Judgment Date: 21.01.2010
This case addressed issues of jurisdiction in the context of adjudication decision enforcement proceedings where there are or may be disputes arising under two contracts between the parties that are referred to a single adjudicator. The Court held that the defendant had no real prospect of successfully arguing that there were two contracts, or of resisting an argument that it was estopped from so arguing. Further, the adjudicator had had jurisdiction to decide whether there were one or two contracts.
Technology and Construction Court, Mr Justice Akenhead
Story Rail Ltd (“Story”) was engaged by Network Rail in 2008 to carry out refurbishment works on a railway viaduct in St. Helens. Story invited Supablast (Nationwide) Ltd (“Supablast”) to tender for grit blasting and painting works on the project. Supablast provided a quotation and also took the opportunity to provide a fully priced Bill of Quantities relating to certain further works, including amongst other things steelwork repair and scaffolding. Following discussions, Supablast wrote to Story on 17th December 2007 providing prices for the grit blasting/painting and scaffolding. Story replied on 18th December 2007 with an order for Supablast to carry out the grit blasting, painting and scaffolding works. The order stated that the contract between the parties was to be on the ICE sixth edition form of contract, which provides at clause 8 for variations. Shortly after this, Supablast finalised and submitted its quotation for steelworks and in discussions with Story the price was agreed. There then followed a “Subcontractors Preliminary Meeting” at which contractual details for all the works, i.e. the grit blasting, painting, scaffolding and steelworks, were discussed. Two weeks later, Story sent a letter to Supablast accepting Supablast’s price for the steelworks and continuing in identical terms as the order of 18th December. During the contract, payments for all the works, including the steelworks, were applied for and certified as one and applications for extensions of time by Supablast for factors which affected both steelworks and the other works were addressed and processed together.
The parties eventually fell into dispute regarding the valuation of the final account and Supablast referred the dispute to adjudication. At this point Story challenged the jurisdiction of the adjudicator, arguing that there were in fact two sub-contracts, rather than one, and that no single adjudicator would have jurisdiction to deal with disputes arising under each sub-contract. The adjudicator ruled that he did have jurisdiction. The adjudicator found in favour of Supablast and ordered Story to pay £262k plus VAT. The adjudicator referred at several places in his Reasons to his view that the steelworks “constituted a variation to the originally contracted work and that all steelwork repair works were the subject of a variation as well as a remeasure”. Story refused to pay, and Supablast issued proceedings to enforce the adjudicator’s decision by way of summary judgment.
The issues before the Court were as follows:
- Whether there were two subcontracts rather than one and whether in any event Story was estopped from arguing that there were two subcontracts.
- Whether or not the steelworks could have been ordered as a variation to the contract that came into effect on the exchange of correspondence of 17 and 18 December 2007.
- Whether the adjudicator had jurisdiction to decide whether there were one or two sub-contracts and whether or not the steelworks were to be treated as having been instructed as a variation.
The Court held:
- Generally, an adjudicator properly appointed under the original contract between the parties to an adjudication will have jurisdiction to determine whether or not particular work was a variation under that original contract: see Air Design (Kent Ltd) v Deerglen (Jersey) Ltd  EWHC 2047 (TCC) and Camillin Denny Architects Ltd v Adelaide Jones Ltd and Company Ltd  EWHC 2110 (TCC)
- There was no real prospect of Story establishing that there were two subcontracts. The parties agreed no later than the Subcontractors Preliminary Meeting that both the original (scaffolding, grit blasting and painting) works and the steelworks should be dealt with under the umbrella of one subcontract whose essential and detailed terms were recorded in the minutes of that meeting.
- Story did not have a real prospect of establishing that there was no estoppel. The parties' behaviour after the Subcontractors Preliminary Meeting was such that there would be an estoppel by convention whereby the parties proceeded on the basis that there was only one subcontract for all the works in question. Accordingly, it was not now open to Story to argue that there were two subcontracts.
- Having found as above, it was not necessary to consider the issue of whether or not the steelworks could be instructed as a variation for the purposes of the ICE standard form. However, the Court held that it was reasonably arguable that they could not have been so instructed. For the purposes of that contract it was not any addition, modification or omission that could be instructed as a variation, but only those that related to the sub-contract works, as defined. The steelworks appeared to have been “very substantial” and more than incidental to the grit blasting and painting works.
- As there was only one sub-contract, it was also unnecessary to decide the issue of whether the adjudicator had jurisdiction to decide whether there were one or two sub-contracts and whether the steelworks were to be treated as having been instructed as a variation. If it had fallen to be decided, then the Court would have found that the adjudicator did have such a jurisdiction. The Court considered that this was a case falling within Air Design.
- It followed that there should be summary judgment for Supablast to enforce the Decision of the adjudicator.
Supablast went on to claim its costs on the indemnity basis, arguing that there was no arguable defence to the enforcement proceedings and that Story should be penalised accordingly. In this respect Supablast put emphasis on the case of Harris Calnan Construction Co Ltd v Ridgewood (Kensington) Ltd  EWHC 2738 (TCC).
The Court held:
- This was not a suitable case for indemnity costs. Although there was an absence of reality about the argument that the parties had not agreed to proceed on the basis that there was only one sub-contract, this argument was not put forward in bad faith, unprofessionally or wholly unreasonably.
- Story also argued that Supablast succeeded on a basis different to that argued before the adjudicator. This was a bad point, because the cost of the enforcement proceedings depended on what is argued at those proceedings, rather than what had been argued before the adjudicator.
- A better point was that Supablast should not have taken the point about variations, on which issue it effectively lost. A reduction of 20% in Supablast’s costs would be made to reflect this.
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