J G Walker Groundworks Ltd v Priory Homes (East) Ltd

This is an application by the Claimant for summary judgment to enforce the decision of an Adjudicator, Mr. Richard Silver. By his Decision dated 11 October 2013 he awarded the Claimant the sum claimed, namely £38,832.51, plus interest. He also directed that the Defendant should pay his fees and expenses of £8,260 plus VAT.

The application was issued on 22 October 2013 and, in accordance with the practice of this court, directions were given for an expedited hearing which then took place on Friday, 22 November 2013.

By a simple purchase order dated 22 January 2013 the Defendant engaged the Claimant to construct roads, sewers and groundworks for a project to build eight new bungalows. According to the Claimant, variations and additions to the works were agreed during the course of the project and the value of these was included in applications for payment that were then submitted by the Claimant.

The Claimant submitted three applications for payment as follows:

The Defendant paid JGW/15 and JGW/24 in full. It did not pay JGW/28. However, on 7 June 2013 it made a payment on account of £20,000. It refused to pay anything further.

On 10 September 2013 the Claimant referred the dispute about the non-payment of the balance of JGW/28 to adjudication. As I have already said, it was successful because it ws awarded the sum claimed.

The skeleton argument served on behalf of the Defendant in accordance with the directions of the court relied solely on what were described as “serious errors and inconsistencies” in the Adjudicator’s award such that it could not stand. These points, which were wholly misconceived, were soon abandoned. On the morning of the hearing the Defendant served a further skeleton argument raising two new points, both of which were said to go to the jurisdiction of the Adjudicator.

The first point was based on paragraphs 5-7 of the Referral Notice, which were in these terms:

“5.

In January 2013, the parties entered into a construction contract for JGW to supply and fix roads, sewers and groundworks pursuant to the Purchase Order dated 22 January 2013 exhibited at Appendix 2 (“the Contract”).

6.

The Contract was for the works to be carried out at 37 Lampits Hill, Corringham (“the Site”), a development site for 8 new bungalows. The agreed price for the works was £137,898.15 as per the Bill of Quantities exhibited at Appendix 3.

7.

Variations to the works were agreed verbally on various dates between Gary Walker and Richard Pither of Priory Homes on site. A list of variations and the agreed valuations for these variations is exhibited at Appendix 4. The total value of the works carried out and invoiced by JGW was £158,219.27.”

Mr. Alan Tunkel, who appeared for the Defendant, submitted that the definition of the Contract in paragraph 5 was very precise and did not include what was due under what he called the “varied Contract”. He submitted that this definition in the Referral Notice was picked up and adopted by the Adjudicator at paragraphs 25 and 28 of his Decision, where he said:

“25.

JGW say in January 2013, the parties entered into a construction contract for JGW to supply and fix roads, sewers and groundworks pursuant to the Purchase Order dated 21 January 2013 (“the Contract”).

…

28.

Having reviewed the Contract I agree with JGW that it was for JGW to supply and fix roads, sewers and groundworks at the Site for the sum of £137,898.15 as per the Bill of Quantities.”

Mr. Tunkel relied on the fact that the Adjudicator referred to “the Contract” at many places in his Decision, never to the contract as varied. Accordingly, he submitted, the Adjudicator only had jurisdiction to determine what was due under “the Contract”, which meant that he had to ignore any variations (whether agreed or not).

I cannot accept this submission. The Notice of Intention to Refer a Dispute to Adjudication (the “Notice of Adjudication”) described “The Contract” in these terms:

“The Contract

In January 2013 JG Walker Groundworks Ltd (“JGW”) was contracted by Priory Homes (East) Ltd (“Priory Homes”) to supply and fix roads, sewers and groundworks in accordance with the Purchase Order dated 21 January 2013. The works were carried out at 37 Lampits Hill, Corringham (“the Site”), a development plot for 8 new bungalows. The agreed price for the works was £137,898.15. Variations to the works were agreed verbally between the parties and the total value of the works carried out by JGW was £158,219.97.”

Whilst Mr. Tunkel accepted that this definition clearly embraced the varied work, he submitted that it has to be read with and qualified by the definition of “the Contract” in the Referral Notice. Whilst there may be scope, in the case of ambiguity, for reading the Notice of Adjudication in the light of the Referral Notice, it is quite clear that it is the Notice of Adjudication, not the Referral Notice, that defines the scope of the referral: see paragraph 1 of the Scheme for Construction Contracts. There is no ambiguity in this definition of the Contract: it plainly includes the variations.

But looking at the matter more broadly, Mr. Tunkel’s approach is in my view too subtle by half. What the Referral Notice described as “the Contract” was the initial agreement between the parties for the carrying out of the works. It consisted of a simple order and its only express terms, in addition to the price, were as follows:

“To supply and fix roads, sewers and groundworks as per your Bill of Quantities Issue B, dated 15 January 2013.

Order Value, subject to re-measure on completion

Notes

Valuation date 25^th of each month

Priory Homes (East) Ltd, will have 7 Days to certify from receipt of a fully particularised Valuation with payment due 7 days thereafter.”

The fact that the contract was expressly made subject to re-measurement on completion suggests that the parties anticipated that there would be variations to the scope of the works over the course of the contract. So far as I am aware, there was no variation to these express terms of the contract. What was varied, according to the Claimant, was the scope of the works. The additional work is set out in full in a document attached to the invoice JGW/28 dated 30 April 2013. Also attached to this invoice was a document entitled “Interim Valuation” which set out the sums claimed for the various different parts of the works and the amounts previously paid in respect of each item. This was dated 25 April 2013, and was Interim Valuation No. 3.

The Adjudicator stated in paragraph 32 of the Decision that he had studied the valuation of 25 April 2013, and so he must have appreciated that it included claims for additional work (because it said so on its face and the list of additional work was attached to it).

In the Notice of Adjudication the dispute was described in these terms:

“The dispute to be determined by adjudication is what sum is due from Priory Homes to JGW and whether they are entitled to withhold the monies pursuant to the Payless Notice dated 26 July 2013.”

As I have already pointed out, paragraph 1 of the Scheme provides that the dispute to be referred to adjudication is to be defined in the Notice of Adjudication. In these circumstances I consider that the Adjudicator was required to determine what was due to the Claimant following the issue of JGW/28 as at the date of the referral. This involved a consideration of the effect, if any, of the Payless Notice. The sum that was due to the Claimant at the time of the issue of invoice JGW/28 would have been the value of all work properly carried out pursuant to the agreement made on 22 January 2013, including the value of any work that was carried out pursuant to additions ordered by the Defendant.

This is exactly what the Adjudicator assessed. At paragraph 80 of his Decision he answered that question. He then went on to note that the Claimant had accepted that there should be a reduction to that amount in the sum of £7,483.55 in respect of a finishing course of tarmac that had not been completed. The Adjudicator therefore deducted that sum from the amount that he had assessed as due under JGW/28. He then awarded the Claimant the balance.

I therefore have no hesitation in concluding that the Adjudicator acted within his jurisdiction when he took into account the value of the additional work that the Claimant said it had carried out when assessing what sum was due to the Claimant following the issue of invoice JGW/28. The Defendant’s submissions to the contrary had no merit whatsoever.

I turn now to Mr. Tunkel’s second point. This was that the question that was referred to the Adjudicator was about the value of the Claimant’s final account, and not what was due under an interim valuation. He relied on the many references in the correspondence to the Claimant’s final account: for example, in their solicitors’ letter of 14 August 2013. In that letter the Claimant’s solicitors, Birkett Long LLP, wrote to the Defendant’s solicitors and said this:

“Your client has delayed agreeing and making payment of the final account to our client for over three months.”

Mr. Tunkel pointed out that this referred to a period of delay that must have started in early May 2013, very shortly after JGW/28 was issued. However, the letter went on to say this:

“We are informed that your client’s quantity surveyor, Michael Kinsella, met with our client’s Gary Walker on site in June and provided him with a breakdown of the work carried out by our client. We are also informed that Mr. Kinsella walked the site and measured the works at that time. Your client’s quantity surveyor therefore has all the information he needs to agree the final accounts. Our client cannot understand the delay in finalising the accounts.”

I do not know what the document was that was described as “a breakdown of the work carried out” and was said to have been provided to the Defendant at the meeting referred to, but that occasion appears to have been when the re-measurement took place. Apart from the deduction of the £7,400 odd, it appears to be the case that the sum claimed by the Claimant has not changed since the issue of JGW/28. Indeed, on 29 July 2013 the Claimant issued a statutory demand in the sum now claimed. This also included the reduction of £7,400 odd, but otherwise the figure said to be due was that set out in JGW/28 (after making an adjustment for the £20,000 paid on account by the Defendant).

As I have already mentioned, JGW/28 had attached to it the Claimant’s valuation headed “Interim Valuation”, which was dated 25 April 2013 (being the monthly valuation date). Leaving aside its title, this document does not bear the characteristics of a final account. Further, the valuation date of 25 April 2013 preceded the completion of the works, which on the Claimant’s case was not until the end of that month (and on the Defendant’s case, very much later).

Mr. Tunkel submitted that at the adjudication both parties accepted that the dispute was about the Claimant’s final account. At paragraph 2.4 of his second skeleton argument he put it this way:

“It was common ground between JGW and Priory that the dispute was about the final payment due to JGW under the contract pursuant to the final account and valuation that had been rendered.”

However, this submission is not borne out by what the Defendant itself said in the course of the Referral. In its Response, at paragraphs 7-9, the Defendant submitted:

“7.

As to JGW/28, the Notice of Intention to Refer a Dispute to Adjudication referred to it being a final valuation with the final account calculation. JGW seeks to widen the dispute referred by referring to it as an interim valuation in the Referral.

8.

By its own case JGW suggests that works were virtually completed by end of April being the date when the last valuation was issued.

9.

Priory Homes submits that the matters referred to in the Referral and Notice is that of the final account valuation. There being no provision within the contract in relation to the payment of the final account the Scheme shall apply.”

In my view, paragraph 7 was in one sense a correct appreciation of the situation, because the Claimant was arguing that JGW/28 was an interim valuation. However, for the reasons that I have already given I do not consider that this was in any way widening the scope of the referral. In the Claimant’s submissions at paragraphs 19-22 of the Referral Notice, under the heading “Payment pursuant to The Scheme”, the Claimant set out the provisions of the Scheme that relate to interim payments (namely, paragraphs 4 and 8 of Part II of the Scheme).

I have already concluded that the dispute referred to adjudication was the amount to which the Claimant was entitled following the issue of JGW/28 on 30 April 2013. The fact that the Claimant’s description of the dispute in the Notice of Adjudication referred to the Payless Notice dated 26 July 2013 implicitly raised the question of the status of JGW/28: because unless it was a notice of final payment, a Payless Notice issued at the end of July 2013 could have had no conceivable relevance because it would have been issued way out of time.

The Adjudicator said, at paragraph 57 of his Decision, that he agreed with the Claimant that JGW/28 was an interim application, with the result that paragraph 4, not paragraph 5, of the Scheme applied. Since paragraph 4 of the Scheme is concerned with interim valuations, whereas paragraph 5 is concerned with the final payment, this conclusion in the Decision makes it clear that the Claimant must have been contending that JGW/28 was an interim application.

If, as Mr. Tunkel submitted, it was accepted on both sides during the referral that JGW/28 was a final account, the only debate before the Adjudicator would have been about the date of completion. This is because, by paragraph 5 of the Scheme, that would have determined the Final Date for Payment and hence would have determined whether the Payless Notice was effective. In that context, there would have been no need for any discussion about the effect of paragraph 4 of the Scheme.

For all these reasons, I consider that Mr. Tunkel’s second point has no more merit than his first point. The Adjudicator plainly had jurisdiction to determine whether or not JGW/28 was an interim application or a final application. He determined that point against the Defendant, and in my view in doing so he reached the right conclusion (although whether in fact he reached the right conclusion is irrelevant, because he is was clearly answering the right question).

For the reasons that I have given, neither of Mr. Tunkel’s challenges to the jurisdiction of the Adjudicator succeeds and so the Claimant is entitled to summary judgment.

However, Mr. Tunkel did identify one error made by the Adjudicator. That is when he found that the Final Date for Payment was 19 May 2013. This was based on a slip. Having found that the Due Date was 2 June 2013, the Adjudicator subsequently referred to this date as 2 May 2013. That led him to find that the Final Date for Payment was 19 May, instead of 19 June 2013. Accordingly, that is the date from which interest should run.

Apart from that, the Claimant is entitled to the relief sought in the Amended Particulars of Claim. However, the Claimant’s solicitors must give the undertaking that they have promised that when they receive from the Defendant the sum due in respect of the Adjudicator’s fees, that sum will be paid forthwith to the Adjudicator.

I direct that a copy of this judgment, when formally handed down, is to be provided to the Adjudicator by the Claimant’s solicitors.

Since I have concluded that the Defendant’s challenge to the adjudicator’s jurisdiction was without merit, I consider that the Defendant should be required to explain why it should not pay the costs of the application on an indemnity basis. I will therefore give the Defendant permission to make short submissions (if it wishes) within three days of the issue of this judgment in draft as to why it should not pay the Claimant’s costs of the application (but not of the amendment - which the Claimant should bear) on an indemnity basis. The Claimant has permission to put in a reply to those submissions within 48 hours thereafter. I will then determine the question on paper.