Clark Electrical Ltd v JMD Developments (UK) Ltd

This is an application for summary judgment by Clark Electrical Limited (“CEL”) against JMD Developments (UK) Ltd (“JMD”). CEL seek to enforce an adjudication award of £194,369.12 plus VAT made on 12^th April 2012 by Mr Lawless, the adjudicator, pursuant to what he held to be an ad hoc adjudication agreement made between the parties on or about 13^th March 2012 when JMD paid him an appointment fee of £6,000.

JMD contend that there is no statutory or contractual right to an adjudication and contend that the adjudicator was wrong to find that the parties had formed an ad hoc adjudication agreement either on the basis that he did or on any other basis. Accordingly it contends there was no jurisdiction to make the award and that it is not bound by the award.

Mr Beresford on behalf of CEL accepts that there was no express contractual right in the contracts to an adjudication and that, for the purpose of this summary judgment application, it is arguable that there is no statutory right to an adjudication. However he contends that it is clear that JMD have agreed to be bound by the adjudicator’s decision in the full sense of the word – i.e. both in respect of the award itself and in respect of his jurisdiction to make the award. In support of this contention he relies on an e-mail sent by Mr Teale (an employee of JMD) to Mr Lawless on 7^th March 2012 and on the payment of £6,000 by JMD on 13^th March 2012. In those circumstances he submits that there is no defence to the enforcement of the award.

Before considering the matter in more detail it is right that I should immediately acknowledge the very considerable assistance I have received from Counsel in this application. Mr Hussain helpfully referred to all the relevant decisions in his very full skeleton argument and the oral submissions from both Counsel were concise, clear and extremely helpful.

JMD engaged CEL to carry out certain electrical works at the premises of Sedacol UK Limited at Selby North Yorkshire. The site was being developed as an alcohol distillery. JMD was itself under a subcontractor to the Main Contractor Giordano and C Spa.

As summarised in the Particulars of Claim the works comprised 8 packages:

There is a dispute as to whether the works were comprised in one or eight subcontracts. There is also a dispute as to whether the works fall within the exception in section 105(2)(c)(ii) of the Housing Grants, Construction and Regeneration Act 1996 (“HGCRA”) in that JMD contends that the electrical works were carried out for the process and production on a site for construction of excluded plant.

Both of these disputes are relevant to the question of whether there is a statutory right to an adjudication. However, in the light of Mr Beresford’s concession in relation to the statutory right I need say nothing more about these disputes.

CEL carried out works on the site between September 2011 and January 2012. CEL claims (based on an application for payment dated 22^nd December 2011) amount to £487,459.87. Payments totalling £309,610 were made by JMD between 16^th November 2011 and 13^th January 2012.

On 2^nd March 2012 CEL served on JMD a Notice of Adjudication on the ground that JMD had failed to make adequate and proper payments. It claimed £177,849.87 plus VAT.

On 5^th March 2012 the Construction Industry Council appointed Mr Lawless as adjudicator. On the same day Mr Lawless wrote a long letter with two enclosures to each of the parties. A number of points have been made about this letter. The letter included an outline timetable for the adjudication which provided that JMD respond to the Referral no later than 21^st March 2012. Second he enclosed his Schedule of Conditions. He stated that in line with Section 10 he would raise an Invoice and send it to each party in due course.

The Schedule of Conditions is headed In the Matter of the Housing Grants, Construction and Regeneration Act 1996. Section 9 deals with the adjudicator’s fees and provides for an hourly rate and expenses. Section 10 requires each party to contribute equally as security for the fees an appointment fee of £6,000.

On 7^th March Mr Lawless wrote to each of the parties enclosing a fee invoice for £6,000 plus VAT said to be due for payment by 14^th March 2012. The invoice stated that the moneys were due in respect of the Appointment fee as per section 10 of the Schedule of Conditions.

On 7^th March 2012 Shaun Teale sent to Mr Lawless (with a copy to CEL) the e-mail now relied on by Mr Beresford. It reads:

On 13^th March 2012 JMD paid Mr Lawless’s invoice for £6,000 plus VAT by direct bank transfer. There was no covering letter.

Shortly thereafter JMD instructed Peter Dale of P W Dale Consulting Ltd to act for them in relation to the adjudication.

On 19^th March 2012 Mr Dale wrote to the adjudicator (with a copy to CEL’s agent – Mr Sutcliffe). Mr Dale drew attention to section 105(2) of HGCRA. He submitted that the electrical work was excluded under that section and contended that Mr Lawless had no jurisdiction to proceed with the adjudication. He submitted that the payment of the £6,000 by JMD was not to be treated as its acceptance that Mr Lawless had jurisdiction to adjudicate.

There followed an exchange of submissions between Mr Dale and Mr Sutcliffe on the jurisdiction issue. Mr Sutcliffe maintained that there was statutory jurisdiction and Mr Dale maintained his position that there was not. No part of the submissions were directed to the question of whether the parties had made an ad hoc agreement to adjudicate.

In the light of Mr Beresford’s concession as to statutory jurisdiction it is not necessary to refer to the nature of the arguments in any more detail. It is perhaps worth noting that in the letter of March 27^th 2012 Mr Dale concluded:

On 2^nd April 2012 the adjudicator made a detailed non binding decision on jurisdiction. It is a lengthy document of some 41 pages followed by a number of Appendices. In summary he held:

On 3^rd April 2012 JMD wrote to the adjudicator challenging the non binding conclusion and stated that it would take no further part in the adjudication process. On 10^th April 2012 Mr Dale wrote to the adjudicator confirming this, purporting to terminate the contract with the adjudicator and denying any liability for any fees of the adjudicator.

On 12^th April 2012 the adjudicator awarded CEL £177,453.88 exclusive of VAT.

I was referred to four cases where ad hoc agreements have been discussed – the decision of Devlin J (as he then was) in Westminster Chemicals v Eicholz [1954] 1 LlR 99, 105 – 106, the decision of Dyson J (as he then was) in Project Consultancy v Trustees of Gray Trust [1999] BLR 377, the decision of HHJ Gilliland QC in Nordot Engineering Services v Siemens Plc (SF00901 TCC 16/00) dated 14 April 2000 and the decision of the Court of Appeal in Thomas-Frederic’s (Construction) v Wilson [2004] BLR 23.

There is a review of the previous authorities in the judgment of Simon Brown LJ in Thomas-Frederick and it is unnecessary for me to repeat it here. In my view the following propositions can be derived from the authorities:

In paragraph 33 of his judgment Simon Brown LJ summarised the proper approach in a case where as here a claimant seeks to enforce an award with an application for summary judgment:

This case involved a claim by the adjudicator for his fees in a case where the Defendant had contested his jurisdiction. It is relevant to the present dispute because in his non binding decision in this case Mr Lawless has relied on the payment of the £6,000 as evidence of an adjudication agreement between CEL and JMD. In his judgment Ramsey J drew a clear distinction between the contract between the adjudicator and the parties (“the adjudicator's contract”) and adjudication agreement between the parties themselves.

In paragraphs 32 to 34 of his judgment Ramsey J said:

If there is a valid jurisdictional challenge and if a party has not participated in the adjudication then, on the basis of the view I have expressed above, that party can have no liability for the fees and expenses of the adjudicator.

If, however, a party has participated in the adjudication process, albeit without prejudice to its contention that the adjudicator did not have jurisdiction, then in principle by participating and thereby requesting the adjudicator to adjudicate on the dispute I consider that the party will generally be liable for the reasonable fees and expenses of the adjudicator on the same basis as set out above.

I emphasise that this is a matter of contract as between the adjudicator and the relevant party. If the adjudicator did not have jurisdiction then any decision made by the adjudicator will be null and void. This will preclude one party from recovering from the other party any sums based on the adjudicator’s allocation of the fees and expenses contained in the invalid decision.

Mr Beresford’s primary submission is that JMD submitted to the adjudicator’s jurisdiction in the full sense by virtue of the e-mail of 7^th March 2012 and the subsequent payment of the adjudicator’s appointment fee. He submits that once the submission to jurisdiction had been made it was irrevocable with the result that the numerous protests that were made by Mr Dale were of no effect. They were made too late.

In support of his submission Mr Beresford accepts that the e-mail must be read as a whole but relies in particular on 3 passages in the e-mail –

Mr Beresford submits that these passages show that JMD were participating in the adjudication process and thus submitting to the jurisdiction of the adjudicator in the full sense.

Mr Hussain refutes this interpretation of thee-mail and of the conclusions that Mr Beresford seeks to draw from it. He submits that the payment of the appointment fee is of no assistance in determining whether there was an ad hoc agreement to abide by the decision of the adjudicator in the full sense. He points to the decision in Linnett and makes the point that there can still be liability for the adjudicator’s fee where there is a legitimate challenge to the jurisdiction. Thus payment of the fee does not assist in determining whether there was a submission to the jurisdiction in the full sense. He submits that the e-mail has to be read in context. He points to the fact that CEL were, as expressed in the e-mail, unrepresented, not familiar with the adjudication process and had not, at the time of the e-mail, received the documentation which should have been served on them. He submits that the three passages relied on by Mr Beresford have to be read with those factors very much in mind. He submits when read in that context it is fanciful to suggest that any of the three passages amount to a clear and unequivocal submission to the jurisdiction. In his submission when read as a whole the e-mail is doing no more than explaining that JMD have not received the relevant documents, are unrepresented are unfamiliar with the process and accordingly need more time and guidance on the process.

As Lord Hoffmann has explained in a well-known passage:

“Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonable have been available to the parties in the situation in which they were at the time of the contract.”

In this case the e-mail was addressed to the adjudicator so that the reasonable person is a reasonable adjudicator. Thus I have to determine the meaning which would be conveyed a reasonable adjudicator receiving the 7^th March 2012 e-mail. I also agree with Mr Hussain that the background knowledge available in this case to the reasonable adjudicator of the e-mail would include the three matters contained in the e-mail, that is to say, that JMD had not received the relevant documentation, that it was unrepresented and unfamiliar with the adjudication process.

It is to my mind not without significance that Mr Lawless did not interpret the e-mail as a submission to the jurisdiction in the full sense. His ruling on 2^nd April was described as “Non binding”. If there had been a full submission it would have been binding. Furthermore he did not find it necessary to refer to the e-mail in the whole of his lengthy judgment.

Whilst I accept that a clear and unequivocal representation may not be necessary in every case this e-mail is, as Mr Hussain pointed out, at the opposite end of the spectrum. It contains no reference to the adjudicator’s decision at all. As he says it is simply a request for guidance as to the procedure and a request for more time to deal with the matter having regard to the fact that JMD had not, at that time received the relevant documents.

In all the circumstances I find it impossible to interpret the e-mail as a whole in the way suggested by Mr Beresford. It is not, in my judgment, a submission to the jurisdiction of the adjudicator in the full sense.

I also agree with Mr Hussain, for the reasons he gave, that the payment of the appointment fee by JMD does not amount to a submission to the jurisdiction in the full sense. It is, at its highest, equivocal. As Ramsey J demonstrated in paragraph 70 of his judgment JMD could be liable for his fee even if it contested the jurisdiction. It follows that the decision of Mr Lawless on jurisdiction based on an ad hoc agreement was in my judgment not plainly right. In my judgment it was, with respect, wrong.

It follows that this application for summary judgment fails and falls to be dismissed.

In the course of her witness statement Ms Shelston invited me to strike out the claim. However there was no cross application for summary judgment by JMD and Mr Beresford (possibly with some encouragement from the bench) invited me not to deal with it. It would not be possible to strike out the claim without deciding that the claim for a statutory adjudication was fanciful in the light of section 105(c)(ii) HGCRA. Although the point is addressed in Mr Hussain’s skeleton argument it is not addressed by Mr Beresford at all. In the absence of a formal cross application (together with the appropriate fee!) it would not be right to deal with that application at this stage. If JMD wish to bring such an application I will give appropriate directions when judgment is handed down.