BEACH HOMES LTD v HAZELL

 

BEACH HOMES LTD v HAZELL

Technology and Construction Court

Jonathan Acton Davis QC

20 July 2018

The home owners by participating in the adjudication waived any jurisdictional argument that they might have had in opposing the decision’s enforcement

 

The home owners appointed the contractor to carry out construction works on their house. A dispute arose as to whether the works were complete and the value of the final account. The contract contained various dispute resolution provisions (i) for all disputes to be referred to adjudication under the Scheme for Construction Contracts and (ii) for disputes concerning the value of variations to be resolved by expert determination which was to be final, conclusive and binding upon the parties. The dispute was referred to adjudication and expert determination by the contractor. The RICS appointed the same person to be the adjudicator and expert. The home owners put before the adjudicator a document in which they stated that “no authority was given for [the contractor] to start an adjudication process and this is not implicit to the contract without our approval”. The adjudicator (i) proceeded to act and made a decision both as adjudicator and (in respect of the value of variations in dispute) as expert and (ii) awarded the contractor a specified sum. The home owners did not pay the sum awarded and the contractor brought enforcement proceedings.

 

The home owners contended that (i) The adjudicator was wrong to conclude that he could embark on an expert determination where the contractor had not placed it within his remit and (ii) Therefore the entirety of his activity as an expert was conducted without jurisdiction.

 

Jonathan Davis QC rejected the home owners’ contention and held that the home owners by participating in the adjudication waived any jurisdictional argument that they might have had. The home owners put before the adjudicator a document in which it stated that “no authority was given for [the home owners] to start an adjudication process and this is not implicit to the contract without our approval”. However, thereafter the home owners played a full part in the adjudication and expert determination in the knowledge that the adjudicator believed that he had jurisdiction to conduct the expert determination aspect and the adjudication aspect.

 

THE FULL TEXT OF THE JUDGMENT OF JONATHAN DAVIS QC

 

1.On 28th June 2018 I heard applications in this case and in a related case in which Douglas Harold Judkins is the Claimant, Mr and Mrs Stephen Hazell are the First Defendants and Beach Homes Limited are the Second Defendants. That case is numbered Claim No. HT-2017-000259. I have prepared a separate Judgment in that case which I will hand down on the same occasion as the Judgment in this case.

 

  1. On 12th August 2014, Beach Homes Limited and Mr and Mrs Hazell entered into a written contract for Beach Homes Limited to carry out construction works on a house at Moor Green House, Lower Sandhurst Road, Finchampstead, Wokingham, Berkshire, RG40 3TH.

 

  1. A dispute arose between the Parties as to whether the works were complete and as to the value of the Final Account. On 19th October 2016, Beach Homes Limited referred the dispute to adjudication and expert determination. Mr Judkins was appointed by the RICS as the Adjudicator and Expert for the dispute.

 

  1. On 7th April 2017, Mr Judkins gave his Decision to the Parties. He decided that Mr and Mrs Hazell must pay Beach Homes Limited the sum of £128,826.04 by no later than noon on 21st April 2017 and a further sum of £4,500.09 in respect of interest by no later than noon on 21st April 2017 plus £8.82 per day from 8th April 2017 until payment is made together with immediate payment of a further sum of £4,128.

 

  1. Mr Judkins also decided that in respect of the Expert Determination element, his fees should be divided equally between the Parties and in respect of the Adjudication element they should be borne in their entirety by Mr and Mrs Hazell. Thus, the debt owed by Mr and Mrs Hazell in respect of the Adjudication work is £22,616.40. It is that sum plus interest which Mr Judkins seeks to recover in the related application which I heard.

 

  1. With that introduction, I return to this claim.

 

  1. On 5th July 2017, the Claimant issued a Claim Form to enforce the Adjudicator’s / Expert’s Decision and on 10th July 2017 made an application for summary judgment in the usual way.

 

  1. On 12th July 2017, O’Farrell J abridged time for the Defendants to file an Acknowledgment of Service to four days and gave Directions.

 

  1. The Claimant served documents on the Defendants with a deemed date of service of 18th July 2017. The Defendants did not file an Acknowledgment of Service and the Court entered default Judgment on 3rd August 2017.

 

  1. On 9th August 2017, the Claimant applied for a Charging Order over the property. On 23rd August 2017, Jefford J granted an Interim Charging Order. The Claimant served the Interim Charging Order on the Defendants and the affected parties.

 

  1. In the meantime, on the 25th July 2017, the Defendants had written to the Court saying that they had just returned to the United Kingdom and wished to defend the claim. They then made an application to the Court seeking time to be given for them to apply for Legal Aid, to prepare and make an application to set aside the Adjudication and Award and Default Judgment. The Application Notice was dated 13th August 2017. It was sent by Registered Post but did not reach the Court until 13th December 2017.

 

  1. On 14th December 2017, O’Farrell J gave directions for the Parties to file evidence and for a hearing to be listed on 2nd February 2018.

 

  1. In response to the Order, the Defendants lodged a lengthy document which commented on the Decision paragraph by paragraph and a further document setting out various complaints. The Claimant commented on that response. Last, on 29th January 2018, the Defendants filed further material.

 

  1. The hearing of 2nd February 2018 was adjourned to 11th May 2018 and subsequently adjourned to 28th June 2018.

 

  1. Thus, before me, there was the Defendants’ application to set Judgment aside, a claim that the Adjudication/expert determination Decision of Mr Judkins was invalid and/or should not be enforced and the Claimant’s application for a Final Charging Order.

 

  1. At the conclusion of the hearing, I refused the application to set the Judgment aside, I refused to make any declaration that the Decision of Mr Judkins was invalid and/or should not be enforced and I granted the Claimant’s application for a Final Charging Order. I ordered the Defendants to pay the costs of this action which I summarily assessed. I said I would give my reasons in a written Judgment to be handed down. This is that Judgment.

 

  1. Mr Newman had been instructed very shortly before the hearing but he was able to produce a very helpful Skeleton Argument. In oral argument, he took me carefully and firmly through all the points which could be made on behalf of Mr and Mrs Hazell but authority and principle were against him. The document which the Defendants filed in response to the Order of O’Farrell J is at pages 150-163 of the Bundle. Mr Newman drew my attention in particular to paragraphs 1.8, 1.17, 2.2, 2.4, 2.5, 2.6, 2.11, 2.13, 2.16, 2.25 and 2.41 of that document. A further document put in by the Defendants is at pages 164-168: Mr Newman drew my attention to paragraphs 1, 2, 3, 5 and the conclusion at sub-paragraphs 1-4 on page 168.

 

  1. The application to set aside the Judgment is under CPR Part 13.3. The Defendants are required to show that they have (a) “a real prospect of successfully defending the claim” or (b) there is “some other good reason”. The relevant tests for (a) and (b) are to be found in the White Book 2018 at Notes 13.3.1 and 13.3.2. The Court is also required to consider the promptness of the application to set aside (see CPR Part 13.3(2) and the Note at 13.3.3).

 

  1. As mentioned at paragraph 11 above, the application to set aside was prepared on 13th August 2017 but only reached the Court on 13th December 2017. I made it plain to Mr Newman at the hearing that I would deal with the application to set aside on the basis that the Defendants made the application promptly.

 

  1. I have considered closely the detailed argument put forward by the Defendants in all of the documentation which they have put before the Court. I have had particular regard to the paragraphs which Mr Newman drew to my attention which I mention at paragraph 17 above.

 

  1. In Gosvenor London Limited v. Aygun Aluminium UK Limited [2018] EWHC 227, Fraser J said:

 

“As is well known, and as was stated in Amey Wye Valley Limited v. The County of Herefordshire District Council [2016] 2368 EWHC (TCC) at [30], as a way of reminder to parties generally rather than stating any innovative principle:

 

“Adjudicator’s decisions will be enforced by Courts, regardless of errors of fact or law. This has been stated many times. Carillion v. Devonport Royal Dockyard [2005] EWCA Civ. 1358 is the most often quoted appellate authority”

 

“There are so many other well-known cases that state, re-state, and emphasise this fundamental point that those who practice in this field barely need such reminders Macob Civil Engineering Limited v. Morrison Construction Limited. They include the first judgment on this topic, by Dyson J (as he then was) in [1999] EWHC 254 (TCC) [1999] BLR 93, the first Court of Appeal authority in Bouygues (UK) Limited v. Dahl-Jensen (UK) Limited [2000] EWCA Civ. 1358 [2000] BLR 49; and an enormous number since.”

 

  1. In his written Skeleton Argument, Mr Newman reduced the lengthy and detailed arguments presented by the Defendants to three arguments:

 

(i) Mr Judkins did not act in accordance with the Notice of Intention to Refer to Adjudication;

 

(ii) Mr Judkins misconstrued the variations clause; and

 

(iii) The Adjudication clause was unfair and, thus, void under the Unfair Terms in Consumer Contracts Regulations 1999.

 

  1. I think it also fair to add a fourth argument which can be summarised as an allegation that Mr Judkins reached the wrong Decision.

 

The First Argument

 

  1. It is said that the Adjudicator’s responsibilities derive from the Notice of Intention to Refer Dispute to Adjudication. The Notice itself makes no reference to the expert determination provision and relies entirely upon the concluding two lines to the Variations’ clause. The Notice further suggested that the Adjudication should be conducted in accordance with the Scheme for Construction Contracts (England and Wales) Regulations 1998, including paragraph 25. At no stage in preparing the Notice did the Claimant refer to the expert determination provision, nor did it invite the RICS to make such an appointment. Yet, in his decision the Adjudicator headed the document “In the matter of an expert determination and in the matter of adjudication”. In the body of the Decision, the Adjudicator wrote

 

“the contract therefore provides for disputes concerning the value of variations to be resolved by expert determination which is final, conclusive and binding on the parties, and for all our disputes to be determined by adjudication”.

 

The argument is that the Adjudicator was wrong to conclude that he could embark upon an expert determination in circumstances in which the Claimant had not placed it within his remit. Therefore, the entirety of his activity as an expert was conducted without jurisdiction.

 

  1. I accept that in a document, which is at page 235 of the Bundle, which was put before the Adjudicator, the Defendant said “no authority was given for Beach Homes Limited to start an adjudication process and this is not implicit to the contract without our approval”. However, thereafter, the Defendants played a full part in the Adjudication and expert determination in the knowledge that Mr Judkins believed that he had jurisdiction to conduct the Expert Determination aspect and the Adjudication aspect. The short answer, therefore, to this argument is that they waived any jurisdictional argument that they might have had.

 

The Second Argument

 

  1. The Contract provides:

 

“Variations

 

Should the client require the contract work to be varied he shall issue a formal instruction, in writing, setting out what is required. If a verbal instruction is given in the first instance we will confirm this in writing to the client and this will have the same effect.

 

All variations and extra work to be calculated on a cost plus profit and overheads at 25% basis unless a rate has been agreed prior and a variation order has been signed before commencement of extra works. Should agreement not be possible at the final stage, the value of the variations to be ascertained by an independent quantity surveyor whose valuation shall be binding. The quantity surveyor’s fees shall be divided equally and paid by each party.

 

In the event of a dispute, it shall be agreed that it would be resolved through adjudication proceedings and that the adjudicator should be appointed by the RCIS [sic].”

 

  1. The Defendants argued before the Adjudicator and Mr Newman argued before me that the clause relates to Variations only, the value of which must be agreed before the work is carried out but, if the cost cannot be so agreed, valuation of the variations is to be determined by an independent quantity surveyor. The Defendants argue that the procedure does not apply to works they claim to have been already carried out and that the Claimant had no right to refer a question to adjudication regarding the completed variations “or anything else for that matter”.

 

  1. Mr Judkins concluded, at paragraph 2.14 of his Decision,

 

“when objectively construed, it is the clear intention of the Contract that where the parties have failed to agree the value of any Variations the value of those Variations shall be determined at final account stage by an independent quantity surveyor acting as an expert determiner”.

 

He then concluded, at paragraph 2.16

 

“the second and distinctly separate, part of the dispute resolution process concerns disputes other than those relating to Variations. In my opinion, it is the clearly expressed intention of the Contract that all disputes other than those relating to Variations are to be determined by reference to Adjudication. I reject the Defendants’ submission that it is only disputes relating to the value of the Variations that may be so referred. The reason is that the Contract provides that disputes relating to the value of Variations will be determined by an independent quantity surveyor whose decision will be binding on the Parties as a matter of contract. The Parties having agreed to accept the determination of the surveyor as binding as, in any event, an expert determination is so binding on the parties, there cannot be any dispute concerning the surveyor’s determination capable of reference to Adjudication. Therefore, the Adjudication provisions refer to all other matters in dispute between the Parties.”

 

  1. In my Judgment, although it is unnecessary for me to decide the issue, Mr Judkins is clearly right in that interpretation. But even if he be wrong, it would make no difference. As set out above, it is not the role of the Court to second guess the Arbitrator’s Decision when considering the matter of enforcement. The Decision is to be enforced irrespective of any errors of fact or law. The remedy for the Defendants, if they wish, is to litigate the issue.

 

The Third Argument

 

  1. This too was raised before the Adjudicator and he rejected also any arguments based upon the Unfair Terms in Consumer Contracts Regulations.

 

  1. The TCC has considered whether or not an Adjudication clause complies with the UTCCR’s in a number of previous cases including Bryen & Langley v. Boston [2005] BLR 28, Domsalla v. Dyason [2007] BLR 348 and Picardi v. Cuniberti [2003] BLR 487. In the latter case, HHJ Toulmin CMG QC said obiter that he would have found an adjudication clause in an RIBA form was unfair under the UTCCR’s. However, in the remaining two cases, the Judges dismissed arguments to the effect that the UTCCR’s rendered the adjudication clauses unfair.

 

  1. Again, in my judgment, Mr Judkins reached the right answer, although it is unnecessary for me to decide the point. However, again, it would not matter if I was of a different view, for the reasons expressed above.

 

The Fourth Argument

 

  1. This can be dismissed shortly. Whether or not the detail of Mr Judkins’ Decision is right or wrong is of no relevance in an enforcement action.

 

  1. For completeness, I mention an additional argument raised by Mr Newman at paragraphs 7 and 8 of his Skeleton Argument concerning the agreement itself. Mr Newman produced, at Appendix 1 to his Skeleton Argument, a new document which he told me, on instructions, was the correct Contract. That was not an argument which was put before Mr Judkins. Appendix 1 was not produced in the Adjudication, was not produced in response to the Order made by O’Farrell J and was not referred to in any of the lengthy and detailed submissions put in by the Defendants. I placed no reliance upon it.

 

  1. Accordingly, I refused the application to set aside the Judgment and to make any declaration or decision that the Decision of Mr Judkins was invalid.

 

  1. Last, Mr Newman invited me to delay making a Final Charging Order to permit the Defendants to endeavour to arrange a re-financing package. I refused that application. There has been a long period of time whilst these proceedings have been on foot when they could have taken steps to re-finance themselves in order to pay the money which, on Mr Judkins’ Decision, is owed but there was no evidence that they had made any attempt to do so. I made a Final Charging Order.