Royal Courts of Justice
Rolls Building, 7 Rolls Buildings
London EC4A 1NL
Before :
MR. JUSTICE EDWARDS-STUART
Between :
Gibraltar Residential Properties Ltd | Claimant |
- and - | |
Gibralcon 2004 SA | Defendant |
Andrew Goddard Esq, QC
(instructed by Thomas Eggar LPP and Triay Stangetto Naish) for the Claimant
The Defendant did not appear and was not represented
Hearing dates: 20th October 2015
Judgment
Mr. Justice Edwards-Stuart:
Introduction
This judgment follows a trial in which only the Claimant, Gibraltar Residential Properties Ltd (“GRPL”), appeared. GRPL is a property company which is ultimately owned by the Government of Gibraltar. The Defendant, Gibralcon 2004 SA (“Gibralcon”), is a Spanish building contractor that was registered to carry on business in Gibraltar. However, I was told that it has filed no accounts in Gibraltar since 2008. In March 2010 it went into voluntary insolvency pursuant to an order of the Commercial Court in Madrid dated 8 March 2010.
The subject of the litigation is a very substantial property development in Gibraltar, in respect of which GRPL was the employer and Gibralcon the contractor. The works were carried out between 2007 and 2010.
In early 2010 GRPL started two sets of proceedings in this court: the first under CPR Part 8 and the second under CPR Part 7. Gibralcon responded by making an application in each action for a declaration that the English court had no jurisdiction to hear the claims because of the existence of the insolvency proceedings in Spain. In a judgment handed down on 19 October 2010 I dismissed Gibralcon’s applications: see [2011] BLR 126. However, I made it clear that, in the event of this court finding that Gibralcon owed money to GRPL, there would be no question of the court ordering Gibralcon to pay any money in consequence of that finding. I indicated that the court would instead give declaratory relief and then order a stay of the proceedings so that GRLP could prove the debt in the Spanish insolvency proceedings.
Thereafter no further steps were taken in the English actions until March 2015, when the proceedings were revived following the service by Gibralcon in Madrid of a claim for over £27 million against GRPL. GRPL responded by issuing a writ in the Madrid court challenging its jurisdiction to hear the claim and then, in this country, listing the actions in this court for a case management conference. On 14 April 2015 Gibralcon’s London solicitors, Pinsent-Masons, came off the record. GRPL has now restored its claims for various declarations. Gibralcon has taken no part in the revived proceedings and it and the administrators have refused to accept delivery of documents served in Spain and the latter have written contending that the courts of Madrid have exclusive jurisdiction to hear the disputes.
Gibralcon has therefore taken no further part in these two actions. In these circumstances, GRPL has sought to prove its entitlement to the various declarations in the absence of any evidence from Gibralcon. This is an unsatisfactory state of affairs in an adversarial system, but there is nothing that can be done about it. However, in these circumstances I consider that the court is bound to examine the evidence put before it with a particularly critical eye and that I propose to do.
GRPL was represented by Mr. Andrew Goddard QC, instructed by Mr. Christopher Coveney of Thomas Eggar LPPand by Triay Stangetto Naish. I heard evidence from Mr. Coveney, and also from Mr. Simon Bayliss, whose firm, HTA, was the named architect under the contract.
The facts
The course of the project
The project was a substantial property development in Gibraltar involving the construction of over 500 new dwellings and retail units. The contract price was about £50 million and the contract included a term which provided that the courts of England and Wales were to have exclusive jurisdiction in relation to any disputes.
In the course of the project there were at least three referrals of disputes to adjudication. The first effective referral (“Adjudication No. 1”) concerned a claim by Gibralcon in respect of the value of bar and mesh reinforcement. The adjudicator found that Gibralcon was entitled to £517,040 (including interest). Initially, GRPL refused to pay that sum because it intended to challenge the decision.
The next two adjudications, Adjudication No. 2 and Adjudication No. 3, were effectively consolidated. They concerned, in Adjudication No. 2, claims for the value of variations in respect of:
the diversion of external services;
fire barriers; and
stud partitions and door frames.
Adjudication No. 3 concerned the principles to be applied to the valuation of site preliminaries and off-site overheads and profit.
On 19 February 2010 the Adjudicator issued his decision in Adjudication Nos 2 and 3. In relation to Adjudication No. 2, he decided the following:
for the external services, that Gibralcon was entitled to further payment in the sum of £200,168;
that there was no variation in relation to the work to the fire barriers and so Gibralcon was not entitled to anything (in fact, it had already been paid £259,096 in respect of that claim); and
for the stud partitions and doors, that Gibralcon had been overpaid by £100,900.
However, the adjudicator decided that he was not entitled to set off these sums against each other, with the result that he awarded Gibralcon £200,168 in respect of the diversion of the external services and nothing in respect of the other two claims. So although Gibralcon had been overpaid by more than £350,000 on the second and third claims, GRPL was ordered to pay £200,168 to Gibralcon.
In relation to Adjudication No. 3, the adjudicator determined the percentages that should be added to the direct costs of variations to reflect off-site overheads and profit. Nothing turns on that decision, and I understand that effect was given to it.
I will have to revert to Adjudication Nos. 1 and 2 later in this judgment.
The contract provided for sectional completion. There were three sections, made up as follows:
Section | Blocks | Date for possession | Date for completion |
Section 1 | Blocks A-D | 14 July 2005 | 2 February 2007 |
Section 2 | Blocks E-H | 14 July 2005 | 4 May 2007 |
Section 3 | Blocks J and K | 14 July 2005 | 3 August 2007 |
The contract provided also for partial possession, so that, for example, within a section GRPL could take possession of one block at a time. As I shall explain below this had an important impact on the obligation to pay liquidated and ascertained damages for delay (“LADs”).
Extensions of time were given by the Architect so that the dates for completion became:
Section 1 | 9 July 2007 |
Section 2 | 18 September 2007 |
Section 3 | 15 February 2008 |
Practical completion for section 1 was achieved on 10 November 2009. It was not achieved for sections 2 and 3.
The effect of the provisions in the contract for LADs was that no LADs were payable for the first two months of delay in the completion of a section, but thereafter they were payable on a sliding scale. To take the case of section 1, for example, the rates were as follows:
First month | Nil |
Second month | Nil |
Third month | £31,500/month |
Fourth month | £63,000/month |
Thereafter | £26,750/week |
The liability to pay LADs ceased when partial possession was taken of any part of a section. In the case of section 1, the first parts were taken into possession on 21 October 2008. The LADs payable for that section were calculated by the architect as follows:
First month | Nil |
Second month | Nil |
Third month | £31,500 |
Fourth month | £63,000 |
47.6 weeks @ £26,750/week | £1,273,300 |
However, the contract provided that the aggregate amount of LADs deducted should not exceed 5% of the contract sum, namely £2,510,623.71. As events turned out, across all three sections this cap been reached well before the first parts of section 1 were taken into possession on 21 October 2008.
Mr. Bayliss prepared a witness statement dated 3 September 2015 and he gave evidence before me. In his witness statement he set out the extensions of time that he gave, which he said he considered to be fair and reasonable. Mr. Bayliss is a very experienced architect and, in the absence of any basis for making a finding to the contrary, I accept his evidence and find that the revised dates for completion were properly fixed by Mr. Bayliss. In the circumstances, Gibralcon is liable for LADs in the sum of £2,510,623.71.
The Deed of Variation
As the work progressed Gibralcon found itself short of funds to such an extent that it could no longer pay its sub-contractors and suppliers. As a result, on 2 October 2009 the parties entered into a Deed of Variation. By this deed GRPL agreed to make an advance payment to Gibralcon of £1,348,909.67. The deed provided that this sum was to be used to pay the sub-contractors, suppliers and creditors listed in a schedule to the deed.
The deed recorded that Gibralcon had represented:
that it would use the money to pay the listed sub-contractors, suppliers and creditors; and
that the Certificate of Fitness and Practical Completion of Block B “will be” achieved by 7th October 2009, Certificate of Fitness and Practical Completion of Block F “will be” achieved by 7th November 2009 and Certificate of Fitness and Practical Completion of Block J “will be” achieved by 15th January 2010.
The deed then recorded that GRPL relied on these representations and wished to advance the stated sum to Gibralcon. It provided also that if Gibralcon failed to achieve practical completion of the last remaining stage of the works by 15 January 2010, the advance payment would be repayable forthwith.
The termination of the contract
Clause 23.1.1 of the contract provided as follows:
“On the Date of Possession possession of the site ... shall be given to the Contractor who shall thereupon begin the Works and regularly and diligently proceed with the same and shall complete the same on or before the Completion Date.”
Clause 27, “Determination by Employer”, provided, so far as relevant, as follows:
“27.1 Any notice or further notice to which clauses 27.2.1, 27.2.2, 27.2.3 and 27.3.4 refer shall be in writing and given by actual delivery or by special delivery or recorded delivery ...
27.2.1 If, before the date of Practical Completion, the Contractor shall make a default in any one or more of the following respects:
.1 .2 he fails to proceed regularly and diligently with the Works; or
...
the Architect may give to the Contractor a notice specifying the default or defaults (the ‘specified default or defaults’).
27.2.2 If the Contractor continues a specified default for 14 days from receipt of the notice under clause 27.2.1 then the Employer may on, or within 10 days from, the expiry of that 14 days by a further notice to the Contractor determine the employment of the Contractor under this Contract. Such determination shall take effect on the date of receipt of such further notice.
...
27.2.4 A notice of determination under clause 27.2.2 or clause 27.2.3 shall not be given unreasonably or vexatiously.”
On 4 December 2009 Mr. Bayliss sent an e-mail to Señor Jose Felix Triano of Gibralcon. Attached to this e-mail was a notice under clause 27.2.1.2 of the contract, which provided as follows:
“1. By the Deed of Variation made the second day of October 2009 it was recorded that the Contractor represented that the Certificate of Fitness and Practical Completion of Block B would be achieved by 7 October 2009 and the Certificate of Fitness and Practical Completion of Block F would be achieved by 7 November 2009.
2. The Certificate of Fitness and Practical Completion of Block B was not achieved until 10 November 2009.
3. The certificate of Fitness and Practical Completion of Block F has not been achieved at the date of this Notice.
4. By reason of the failure to achieve Certificate of Fitness and Practical Completion in respect of Blocks B and F by 7 October 2009 and 7 November 2009, respectively, I give Notice under Clause 27.2.1.2 of the Contract that the Contractor has failed to proceed regularly and diligently with the Works and that the default in respect of Block F continues.”
The signature at the foot of the document was an electronic signature that was applied automatically, but it was a true reproduction of the actual signature of Mr. Bayliss.
On 24 December 2009, lawyers in Gibraltar acting for GRPL served the following notice on Gibralcon:
“NOTICE UNDER CLAUSE 27.2.2
1. By a notice under Clause 27.2.1.2 of the Contract given to the Contractor dated 4 December 2009, the Architect gave notice to the Contractor that the Contractor had failed to proceed regularly and diligently with the Works and that the default in respect of Block F continued.
2. The contractor has continued the specified default for 14 days and by this further notice the Employer determines the employment of the Contractor under this Contract. This further notice shall take effect on the date of its receipt by the Contractor.”
Later the same day Triay & Triay, the lawyers representing Gibralcon, wrote to GRPL as follows:
“We refer to the Notice under Clause 27.2.2 of the Contract served on our client, [Gibralcon], today in purported determination of our client’s employment under the Contract.
...
For the reasons we will address below, it is apparent that you have failed to terminate our client’s employment under the contract and that your notice constitutes a repudiated breach of contract. We hereby confirm our client’s acceptance of the same.
In summary, your attempt to terminate our client’s employment under the Contract is unlawful because:
1. The Architect’s notice of default, which is a precondition to any right you may have to terminate our employment, has not been served in accordance with the requirements of the Contract.
2. In the circumstances of this contract, at the 4th December 2009, our client’s failure to provide Certificate(s) of Fitness for and achieve Practical Completion of Blocks B and F on 7th October 2009 and 7th November 2009 respectively cannot be construed as a failure on their part to proceed regularly and diligently.
3. The Architects purported notice of default and/or your attempt to terminate our client’s employment under the Contract have been given unreasonably and/or vexatiously.
4. There occurred a ‘Site Lock Out’ between the 14th and the 23rd December 2009.
5. The Employer’s purported notice to determine our client’s employment under the Contract was and is not valid.
We will briefly expand upon the above.
The Architect’s Purported Notice of Default
1. On the 4th December 2009 our client’s project manager, Jose Felix Triano, received an email from the Architect which attached a purported notice under clause 27.2.1.2.
2. Clause 27.1 requires any notice given under clause 27.2.1 to be in writing and given by actual delivery or by special delivery or recorded delivery.
3. Clause 1.7 requires notices to be served to an agreed address or the last known principal business address or our registered office or our principle (sic) office. Mr. Triano’s email address is none of these.
4. A further shortcoming in the Architect’s purported notice of default is that this was not issued ‘in writing’. As a consequence of there being no inclusion within the contract of Annex 2 (relating to EDI - Electronic Data Interchange”) it remains the case that where the contract stipulates that any communication is to be in writing, then communication in any other will not be valid. Consequently the attachment to the Architect’s e-mail dated the 4th December 2009, has not under our Contract been received in writing and is invalid.”
The letter went on to mention the following points:
The Deed of Variation did not assist with the financial closeout of outstanding work.
GRPL’s quantity surveyor had consistently incorrectly valued the works and thereby caused financial hardship to Gibralcon.
The Deed of Variation had its own exclusive remedy for any breach, namely liability to repay the advance if the last stage of the works was not completed by 15 January 2010.
That there had been a site lock-out during the period 14-23 December 2010.
The letter does not state the precise date or dates of this lock-out, although it must have started on 15 December 2009 because the letter records that a notice of delay was issued by the contractor on the morning of 16 December 2009. Whether or not it lasted for more than one day is unclear: its duration is unstated.
Subject to the point about the validity of the service of the notice under clause 27.2.1.2, in my view this letter effectively amounted to an admission of an inability to proceed regularly and diligently with the works because of a lack of funds. The reason given as the cause for this was persistent undervaluation of Gibralcon’s work by the quantity surveyor.
I am prepared to accept in principle that an employer could not take advantage of his quantity surveyor’s failure properly to value a contractor’s work, thereby depriving the contractor of the funds necessary to continue the works, in order to terminate the contract for want of diligence in carrying out the work. However, apart from the allegation in this letter there is no evidence before the court that this happened.
The fact that Gibralcon had to enter into the Deed of Variation is a very strong indication that, for whatever reason, by the latter part of 2009 it was in financial difficulty. Indeed, it must have been on the brink of insolvency if its position was such that it had to have an injection of funds from GRPL in order to meet its outstanding commitments.
Further, Mr. Bayliss gave evidence that Gibralcon’s work was re-measured in early 2010 by Davis Langdon, GRPL’s quantity surveyors, and representatives of HTA. The value of Gibralcon’s work was assessed at £47,991,613. This figure included the sum awarded by the adjudicator in Adjudication No. 1. The amount paid, including the advance payment made under the Deed of Variation, was £49,629,409 and so, if the valuation of the work was correct, Gibralcon had been overpaid by about £1.6 million. This is inconsistent with its allegation that its work had been persistently undervalued during the course of the project. It is, of course, possible that Davis Langdon undervalued Gibralcon’s work both during the course of the project and after the termination. However, at the time of the valuation in early 2010 the works were fairly close to completion and so I would have expected a valuation properly carried out in those circumstances to be reasonably accurate.
Whilst I am very conscious of the fact that there is no evidence before the court from Gibralcon on this aspect, there is no ground for doubting the accuracy of the figures put forward by GRPL apart from the bare assertion of persistent undervaluation in the letter from Gibralcon’s lawyers dated 24 December 2009.
In my view, the evidence, taken as a whole, points strongly towards the conclusion that Gibralcon had been in financial difficulty for some time. I do not regard the apparent existence of a lock-out in December 2009 as affecting this because there is no evidence that it made any difference. It seems that by then Gibralcon did not have the funds to progress the works regularly and diligently and was not doing so, lock-out or no lock-out.
I now turn to Gibralcon’s challenge to the validity of the clause 27.2.1.2 notice. Mr. Bayliss accepted that the notice, a copy of which was in the trial bundle, was an attachment to an e-mail that he sent on 4 December 2009. However, in evidence he said that one of the site architects, Klaus Kroes, handed a copy of the notice on site to Gibralcon’s Señor Jose Felix Triano. Mr. Bayliss was able to produce a copy of an e-mail sent by Mr. Kroes on 9 December 2009 enclosing a scanned copy of the clause 27.2.1.2 notice which had been endorsed by Señor Jose Felix Triano “Received 04-12-09 by e-mail” and signed by him. Mr. Bayliss forwarded that e-mail to his client, explaining that the notice had to be issued in hard copy. It seems, therefore, that Mr. Bayliss was aware of the requirements of the contract relating to the service of a notice under clause 27.
In my view, the evidence of Mr. Bayliss proves beyond any doubt that the notice was given to Gibralcon by actual delivery on a date no later than 9 December 2009. The 14 day period required by clause 27.2 had therefore just expired by the time the clause 27.2.2 notice was served on 24 December 2009.
It seems that Gibralcon’s lawyers were either unaware of the fact that a hard copy of the notice had been given to Señor Jose Felix Triano or chose to ignore it. Either way, I reject the challenge to the validity of the notice. So far as I am aware, there was no challenge to the second notice that was served on 24 December 2009.
On 3 February 2010 GRPL demanded repayment of the Advance Payment on the ground that Gibralcon had failed to achieve completion of the remaining stages of the works by 15 January 2010. The money was not repaid but, as I have explained, was taken into account in the final calculation of the sums paid to Gibralcon.
The assessment of Gibralcon’s final account
In the course of its final valuation, following the termination of the contract, Davis Langdon assessed the cost of completing the work, which it then added to its estimate of the value of the work carried out by Gibralcon up to the date of termination. From the sum of these two figures was subtracted an assessment of the value of Gibralcon’s likely final account on the assumption that it had completed the work. This exercise produced a figure of £5,434,458, which was taken to be the cost of engaging other contractors to complete the works. In fact, the cost of engaging other contractors proved to be significantly more but GRPL limits its claim under this head to the lower amount.
In addition, GRPL claims £1,293,430 in respect of the costs of managing the defective work by Gibralcon and for managing the project following the termination. Its total claim is therefore as follows:
Amount of overpayment | £1,637,796 |
Entitlement to LADs | £2,510,623 |
The additional cost of engaging other contractors | £5,484,458 |
Additional management costs (as at July 2012) | £1,293,430 |
Total: | £10,876,307 |
In a letter dated 7 May 2010 to Gibralcon Mr. Bayliss set out a summary of the final assessment of the value of the works that was carried out by Davis Langdon and HTA during early 2010. The figures given in that letter differ very slightly from the figures that I have set out above - the latter representing GRPL’s current claim. The total value of Gibralcon’s work as at the date of termination was said to be £47,945,062, which is slightly less than the figure now put forward by GRPL. There is no satisfactory explanation for this discrepancy, so I shall assume in Gibralcon’s favour that the higher figure now put forward is correct. The letter stated that the values of Gibralcon’s account had taken into account the adjudicator’s decisions in Adjudication No. 1 and Adjudication No. 2. In addition, it said that the decision in Adjudication No. 3 had been applied to all variations.
The letter also mentioned that the adjudicator’s decision in Adjudication No. 1 could give rise to an extension of time, which HTA proposed to consider. Mr. Bayliss made it clear in the letter that the figures given did not take into account the additional costs incurred by GRPL to complete the works by others or the additional costs incurred by GRPL owing to Gibralcon’s failure to complete its obligations under the contract.
In his witness statement Mr. Bayliss said that he was willing to consider any claims by Gibralcon for direct loss and expense that had already been indicated but that, although both he and Davis Langdon had requested details of any loss and expense, nothing was provided.
My conclusions on the figures
In the light of the evidence of Mr. Bayliss I am prepared to accept GRPL’s figures for the valuation of the work carried out by Gibralcon, the net amount paid to Gibralcon, the amount of LADs for which Gibralcon is liable and the figure for the additional cost of completing the work.
However, there is no breakdown or any explanation of the sums claimed by way of additional management costs. It is not clear whether these are said to be the costs of sums paid to others, such as HTA, or management costs incurred by GRPL internally. In the absence of any explanation, let alone proof, I am not prepared to accept these figures.
Accordingly, I find that GRPL is in principle entitled to the following sums from Gibralcon:
Amount of overpayment | £1,637,796 |
Entitlement to LADs | £2,510,623 |
The additional cost of engaging other contractors | £5,484,458 |
Total: | £9,582,877 |
I shall therefore make declarations accordingly.
Adjudication No. 2
GRPL challenges the correctness of the adjudicator’s decision in Adjudication No. 2. It submits, quite understandably, that the adjudicator was wrong to order GRPL to pay some £200,000 to Gibralcon when in fact the variations, taken together, had been overvalued so that the net balance was in favour of GRPL, not Gibralcon.
At paragraphs 16 and 17 of his Decision, the adjudicator summarised the relief claimed by Gibralcon in the following terms:
“16. [Gibralcon’s] Notices of Adjudication in Adjudication No 2 described the dispute I am to decide in the following words:
‘The dispute between the parties concerns the Quantity Surveyor’s failure to properly value variations in its gross valuation of the Works for Interim Payment purposes with the latest being Interim Payment No 51, in accordance with the Conditions of Contract. This has caused the Architect to under certify payment for variations in its Interim Payment Certificate.
For reasons of proportionality, Brues intend to refer to Adjudication in Adjudication No 2, its entitlement to payment in respect of 3 variations. This is without prejudice to Brues’s right to commence proceedings in respect of other variations, that the Quantity Surveyor has failed to properly value in its gross valuations of the Works for Interim Payment purposes’
17. And [Gibralcon’s] Notice of Adjudication in Adjudication No 2 went on to describe the redress they seek from me in the following words:
‘4.1.1 A decision from the Adjudicator that for Interim Payment Certificate No 51, the gross valuation of the Works should include the following values for variations: AI 11 (External Services), A1 157.2 (Fire Barriers) and CRI 183 (Stud Partitions).
Reference
Description
Correct Valuation to be included in Payment Certificate No 51
A1 11
External Service Diversions
922,367.26
AI 157.2
Fire Barriers
683,600.53
CRI 183/189
Stud Partitions and increased door sub-frames and frames
343,040.20
Or such other sum, over and above the value currently included, as the Adjudicator shall so decide.
4.1.2 A decision from the Adjudicator that GRP shall pay the difference between the correct value for each variation that should have been included in the gross value of the Works for Interim Payment Certificate No 51 purposes and the values included by DL and that this difference amounts to £876,338.18:
No
Reference
Description
Correct Valuation to be included in Payment Certificate No 51
Amount included in Payment Certificate No 51
Payment Shortfall
1
A1 11
External Service Diversions
922,367.26
566,164.16
356,203.10
2
AI 157.2
Fire Barriers
683,600.53
256,505.65
427,094.88
3
CRI 183/189
Stud Partitions and increased door sub-frames and frames
343,040.20
250,000.00
93,040.20
Total
£1,949,007.99
£1,072,669.81
£876,338.18
Or such other sum as the Adjudicator shall decide over and above the sum of £1,072,669.81 already included by DL in its gross valuation of the Works for Interim Payment No 51.’”
At paragraphs 547 and 548 of his decision, the adjudicator said this:
“547 On the basis of the wording of the Notice of Adjudication in Adjudication No 2 [see 16 and 17 above], neither do I consider that I have the jurisdiction to consider my decided Valuation of those three Variations, compared to the Certificate No 51 certified Valuations for same, in the aggregate for the purposes of deciding any amount [Gibralcon] are now entitled to be paid.
548 In other words I do not consider that in this Decision I can set off any Certificate No 51 over-certification I find there has been on any of those three Variations against any Certificate No 51 under-certification I find there has been on any other of those three Variations. And if I did I would be trespassing into areas concerning the Gross Value of the Works and I have not been invited, nor am I authorised, to go there so I do not.”
With respect to the adjudicator, I simply do not understand this. As set out in the extract quoted above, the relief sought by Gibralcon, in the alternative, was as follows
“Or such other sum as the Adjudicator shall so decide over and above the sum of £1,072,669.81 already included by [Davis Langdon] in its gross valuation of the Works for Interim Payment No 51.”
This seems to me to be a request, in the clearest terms, to the adjudicator to determine the true value of the variations that should have been included in Certificate No. 51 (which Gibralcon asserted was £1,949,007.99) and then to award the difference between that amount and the sum of £1,072,669.81 that had been included in Certificate No. 51. The words “such other sum ... over and above the sum of £1,072,669.81” put this beyond any doubt.
Where I am in agreement with the adjudicator is that part of his conclusion in which he decided that he could not award a negative sum - in other words, that he could not make an award in favour of GRPL against Gibralcon. That is because he was being invited to award whatever sum he considered due over the figure of £1,072,669.81. If his conclusion was that the Davis Langdon valuation was too high, then the correct answer had to be that no sum was due over the figure of £1,072,669.81.
Accordingly, in my judgment the adjudicator was wrong to conclude that he could not set off against the true valuation of the variations the sum already certified and paid, provided that he did not award a negative amount: if the true valuation of the variations was less than the sum already certified, then the only answer available to the adjudicator was nil.
Since GRPL is seeking a final decision from the court as to the correctness of the decision made by the adjudicator in Adjudication No. 2, I will make a declaration accordingly.
Interest
Mr. Goddard has invited me to determine the appropriate rate of interest. He accepts that it is usual in commercial litigation for interest to be awarded at either 1% or 2% above base rate. Since the base rate has been 0.5% since March 2009, this represents an actual rate of interest of 1.5% or 2.5%.
The purpose of interest in a case such as this is to compensate the claimant for being kept out of his money. However, in this case, for no doubt perfectly sound commercial reasons having regard to the insolvency proceedings involving Gibralcon, GRPL allowed these claims to remain dormant for some five years. In these circumstances, it seems to me that I should award interest at the lower end of the range, and so in my judgment the appropriate rate is 1.5%.
The form of relief
As I have already made clear, the court should do no more at this stage than give declaratory relief. It will then be for GRPL to take such steps as it thinks appropriate to prove its claims in the insolvency proceedings in Madrid.
Following the hearing Mr. Goddard submitted a revised prayer for relief. Subject to any further submissions, I consider that the appropriate form of relief is as follows:
A declaration that the decision in Adjudication No. 2 is wrong to the extent that the adjudicator should have concluded that no sum was due to Gibralcon.
A declaration that Gibralcon is entitled only to the following Extensions of Time under the Contract:
Section 1 | 9 July 2007 |
Section 2 | 18 September 2007 |
Section 3 | 15 February 2008 |
A declaration that GRPL is entitled to deduct or be paid LADs in the sum of £2,510,623.71 (being the limit of 5% of the Contract Sum).
A declaration that GRPL validly terminated Gibralcon’s employment under the contract pursuant to clause 27.2.2.
A declaration that the value of the Works completed by Gibralcon by the date of termination is £47,991,613, which sum includes and takes into account the decisions of the adjudicator in Adjudication Nos. 1, 2 and 3.
A declaration that GRPL is, subject to the caveat in paragraph 3 above, entitled to the following sums under the terms of the contract and/or as damages for breach of contract:
Amount of overpayment | £1,637,796 |
Entitlement to LADs | £2,510,623 |
The additional cost of engaging other contractors | £5,484,458 |
Total: | £9,582,877 |
GRPL is entitled to interest at the rate of 1.5% on the above sums. In relation to the overpayment and LADs, interest is to run from 7 May 2010. In relation to the cost of engaging other contractors, I understand that the work was due to be completed by the end of September 2010. No doubt GRPL would have been required to make interim payments, but since I have no details of these I propose, on a broad brush approach, to order that interest should run from 1 July 2010.
So far as costs are concerned, I consider that GRPL is entitled to its costs of the action on the standard basis. The costs will have to be referred to detailed assessment if not agreed. I am not prepared to embark upon a summary assessment of the entire costs of the action.
Save for detailed assessment of the costs, the actions are to be stayed until further order. For the avoidance of doubt, such stay does not extend to any steps that GRPL may see fit or have to take within this jurisdiction for the purpose of proving the debts in the insolvency proceedings in the Kingdom of Spain.