RMP Construction Services Ltd v Chalcroft Ltd [2015] EWHC 3737 (21 December 2015)

Facts:

• RMP Construction Services Ltd (hereinafter referred to as “the Claimant”) is a ground works subcontractor which carried out works for the Charlcroft Ltd (hereinafter referred to as “the Defendant”) in late 2014 and 2015.

• A dispute arose as to payment, which the Claimant referred to adjudication. The adjudicator found in favour of the Claimant, declaring that the Claimant was entitled to £258 760.67 plus VAT as well as the adjudicator’s fee.

• The Defendant did not pay the awarded sum and the Claimant issued proceedings on 17 November 2015 and brought an application for summary judgment to enforce the award.

• The parties disagreed as to the manner in which the contract came about. The Claimant alleged it was formed by an email dated 5 December sent by the Defendant to the Claimant, which accepted an offer made by the Claimant. The Defendant, however, stated that it had been formed either (a) by a Letter of Intent on 8 December 2014, or (b) by the Letter of Intent read with a subsequent exchange of emails on 18 December 2014, or (c) by the placing and subsequent acceptance of a sub-contract order on 13 April 2015.

• It was the Defendant’s case that if the contract was formed by the Letter of Intent or by the sub-contract order, the contract incorporated standard JCT Contract wording.

Issue:

• The issues in this matter were three-fold:

1. How was the contract formed, and what contractual documents formed the contract?
2. Once the contract formation and contract documentation had been established, did the adjudicator have the jurisdiction to give a decision?
3. Considering that the adjudicator did have jurisdiction, must his decision be enforced if it could be argued that the adjudicator erred in his application of the law.

Law:

• Mr Justice Stuart Smith noted that there were two features of the contractual case that are central to the arguments on the application. Firstly, no matter what contractual route applies, the Scheme for Construction Contracts as laid down in the Scheme for Construction Contracts (England and Wales) Regulations 1998 (hereinafter referred to as “the Scheme”) applies and no adjudicator nomination body was specified by the parties. The adjudicator was appointed in accordance with the Scheme.

• Secondly, if the Claimant’s interpretation of the contractual formation is correct, the Defendant did not serve a pay less notice timeously, and thus the Adjudicator’s conclusion on the Claimant’s entitlement would have been correct. However, if the one of the Defendant’s interpretations of the substantive obligations was correct it was at least reasonable to argue that a pay less notice sent on 26 August 2015 was valid and in time, and the Adjudicator’s conclusion on the RMP entitlement would have been incorrect.

• The Claimant submitted that if it is acknowledged that the Adjudicator has jurisdiction, and that the adjudicator had jurisdiction regardless of the whichever contractual interpretation is correct, and further if the different interpretations lead to different substantive outcomes is irrelevant.  The Claimant submitted that the Adjudicator was validly appointed, and if he misinterpreted the contractual provisions, that is no bar to the enforcement of the Adjudicator’s decision.

• Mr Justice Stuart Smith held that during adjudication’s infancy, the Courts have, when considering whether to enforce adjudicators’ decisions, drawn a clear distinction between the questions going to the jurisdiction of the adjudicator and the questions about whether the adjudicator (if it is deemed that they do have jurisdiction) has reached the correct substantive answer.  The legal policy on this issue, as derived from statute, has been that reasonable challenges to the jurisdiction of the Adjudicator may be reason enough to not enforce the decision, but the simple submission that the adjudicator has misunderstood the factual or legal basis is not.

• This position is described in Sherwood and Casson v Mackenzie [2000] 2 TCLR 418 HHJ as follows:

• • “1. A decision of an adjudicator whose validity is challenged as to its factual or legal conclusions or as to procedural error remains a decision that is both enforceable and should be enforced.
  •  2. A decision that is erroneous, even if the error is disclosed by the reasons, will still not ordinarily be capable of being challenged and should, ordinarily still be enforced.
  • A decision may be challenged on the ground that the adjudicator was not empowered by the HGCRA to make the decision because there was no underlying construction contract between the parties or because he had gone outside the terms of his reference.”

• Similarly, in Carillon Construction v Devonport Royal Dockyard Ltd [2005] BLR 310 Jackson J stated principles that were endorsed by the Court of Appeal and have been repeated and relied upon many times since:

• • “1. The adjudication procedure does not involve the final determination of anybody’s rights (unless all parties so wish).
  • 2. The Court of Appeal has repeatedly emphasised that the adjudicator’s decisions must be enforced, even if they result from errors of procedure, fact or law;
  • 3. Where an adjudicator has acted in excess of his jurisdiction or in breach of the rules of natural justices, the court will not enforce the decision:
  • 4. Judges must be astute to examine technical defences with a degree of scepticism consonant with the policy of the 1996 Act. Errors of law, fact or procedure by an adjudicator must be examined critically before the court accepts that such errors constitute excessive jurisdiction or serious breaches of the rules of natural justice”

• Jurisdictional challenges regarding enforcement of the adjudicator’s decision as well as challenges to the substantive law provided in the decision had to be dealt with. As to the adjudicator’s jurisdiction, the court held that the adjudicator did have jurisdiction on either contractual formation as suggested by the parties, due to being appointed under the Scheme.

• The court held further that even though it may be correct to describe the Defendant’s various alternative formulations as different contracts from the contract alleged by the Claimant, that difference should not be the determining factor when it is remembered that the Court was concerned with one contracting process, with the only question being which party has correctly identified the manner in which the contract was formed. The court had already decided that the adjudicator had the requisite jurisdiction under the scheme, regardless of the manner in which the contract came into being (and from what documents the contract took reference).

• To bar the Claimant from court on the grounds that it may have misidentified the contractual provisions that would provide the adjudicator with jurisdiction under the Scheme is an unnecessarily formalistic barrier, bearing in mind that  adjudication is meant to provide speedy and effective remedies to parties, equally accessible to those who are legally represented as well as to those that are not, also bearing in mind that the system now covers not only written contracts but also oral contracts which increases the likelihood that they may be incorrectly described.

• Thus, the adjudicator has jurisdiction as no matter how the contractual arrangements between the parties are correctly described, they mandated the use of the Scheme and he was appointed correctly in terms of the Scheme’s procedure.

• In coming to this determination, the court did not ignore the potential difference in substantive outcome that could arise from identifying the contract correctly. So long as the adjudicator addressed the correct question without bias, breach of natural justice or any other vice that would justify overturning the decision, it must at this stage be upheld.

• If he made an error in law (which cannot be resolved by the court at this stage) in referring to wrong contractual provisions when deciding the substantive question that was referred to him, that falls to be considered within the category of errors of procedure, fact or law which the Court of Appeal has repeatedly emphasised should not prevent the enforcement of the adjudicator’s decision.

Conclusion:

The Claimant, for the reasons given above was entitled to enforce the award and is entitled to summary judgment in the sum of £318 529.30 (including the Adjudicator’s fee and VAT) plus interest of £7 231.15 as of the date of judgment and continuing at a daily rate of £60.26 awarded by the adjudicator until further order.