Broughton Brickwork Ltd v F Parkinson Ltd

THE JUDGE: This is an application for summary judgment to enforce a decision of an adjudicator, Mr Paul Greenwood, made on 4^th September 2014, in which he decided that the defendant should pay the claimant £96,000 odd including interest. The defendant’s case is that there should be no enforcement of that decision because there was a real and a serious breach of natural justice. In short, it is submitted by the defendant’s counsel, Miss Day QC, that this is a case where something has genuinely gone seriously wrong, and where what has occurred was not rough justice, which she accepts cannot prevent a decision being enforced, but no justice at all. The defendant’s first specific complaint is that the adjudicator decided a particular point which was of considerable importance to the determination of the dispute on a basis which was not the way in which the parties had argued it, and without first giving the parties the opportunity to comment. Its second complaint is that in deciding that point the adjudicator failed, through inadvertence, to address a particular document which the defendant had placed before him and which, had he considered it, would have led to his reaching a different conclusion in the defendant’s favour, as indeed says the defendant the adjudicator has subsequently acknowledged.

In short the claimant’s case, as presented by its counsel Mr Lee, is that there was no breach of natural justice at all in this case, let alone a real or a serious breach. In summary Mr Lee submits that the adjudicator was not just entitled but required to decide the point which he did, and that there was no need for him to revert to the parties before doing so. He also submits that his inadvertent error in not seeing and, therefore, not considering the particular document was firstly largely contributed to, if not wholly caused, by the defendant’s own conduct and secondly, and in any event, was no more than a mere procedural error which does not invalidate the decision.

The defendant building contractor, F Parkinson Limited, engaged the claimant, Broughton Brickwork Limited, as a subcontractor to carry out certain works at sites in Warrington pursuant to the terms of the subcontract made between them. The terms and conditions of sub-contract applied the adjudication provisions contained in the Scheme for Construction Contracts and, in that regard, I have been referred to paragraph 17 of the Scheme, which provides that “the adjudicator shall consider any relevant information submitted to him by any of the parties to the dispute and shall make available to them any information to be taken into account in reaching his decision”. The terms and conditions also included a clause providing for service of contractual notices either by post, e-mail or facsimile, and that if served by e-mail or facsimile between 9am and 5pm on a business day they would be deemed received on that day.

In June 2014 the claimant submitted its interim application number 12 which, it is common ground, the defendant has not paid. The adjudicator subsequently found, contrary to the defendant’s case in the adjudication, that this application was a valid payment application, that no valid payment notice or pay less notice had been served by the defendant in accordance with the contractual timetable which he decided was applicable (in short, a 35 day payment cycle with provision for when notices were required to be served by the defendant) and, accordingly, that there was no defence to the claim for payment of application 12 in itself. These findings are not, and cannot be, the subject of challenge in these enforcement proceedings. In particular, there can be and is no challenge to his conclusion that under the contract, as he construed it, a pay less notice had to be effectively served within twelve days of the due date for payment.

He also however had to go on to resolve a further defence raised by the defendant as to the impact of the subsequent payment cycles numbered 13 and 14, and it is his decision in relation to the subsequent pay less notices which the defendant contended had been served in accordance with the contract in relation to those payment cycles which is at the heart of this case.

In order to address the parties’ respective cases I need to refer to the way in which this issue arose and was argued by the parties before the adjudicator and, in particular, the way in which the response incorrectly identified a document upon which the defendant relied to prove its case as to service of a subsequent pay less notice. Nothing of any relevance was said about these subsequent payment cycles in the referral notice, but it was something which was raised by the defendant by way of defence in its response. In particular, in paragraph 4.3 the defendant set out the relevant chronology, as it asserted it to be, in relation to payment cycles 12, 13 and 14. For present purposes it suffices to note that in relation to payment cycle 14 its case was that on 30^th July 2014 it issued a pay less notice against payment notice number 14. Mr Lee drew to my attention that it said “issued” as opposed to “serve” and also that payment notice 14 was issued on 18^th July so that if the notice had been served on 30^th July it would have been within time on the basis of the adjudicator’s conclusions but, if served after that date, would not have been.

I also refer to paragraph 7.1 and 7.2 of the response, which introduced and set out the defendant’s case to the effect that payment cycle 12 had been superseded by payment cycles 13 and 14 and, in particular, by the pay less notices issued in relation to those cycles. Paragraph 7.2 refers back to the chronology in paragraph 4.3 and asserted that it was clear from that chronology that the notice of adjudication was served by the claimant after it had issued payment notices numbers 13 and 14 and the defendant had issued pay less notice numbers 12 and 13. Then these words appear in brackets: “Pay less notice number 14 was issued to Broughton before the referral notice was served”. Immediately after the words, “Pay less notice numbers 12 and 13”, there appears in brackets page references to the documents which accompanied the response, namely 143 to 183. Immediately after the words “Pay less notice number 14” there appears in brackets a reference to pages 184 to 204. It is common ground that if one goes to page 184 of the bundle which was before the adjudicator, one finds the defendant’s pay less notice in relation to payment cycle 14 which is dated 30^th July 2014 and which, as Mr Lee noted, contained no indication on its face that it was to be or had been submitted by e-mail as opposed to any other particular means. It is also common ground that if one was to turn back to page 183 which, as I have already said, was said to be the last page relevant to pay less notices number 12 and 13, that is in fact a copy of an e-mail sent by the defendant to the claimant at 16.44 hours on 30^th July which states that it attaches a copy of pay less notice number 14 and that a hard copy will be sent in the post.

In his submissions Mr Lee contended that there was material from which the court could draw the inference that this was not simply an inadvertent error but a deliberate tactic by the defendant, who did not want to prejudice its case in relation to service of the earlier pay less notices by drawing specific attention to the fact that the only evidence it had of service by e-mail of any of these notices related to notice number 14. Miss Day strongly contested that it was proper for the court to draw such an inference, at all or on any view on a Part 24 application. I am satisfied that there is no proper or sufficient evidential basis for me to make such a finding and I decline to do so.

However, I am satisfied that it was an error on the part of the defendant which on any view caused, or at least materially contributed to, the problem which subsequently emerged. In my view the error was threefold: (1) the failure specifically to assert in the body of the response that pay less notice 14 was, in fact, served by e-mail as opposed to any other means; (2) the failure in the body of the response specifically to draw to the adjudicator’s attention the existence or relevance of the e-mail; (3) the misnumbering of the page references, so that if the adjudicator was looking for himself for evidence in relation to service of pay less notice 14 they would naturally look at page 184 onwards rather than to page 183.

Returning to the response, in paragraph 8.2(1) there appeared a positive case to the effect that even if the defendant was wrong about the 35 day payment cycle (that is the point to which I have referred as to when, contractually, notices were required to be served by the defendant), pay less notices number 13 and 14 were served in time on Broughton’s own case in any event. It follows that the defendant was advancing a positive case that it was the claimant’s own case that these notices had been served on time. So far as I have been made aware, the defendant did not adduce or refer to any specific evidence in support of that – in other words there is no evidence to the effect that that is something which the claimant had positively averred in documentation put before the adjudicator.

So far as the claimant’s reply to the response is concerned Mr Lee drew my attention to paragraph 1.2 where it was said that where the referring party did not deal with a specific point raised in the response, it was not to be regarded as admitting the responding party’s case. The only material part of the reply is section 7, which dealt with the supersession of application number 12 and set out the claimant’s positive case in relation to payment cycles 13 and 14. It did not include any positive case in relation to the time of service of pay less notice 14. Thus the reply did not specifically join issue with the defendant in relation to paragraph 8.2(1), but neither did it admit what was being said, expressly or impliedly. It follows in my view that the proper analysis is that the defendant had advanced a positive case in the response which was not admitted by the claimant in its reply so that it was for the defendant to establish that case to the adjudicator’s satisfaction.

There was no material addition to the defendant’s case in its rejoinder, but in the surrejoinder served by the claimant there was a further section at paragraphs 5.6 through to 5.8, again headed “Supersession of application number 12”, where in paragraph 5.7 a positive case was advanced to the effect that pay less notice 13 was not served or received on the date on which it was issued and, thus, was invalid, whereas in paragraph 5.8 in relation to pay less notice 14 it simply said that was issued on 30^th July 2014, after the notice of adjudication had been served, so that as at that time there was no dispute in respect of that application for payment. It follows that although the claimant was advancing a positive case in relation to the date of service of pay less notice 13 it was not advancing an equally positive case in relation to pay less notice 14. Again, however, neither was it making any admission as to the date of service of pay less notice 14 so that it remained, it seems to me, a point in issue in the adjudication.

I turn now to the decision. It is a lengthy and detailed decision. Fortunately I only need to make reference to the particular section which is relevant to this application, which begins at paragraph 136. There the adjudicator began to consider whether it was appropriate for him to take into account the subsequent pay less notices. In paragraph 134 he had made a positive finding in relation to pay less notice 12 that it was posted and thus not deemed served until after the requisite contractual date, as he found it to be, so that it was served late and was of no effect.

In paragraphs 137 through to 139 the adjudicator recorded that he accepted a submission by the defendant that he was obliged to take into account developments in the subsequent payment cycles 13 and 14. Mr Lee submitted that that is a decision which is wrong as a matter of law, but he recognises that there is no application before the court seeking a final conclusive determination to that effect. Insofar as material he submits that it is relevant to any question which may arise as to whether or not any breach of natural justice has caused substantial injustice to the defendant. His submission, in short, is that it has not because the adjudicator’s decision on this point was obviously wrong. I am not prepared to make such a finding in the context of a summary judgment enforcement application. It seems to me that this was the adjudicator’s approach, whether right or wrong, and unless the court can obviously conclude, which I am not prepared to do, that it was a decision which was so obviously wrong that no question of substantial injustice could possibly arise, the court should not be drawn into embarking on the process which Mr Lee invites me to do.

I turn then to paragraph 140 which Miss Day submits is really at the heart of this case and which reads as follows:

“Whilst I have been provided with the details of when valuation numbers 13 and 14 were issued by Broughton, neither Broughton nor Parkinson have provided me with any submissions on these valuations, in particular whether the pay less notices served in respect of these valuations were or were not valid. No doubt Broughton have not done so because they maintain I should not be considering these. I nonetheless have sufficient information in the documents provided to me to consider whether I consider these pay less notices were valid.”

Miss Day submits that this was simply a wrong approach. What the adjudicator should have done she say was to go back to the parties and invite their comments as to the validity of the valuations and, in particular, to enquire whether or not there was any issue as to whether or not pay less notice 14 had been served in accordance with the contractual time limit on the claimant’s case. She says that if he had done so he would inevitably have had his attention drawn to the e-mail to which I have referred at page 183 and would have concluded, equally inevitably, that it had been served in time.

Before dealing with that submission I should record that in paragraphs 141 and 142 the adjudicator decided that pay less notice 13 had not been served on time and, in paragraphs 143 and 144, reached the same conclusion in relation to pay less notice 14. It is clear from those paragraphs that the adjudicator reached that decision on the basis that he decided that the notices had been served by way of letter and, thus, were not deemed to have reached the claimant by the relevant contractual date. Finally, in paragraph 145, on the basis of those conclusions he decided that these pay less notices were of no effect, since they were both served late, and were consequently invalid.

On receipt of that decision the defendant’s solicitors communicated their concern about the failure to refer to the e-mail to the adjudicator, which produced an e-mailed response by him to both parties’ solicitors saying that, having checked the hard copy documents in his possession, he found that page 183 was loosely adhered to the preceding page 182, so that it was not viewed by him in making his decision, since he used the hard copy documents to reach his decision rather than the electronic versions with which he had also been supplied. He also said that in view of the fact that the pay less notice did not indicate on its face that it was sent by e-mail, and because he did not see the e-mail, it had appeared to him that the letter had been sent by post only in the same manner as the two previous pay less notices, which is why he had concluded that it was served late. He gave his opinion that he had no jurisdiction to correct that error, and he went on to say this, upon which the defendant particularly relies:

“Had I seen document 183 then Broughton’s claim would have failed because a subsequent valid pay less notice had been served, but it appears to me that I do not have the power to correct the reasoning in my decision thereby resulting in a different outcome.”

And that is how matters rested prior to the enforcement proceedings being issued.

I must now refer to the relevant legal principles. The general approach, which is not in dispute, is that an adjudicator is entitled to make mistakes, whether of fact or law, even ones which are obvious and fundamental, without thereby rendering his decision unenforceable, so long as he acted within his jurisdiction. This reflects the underlying well-established policy which the court adopts in relation to adjudication. It is also not in dispute that the court should not enforce decisions reached in serious and material breach of natural justice. In that regard my attention has been drawn to the decision of the Court of Appeal in Carillion Construction v Devonport Royal Dockyard [2003] BLR 79 where Chadwick LJ, at paragraph 52, approved the principles stated by Jackson J (as he then was) at first instance, including:

“Where an adjudicator has acted in excess of his jurisdiction or in serious breach of the rules of natural justice the court will not enforce his decision.”

In paragraph 85 Chadwick LJ also stated that the court would not enforce a decision if the manner in which the adjudicator had gone about his task was obviously unfair.

Miss Day in her submissions has also referred me to what Akenhead J said in relation to breach of natural justice in Cantillon Ltd v Urvasco Ltd [2008] EWHC 282 and ABB Ltd v Bam Nuttall Ltd [2013] BLR 529, with which I respectfully agree.

Mr Lee submitted to me that on a proper analysis of the authorities there would be no breach of natural justice unless the adjudicator had made a deliberate decision to adopt a particular course, or at least had made a conscious choice to adopt a course of conduct which amounted to a breach of natural justice, and that an inadvertent error would not suffice. Miss Day did not accept this analysis and it seems to me, with respect to Mr Lee, that the authorities do not provide a clear basis for drawing that dividing line. It seems to me that in principle an inadvertent error might suffice, if it was sufficiently serious, although I do accept Mr Lee’s further submission that the question as to why the breach, if that is what it was, occurred will usually be a material consideration, and if it was deliberate that might well justify a conclusion that there was a breach, whereas if it was inadvertent that might be less likely to produce that result.

Miss Day also referred me to three decisions from outside the field of adjudication enforcement in support of her submission that decisions should be quashed where a decision-maker has failed to consider material evidence in reaching a decision, being decisions from the planning, special educational needs and criminal injuries compensation board jurisdictions respectively. I do not need to make specific reference to these decisions. All such decisions are fact sensitive, not just in the context of the particular facts of the individual case, but also in the context of the tribunal whose decision is under challenge. In particular it is plainly material to consider the jurisdiction which it is being exercised, including whether or not the decision is a final or an interim decision, and the time period in which the decision must be made. It is also plainly material to consider the nature and extent, for example, of the obligation imposed on the tribunal to act as a fact finding tribunal, or upon one or more of the parties to assist the tribunal in reaching a correct decision. Thus it seems to me that Mr Lee is plainly right when he submits that it is not necessarily the case that decisions in relation to other tribunals will be applicable to adjudicators’ decisions, where different considerations are in play.

Finally I have as I have said been referred to paragraph 17 of the Scheme. Mr Lee has submitted that there is no basis for treating that as a strict obligation, breach of which will without more render the decision unenforceable. That seems to me to be right. It is an obligation which is imposed on an adjudicator, in the same way as other obligations are imposed on him by the Scheme. For example paragraph 12 requires the adjudicator to reach his decision in accordance with the applicable law, but it is obviously not the case that breach of such obligations will of themselves render the decision unenforceable. It follows that this adds anything to the basic requirement of natural justice.

I now turn to the application of those relevant principles to the facts of this case. First I have to consider whether or not the adjudicator was correct in his approach in paragraph 140. I consider that he was. I am satisfied that he was entitled to proceed on the basis that the question as to whether or not pay less notice 14 was valid was an issue which had been specifically raised by the defendant and not admitted by the claimant and was, therefore, something which was before him for him to decide and that he was, in those circumstances, entitled to proceed on the basis that he should do so on the evidence and submissions which had been placed before him.

I do not consider that he was under a positive obligation to go back to the parties and say, in effect, I am not entirely clear whether or not the claimant is admitting or denying that pay less notice 14 was not just issued but also served on 30^th July, and I am not entirely clear whether or not either party wants to put forward any evidence in relation to that particular issue, and I wish to give the parties the opportunity either to clarify their position or to submit further evidence in that regard.

Instead it seems to me that he was entitled to approach this issue on the basis that it was an issue which was before him, albeit as he understood it not the subject of specific evidence by either party, and that he could and should decide it without needing to revert further to the parties. After all, each had been afforded plentiful opportunity to say all that they wanted to say about the issue, and to put forward all of the material which they wanted him to consider. As he noted in paragraph 140, it was not just the claimant but also the defendant who had not provided any detail in its submissions in relation to the validity of these pay less notices and where he understood that the claimant’s primary position was that they were irrelevant in any event.

It also seems to me that he cannot be criticised for taking the view that he believed he had sufficient information in the documents provided to him to consider whether or not those notices were or were not valid. He was entitled in my view to have regard to the fact that the parties had chosen to address more detailed submissions and/or evidence to him in relation to the other pay less notices, so that he was entitled to assume that they had both taken the conscious decision to rest on their respective cases in relation to pay less notice 14. I also bear in mind the expedited timetable required of adjudicators to reach decisions. In my view it is undesirable to impose a general obligation on adjudicators in such cases to have to go back to the parties and, in effect, ask them: Are you sure there is anything further that you do not want to add?

For all these reasons I reject the defendant’s first ground of challenge to his decision.

What then about his failure to have regard to the e-mail at page 183? I accept that it can properly be categorised as a procedural error, in the sense that it was a document put before him to which he did not have regard. However it was plainly not a deliberate decision on his part to disregard it. It is also in my view difficult to be critical of the adjudicator in that respect. It was, for the reasons I have already given, in my view substantially the defendant’s fault that it had not drawn the existence or the importance of this document to the adjudicator’s attention, and it does not seem to me that he can be criticised for not trawling through the totality of the documents before him or, even by reference to paragraph 7.2, for not looking at all of the pages which were said to be relevant to pay less notices 12 and 13, but not 14, in order to decide whether or not pay less notice 14 had been served on time.

I do not consider that his approach was one which amounted to a serious breach of the rules of natural justice, or rendered the adjudication process obviously unfair. At its highest from the defendant’s view it was a decision which was wrong, due to an inadvertent procedural error caused or substantially contributed to by the defendant itself. I am unable to accept Miss Day’s submission that the claimant was also responsible for the error. No doubt she is right to say that it would have been open to the claimant to have said: it is agreed that pay less notice 14 was served by e-mail on that date, but it was under no obligation, it seems to me, in the context of adjudication proceedings to do so, and it did not cause or create any misleading impression.

I accept that this may leave the defendant with a sense of injustice but that, I am afraid, is part of the rough and ready nature of the adjudication process. It is an interim remedy, it provides and it is intended to provide a decision in relation to cash flow which can, of course, if wrong be put right in later legal proceedings so as to put right any real injustice. In that regard I reject a submission, insofar as persisted in, that I should refuse enforcement on the basis of the precarious nature of the claimant’s finances. This is not a case in which the defendant has made an application, based on evidence and fully developed in written or oral submissions, to seek to persuade me that, following the approach summarised by His Honour Judge Coulson QC (as he then was) in Wimbledon Construction v Vago [2005] EWHC 1086, I should stay enforcement. Nor, it seems to me, is this a case where further developments, in terms of the defendant having issued further pay less notices, which appear to be disputed in any event, should be taken into account by the court in deciding whether or not to enforce the adjudicator’s decision. To do so would appear to me to be contrary to established principle.

For all of those reasons, I am satisfied that there is no real prospect of a successful defence and that summary judgment should be entered in relation to this claim.