Royal Courts of Justice
Strand, London, WC2A 2LL
Before :
THE HON. MR JUSTICE COULSON
Between :
JERRAM FALKUS CONSTRUCTION LIMITED | Claimant |
- and - | |
FENICE INVESTMENTS INC | Defendant |
[No.4] |
Mr Graeme Sampson (instructed by Davies & Davies Associates Limited) for the Claimant
Mr William Webb (instructed by Field Fisher Waterhouse LLP) for the Defendant
Hearing dates: 11, 12 & 13th July 2011
Judgment
Mr Justice Coulson:
1: INTRODUCTION
The claimant, Jerram Falkus Construction Limited (“JFC”), was engaged by the defendant, Fenice Investments Inc (“Fenice”) to carry out the development of a site at 150 Loudoun Road, Camden, London NW8. The contract incorporated the JCT Design and Build Form 2005, although the form was the subject of a number of bespoke amendments. The works were delayed, and the parties fell out as to the causes of that delay.
The parties have been extraordinarily promiscuous in their attempts at dispute resolution. There have been no less than three adjudications between the parties, the first being the subject of a disputed enforcement hearing before me ([2009] EWHC 3272). The third, which is referred to in greater detail below, led to an acrimonious dispute about the adjudicator’s fees, which was resolved recently (against JFC) in a judgment of HHJ Waksman QC at [2011] EWHC 1678 (TCC). The present proceedings, began by JFC in March of this year, sought a number of declarations, but strayed so far into the facts that the court has had to adopt a hybrid CPR Part 7/CPR Part 8 procedure in order to meet the needs of the parties. All of this activity and acrimony relates to a dispute worth at most £300,000, and the parties have told me that, although this Judgment will resolve the critical issues as to time, it will not address all the remaining disputes between them.
2: THE ISSUES
The original contract completion date was 25 May 2009. That was extended by Fenice’s agent (Sawyer & Fisher) to 15 June 2009. The works were not practically complete until 9 September 2009, a delay of 86 days, for which Fenice have levied liquidated damages. JFC maintain that Fenice and/or their servants or agents prevented completion and that, by reason of the deletions to the extension of time provisions, which meant that no extension of time could be granted in relation to such acts of prevention, time was set at large. This would then mean that Fenice were not entitled to any liquidated damages at all. Moreover, JFC claim an entitlement to loss and expense under the contract. There is an issue as to the extent to which these claims were the subject of the decision in the third adjudication. That is because Fenice claim that the issues which JFC now seek to raise are precisely the same as those decided by the adjudicator, and that, pursuant to the terms of the contract, JFC’s failure to challenge the decision in the third adjudication in the stated time means that that decision is conclusive.
In addition, each side maintains that the other is prevented from arguing the substance of these points because of other conclusivity arguments, this time arising out of the Final Account and Final Statement. Again these arguments turn on the terms of the contract. Thereafter, assuming the conclusivity arguments fail, it is necessary to analyse both the prevention principle and the factual delay issues which arise in this case. There was also a separate dispute about an alleged agreement to discount the amount of liquidated damages. On those matters of fact, I heard evidence from Mr Foskett of JFC, and Miss Stockhammer and Mr Christmas on behalf of Fenice.
Accordingly, the particular issues that arise in this case can perhaps be summarised as follows:
Conclusivity Issues
Is the decision of the adjudicator in the third adjudication, dated 28.10.10, conclusive, such that JFC’s arguments as advanced before the court are simply not open to them?
Are JFC’s Final Account and Final Statement conclusive as to the matters contained therein, such that Fenice cannot challenge JFC’s claim for loss and expense?
Conversely, in the events that occurred, is it JFC who are prevented now from raising their delay claims as a result of the conclusivity of their own Final Account and Final Statement?
Prevention Issues
What caused the delays to the works?
Did Fenice prevent JFC from completing the contract works?
If Fenice did prevent completion, but the delay so caused was concurrent with delays which were JFC’s fault, was time set at large?
Liquidated Damages
Was there an agreement to vary liquidated damages and, if so, what was the effect of that agreement?
Are Fenice entitled to £209,840 (gross) or £122,102.36 (net) by way of liquidated damages?
JFC’s Final Account Claim
Are JFC entitled to £311,393.78 by way of their Final Account or some other sum?
I propose to set out in the next section of this Judgment the relevant contract terms, as amended. In Section 4, I set out an outline chronology. Then, in Section 5, I deal with the three different conclusivity arguments. Thereafter I set out in Section 6 an outline of the delay issues, and in Section 7 I address what I have called the prevention principle. There is an analysis of the factual delay issues in Section 8. I deal with the other matters in dispute in Section 9, and there is a short summary of my conclusions in Section 10.
3: THE CONTRACT TERMS
Clause 1.9 was entitled ‘Effect of Final Account and Final Statement’. It was in these terms:
“1.9 1 The Final Statement, when it becomes conclusive as to the balance due between the Parties in accordance with clause 4.12.4, or the Employer’s Final Statement, when it becomes conclusive as to the balance due between the parties in accordance with clause 4.12.7, shall, except as provided in clauses 1.9.2, 1.9.3 and 1.9.4 (and save in respect of fraud), have effect in any proceedings under or arising out of or in connection with this Contract (whether by adjudication, arbitration or legal proceedings) as:
1 conclusive evidence that where and to the extent that any of the particular qualities of any materials or goods or any particular standard of an item of workmanship was described expressly in the Employer’s Requirements, or in any instruction issued by the Employer under these Conditions, to be for the approval of the Employer, the particular quality or standard was to the reasonable satisfaction of the Employer, but the Final Account and Final Statement or the Employer’s Final Account and Employer’s Final Statement shall not be conclusive evidence that they or any other materials or goods or workmanship comply with any other requirement or term of this Contract;
2 conclusive evidence that all and only such extensions of time, if any, as are due under clause 2.25 have been given; and
3 conclusive evidence that the reimbursement of direct loss and/or expense, if any, to the Contractor pursuant to clause 4.19 is in final settlement of all and any claims which the Contractor has or may have arising out of the occurrence of any of the Relevant Matters, whether such claim be for breach of contract, duty of care, statutory duty or otherwise.
2 If any adjudication, arbitration or other proceedings have been commenced by either Party before the Final Account and Final Statement or the Employer’s Final Account and Employer’s Final Statement, as the case may be, the Final Account and Final Statement or the Employer’s Final Account and Employer’s Final Statement, as the case may be, shall have effect as provided in clause 1.9.1 upon and from the earlier of either:
1 the conclusion of such proceedings, in which case the Final Account and Final Statement or the Employer’s Final Account and Employer’s Final Statement, as the case may be, shall be subject to the terms of any decision, award or judgment in or settlement of such proceedings; or
2 the expiry of any period of 12 months from or after the submission of the Final Account and Final Statement or the Employer’s Final Account and Employer’s Final Statement, as the case may be, during which neither Party takes any further step in such proceedings, in which case the Final Account and Final Statement or the Employer’s Final Account and Employer’s Final Statement, as the case may be, shall be subject to any terms agreed in settlement of any of the matters previously in issue in such proceedings.
3 If any adjudication, arbitration or other proceedings are commenced by either Party within 28 days after the Final Account and Final Statement or the Employer’s Final Account and Employer’s Final Statement, as the case may be, would otherwise become conclusive by the operation of clause 4.12.4 or 4.12.7, the Final Account and Final Statement or the Employer’s Final Account and Employer’s Final Statement, as the case may be, shall have effect as conclusive evidence as provided in clause 1.9.1 save only in respect of the matters to which those proceedings relate.
4 In the case of a dispute or difference on which an Adjudicator gives his decision on a date which is after the date of submission of the Final Account and Final Statement or the Employer’s Final Account and Employer’s Final Statement, as the case may be, if either Party wishes to have that dispute or difference determined by arbitration or legal proceedings, that Party may commence arbitration or legal proceedings within 28 days of the date on which the Adjudicator gives his decision.”
As to the time for completion, the original contract completion date was 25 May 2009. That date could be adjusted pursuant to the extension of time mechanism at clauses 2.23-2.25. Clause 2.26 set out the Relevant Events, that is to say those events which would or might trigger an entitlement on the part of JFC to an extension of time. These provisions were the subject of detailed amendment. Two particular provisions were deleted altogether. They would have read:
“2.26.5 Any impediment, prevention or default, whether by act or omission, by the Employer or any of the Employer’s Persons, except to the extent caused or contributed to by any default, whether by act or omission, of the Contractor or of any of the Contractor’s Persons.
2.26.6 The carrying out by a Statutory Undertaker of work in pursuance of its statutory obligations in relation to the Work, or the failure to carry out such work…”
Clause 2.28 provided for the issue by the employer of a notice in writing, known as a non-completion notice, identifying the contractor’s failure to complete the works by the completion date (as adjusted). Clause 2.29 was entitled ‘Payment or Allowance of Liquidated Damages’ and was in these terms:
“2.29.1 Provided:
1 the Employer has Issued a Non-Completion Notice for the Work or a Section; and
2 the Employer has Informed the Contractor in writing before the date when the Final Account and Final Statement (or, as the case may be, the Employer’s Final Account and Employer’s Final Statement) became conclusive as to the balance due between the Parties that he may require payment of, or may withhold or deduct, liquidated damages,
the Employer may, not later than 5 days before the final date for payment of the debt due under clause 4.12, give notice in writing to the Contractor in the terms set out in clause 2.29.2.”
Clauses 4.19 and 4.20 dealt with the contractor’s entitlement to loss and expense. The Relevant Matters entitling JFC to loss and expense under this contract were, as is usual, much more limited than those matters which entitled them to an extension of time.
The provisions relating to loss and expense arise in clause 4, which is concerned, amongst other things, with the contractor’s Final Account. Clause 4.12 is entitled ‘Final Account and Final Statement – submission and payment’. The relevant parts are in these terms:
“4.12.1 Within 3 months of practical completion the Contractor shall submit the Final Account and the Final Statement referred to in clause 4.12.3 for agreement by the Employer, and the Contractor shall supply the Employer with such supporting documents as the Employer may reasonably require.
2 The Final Account shall set out the Contract Sum together with the adjustments referred to in clause 4.2.
3 The Final Statement shall state:
1 the Contract Sum adjusted as necessary in accordance with clause 4.2; and
2 the sum of the amounts already paid by the Employer to the Contractor;
and the difference (if any) between the two sums shall be expressed as a balance due to the Contractor from the Employer of to the Employer from the Contractor, as the case may be. The Final Statement shall state the basis on which that amount has been calculated.
4 The Final Account and the Final Statement as submitted by the Contractor in accordance with clause 4.12.1 shall on the expiry of one month from whichever of the following occurs last:
1 the end of the Rectification Period in respect of the Works or (where there are Sections) the last such period to expire;
2 the date named in the Notice of Completion of Making Good under clause 2.36 or (where there are Sections) in the last such notice to be issued; or
3 the date of submission of the Final Account and the Final Statement to the Employer by the Contractor,
be conclusive as to the balance due between the Parties in accordance with the Final Statement except to the extent that the Employer disputes anything in that Final Account or Final Statement before the date on which, but for the disputed matters, the balance would be conclusive…
8 Not later than 5 days after the Final Statement becomes conclusive as to the balance due between the Parties in accordance with clause 4.12.4 or after the Employer’s Final Statement becomes conclusive as to the balance due between the Parties in accordance with clause 4.12.7 the Employer shall give a written notice to the Contractor which shall, in respect of any balance stated as due to the Contractor from the Employer in the Final Statement or in the Employer’s Final Statement, specify the amount of the payment proposed to be made, to what the amount of the payment relates and the basis on which that amount was calculated.
9 The final date for payment of the balance by the Employer to the Contractor or by the Contractor to the Employer, as the case may be, shall be 28 days from the date the Final Statement becomes conclusive as to the balance due between the Parties in accordance with clause 4.12.4 or after the Employer’s Final Statement becomes conclusive as to the balance due between the Parties in accordance with clause 4.12.7. Not later than 5 days before the final date for payment of the balance the Employer may give a written notice to the Contractor which shall specify any amount proposed to be withheld and/or deducted from any balance due to the Contractor, the ground or grounds for such withholding and/or deduction and the amount of withholding and/or deduction attributable to each ground.”
4: OUTLINE CHRONOLOGY
As I have already noted, the contract completion date was extended by Sawyer & Fisher to 15 June 2009 pursuant to clause 2.25. There was therefore an actual delay between that date and 9 September 2009 of 86 days.
JFC provided their Final Account on 17 November 2009. It included a claim for just under £200,000 by way of loss and expense. The total balance payable was said to be £311,393.78. The Final Statement in this sum was provided on 1 July 2010.
Thereafter, in September and October 2010, the parties fought out a third dispute in adjudication. The notice of adjudication was served by Fenice and sought declarations that JFC were not entitled to any further extension of time for, amongst other things, the alleged delays by British Gas and EDF and the alleged late instructions in respect of the problem of the levels in Houses 4 and 5. In their lengthy response document, JFC said that, as a result of the deletion of clause 2.26.5 and 2.26.6 (paragraph 8 above), these events (that is to say, the delays by British Gas and EDF and the delay in the instructions as to the levels) “rendered time for completion of JFC’s obligations under the contract at large”. References were also made to various authorities as to the meaning of ‘statutory undertaker’.
In a careful and detailed decision provided by the well-known construction adjudicator, Dr Franco Mastrandrea, the adjudicator found in favour of Fenice on all these points. Amongst other things he said, at paragraph 6.6, that he was satisfied “that there was no act of prevention by the Employer render time at large…”
The adjudicator’s decision was dated 28 October 2010. It is common ground that it was not the subject of an arbitration notice or the issue of proceedings within 28 days of that date.
It is also common ground that the remediation period under the contract ended on 13 January 2011 and that, as a result, subject to the issue of whether and to what extent there was a challenge to the Final Account by Fenice, this rendered the Final Statement conclusive as at 13 February 2011 (clause 4.12.4) and made 13 March 2011 the final date due for payment of the £311,393.78 (clause 4.12.9).
However, whether or not those arguments are right turns in large part on the status and proper interpretation of Fenice’s letter of 24 January 2011. That letter came from Sawyer and Fisher and was in these terms:
“150 Loudoun Road
Employer Response to Final Account/Final Statement
I refer to your Final Account submission of 17th November 2009 and Final Statement dated 1st July 2010 in relation to the above project.
I have considered and reviewed your Final Account submission in full on the basis of all of the substantiation provided, the relevant adjudication decisions and my own knowledge of the project together with the discussions in our recent meetings.
Having completed this review, please find enclosed on behalf of Fenice Investments Inc its response to your final account identifying those adjustments to the Contract Sum identified in your Final Account submission which are agreed and those which were incorrect in your original submission and so for the purpose of the Contract are identified as disputed. Where an item is disputed, there is included in the enclosed response the correct valuation for that item.
You will note that some of the items shown as disputed have been agreed between us in the sum recorded in this response in discussions which took place after your original Final Account submission. Where this is the case the items are nevertheless identified as disputed (on grounds that the correct assessment differs from that which was included in your formal Final Account submissions) but have been annotated to record the agreement subsequently reached for the relevant item.
As you will see from the enclosed, when properly assessed the final Contract Sum as adjusted in accordance with Clause 4.2 of the Contract is £3,945,531.64.
Fenice has made payment to you to date of £4,067,634.00.
A balance of £122,102.36 is therefore due and payable to Fenice, relating to and calculated in accordance with the content if the enclosed response to your Final Account and is required to be paid in accordance with the timeframe set out in Clause 4.12.9.”
The letter enclosed Fenice’s own version of the Final Account, which ran to some 44 pages. That amounted to an item-by-item response. As to the individual items of claim, it accepted £70,000 odd (subject to Fenice’s claim for liquidated damages in the gross figure of £209,840) and disputed a further £43,000 odd worth of items. But as to the principal dispute between the parties, namely the question of the cost consequences of delay, Fenice’s response set out its entitlement to liquidated damages and rejected any entitlement on the part of JFC to loss and expense.
5: CONCLUSIVITY
The Decision in the Third Adjudication (Issue a))
As set out at paragraphs 14 and 15 above, the decision in the third adjudication rejected JFC’s claim that time was at large and/or that they were entitled to anything further arising in respect of delay. The decision was dated 28 October 2010. It was not the subject of any subsequent arbitration or legal proceedings. Accordingly, Fenice argue that in accordance with clause 1.9.4 (paragraph 7 above), it was conclusive.
JFC’s principal response to this was to suggest that the dispute in the third adjudication was different to the dispute raised before me. I have no hesitation in rejecting that submission. It is plain that the dispute before me raises all of the same issues argued in front of Dr Mastrandrea: indeed, even the same authorities, whether relevant or irrelevant, appear to have been cited to him too. Thus I find that the dispute which JFC wish to raise before me (delays caused by alleged acts of prevention in respect of EDF, British Gas and the instructions as to the levels) is exactly that which was decided in the third adjudication. What is more, since that third adjudication took place after the Final Account and Final Statement had been submitted, there is equally no doubt that clause 1.9.4 has been triggered. The only remaining issue is what that clause means.
Superficially, JFC’s best point arises out of the precise words of clause 1.9.4. Nowhere in that provision does it say in terms that the adjudicator’s decision, if not challenged within 28 day, is conclusive on the matters with which it deals. In a form of contract which appears liberally to endorse the concept of conclusive decisions and statements, that might be thought to be something of an obstacle to the argument that, in this case, Dr Mastrandrea’s decision was indeed conclusive. Furthermore, I note that the requirement to challenge that decision within 28 days was not said to be mandatory but merely permissive: “that party may commence arbitration or legal proceedings within 28 days…”
However, on a proper analysis, it seems to me that these narrow points on the wording of the clause ignore two fundamental issues. The first is the purpose of clause 1.9 itself. The clause is designed to provide for various circumstances in which, following the provision of the Final Account, the position between the parties can become conclusive, thereby precluding any further dispute. Clause 1.9.4 must therefore be read in that context; it is providing a deadline beyond which something – in this case the decision in an adjudication started after the provision of the Final Account – becomes conclusive. Mr Sampson agreed that it was providing a “last chance”. If it were not a provision relating to conclusivity, it would not be part of clause 1.9 at all.
Secondly, if clause 1.9.4 was not providing some form of deadline, beyond which the result in a post-Final Account adjudication could not be challenged, then the provision was entirely redundant. If the clause was simply recording that the losing party could challenge the adjudicator’s decision within 28 days, but that there was no consequence if they did not do so, then the provision would be meaningless: it would simply be recording something which the losing party could do in a 28 day period, but which it could also do just as well after the 28 day period had expired. It is contrary to one of the canons of contractual interpretation to read a clause of this type as mere verbiage, without any consequence or effect (Footnote: 1).
I acknowledge that there is a gap between the language of clause 1.9.4 and its intended purpose. But, for the reasons I have given, I conclude that clause 1.9.4 was plainly intended to ensure that, if there was an adjudication after the Final Account had been provided, the losing party had 28 days in which to challenge the result, or the result became conclusive. JFC failed to do that in this case, and as a result they cannot now raise any argument to the effect that time is at large, that contention having been expressly considered and rejected by the adjudicator.
Standing back from the clause for a moment, it seems to me that this result makes commercial common sense. It would be absurd for the parties to enter into a detailed adjudication on the issues between them, after the Final Account has been provided and thus a long time after the works were completed; for the losing party to allow the decision to rest unchallenged for months or even years; and for that losing party to endeavour, months or years later, to go over exactly the same course all over again. That would provide for neither finality nor certainty, both of which clause 1.9 was designed to provide.
This means that JFC are not entitled to loss and expense under the contract, so that £199,717.50 claimed under this head in their Final Account is not and can never be due. It also means that, subject to the issue explored in paragraph 85 below, Fenice are entitled to liquidated damages for the 86 days delay to the contract in the sums of £209,840 (gross) and £122,102.36 (net). The remainder of this Judgment is only relevant at all if my finding as to conclusivity on Issue a) is wrong.
JFC’s Conclusivity Case (Issue b))
JFC’s argument turns principally on clause 4.12.4. They say that, following the Certificate of Making Good Defects, pursuant to clause 4.12.4 (paragraph 11 above), the Final Account and Final Statement became conclusive as to the balance between the parties on 13 February 2011. Thus they maintain that there can be no defence to the claim for £311,393.78. But for the operation of the proviso at the end of that clause (“except to the extent that…”), it is common ground that the Final Account became conclusive on 13 February 2011.
However, the critical issue seems to me to arise out of that proviso. The Final Account is said to be conclusive “except to the extent that the Employer disputes anything in that Final Account or Final Statement before the date on which, but for the disputed matters, the balance would be conclusive.” On behalf of Fenice, Mr Webb points to the letter of 24 January 2011, referred to in paragraphs 18 and 19 above, which enclosed Fenice’s own version of the Final Account. He says that that letter made plain the nature and extent of Fenice’s disputes in respect of the Final Account and that, accordingly, the Final Account as originally provided cannot be regarded as conclusive, save where the letter of 24 January admitted certain items in the Account.
That submission seemed to me to be manifestly correct. The whole point of conclusivity provisions such as these is to provide the employer with an opportunity to challenge the Final Account, but to ensure that the time in which such a challenge may be made is restricted, so as to provide at least a measure of finality. Here, within the relevant period, there was a clear and detailed challenge provided by Fenice. To the extent that it challenged JFC’s Final Account, the letter of 24 January prevented that Final Account from becoming conclusive.
It was difficult to discern any coherent answer to that point from Mr Sampson’s submissions. At one stage, he appeared to indicate that the challenge was not in accordance with clause 4.12.4 because it purported to provide a copy of the Employer’s own version of the Final Account but, on analysis, that argument is unsustainable. There was no limitation on the nature, type or extent of the challenge that may be provided by the Employer under clause 4.12.4.
Accordingly, I am satisfied that the Final Account and Final Statement were not conclusive as to the amount due between the parties because of the detailed challenge of 24 January 2011. On that basis, therefore, I consider that JFC’s conclusivity case must fail.
JFC had an alternative case based on clauses 4.12.8, 4.12.9, and 4.12.10 of the contract, to the effect that, even if they had been properly challenged on 24 January 2011, the Final Account and Final Statement somehow became conclusive on 18 February because no withholding notice pursuant to these provisions was provided by Fenice between 13 February (when the Final Account became conclusive) and 18 February (5 days later). In my view, that argument does not arise because these clauses are only relevant at all if the Final Account had become conclusive; for the reasons that I have already given, as a result of the challenge of 24 January 2011, that had not happened, certainly not in respect of the disputes about delay. Moreover, I also accept Mr Webb’s argument that, even if (contrary to that view) these provisions were in play, Fenice would be entitled now to have the merits of their response determined, rather than see the matter resolved by reference to the existence or otherwise of a withholding notice. The dispute is now concerned with the parties’ final entitlement on the substantive merits, not just interim cashflow (where the service of withholding notices is important).
But even if I was wrong on both those counts, I am in no doubt that the letter of 24 January 2011 was a satisfactory notice under clauses 4.12.8, 4.12.9 and 4.12.10. It set out in full detail how and why the Final Account was disputed. Accordingly, since he could not argue about the detail in the notice, Mr Sampson was obliged to argue that the notice was invalid in some other way. Thus he maintained that the notice was premature, because it could only be a valid notice if it was served in the five days after the Final Statement became conclusive on 13 February 2011. Thus, he said, in accordance with the decision in Strathmore Building Services Ltd v Greig [2001] 17 Const LJ 72, the notice of 24 January was ineffective for the purposes of these contractual provisions.
I consider that that argument is wrong for two reasons. First, the notice under clause 4.12.8 had to be served “not later than 5 days after” the Final Statement became conclusive (18 February). Service on 24 January was not later than 18 February. There was nothing to say that the notice could not be served before the Final Statement became conclusive.
I accept of course that a notice has to properly respond to the particular claim or event against which its provision is being measured. Hence, in Strathmore, it was decided that a withholding notice against a particular claim could not properly respond to the claim until after that claim had been made. But this is an entirely different situation; here, the detail of JFC’s claim was apparent from its Final Account and Final Statement served in 2009 and 2010 respectively, and Fenice could and did respond to it in detail. There was no information which Fenice did not have in January 2011 but which they received on 13 February. There was therefore no reason why the letter of 24 January 2011 could not respond to the Final Statement of July 2010, and no reason why the letter had to be delayed until the five day window between 13 and 18 February 2011. JFC had to maintain that, for no good reason, the notice had to be served, or served again, in the 5 day window, or it became invalid. In my view, such an artificial and constrained construction of clause 12.4.8 fails every canon of commercial contract interpretation.
Accordingly, for these reasons, I reject JFC’s case on conclusivity.
Fenice’s Second Conclusivity Case (Issue c))
Fenice has its own conclusivity case arising out of the Final Account. This is by reference to clause 1.9.1.2 (paragraph 7 above), which provides that when the Final Statement becomes conclusive it shall have effect in any subsequent legal proceedings as, amongst other things “conclusive evidence that all and only such extensions of time, if any, as are due under clause 2.25 have been given”. Mr Webb argues that the only extension of time that had been “given” was the extension to 15 June 2009 (which has never been challenged by Fenice) and that this provision meant that JFC were not only not entitled to any further extension of time, but were also barred from seeking to raise the alternative argument that time was at large.
I see a number of problems with this argument. First, I have found that, to the extent that the letter of 24 January 2011 raised a challenge to JFC’s Final Account, that Final Account and Final Statement are not conclusive. One of the principal points of dispute between the parties concerns the cost consequences of the delay, because JFC’s Final Account claims loss and expense, whilst Fenice’s responsive document, enclosed with the letter of 24 January, rejects that claim in its entirety, and identifies the liquidated damages due from JFC. The cost consequences of delay therefore remain a matter which, on the face of the documents, is in dispute; it is not something in respect of which the Final Account is or could be conclusive. Thus clause 1.9.1.2 is not triggered at all.
Secondly, I am puzzled by the phrase used in clause 1.9.1.2, that the only extensions of time due are those which “have been given”. Mr Webb says that that must mean such extensions of time that have already been granted by the employer’s agent. But that seems an odd provision in a term that is supposed to be dealing with the conclusivity of the contractor’s Final Account. It would mean that, if the employer’s agent had granted an extension of time of two weeks, and the contractor claimed an additional period of seven weeks in his Final Account, the Final Account (on becoming conclusive) would limit the contractor to the two weeks extension of time. That seems to be the opposite of making the Final Account itself conclusive.
In truth, the problem with clause 1.9.1 generally, and this provision in particular, is that it is seeking to make the Final Account conclusive in the same way as, under the other JCT Forms of Contract which do not impose a design obligation on the contractor, the architect’s Final Certificate is made conclusive. Of course a provision that makes the Final Certificate, issued by the architect, conclusive evidence of all extensions of time granted by that same architect makes complete sense. But it does not seem to me that sufficient thought has been given to the translation of that concept to a contract where the contractor’s Final Account may well claim an extension in excess of that which has been granted already. How can the conclusivity of his Final Account limit the contractor to an entitlement which that Final Account expressly challenges?
For these reasons, I do not consider that JFC’s Final Account is conclusive in relation to the parties’ rights and liabilities in respect of delay. But that does not ultimately matter because of my view that the failure to challenge the decision in the third adjudication is conclusive of those same rights.
6: OUTLINE OF DELAY ISSUES
JFC’s delay claims, as set out in the amended Particulars of Claim, are not always entirely clear. After some detailed questioning of Mr Sampson, the following emerged.
JFC claim that they were delayed for 95 days as a result of the works by British Gas and EDF. The 95 days are said to run between 28 April and 1 August, although it is very unclear how these dates arose. In relation to the individual matters, it is said that the British Gas delay was between 27 April and 18 May (21 days) whilst the EDF delays were said to be between 9 April and 20 July, with a further 12 days delay in relation to the provision of meters. Notwithstanding all these various competing periods, the pleading then goes on to assert that the actual delay caused by British Gas and EDF was 53 days, from 15 June 2009 to 7 August 2009.
As to the delay in relation to the levels, it is apparently JFC’s case that this was 46 days, between 11 June and 27 July 2009. Mr Foskett said that this delay was concurrent with the delays caused by EDF and British Gas and, in his closing submissions, Mr Sampson properly accepted that these delays were indeed concurrent. However, JFC maintain that all of these matters comprised acts of prevention on the part of Fenice which, in the absence of a relevant extension of time provision, rendered time at large. If that argument was right, Fenice would not be entitled to levy liquidated damages.
Fenice, on the other hand, argue that the contract works were not delayed by British Gas or EDF and that, although the works were plainly delayed by the levels issue, that was solely JFC’s responsibility. They also argue, by way of a fall-back position, that, even if there were delays by British Gas and EDF, and even if Fenice were responsible for those delays (which they also dispute), such delays were concurrent with the delay as to the levels for which JFC were wholly responsible, and that therefore they could not be liable under the prevention principle in any event. Accordingly, it is necessary to start with an analysis of the prevention principle before going on to make findings in relation to delay issues generally.
THE PREVENTION PRINCIPLE
The modern-day law on this topic really starts with the decision of the Court of Appeal in Peak Construction (Liverpool) Limited v McKinney Foundations Limited (1970) 1 BLR 111. The essence of the principle is that the promisee cannot insist upon the performance of an obligation which he has himself prevented the promisor from performing. In construction law, that means that the employer cannot hold the contractor to a specified completion date if the employer has, by his own act or omission, prevented the contractor from completing by that date.
In Multiplex v Honeywell[2007] Bus LR Digest 109,Jackson J (as then was) noted at paragraph 56 two important propositions, namely that:
“i) actions by the employer which are perfectly legitimate under a construction contract may still be characterised as prevention, if those actions cause delay beyond the contractual completion date.
ii) Acts of prevention by an employer do not set time at large if the contract provides for extension of time in respect of those events.”
More recently, in Adyard Abu Dhabi v SD Marine Services[2011] EWHC 848 (Comm) Hamblen J dealt, at paragraphs 257 to 292 of his judgment, with the interaction between the prevention principle and the issues of causation. I gratefully adopt that analysis and do not set it all out again here. As part of that analysis, at paragraph 282, he stressed that:
“The conduct therefore has to render it “impossible or impracticable for the other party to do the work within the stipulated time” The act relied on must actually prevent the contractor from carrying out the works within the contract period or, in other words, must cause some actual delay”.
Hamblen J’s analysis indicated that, if there were two concurrent causes of delay, one which was the contractor’s responsibility, and one which was said to trigger the prevention principle, the principle would not in fact be triggered because the contractor could not show that the employer’s conduct made it impossible for him to complete within the stipulated time. The existence of a delay for which the contractor is responsible, covering the same period of delay which was caused by an act of prevention, would mean that the employer had not prevented actual completion. Throughout his analysis, Hamblen J stressed the importance of the contractor proving delay to the actual progress of the work as a result of the alleged act of prevention.
Mr Webb has properly drawn my attention to a suggestion to the contrary at paragraph 9-018 of Keating on Construction Contracts, 8th edition. The learned editors suggest that the prevention rule “probably applies even if the contractor has by his own delays disabled himself from completing by the due date.” The authority for that proposition is said to be SMK Cabinets v Hili Modern Electrics[1984] VR 391 at 398 and following. In fact, on an analysis of that case, and indeed the other cases referred to in the Keating footnote, it becomes apparent that they were not dealing with concurrent delay, but instead with the situation where the contractor was in delay for part of the time but where, for other periods of delay, the contractor could show that they were the result of acts of prevention on the part of the employer (Footnote: 2). I am in no doubt that, in those circumstances, the prevention principle applies. But none of those cases deal with concurrent causes of delay, and in my judgment, in that situation, the right analysis is provided by Hamblen J in Adyard.
Accordingly, I conclude that, for the prevention principle to apply, the contractor must be able to demonstrate that the employer’s acts or omissions have prevented the contractor from achieving an earlier completion date and that, if that earlier completion date would not have been achieved anyway, because of concurrent delays caused by the contractor’s own default, the prevention principle will not apply.
8: ANALYSIS OF DELAY ISSUES (Issues d), e) and f)
8.1: Delays Generally
The documents show that, in the latter part of 2008 and early 2009, JFC were steadily falling behind the programme. By the time of their Progress Report of 16 March 2009, JFC were noting that they were ten weeks in delay. That would have given rise to a completion date in early August 2009, although they set a more optimistic completion date of 10 July 2009. This is important, because this delay was noted to have occurred long before any of the alleged delay events with which I am concerned in this case. Accordingly, aside from the delay encompassed by the original extension of time to 15 June 2009 (from which Fenice do not resile), I find that the earlier delays were JFC’s responsibility.
The works were actually complete on 9 September 2009. Accordingly, between March and September 2009, events occurred which caused an additional delay of just over one month (between the completion date in early August projected by the progress report of March and actual completion). Although that reality is nowhere reflected in JFC’s pleaded case, it gives rise to the central question: what were the causes of that later delay?
The Principal Cause of The Later Delay: The Problem With The Levels
All the documents and all the oral evidence that I heard pointed the same way: that the later delays on the project were due to the levels issue. The principal question for me is whether that can be ascribed to Fenice’s alleged breach of the prevention principle.
The levels problem in relation to houses 4 and 5 was first spotted by Sawyer and Fisher who, in their letter to JFC of 11 June 2009, said:
“It has been drawn to my attention your design for the setting out of the ground floor slab of the houses to the above is lower than the adjacent highway pavement levels.
The works have therefore not been constructed in accordance with the design resulting in the main entrance doors being lower than the pavement level and the inevitable introduction of a combination of ramps and steps.
Under clause 2.12 sole responsibility and ownership of the design is with JFC and as such any additional costs to rectify the works will be your responsibility…
We urgently await your proposals to remedy these defects and deliver the project by the contractual completion date.”
Accordingly, when this problem first arose, it was regarded as being the responsibility of JFC, because they were the design and build contractor. On the basis of the documents I have seen, that conclusion was indisputably right, and no case to the contrary is set out in these proceedings. JFC have no pleaded claim to the effect that, in some way, the setting out difficulties were the responsibility of Fenice and, in the dispute about the adjudicator’s fees, they made much of the fact that they had conceded this point in the third adjudication. Although at one point in his oral submissions, Mr Sampson appeared to suggest that these events introduced a Change to the works in accordance with clause 5, such a suggestion is wholly contrary to the case advanced now, not least because, if this had been a Change, JFC would have been entitled to an extension of time under clause 2.26.1 (which was not deleted) and the prevention principle would not arise. That is emphatically not JFC’s case before me.
Accordingly, the starting point for any consideration of the levels issue is an appreciation of the fact that the problem was JFC’s responsibility. Despite that, JFC claim that, once the problem was spotted, Fenice failed to approve the solution promptly, and thereby caused delay. It is said that, in this way, Fenice’s delay prevented completion. There are two elements of Fenice’s conduct which are singled out for particular criticism. The first is that Fenice somehow kept secret the fact that the difficulty with the external levels had been dealt with in house 2 by an internal step and that, in some way, they should have indicated that this solution would automatically apply to houses 4 and 5. Secondly, it is said that they took too long to approve the resulting change in any event.
As to the alleged ‘secrecy’ concerning the step in house 2, the evidence quickly demonstrated that to be a nonsense. The internal step solution in house 2 was shown in the tender and contract drawings, and had been constructed by JFC some months before. There was therefore no question of it being in some way ‘secret’, and Mr Foskett properly accepted, in his cross examination on the morning of the second day of the trial, that to have suggested otherwise was “incorrect”.
As to the suggestion that Fenice should have immediately concluded that the same solution was appropriate for houses 4 and 5, Miss Stockhammer, on behalf of Fenice, explained how it would have been quite inappropriate to make such an automatic assumption. She said that the step had been appropriate for house 2 because it was a less valuable property and because the stairs in house 2, where the internal step would have to be catered for, were further away from the front door than in houses 4 and 5. She said that, once the level problem had become apparent on houses 4 and 5 in June, she was told that a potential internal solution would have a huge effect on the house as built, and that it was therefore necessary to give all the options proper consideration. As she put it, “I did not want to decide it in half an hour”.
Accordingly, I find that, not only is it wrong to suggest that the internal step in house 2 was kept secret from JFC, but that Fenice were entitled to consider the problem that had been created by JFC on houses 4 and 5 (and the solution that they proposed) on its own merits, and to approve an appropriate solution only once they had considered the options carefully. It was not for them to provide some automatic response to JFC in order to help JFC out of the difficulties which they themselves had created.
As to the argument that, thereafter, Fenice were unacceptably slow in responding to the solution(s) proposed, the documents show that to be an unsustainable criticism. In particular:
The levels problem was first drawn to JFC’s attention by letter dated 11 June 2009.
JFC’s architect, (ATP Group) failed to supply any response until 23 June 2009, a delay of 12 days. That delay, and the reasons for it, is wholly unexplained, and on any view was JFC’s responsibility.
The solution suggested by ATP on 23 June 2009 involved external ramps to the front door from the pavement. The only reason that external solutions were being considered was because it was thought that they would have significantly less impact on the works than internal changes to houses which were well on the way to completion. To the extent that JFC now criticise Fenice (and by extension their own architects ATP) for pursuing external options, I reject that criticism. It was plainly sensible for that option to be explored.
The 23 June option was rejected the very next day because the steepness of the gradients failed to comply with the Building Regulations. There can be no criticism of Fenice either as to the time of response or the reasons for rejection.
On 25 June, ATP had another attempt at an external solution which involved external steps, but that was also promptly rejected for what Mr Foskett fairly accepted were both aesthetic and drainage reasons. Again, there can be no criticism of Fenice as a consequence.
On 30 June 2009, ATP provided an internal step drawing, although it was not clear when that was provided to Fenice.
In any event, on 7 July 2009, Miss Stockhammer asked JFC to review the internal step detail issued by ATP and said, amongst other things, that “the internal steps should be located next to the existing stair to avoid stepping down and then up again, and also more in keeping with the detail as shown on ATP drawings for house 2 (but one step only).” Again, it does not appear that any criticism can be made of Fenice’s actual response (which dealt with the detail of the solution), or the time it took for them to respond.
At a site meeting on 9 July, ATP agreed to produce further drawings as a result of Fenice’s comments, and these were provided on 13 July 2009.
The following day, namely 14 July 2009, there was a site meeting. The relevant minutes read as follows:
Architectural Matters
ATP tabled the latest contractor’s proposals to overcome the defect to the main entrance levels to house 4 and 5. The proposals incorporate an internal step to house 4 and 5.
HDG confirmed the internal step arrangement had been approved and JF should proceed as ATP drawing with the exception of the step to the hall and last step from stairs should align in a single plane.”
Mr Foskett confirmed in his evidence that, as at 14 July, he had everything he needed to get on with the work. He was asked about the pleaded claim, which claimed that the work was delayed until 27 July, because it was only then that the final drawings were approved. He disavowed such a case; his own evidence showed that this was a thoroughly bad point for two reasons. First, it was apparent that, even as late as 22 July, ATP was still issuing revised drawings. The delay in producing drawings by their architects was JFC’s responsibility, and nothing to do with Fenice. And secondly, JFC were not waiting around for these later drawings to be finally approved because, as Mr Foskett confirmed, the parties had agreed at the meeting on 14 July that the works would now commence in accordance with the approval. Procurement began straight away. There was no subsequent suggestion that JFC were waiting for some form of further confirmation before getting on with this aspect of the work.
It is therefore apparent from this analysis that no blame for any delay in relation to the levels issue can possibly lie at Fenice’s door. The whole problem was of JFC’s making. Fenice were entitled to require them to consider a number of options to deal with the problem, and the fact that JFC and/or their architects were sometimes dilatory in doing that was their responsibility, not that of Fenice. Whenever Fenice had to consider and either reject or approve something, they did so within a very short time period. Accordingly, I am in no doubt that there was, as a matter of fact, no prevention here at all. These problem with the levels did cause a significant delay to the end of the project but this delay was principally because of the failure to spot the error earlier (which, as I have explained above, was JFC’s responsibility and there is no pleaded claim to the contrary). To the extent that there were delays after 11 June when the problem had been identified, those delays were, for the reasons that I have explained, entirely the responsibility of JFC.
Delay By British Gas
There was some debate about whether British Gas were a Statutory Undertaker or an Employer’s Person as defined by the contract, but since both of those categories were only relevant to this dispute in the context of clauses 2.26.5 and 2.26.6, both of which were deleted from this contract, it hardly seems sensible to spend very much time on that issue. I note that, although Fenice instructed JFC to enter into a subcontract with British Gas, and their works were included in the contract workscope, in the end British Gas insisted on having their contract with Fenice. Although British Gas were not doing works “solely” in connection with their statutory powers, I am inclined to the view, for what it is worth, that in accordance with Henry Boot Construction (UK) Ltd v Central Lancashire New Town Development Corp (1980)15 BLR 1, British Gas would have been categorised as a statutory undertaker.
British Gas began their work on about 27 April 2009 and completed it shortly after 18 May 2009, which was later than had originally intended. Mr Foskett confirmed in his evidence that this would not have delayed the works as a whole beyond the completion date of 10 July referred to in the progress report of March (paragraph 53 above). That was also confirmed by the minutes of the site meeting on 21 May 2009, after British Gas had finished their works, which still maintained the 10 July completion date. In other words, these works had no effect, and could have had no effect, on the contract completion date. Not only did Mr Foskett accept that, but there was no evidence to the contrary.
Furthermore, once British Gas had carried out their works, all that remained was the paving over and the commissioning. Nobody suggested that that work was on the critical path or that the delays in the completion of the British Gas element of the works had any critical delaying effect. That, therefore, is the end of the claim for delay or time being at large by reference to the work of British Gas.
However, for completeness, I should say that, had there been any evidence of delay on the part of British Gas, that delay would have been JFC’s responsibility. British Gas came to site later than had been planned for the simple reason that JFC’s scaffolding was in the way, and prevented British Gas from carrying out the necessary trenching work. Although Mr Foskett suggested in his evidence that the scaffolding might possibly have been adapted to accommodate British Gas, it is noteworthy that that suggestion was not made by JFC at the time, and it was they who were responsible for liaising with and co-ordinating the works of British Gas.
Delay by EDF
EDF were employed by JFC as sub-contractors pursuant to a contract instruction. Their subcontract workscope was again part of JFC’s contractual workscope. They were carrying out works in connection with the electricity supplies, although they were not works necessitated by statute. I repeat my disinclination to categorise EDF for the purposes of deleted contract clauses (paragraph 65 above). However, to the extent that it matters, I am inclined to agree with Mr Webb that, under the contract, they ought probably to be categorised as ‘statutory undertakers’ and that, to that extent at least, the test provided by Judge Fay QC in Boot v Lancashiremight need to be revisited following the extensive privatisation of these industries which has occurred since 1980. I can see no basis for describing EDF as an Employer’s Person, particularly in circumstances where all the contact and liason with EDF was carried out by JFC.
On the basis of the written and oral evidence, I find as a fact that any problems with EDF’s works were the responsibility of JFC. There is, for example, an extremely useful note (Bundle 2/880) which sets out the repeated difficulties which EDF had as a result of JFC’s failure to have the site ready for EDF’s survey. From July 2008 to February 2009, there were repeated cancellations because the site was just not ready. I find that that was a direct result of the earlier delays which were JFC’s responsibility (paragraphs 53-54 above). When finally, on 9 April 2009, EDF’s surveyor went to site, the survey could not be completed because JFC were asking for two services to be put into the same cupboard, which was contrary to good practice. This problem caused a further delay and was resolved when JFC changed the design of the cupboard and installed a central divider. Again, this delay was JFC’s responsibility.
The survey could not be completed as a result of these difficulties until 18 May 2009. On that date, the works themselves were booked for 2 July. However, on 2 July, the job had to be aborted, again because of the state of the site. That is what the note said and Mr Foskett, who was not on site at the time, could not gainsay it. The photographs taken by EDF on that day also make plain that the installation could not go ahead in such conditions. The works were completed shortly thereafter. There was, however, no evidence that the delay in the completion of EDF’s works had any critical delay on the progress of the works.
The final issue in relation to EDF was concerned with the provision of meters. Mr Foskett agreed that the provision of meters was JFC’s responsibility under the contract. The documents indicate that JFC had applied to EDF for meters on a number of occasions but, for reasons which are unexplained, nothing happened. JFC then asked Fenice to order the meters but, although they were aware of the point, they omitted to tell Miss Stockhammer that particular meters were required, with the result that, in July, when EDF arrived to install the meters, three incorrect meters were installed. That was spotted on 27 July and corrected on 1 August. The problem was plainly the responsibility of JFC (because they were contractually responsible for the meters and/or they had failed to tell Miss Stockhammer to order particular meters which they knew were required) and in any event the delay must be restricted to the few days between 27 July and 1 August. In the light of the delays caused by the problem with the levels, that short delay was not critical and would not in any event amount to an act of prevention.
Accordingly, for all these reasons, any alleged claim based on the prevention principle in respect of the EDF’s works must fail. There was no evidence that EDF’s works caused critical delay, and if they did, that was JFC’s sole responsibility.
Summary on Delay
For the reasons set out above, I conclude that (save for the delays that were the subject of the original extension of time, from which Fenice does not resile) the delays in the earlier part of the works were the responsibility of JFC. The delays in the latter part of the project were entirely the responsibility of JFC because they were responsible for the delay caused by the levels problem. There was no, alternatively no critical, delay caused by either British Gas or EDF and, to the extent that there was, those delays were due to JFC’s various acts and omissions, and in particular the failure to ensure that the site was ready to accommodate these works. In any event, since JFC expressly pleaded, and Mr Sampson expressly accepted, that the delay caused by the levels problem was concurrent with the (alleged) EDF/British Gas delays, my findings in relation to the levels are also fatal to the claim. That is the answer to Issue d).
Accordingly, as a matter of fact, JFC have not made out any liability for delay on the part of Fenice. If the extension of time provisions at 2.25.5 and 2.25.6 had still been included in the contract, JFC’s extension of time claim would have failed. As it is, in the absence of those provisions, JFC have got nowhere near demonstrating that the prevention principle has been triggered. Fenice did nothing to prevent JFC completing the contract by the extended completion date: their failure so to do was entirely their own fault. That is the answer to Issue e).
I note and take some comfort from the fact that those conclusions as to delay, and responsibility for delay, are entirely in accordance with those of Dr Mastrandrea in his detailed decision in the third adjudication, to the cost of which JFC objected so vociferously. Although his decision and this judgment have emphasised slightly different matters, our conclusions are exactly the same. However it was cast, JFC’s delay claim was always without any merit.
Concurrency
In the light of my earlier findings, it is unnecessary for me to deal in any detail with the issue of concurrency. However, I ought to say, for what it is worth, that if, contrary to my findings, there had been delay to the works as a result of British Gas and/or EDF, and if, also contrary to my findings, Fenice had been responsible for those delays as a matter of contract, I would still have concluded that the prevention principle had not been triggered. That is because, as JFC pleaded, and Mr Sampson expressly accepted in his oral submissions, such delays would have been concurrent with the delays caused by either the initial matters for which JFC were responsible, or the later problem with the levels. As a result, the completion date would not have been any earlier than it actually was because of the alleged defaults of Fenice; on this hypothesis, the delays by British Gas and/or EDF (if that is what they were) did not prevent JFC from completing the works any earlier. That is the answer to Issue f).
9: OTHER ISSUES
9.1: Agreement for Liquidated Damages (Issue g))
It is JFC’s case that, if they are liable for liquidated damages, those liquidated damages should be less than the amounts identified in the contract. JFC claim that there was an oral agreement, reached on 24 April 2009, between Mr Christmas and Mr Foskett, in which it was agreed that the amounts of liquidated damages would be reduced to reflect the use of house 4 as a show flat.
There was an argument raised by Fenice that Mr Christmas did not have the authority to reach this agreement. Arguments of that kind are always unattractive and it seemed to me that Mr Christmas may well have had at least ostensible authority to reach that agreement. However, I recognise that there was a system of ‘off the record’ meetings between Mr Christmas and Mr Tebbey of JFC out of which this agreement arose, and it is unfortunate, to say the least, that I heard no evidence from Mr Tebbey. I deal with this issue on the assumption, but without deciding, that Mr Christmas did have the necessary authority.
There was no formal agreement reached. There is, however, a helpful email, also dated 24 April, from Mr Christmas to Miss Stockhammer. That referred expressly to the target completion date of 5 June for house 4 (“5th June for house 4 is on programme”). Mr Christmas went on to say that :
“I have agreed with Jerrams that completion of house 4 will not be a formal handover, Jerrams will maintain security, insurances etc, but we can get access for marketing. I have said that if the house and the externals are complete we would discount this off any claim we might make for LAD’s. Jerrams were going for a formal partial possession.”
It is common ground that how this discount might work was never discussed, let alone agreed.
The first issue is whether there was a legally binding agreement at all. On the basis of his email, and his oral evidence, Mr Christmas accepted that, leaving aside the issue of authority, there was a general agreement that, if house 4 was ready by 5 June, there would be a discount on liquidated damages. However, although it is the claimant, JFC, who is asserting this agreement in these proceedings (and who has pleaded a completion date of 5 June and done its calculations of the discount based on that date), JFC chose not to call Mr Tebbey. Moreover, Mr Foskett’s evidence was unsupportive of such a case. He repeatedly made it clear in his cross examination that there was no agreement as to the date of 5 June (Footnote: 3). Of course, if that were right, then there could be no agreement in law or in fact, because Mr Christmas’ email made it plain that this was his understanding of the agreement. Moreover, Fenice would have had no reason to offer a discount on liquidated damages if they did not believe that JFC were offering something in return. The only suggested benefit that JFC were offering was completion of house 4 by 5 June.
Accordingly, if I accept Mr Foskett’s evidence that the 5 June date was not agreed, then there was no binding agreement in relation to the discount on liquidated damages and that is the end of the point. If, however, I prefer Mr Christmas’ evidence, then there was an agreement, but it was on the basis that completion of house 4 would be by 5 June. I prefer Mr Christmas’ version of events because he was the only witness directly involved in the agreement who gave evidence.
That finding then leads on to the second difficulty for JFC. It was common ground that house 4 was not completed by 5 June. In his cross-examination Mr Foskett acknowledged that house 4 was not complete, and that this delay had nothing to do with any of the matters raised in these proceedings or the matters, such as adverse weather, which had formed the basis of the initial extension. Indeed, there was a snagging list dated 22 June which ran to 28 pages and which showed in graphic form the extensive work outstanding on the house. In other words, the agreement was that liquidated damages would be discounted if house 4 was available as a show home from 5 June but, since it was not, the condition in the agreement was not fulfilled and the agreement was of no effect.
Thus, on any analysis, the alleged agreement in respect of liquidated damages goes nowhere, either because, according to Mr Foskett, there was no agreement at all or, according to Mr Christmas, there was an agreement with which JFC subsequently failed to comply. Either way, that must be the end of the case based on the alleged agreement. However, for completeness, I should add that, in the absence of any agreement as to how the discount was to be calculated, and the myriad ways in which such a discount might be calculated, it seems to me that the agreement was too uncertain to be enforced. For all these reasons, therefore, I do not consider that there can be any change to the rate of liquidated damages in the contract. That is the answer to Issue g).
9.2: Breach of Condition Precedent
An argument not foreshadowed in any earlier document was that offered by Mr Sampson in his closing submissions, to the effect that, although Fenice had complied with the other provisions relating to the deduction of liquidated damages, they had not issued a notice pursuant to clause 2.29.1.2 (paragraph 9 above). It was Fenice’s case that they had done so, by reference to the letter of 24 January 2011. On analysis, Mr Sampson’s argument came down to a repetition of the “not later than 5 days” point which I have rejected for the reasons set out above. Accordingly, there was nothing in this late runner for JFC, and it means that Fenice are entitled to the gross sum of £209,840 by way of liquidated damages. Taking into account the sums admitted as due to JFC on the Final Account, the net sum due by way of liquidated damages is £122,102.36.
10 SUMMARY
For the reasons that I have given in Section 5 above, it is not open to JFC to challenge the decision in the third adjudication. They are therefore not entitled to make any further delay-related claim. It would also mean that Fenice is entitled to liquidated damages as set out above. The other two conclusively arguments, one raised by each side, must fail.
For the reasons set out in Section 8 above, I conclude that JFC’s case as to prevention fails both as a matter of fact and as a result of concurrency. This is the same result as was achieved in the third adjudication.
For the reasons given in Section 9 above, there was no effective agreement as to the variation of amounts due by way of liquidated damages.
Accordingly, the effect of this judgment is that Fenice are entitled to liquidated damages in the sum of £209,840 (gross). That amounts to the sum of £122,102.36 net, taking into account Fenice’s set off, against the sums otherwise due pursuant to JFC’s Final Account of £70,000 odd. The sum of £122,102.36 must be paid within 14 days. That is the answer to issue h) above.
That leaves the sum of £43,000 odd which is disputed on the face of the Final Account. I urge the parties to settle their differences in relation to that sum as soon as possible. That is the only part of JFC’s Final Account claim which still remains open to them. That is the answer to Issue i) above.
I cannot complete this Judgment without mentioning my concern about the hopeless nature of the points pursued by JFC. That is not to be taken as a criticism of Mr Sampson, who did his best to answer my questions and keep the case, such as it was, on the road. But in circumstances where they had already lost on all these points in front of the adjudicator, and where their costs for pursuing this flawed re-run were £75,000, I am troubled as to the nature and quality of the advice which JFC may have received along the way. It may well be that this aspect of the case will be explored in greater detail on any application for costs.