The judgment of HH Judge Coulson QC on 27 May 2005 in Allen Wilson Shopfitters v Mr Anthony Buckingham
[2005] EWHC 1165 (TCC) is unremarkable, but does summarise the decided cases
on challenges on the basis of the Unfair Terms in Consumer Contracts
Regulations 1999. There is also an interesting analysis on the
possible consequences on the contractual machinery for payment, of an
appointed contracts administrator being sacked and not replaced.
Background
During 2004 and January 2005, AWS carried out extensive building work at Buckingham's property at Clob
Copse House in Bucklers Hard, Beaulieu ("the property") The
value of the work actually carried out was over 500,000.
Although Buckingham had engaged a firm of quantity surveyors to manage the refurbishment works at
the property and to act as the contract administrators, he terminated their
engagement on 3 January 2005 so there was no longer someone to carry out the
role of supervising officer. AWS submitted Valuation 12 to Buckingham in the total sum of 80,729.14.
On 25 January 2005 Buckingham paid all but 17,757.14. On 24 January
2005 AWS submitted Valuation 13 in the total sum of 32,644.21, of
which nothing was paid by Buckingham. Accordingly, on AWS's case, by the beginning of February 2005, the total sum of
50,401.35 in respect of Valuations 12 and 13 was outstanding. Other
than the payment on 25 January, there was no detailed response from Buckingham
in respect of either Valuation 12 or Valuation 13. On 1 February
2005, AWS suspended its work at the property, due, it said, to
non-payment. On 8 March
2005, AWS issued a Notice of Adjudication and identified dispute "under your contract with us .. because of your
continued failure to make payment in accordance with the terms of the
contract". The Referral Notice limited the claim to the
unpaid sum of 50,401.35. On 30 March 2005 Buckingham's solicitors
served the Response which took four points challenging the Adjudicator's jurisdiction,
namely that:
- There was no written contract in respect of the
works which were the subject of the adjudication;
- Any contract
had been terminated and was therefore irrelevant and could not give the
Adjudicator jurisdiction;
- The works concerned the refurbishment of a
dwellinghouse and were therefore excluded from the adjudication provisions
out in the Housing Grants, Construction and Regeneration Act 1996 ("the
1996 Act");
- Any agreement to adjudicate was
contrary to the Unfair Terms in the Consumer Contracts Regulations 1999.
The Response was expressly
limited to these jurisdictional challenges and
stated, in terms, that it contained no defence on the merits or the detail
of AWS's claims within Valuations 12 and 13. On 20 April 2005, the
Adjudicator published his decision, in which he summarily rejected the four
points taken by Buckingham as to his lack of jurisdiction and awarded AWS 50,401.35, together with interest and certain other
fees. On 6 May 2005 AWS applied to Judge Coulson QC to enforce the
adjudicator's decision.
In the proceedings before Judge Coulson, Buckingham denied that AWS was entitled to the sums awarded by the Adjudicator, although there
remained no breakdown of Buckingham's version of AWS's account as
set out in Valuations 12 and 13. There was no withholding notice or similar document and
there was no pleaded or written counterclaim for defects, incomplete work or
delay.
Jurisdiction
Judge Coulson first examined whether or not there was a contract between
the parties, by examining two letters of intent.
The First Letter of Intent
On 21 July 2004 Buckingham sent out the first letter of intent. This was signed and returned by AWS.
As is all too common in the construction industry, no formal contract
documents were ever prepared and certainly none were
ever executed. After examination of the terms of the first letter of
intent, Judge Coulson held that there was a Contract, evidenced in writing, pursuant to
which:
- AWS would carry out the schedule 3 works for
51,535;
- AWS would carry out the preparatory
stripping-out works in schedule 4 for 16,965;
- All the terms of
the JCT 1998 Edition, including of course those relating to variations and
additional work as well as those relating to adjudication, were incorporated
into this Contract.
The JCT 1998 Edition incorporated a detailed set of
adjudication provisions at Clause 41A. Article 5 of that edition of
the JCT Contract was in clear terms:
"If any dispute or
difference arises under this Contract, either party may refer it to
adjudication in accordance with Clause 41A."
The JCT Edition also
allowed the architect or supervising officer to instruct variations and additional
works on behalf of Buckingham. Clauses 4 and 13 of the 1998 Edition
contained detailed provisions dealing with such instructions and variations
in standard terms; importantly, these Clause permitted the
architect or supervising officer to instruct the contractor to perform
additional work outside the original contract work scope. Accordingly,
Judge Coulson held that any
dispute between the parties arising under, or in connection with the Works
performed pursuant to the Contract set out in the first letter of intent would
be referable to adjudication pursuant to the express terms.
The Second Letter of Intent
A second letter of intent was issued on 8 November 2004 designed
to sweep up all the Works to be carried out at the property in one lump
package, and it introduced the bulk of the schedule 4 works which had not
been expressly included in the first letter of intent. By that stage,
at least some of that work had already been instructed as additional work under Clauses 4 and 13, and had been carried out by
AWS.
The second letter of intent endeavoured to set out a proposed
agreement in which all of the proposed Works could be carried out and
completed for 650,250, including VAT. AWS did not sign this second letter of intent.
This
was apparently a deliberate decision on its part and not mere
inadvertence. Judge Coulson held that because the second letter of intent was deliberately
never signed or returned by AWS, it had no contractual significance - the only contractual document
was the first letter of
intent, dated 21 July 2004.
The Work in Valuations 12 and 13
In the adjudication, Buckingham's principal point was that, in the
absence of an agreement as per the second letter of intent, there was no
express agreement to adjudicate any disputes arising out of Valuations 12
and 13 and the work which was the subject matter of those Valuations.
It was argued that the work which was the subject of Valuations 12 and 13,
being work included within the bulk of schedule 4, was accordingly not
covered by the Contract comprised by the first letter of intent. The work which was the subject matter of
Valuations 12 and 13 like much of the work carried out by AWS at the property, and paid for by
Buckingham, was not
included within the two specific lump sum items in the first letter of
intent. Judge Coulson held however that it was work carried out by AWS and paid for by Buckingham because it was work which the supervising
officer instructed AWS (on behalf of Buckingham) to carry out. Accordingly,
the work in Valuations 12 and 13 was work instructed under Clause 13 of the
JCT 1998 Edition which was itself expressly incorporated into the
Contract comprised within that first letter of intent. Judge
Coulson held that the work
in Valuations 12 and 13 was carried out pursuant to a Contract which
contained an express agreement to adjudicate. Judge Coulson held that in
the circumstances the
work which was the subject matter of the Adjudicator's decision was carried
out as extra or varied work under a Contract which contained express
agreement to adjudicate. The Notice of Adjudication identified the
dispute being referred to the Adjudicator as a failure to make payment for
that work in accordance with that Contract. Judge Coulson held that accordingly the Adjudicator had the necessary jurisdiction to reach his decision and
it ought therefore to be enforced.
The Contract Payment Machinery
A complication was introduced by both parties by arguments concerning the Contract payment machinery.
Without a replacement supervising officer after the sacking of the quantity
surveyors, AWS was unclear how it could claim its perceived
financial entitlement arising out of Valuations 12 and 13. In the
Referral Notice, AWS put its claim by reference, not
to the payment mechanism in the Contract, but to the payment provisions set
out as part of the Scheme in the 1996 Act. Buckingham challenged on
the basis that he was a residential occupier
of the property, the Act could not apply and the Adjudicator had no
jurisdiction.
Judge Coulson held that the precise nature of the
contractual payment machinery operating in January and February 2005 was an
issue which did not affect the enforcement proceedings.
The Adjudicator derived his jurisdiction, to consider claims in respect of
the work which was the subject of Valuations 12 and 13, from the terms of
the Contract and the Notice of Adjudication. He concluded that the sums claimed in Variations
12 and 13 were due and payable by Buckingham. Any enquiry into the precise status of Valuations 12 and 13
was entirely a matter for him. Since the Adjudicator had the
jurisdiction to consider what was due by reference to Valuations 12 and 13,
it is not for the court to review the correctness of that decision.
Judge
Coulson referred to the decision of
the Court of Appeal in C&B Scene Concept Design Limited v Isobars
Limited [2002] E.W.C.A. Civ. 46. There the Court of Appeal allowed
an appeal in which the recorder had refused to
enforce the decision of the adjudicator on the ground that he had wrongfully
endeavoured to enforce the contract terms, rather than the scheme under the
1996 Act. In allowing the appeal, Sir Murray Stuart-Smith said:
"29
...The Adjudicator's jurisdiction is determined by and derives from the
dispute that is referred to him. If he determines matters over and
beyond the dispute, he has no jurisdiction. But the scope of the dispute was
agreed, namely as to the Employer's obligation to make payment and the
Contractor's entitlement to receive payment following receipt by the
Employer of the Contractor's entitlement to receive payment following
receipt by the Employer of the Contractor's Applications for interim payment
Nos 4, 5 and 6 ... In order to determine this dispute the Adjudicator had to
resolve as a matter of law whether Clauses 30.3.3-6 applied or not, and if
they did, what was the effect of failure to serve a timeous notice by the
Employer. Even if he was wrong on both these points that did not
affect his jurisdiction. 30. It is important that the
enforcement of an adjudicator's decision by summary judgment should not be
prevented by arguments that the adjudicator has purported to decide matters
that are not referred to him. He must decide as a matter of construction of
the referral, and therefore as a matter of law, what the dispute is that he
has to decide. If he erroneously decides that the dispute referred to
him is wider than it is, then, in so far as he has exceeded his
jurisdiction, his decision cannot be enforced. But in the present case
there was entire agreement as to the scope of the dispute, and the
Adjudicator's decision, albeit he may have made errors of law as to the
relevant contractual provisions, is still binding and enforceable until the
matter is corrected in the final determination."
In the instant
case, the Notice of Adjudication sought payment of the 50,000-odd made up
of two sums due by reference to interim Valuations, nos 12 and 13, issued
under the Contract. The dispute which was referred to the Adjudicator
in those terms was wide enough to allow him to reach the decision
which he did. On one analysis, the most that can be said was that the
Adjudicator has done the exact opposite of what the Adjudicator did in C&B
Scene; the instant adjudicator applied the Scheme under the Act rather than the
Contract payment mechanism. However, the point of principle was
precisely the same: his choice of payment mechanism might be
incorrect, but it did not affect his jurisdiction. For the
avoidance of doubt, Judge Coulson recorded that the Contract, including the
agreement to adjudicate, continued to govern any disputes as to valuation
and payment arising out of Valuations 12 and 13, and that no jurisdictional
challenge, based on the 1996 Act, were open to Buckingham in any
event. He gave four reasons for these conclusions.
- Notwithstanding the termination of employment of the quantity
surveyors, the Contract between AWS and Buckingham continued to
operate in practice. The Contract provided the machinery pursuant to which, even
without the quantity surveyors, AWS's entitlement to interim payments
would be assessed and paid. AWS provided Valuations 12
and 13 in January 2005 in the same way as it had done before the new year;
all that was different was that it was now Mr Buckingham alone who had to
consider them and pay what was due in accordance with the Contract
timetable. The Contract payment mechanism
was not rendered irrelevant by the sacking of the quantity surveyors. The machinery
was capable of being adapted by the parties so that it could continue to
work in the absence of Certificates issued by the quantity surveyors. Buckingham had written to AWS on 4th January 2005 to say that he would now administer the
Contract. Accordingly, on that view, the payment mechanism stayed in
place and was not changed at all. As the contract administrator Buckingham
should have issued Certificates in respect of Valuations 12 and 13. That
default was rectified by the Adjudicator, who essentially made good the
absence of such Certificates by his decision.
- Not only was the
Contract payment mechanism capable of being adapted by the parties to
operate in the absence of the quantity surveyors, but it was so adapted. When he received Valuation 12, Buckingham did not reject it outright; he considered it and made a payment of
some 40,000-odd in respect of the claim which had been made. That
was, therefore an unequivocal acknowledgment by Buckingham that the contract machinery continued to operate in the absence of
the quantity surveyors.
- Judge Coulson suggested that one
analysis of the situation after the sacking of the quantity surveyors could be
that the Contract remained in force, including the agreement to adjudicate,
and that, if appropriate or necessary, the terms of the scheme in the 1996
Act could be implied into that Contract simply in order to make the payment
mechanism work in the absence of interim certificates. That did not
mean that the Adjudicator derived his jurisdiction from the 1996 Act: he did
not.
- Judge Coulson considered that even if he was wrong and the only appropriate payment mechanism, following the sacking
of the quantity surveyors, was that provided by the scheme in the 1996 Act, Buckingham
was in any event prevented from seeking to rely on the residential
occupier exclusion in the Act in order to challenge the Adjudicator's
jurisdiction and resist these enforcement proceedings. If the payment
mechanism within the scheme was the only way in which AWS could
recover its financial entitlement, then the failure to replace the quantity
surveyors by others who would issue interim certificates meant that Buckingham was in breach of contract (see Croudace v Lambeth [1996] 33
B.L.R. 20). In those circumstances Buckingham could not seek to take
advantage of his own breach by arguing that, as a result of that
breach, the Contract payment machinery was unworkable and the scheme,
under the 1996 Act, did not fill the gap because Buckingham was a
residential occupier.
Accordingly, Judge Coulson held that whether
there was anything in the point about the status of Valuations 12 and 13 and
the precise operation of the Contract payment machinery (which he did not
accept) it did not affect the conclusion that the Adjudicator had the necessary jurisdiction
to consider the claims set out in Valuations 12 and 13 and to make a
decision based upon them. That disposed of the application,
but for completeness Judge Coulson dealt with three other matters
which were raised in the course of argument.
Residential Occupier
Judge Coulson considered that the property
was one of Buckingham's residences and that he was therefore a
residential occupier. Accordingly, if the Adjudicator's jurisdiction had derived from the 1996 Act,
then he would not have had jurisdiction because s.106(1)(a) would
have applied. Judge Coulson emphasised that in this case the Adjudicator's jurisdiction did not derive from the
1996 Act but from the Contract
agreed between the parties and, therefore, the residential occupier point
does not arise.
Termination
Judge Coulson considered that Buckingham's argument that because the Contract had been terminated,
it was therefore irrelevant was manifestly a bad one. The
Contract may have come to an end, but the parties' accrued rights and
liabilities under the Contract remained for the Adjudicator to
determine. AWS had an accrued right in respect of Valuations
12 and 13, and the subsequent termination of the Contract did not alter or
affect that right. Further the suggestion that AWS had terminated the Contract by its letter of
1 December was wholly wrong. After 1 December, works continued at the property and, in early
January, although Buckingham sacked the quantity surveyors, he expressly told AWS
that he was taking over the administration of the Contract
himself. The continuing existence of the Contract was affirmed by both
parties repeatedly after 1 December. In those circumstances the Contract was not, and could not have been,
terminated by AWS's letter of 1 December in any event.
The UnfairTerms in Consumer Contracts Regulations 1999
Judge Coulson rejected as a matter of principle the argument that the adjudication provisions in the Contract should
be struck out as offending against the Unfair Terms in Consumer Contract
Regulations 1999. He adopted the phrasing of His
Honour Judge Thornton QC in Westminster Building Company Ltd v Beckingham
[2004] B.L.R. 163 at p. 170, the adjudication agreement would be unfair and,
hence, not binding on Mr Buckingham if:
- It was not individually
negotiated and
- It was contrary to the requirement of good
faith and
- It caused significant imbalance in the parties' rights
and obligations arising under the Contract, to the detriment of Mr
Buckingham as a consumer and
- It was unfair, taking into account
the nature of the goods or services for which the contract was concluded, by
referring at the time of the conclusion of the Contract to all the
circumstances attending the conclusion of the Contract and all the other
terms of the contract.
The only authority of which Judge Coulson was aware in which it
was found that adjudication provisions might contravene these Regulations was
Picardi v Cuniberti [2003] B.L.R. 487. There, His Honour Judge
Toulmin C.M.G. held that relevant conditions, including an adjudication
agreement, had not in fact been incorporated into the contract.
Therefore his remarks about the Regulations were obiter. Furthermore,
there was little doubt that one of the principal reasons why the learned
judge came to the view that, if there had been an adjudication agreement, it
may have offended against the Regulations, was because the proposed
adjudication agreement in that case had been originally put forward by
Claimant architect, so that, if he had been able to establish the contract
for which he contended, he could then have relied upon that agreement. In Westminster
v Beckingham itself, Judge Thornton rejected the suggestion that the
term was unfair on the facts with which he had to deal. Importantly,
he found at paragraph 21:
"The terms of the contract were decided
upon by Mr Beckingham's agents who are chartered surveyors, and Mr
Beckingham had, or had available to him, competent and objective advice as
to the existence and effect of the adjudication clause before he proffered
and entered into the contract. Westminster did no more than accept the
contract terms offered and had not reasonable need to draw to Mr Beckingham'
attention the potential pitfalls to be found in the adjudication clause and
in its operation during the course of the work. The clause did not
therefore contravene the requirement of good faith (see especially the
speech of Lord Bingham in the case of Director-General of Fair Trading v
The First National Bank plc [2002] 1 A.C. 481)."
Judge Coulson considered that the instant case was precisely on all fours with the decision in Westminster
and the same result should apply. Judge Coulson
suggested that a more comprehensive
review of the authorities was provided by His Honour Judge Richard Seymour
QC in Bryen & Langley Limited v Martin Rodney Boston [2004]
E.W.H.C. 2450. Again the judge ruled that the adjudication agreement
was not unfair. Again it was a highly material face that there (as in
the instant case) the Claimant's agents had proffered the contract terms, which
included the adjudication agreement. Judge Coulson agreed with and adopted
Judge Seymour's comments at paragraphs 43 and 44 of his judgment. In
particular, he agreed with his commonsense conclusion that:
"While
it may be going too far to say that a building contractor who merely, without
more, accepts a proposal from a 'consumer' as the terms of the contract to
be made between them could never contravene the requirement of good faith,
it is difficult to envisage circumstances in which the criticism could
properly be made that the contractor had acted contrary to the requirement
of good faith in such a case."
For all those reasons, Judge Coulson rejected the suggestion that the adjudication agreement in the JCT
conditions in the instant case was unfair to Buckingham, pursuant to the Unfair
Terms in Consumer Contracts Regulations 1999. Judgment
Judge Coulson held that the Adjudicator had the
necessary jurisdiction to reach the decision he did and granted
summary judgment to AWS for the following:
- The sum of
50,401.35, being the total due in respect of valuations 12 and 13;
- Interest in a sum for the parties to agree, pursuant to the Late
Payment of Commercial Debts Interest Act 1998;
- The nomination
fee payable to the RICS, which the adjudicator ordered Buckingham to pay;
and
- The sum of 2,112.25 plus VAT, in respect of the
adjudicator's fees, which he also directed to be paid.
Judge Coulson recorded his sympathy for Mr Buckingham's position, not
because he had any defence to the enforcement claim (because he
did not) but because it seemed that he had apparently been let down by his previous professional advisors. In
particular, it seemed that the disputes arose because there was not
in place a clear lump sum Contract at the outset covering all the proposed
Works at the property. Judge Coulson observed that if work begins on site without a lump sum
agreement in place, events can quickly mean that the parties move apart,
rather than together, and the prospect of ever agreeing a lump sum recedes
into the distance. Unhappily for Buckingham, that seem to be what
happened. These difficulties were then compounded by the curious
decision not to advance any case at all on the merits in the
adjudication. These points did not and could not give Mr Buckingham any sort of defence to enforcement
proceedings.
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