steelwork and what, in fact, caused the delay in that period.

Further, on analysing the facts, as derived from information in the Adjudicator’s decision, I accept that Mr Stansfield’s submission that the effect of any declaration on the appropriate extension of time would be uncertain. The Adjudicator has set out in his decision, including in particular paragraph 155, the following sequence of events:

The Birdcage Scaffold was only used for 3 weeks to paint the steelwork and it is evident that it was also used to inspect the primer, in which it is said only a few blemishes were found, and to carry out changes to the wall render. If the painting of the steelwork did not give rise to delay for which the Council were liable then the need for the Birdcage Scaffold for the inspection of the primer (which the Adjudicator found was not something for which Jackson were responsible) and for the changes to the render (which Jackson say was defectively designed by the architect and changed to a new system) would evidently give rise to arguments that the delay was caused by other matters.

Even if the period of delay caused by the Birdcage Scaffold were determined not to be delay for which Jackson could claim extension of time then there are two aspects of concurrent delay on which Jackson would seek to rely. The first relates to “delays post Birdcage Scaffold” which are dealt with at paragraph 168 of the Adjudicator’s decision. There the Adjudicator finds that there is a 4.3 week delay concurrent with the Birdcage Scaffold delay (see paragraphs 168(i) and (iii)). Secondly, under issue 4, Jackson sought in the Adjudication an extension of time on the basis that there has been an increase in work because the Contract Sum based on provisional sums was £7m but is now, according to Jackson, some £12m. The Adjudicator made no award of extension of time for this reason but commented at paragraph 189 of his decision that : “if a proper programme analysis, including changes to logic links, etc, was carried out, then it is likely this would demonstrate entitlement to an extension of time”

Therefore I have come to the conclusion that, in any event, any declaration would be unlikely to serve a useful purpose or do justice as between the parties. It would not lead to a final determination of the dispute submitted to the Adjudicator and its effect on the extension of time for the delay to the Birdcage Scaffold would be at best uncertain. In addition, given the concurrent delays alleged for events post Birdcage Scaffold and for the increase in work instructed in place of the provisional sums, for which there is support in the decision of the Adjudicator, the position on extension of time is even less certain. Inevitably questions of the actual cause of delay would arise as part of the issue and in order to do justice to both parties, wider issues of causation and delay would properly need to be dealt with in order to produce a useful declaration which did justice to both parties.

A negative declaration (if it were justified on the facts) that the decision to paint the steelwork on site was not taken as a result of the late finalisation of the steelwork design, would necessarily open up the underlying issues of what, in fact, was the reason for painting the steelwork on site and the delay. In addition, to make a declaration as to one issue would serve no useful purpose and would not resolve the underlying dispute of the period of culpable delay and entitlement to extension of time under the Contract.

I accept Mr Stansfield’s submission that a useful analogy is to be found in the approach of the Court in ordering the trial of preliminary issues. This is a case where there was a dispute between the parties related to the overall extension of time. In such circumstances the court would be unwilling, in my judgment, to order a preliminary issue of the cause of the decision to paint steelwork on site where that opened up an area of factual investigation and where the ultimate outcome in terms of extension of time would be unclear. I consider that similar considerations apply to the declaration sought in this case.

In the circumstances, I make no declaration in relation to these Part 8 proceedings.

Whilst I have sympathy for the Council’s position where they feel that the Adjudicator has come to a wrong conclusion on a particular ground on which he has granted a substantial extension of time, I do not consider that the remedy lies in this Part 8 Claim. I consider that for the reasons given it would prove a treacherous shortcut, to borrow a phrase from the approach to preliminary issues. This is not a case where there is no substantial dispute of fact or where the disputed issue of fact could be determined by a short hearing with a narrow focus without disclosure. The scope of the factual issue is likely to widen on further investigation and any outcome would leave unresolved uncertainty and argument between the parties as to the effect on extension of time. It would not amount to a final determination of the dispute and would not assist in the overall resolution of the dispute, given the uncertain effect on extension of time.