Paice & Anor v Harding (t/a MJ Harding Contractors)

This is an adjudication enforcement application by the claimants against the defendant pursuant to Part 24 of the Civil Procedure Rules to enforce the decision of Mr Christopher Linnett dated 27 April 2016, in which he directed the defendant to pay the claimants the sum of £296,006.44.

The defendant resists enforcement of the decision on the following grounds:

On 25 March 2013 the claimants entered into a contract with the defendant, whereby the defendant agreed to construct and fit out two residential houses, together with related landscaping and access works, at a site in Purley, Surrey.

The contract incorporated the JCT Intermediate Building Contract, 2011 edition, as amended by the parties, and included at Article 7 and Clause 9.2 an adjudication agreement.

The work commenced in April 2013 but relations between the parties deteriorated and in September 2013 the works came to a standstill. Each party has purported to terminate the contract and there have been five adjudications in respect of the ensuing dispute.

The first adjudication concerned the defendant’s claim for payment in respect of an interim application. In a decision dated 4 November 2013, Mr Sliwinski, the adjudicator, ordered the claimants to pay the defendant £8,252.72 in respect of that application.

The second adjudication concerned the defendant’s claim for payment in respect of a further interim application. In a decision dated 28 November 2013, Mr Sliwinski ordered the claimants to pay the defendant £249,769.59 plus VAT and interest.

The third adjudication concerned the defendant’s claim for payment in respect of its account following termination, submitted on 8 August 2014 under clause 8.12 of the contract. In a decision dated 6 October 2014, Mr Linnett, the adjudicator, ordered the claimants to pay the defendant £397,012.48 on the basis that the claimants had failed to serve a compliant pay less notice.

The fourth adjudication concerned the claimant’s claim for determination of the proper value of the contract works and repayment of any balance due from the defendant. In a judgment dated 21 November 2014, Matthew Harding (t/a M J Harding Contractors) v Gary George Leslie Paice and Kim Springall [2014] EWHC 3824 (TCC), Edwards-Stuart J declined to grant an injunction to prevent the fourth adjudication from going ahead. That decision was upheld by the Court of Appeal in Matthew Harding (t/a M J Harding Contractors) v Paice & Another [2015] EWCA Civ 1231 (CA). In a decision dated 15 December 2014, Mr Sliwinski, the adjudicator, ordered the defendant to pay the claimants the sum of £325,484.00 together with his fees of £15,487.50.

In a judgment dated 10 March 2015, Gary Paice and Kim Springall v MJ Harding (t/a M J Harding Contractors) [2015] EWHC 661 (TCC), Coulson J declined to enforce the decision on the grounds of apparent bias.

On 8 January 2015 the defendant made a formal complaint to the RICS, the adjudication appointing body, in respect of Mr Sliwinski’s acceptance of the appointment and conduct in the fourth adjudication. An investigation was carried out by the RICS and the Head of Regulation was satisfied that there was a reasonable prospect of establishing that Mr Sliwinski was liable for disciplinary action in failing to make appropriate checks to ascertain whether there had been unilateral contact by either party and in failing to disclose that there had been such contact. The disciplinary hearing was disposed of by a confidential consent order in December 2015.

The fifth adjudication concerned the same issue as the fourth adjudication, namely the claimant’s claim for determination of the proper value of the contract works and repayment of any balance due from the defendant. In a decision dated 27 April 2016, Mr Linnett, the adjudicator, ordered the defendant to pay the claimants the sum of £296,006.44 by way of repayment of sums overpaid in respect of the works. It is the fifth adjudication that the claimants seek to enforce by this application.

The issue is whether the defendant agreed to an extension of time for the adjudicator to reach his decision or whether there was no such agreement and the decision was late.

Clause 9.2 of the contract provides that the Scheme for Construction Contracts applies to adjudications between the parties (subject to specific amendments by the parties).

Paragraph 19(1) of the Scheme provides that:

“The adjudicator shall reach his decision not later than –

(a)

twenty eight days after receipt of the referral notice ...

(b)

forty two days after receipt of the referral notice if the referring party so consents, or

(c)

such period exceeding twenty eight days after receipt of the referral notice as the parties to the dispute may, after the giving of that notice, agree.”

If the adjudicator fails to reach his decision within the prescribed time, or as agreed by the parties, it is invalid and unenforceable: Cubitt Building & Interiors Ltd v Fleetglade Ltd [2006] EWHC 3413 (TCC) per Coulson J at para.76.

If an adjudicator requests an extension of time for his decision, it is incumbent on the parties to respond plainly and promptly to such request; failure to do so may give rise to an estoppel precluding a party from subsequently disputing that the extension of time was agreed: AC Yule & Son Ltd v Speedwell Roofing & Cladding Ltd [2007] EWHC 1360 (TCC) per Coulson J at paras.15-20.

On 8 March 2016 Mr Linnett notified the parties that he had been nominated as adjudicator in respect of the fifth adjudication.

By emails dated 8 March 2016 and 14 March 2016 respectively Mr Davies, on behalf of the defendant, made a general reservation in respect of the defendant’s rights as regards its participation in the adjudication and the jurisdiction of the adjudicator.

On 10 March 2016 the Referral was received by Mr Linnett, and therefore the date for his decision was 9 April 2016 in accordance with paragraph 19(1)(a) of the Scheme.

On 24 March 2016 the defendant served its Response, in which it asserted that the adjudicator did not have jurisdiction because the claimants had attempted to refer the dispute to adjudication under the wrong procedural rules (see paragraphs 12-23 and 59-61). However, the defendant requested the adjudicator to act on a different basis and undertake an assessment of the account as between the parties (see paragraphs 11 and 61).

By letter dated 29 March 2016 the adjudicator noted the defendant’s request for him to carry out an assessment of the account and requested the claimants to confirm (a) whether they agreed to a non-binding expert determination or (b) whether they maintained that the adjudicator had jurisdiction to continue the adjudication. In response Mr Silver, on behalf of the claimants, confirmed that they maintained that the adjudicator had jurisdiction to act as adjudicator, following which the adjudicator stated that he would continue to act as adjudicator and not as an expert.

It is common ground that the time for the adjudicator’s decision was extended by the claimants to 21 April 2016 in accordance with paragraph 19(1)(b) of the Scheme.

Following service of the Reply on 4 April 2016, the adjudicator indicated that it would be helpful for the parties to attend a meeting before him and the meeting was fixed for 20 April 2016.

On 9 April 2016 the adjudicator stated that he would not be able to issue his decision one day after the meeting and requested the parties to let him know whether they agreed to allow an extension of time of one week following the meeting i.e. to 27 April 2016.

By email dated 9 April 2016 the claimants agreed to the extension.

On 11 April 2016 Mr Davies responded on behalf of the defendant:

“...Without prejudice to Mr Harding’s position and pursuant to Mr Harding’s Response document of 24 March 2016, Mr Harding agrees you may have a further week to undertake your non-binding determination, but given that Mr Harding denies that a valid adjudication under the contractual adjudication mechanism is presently proceeding he is unable to agree to an extension to that which he maintains does not exist...”

There was then a flurry of emails between the parties in which the parties’ representatives disagreed as to what had been agreed. This was followed by the adjudicator’s letter dated 12 April 2016:

“... I find the exchange extraordinary and unnecessary. In an email at 08:53 hours yesterday, 11 April 2016, Davies & Davies stated that ‘Mr Harding agrees you may have a further week.’ This agreement was given subject to Mr Harding’s on-going reservation about my jurisdiction, but that was to be expected.

I confirm that my Decision shall be issued on or before Wednesday 27 April 2016 and I see no objection to this, beyond Mr Harding’s general objection as to my jurisdiction to act in this matter.”

It is common ground that at the meeting held on 20 April 2016 there was a further discussion as to whether the defendant had agreed an extension of time for the adjudicator’s decision. From the witness statements of Mr Davies (paragraphs 78-79) and Mr Paice (paragraphs 14-15), there is a dispute as to precisely what was said but neither party asserts that Mr Davies provided any further clarification on this point. Mr Paice states that Mr Davies refused to answer the question; Mr Davies states that he reiterated that the defendant’s position was already set out in writing. Therefore, resolution of that dispute would not assist the court in resolving the issue that arises on enforcement as to whether the defendant agreed to an extension of time for the adjudication decision.

On 21 April 2016 the adjudicator sent a letter to the parties, stating:

“As stated in my email dated 12 April 2016, I believe Mr Harding has agreed, in writing, that I may have a further week, albeit this agreement was, understandably, given subject to his on-going reservation about my jurisdiction.”

Later that day Mr Davies sent two further emails. The first stated:

“Thank you for your letter of acknowledgement under cover of your below e-mail of today timed 0916hrs, we await your non-binding decision on 27 April.”

The second stated:

“We write with regard to yesterday’s meeting at your offices and to record that the scope of your jurisdiction regarding the non-binding determination remains as it was on 24 March 2016 when we hand delivered Mr Harding’s response document, there has been no change.

With regard to the purported adjudication, Mr Harding’s position remains that there is no Contractual or otherwise binding adjudication presently proceeding, and therefore nothing to which he could, amongst other things, consent in respect of jurisdiction of such.”

On 27 April 2016 Mr Linnett delivered his written decision.

On behalf of the claimants, Mr Sears QC submits that the email of 11 April 2016 constituted an agreement by the defendant to an extension of time for the decision in the adjudication. The caveat in the email in respect of the adjudication was predicated on the basis of a jurisdictional challenge which, if correct, would have rendered the adjudication proceedings a nullity. On that basis, the defendant was unable to agree expressly to the extension of time, save in respect of the expert determination, but it was implicit that if the defendant’s jurisdictional challenge was wrong, the extension of time for the adjudication was agreed. As the defendant has abandoned the jurisdictional challenge, the reservation of rights in the email falls away.

On behalf of the defendant, Mr Stansfield QC submits that there was no such agreement. The email of 11 April 2016 is clear that the defendant consented to an extension of time of a week for Mr Linnett to undertake a non-binding expert determination but the defendant considered himself unable to, and he did not, agree to an extension for Mr Linnett’s decision in the adjudication.

On an objective reading of Mr Davies’ email of 11 April 2016, against the factual background of the jurisdictional challenge, the defendant agreed that the time for Mr Linnett to reach his decision on the dispute referred to him was extended by one week to 27 April 2016. There was an issue between the parties as to whether the exercise being undertaken by Mr Linnett was an enforceable adjudication determination (as contended by the claimants) or a non-binding expert determination (as contended by the defendant). Irrespective of the competing arguments as to the status of any determination, both parties agreed that the date by which Mr Linnett must reach his decision was 27 April 2016.

The email was clear that because of the jurisdictional challenge, the defendant could not agree to an extension of time under a non-existent adjudication mechanism. However, he did not state that if he was wrong about the validity of the adjudication, there was no agreed extension of time for the decision. I accept Mr Sears’ submission that the reservation in respect of the adjudication was based on the jurisdictional challenge and once that fell away, so did the reservation.

Therefore, I conclude that the decision was reached by the adjudicator and communicated to the parties within the period agreed by them.

There is no suggestion by either party of any actual bias on the part of Mr Linnett that prevented him from making an objective determination of the dispute before him. The issue is whether the defendant has a real prospect of establishing apparent bias, namely that a fair minded observer would conclude that there was a real possibility that the tribunal was biased. The facts relied on are that Mr Linnett provided a reference for Mr Sliwinski in connection with the disciplinary investigation by the RICS, he failed to disclose that the reference had been provided until asked directly by the defendant and the manner of Mr Linnett’s response to the defendant’s questions was unsatisfactory.

The test for apparent bias is whether an informed and fair minded observer, with knowledge of all the relevant circumstances, would conclude that there was a real possibility that the tribunal was biased: In re Medicaments and Related Classes of Goods (No 2) [2001] 1 WLR 700 per Lord Phillips at paragraph 85; Porter v McGill [2002] AC 357 per Lord Hope at paragraph 103.

The test is an objective one and not dependent upon the characteristics of the parties: A v B [2011] EWHC 2345 (Comm.Ct.) per Flaux J at paragraph 23.

The court must look at all the circumstances as they appear from the material before it, not just at the facts known to the objectors or available to the hypothetical observer at the time of the decision: A v B (above) at paragraph 27.

The material circumstances will include any explanation given by the decision-maker under review as to his knowledge or appreciation of those circumstances: In re Medicaments (above) per Lord Phillips at paragraph 86; Paice v Harding [2015] EWHC 661 per Coulson J at paragraphs 46-51; Cofely v Anthony Bingham and Knowles [2016] EWHC 240 (Comm. Ct.) per Hamblen J at paragraph 75.

The fair-minded observer must be assumed to know all relevant publicly-available facts; must be assumed to be neither complacent nor unduly sensitive or suspicious; must be assumed to be fairly perspicacious in that he or she is able to distinguish between what is relevant and what is irrelevant and when exercising judgment able to decide what weight should be given to the facts that are relevant: Lanes Group PLC v Galliford Try Infrastructure Ltd [2011] EWCA Civ 1617 per Jackson LJ at paragraph 51.

The RICS publishes guidance for surveyors acting as adjudicators, advising that adjudicators should make reasonable inquiries to investigate and disclose any potential conflict of interest, as well as any factors or circumstances that may cause his or her impartiality to be questioned.

Mr Davies’ evidence is that on 24 October 2015 at a conference at the Copthorne Hotel in Cardiff, Mr Linnett told him that he had just been asked whether he would write a letter of support for Mr Sliwinski in connection with the defendant’s complaint to the RICS. When asked by Mr Davies what he intended to do, Mr Linnett responded:

“I don’t think I can, I barely know him, I’ve had no experience of him on which to comment.”

Mr Davies stated that he thought that it would be prudent for Mr Linnett to decline because he might be needed by the parties i.e. in respect of the dispute, to which Mr Linnett responded:

“Well I haven’t agreed to do so.”

Subsequently, Mr Linnett did provide a general character reference for Mr Sliwinski in connection with the RICS disciplinary proceedings. He did not disclose this fact when appointed as the adjudicator in the fifth adjudication.

On 25 April 2016, 2 days before the adjudication decision was due, Mr Davies raised a number of questions with the adjudicator:

Mr Linnett provided answers to those questions by letter dated 25 April 2016:

“...the answers to most parts of the eight questions asked are easy to provide and so I clear these up now.

They are, in order, yes (I will confirm the number of times after Wednesday), yes, not particularly, I do not think so (but this question should be directed at the adjudicators I know), not that I recall, see below, see below, not that I recall or took any note of.

I think the point that Mr N Davies is getting at in questions 6 and 7 is that I think I informed him at some time (I cannot recall exactly where or when) that Mr Sliwinski had asked me to provide the RICS with a general character reference for use in his disciplinary proceedings, which I did provide.

This reference did not touch upon anything specific with regards to Mr Harding (and was rather vague about Mr Sliwinski because I do not know him very well). I seem to recall providing something similar for Mr Davies but, without checking, I cannot recall the purpose or content of this reference...”

Mr Linnett provided details of his earlier dealings with the claimants’ solicitors in his adjudication decision.

Following the decision, a dispute arose as to the payment of Mr Linnett’s fees and by letter dated 20 May 2016 a number of challenges to the decision were made by the defendant’s solicitors, including an allegation of a breach of the rules of natural justice.

By letter dated 23 May 2016, Mr Linnett responded to those allegations:

“The points you raise about the meeting and the Decision both rely upon an entirely unbalanced and unjustified perception of the significance of my providing a reference for Mr Sliwinski.

Incredibly, you seem to think that I would be prepared to commit professional suicide, and to trash a reputation I have built up over 22 years as a construction dispute specialist, in order to somehow assist Mr Sliwinski. I urge you to reflect on the likelihood that I would do this for anyone, let alone someone I hardly know.

The comments you make about this issue are all the more difficult to comprehend given that you knew that I had been asked to provide Mr Sliwinski with a reference when the adjudication commenced and when you stated your satisfaction at my appointment. Like me, you clearly did not think this was a matter worthy of mention at the time of my appointment (or at any time in the following 7 weeks) and yet you now portray this very point as a “serious issue”, “a misrepresentation by omission” and “withholding of key information”. You even go on to make defamatory remarks about my honesty...

...for the record, I confirm that:

•

I did not seek to assist or support Mr Sliwinski in regard to your client’s complaint to the RICS; I was merely asked to provide a general reference.

•

I did not know, did not ask and was not told about any points of the complaint against Mr Sliwinski or who made it.

•

My reference for Mr Sliwinski (which must remain confidential for now) could not and did not address any specific issues relating to your client and was similar in content to the one I provided for you, in your dealings with RICS.

•

I did not rely upon any part of Mr Sliwinski’s Decision when preparing my own Decision; it was not in my mind at all...

By letter dated 24 May 2016, Mr Linnett indicated that he was happy for Mr Davies to seek consent for the disclosure of Mr Sliwinski’s reference.

On the same day, Mr Davies replied, stating that Mr Linnett had failed to respond to the points raised and asking a number of further questions in respect of assistance provided to Mr Sliwinski.

On 25 May 2016, Mr Linnett stated:

“I am not going to dance to your tune.

If you do not know the answers to the first ten questions you have asked you should have sought the answers before making the very serious and defamatory allegations in your letters.

As regards the next three questions, please refer to my previous letter and the Decision...”

The defendant’s case is there is a real prospect that it will establish that a fair-minded and informed observer would conclude that there was a real possibility or a real danger that the tribunal was biased. Mr Linnett should have appreciated the likely concern of the defendant if he involved himself in the RICS complaint against Mr Sliwinski, particularly as it concerned the same dispute that Mr Linnett was asked to decide. He should have disclosed the fact that he provided a reference for Mr Sliwinski when he was appointed. His refusal to answer the reasonable questions posed by Mr Davies was not satisfactory.

The claimants’ position is that Mr Linnett’s responses show that he provided a general character reference only that did not touch upon the defendant’s complaint. He responded to the questions raised by the defendant, including the fact that he had provided the reference and invited the defendant to seek a copy. There was nothing in his conduct to suggest that he would favour the claimants. On the facts, this case does not come remotely close to satisfying the test for apparent bias.

I do not consider that Mr Linnett had an obligation to disclose the fact that he provided a general character reference for Mr Sliwinski to the RICS. Although Mr Linnett was appointed in the fifth adjudication to determine the same dispute that had been determined by Mr Sliwinski, he was not required to consider, assess or adjudicate on the abortive decision produced by Mr Sliwinski. The fifth adjudication was a fresh determination and not a review of Mr Sliwinski’s earlier decision. Therefore, on an objective basis, Mr Linnett’s view of Mr Sliwinski could not reasonably be considered to impact on the exercise he was required to undertake in the adjudication.

Mr Davies was aware from before the commencement of the fifth adjudication that Mr Linnett had been approached to provide a reference for Mr Sliwinski. If it was of such significance as is now suggested, it is inconceivable that Mr Davies would not have raised it when Mr Linnett accepted the appointment. The fact that he did not ask Mr Linnett whether a reference had been provided until two days before the decision indicates that he did not consider it to be material. I note that in his letter dated 27 May 2016, Mr Davies agreed that providing Mr Sliwinski with a vague reference for a disciplinary hearing did not come close to a conflict of interest.

The defendant has suggested that Mr Linnett went further and provided assistance to Mr Sliwinski in the RICS complaint but there is no evidence that this was the case. I note that when Mr Linnett was first asked whether assistance was sought for Mr Sliwinski, he immediately disclosed that he had provided a reference and subsequently invited the defendant to seek consent for disclosure of the same. He was not defensive. There was no attempt to mislead or avoid the question.

Mr Linnett’s response in his letter dated 25 May 2016 was intemperate but it followed an unrelenting series of letters that went beyond reasonable questions designed to elicit information regarding his impartiality.

The circumstances in this case are far removed from those that existed in the fourth adjudication or in Cofely.

Although the defendant may well be over-sensitive to issues of perceived impartiality and fairness given the serial adjudications in this matter, in particular, the fourth adjudication, and the general animosity between the parties, the test is an objective one. I consider that a fair-minded and informed observer would conclude that there was no real possibility that the tribunal was biased.

Therefore, I reject the challenge to the enforcement application on this ground.

The issue is whether the adjudicator had jurisdiction to determine the claimants’ entitlement to deduct the sum of £6,049.60 from the amount otherwise due to the defendant on account of design provided by the claimants to the defendant in respect of House A, not forming part of the contract; if there was no jurisdiction, whether that part of the decision is severable.

The contract concerned the construction of Houses B and C. A third house, House A, was built by the defendant on an adjacent plot but was not part of the work included in the contract.

Houses A, B and C were identical in design. The common design for all three houses was procured by the claimants, who sought to deduct one third of the design fees from the defendant’s account in respect of the contract. The contract did not contain any provisions for payment or allocation of those design costs. The claimants asserted that the parties had agreed to share the design fees.

The defendant raised a challenge to jurisdiction in respect of the design fees as part of its response in the adjudication. The adjudicator made a decision that design fees of £6,049.60 were deductible from the account on the basis of evidence of an agreement between the parties but left it for others to decide whether that part of the decision would be enforceable.

The adjudicator’s jurisdiction is derived from the adjudication agreement. Article 7 and Clause 9.2 of the contract entitle either party to refer any dispute or difference arising under the contract to adjudication. The dispute in respect of the design fees did not arise under the contract; it arose, if at all, under a separate agreement. Therefore, the adjudicator did not have jurisdiction to determine the design fees dispute.

The claimants rely on the decision in Premium Nafta Products Ltd v Fili Shipping Co Ltd [2007] UKHL 40 in support of a broad interpretation of disputes resolution clauses. However, that case concerned the scope of arbitration clauses and a party’s right to refer a dispute to adjudication is more narrowly prescribed by the contract or statute. Although in Aspect Contracts (Asbestos) Ltd v Higgins Construction plc [2015] UKSC 38 it was accepted that an alternative cause of action could fall within the language of section 108(1) of the 1996 Act, it does not follow that a different dispute would be treated as falling within the adjudication agreement for the purpose of determining jurisdiction.

However, that part of the adjudication decision can be severed from the other parts of the decision: Cantillon v Urvasco Ltd [2008] EWHC 2218 per Akenhead J at paragraphs 65 and 78. The defendant relies on the decision in Cleveland Bridge v Whessoe-Volker [2010] EWHC 1076 to submit that the design fees issue cannot be severed but Cleveland can be distinguished on its facts. In that case, the adjudicator did not identify an alternative decision so as to identify the proportion that would survive any excess of jurisdiction. In this case, the adjudicator identified and valued the design fees claim separately, so that there is no difficulty in severing that part of the award from the rest of the decision.

Accordingly, paragraphs 3.245 to 3.263 of the adjudication decision are in excess of jurisdiction and are not enforceable but can be severed from the remainder of the decision.

For the reasons that I have given, I uphold the challenge in respect of the design fees and the award is reduced by £6,049.60. I reject the other challenges raised by the defendant.

It follows that the claimants are entitled to have the adjudicator’s decision enforced. Summary judgment should be entered for the claimants in the sum of £301,678.44, interest to 9 August 2016 in the sum of £6,101.01 (continuing at the daily rate of £63.55 until payment) plus the adjudicator’s fees in the sum of £11,721.60 and costs, which I will deal with on paper following consideration of the parties’ written submissions.

I express my thanks to counsel for their concise and skilful submissions.