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St Austell Printing Company Limited v Dawnus Construction Holdings Limited [2015] EWHC 96 (TCC) (21 January 2015)

9 February 2016

Facts:

  • On or during 20 November 2011, St Austell Printing Company Limited (“St. A”) entered into a contract agreement with Dawnus Construction Holdings Limited (“Dawnus”) for the design and construction of two warehouse/industrial units.
  • The contract incorporated the JCT design and build contract form, 2005 edition.
  • Dawnus issued a comprehensive application for interim payment on 10 December 2013 to AECOM. This interim payment application included a claim in respect of changes and variations of which certain amounts reflected the measured work element of the changes and variations.
  • AECOM delivered payment notice to Dawnus on 19 December 2013, which recorded that the sums so far paid to Dawnus (by way of valuations and payment made to Dawnus in April) remained the correct valuation and that no further sum was due to Dawnus.
  • This payment notice was accompanied by a “letter of clarification”, which stated that AECOM was reviewing Dawnus’ revised final account and AECOM will send their final version of the account, early in the New Year.
  • Neither AECOM nor St A responded further to Dawnus in the New Year, thus no defects were identified, no version of the final account was submitted and no response to the loss and expense claim.
  • Only on or during 26 August 2014, Dawnus issued a notice of dispute and instituted and commenced with adjudication proceedings and expressly sought payment by St A of sums claimed in respect of 115 changes. Dawnus limited their claim to a declaration as to their entitlement and expressly sought an order for payment.
  • The adjudicator made a ruling that payment was due to Dawnus and St A lost the adjudication.
  • St A did not want to pay and, although this matter is essentially an adjudication enforcement dispute, in which Dawnus seek enforcement of the sums found due by the Adjudicator, St A issued pre-emptive proceedings, seeking a declaration that the adjudicator did not have the jurisdiction to decide that the said claimed amount was due to Dawnus.
  • St A relied on two grounds: Firstly, that the adjudicator did not have the necessary jurisdiction, due to fact that St A suggested that the dispute had not crystallised between the parties at the time of the notice of adjudication. Secondly, St A argued that the claim referred to adjudication, related only to a part of Dawnus’ original interim application, and expressly excluded other elements. Thus the adjudicator was not empowered to order the payment of any sums which he found due.

Issue:

  • The court was required to decide on two objections. Firstly, had the dispute crystallised in August 2014 and secondly, was the adjudicator empowered to order payment for part only of the interim application.

Adjudication ruling

  • The adjudicator’s conclusion in his ruling was that St A’s jurisdictional challenge was “entirely without merit”.

The TCC [High Court of Justice, Queen’s Bench Division, Technology and Construction Court]:

  • Law – Objection 1 – Had the dispute crystallised in August 2014-
    • The TCC referred to the judgment in AMEC Civil Engineering Limited v Secretary of State for Transport [2004] EWHC 2339 (TCC) and explained “the general view that crystallisation may require no more than the service of a claim by the claiming party and subsequent inactivity for a further short period by the responding party. In practice, in the overwhelming majority of cases dealing with this point, the court has found that the dispute had crystallised by the time of the notice of adjudication”.
    • A more recent case on crystallization, Ringway Infrastructure Services Ltd v Vauxhall Motors Ltd,” summarized the relevant principles…(1) The existence of a dispute or difference may be inferred from what is said or not said by the party in receipt of what may be termed “a claim”. (2) There does not have to be an express rejection of a “claim” by the recipient.
    • The TCC found that there can be no doubt that “the dispute about what, if any, sums were due to Dawnus on the basis of interim application…had crystallised long before the notice of adjudication”.
    • In view of the amount of time, considering the application of 10 December 2013 and the response of 19 December 2013, AECOM considered the detailed claim on behalf of St A, and rejected it on its merits. A claim had been asserted and then expressly rejected and nothing more is required for a dispute to have crystallised.
    • After rejection of Dawnus’ claim, a period of eight months passed before notice of adjudication was issued, a period of eight months in which AECOM had promised to respond on a whole raft of matters, but had failed to do so. Such long period of inactivity, obviously amounted to a rejection of Dawnus’ claim.
    • The first jurisdictional challenge, that the dispute had not crystallised, failed.
  • Law – Objection 2 – No power to order payment for part only of interim application-
    • The TCC referred to the relevant authorities, which was Fastrack Contractors Ltd v Morrision Construction Ltd [2000] BLR 168, David Mclean Housing Ltd v Swansea Housing Association Ltd [2002] BLR 125 and Pylon Ltd v Breyer Group PLC [2010] EWHC 837 (TCC).
    • If a claimant’s interim application for payment is for measured work and loss and expense, a claimant may decide, because the loss and expense claim could be difficult to present in an adjudication, and rather instead focus on those proceedings on just the straightforward claim for measured work.
    • Claims advanced in adjudication should be those claims which the referring party is confident of presenting properly within the confines of that particular jurisdiction.
    • St A were liable to make an interim payment to Dawnus under the contract. The adjudicator’s decision is a decision reflecting St A’s existing liability to pay.
    • The mere fact that Dawnus’ limited their own claim to the measured work value of the 115 changes, did not in any way limit or prevent St A from defending that claim, and raising their own cross-claim by way of set-off.
    • The second ground of jurisdictional objection failed.
  • In consequence Dawnus were entitled to summary judgment in relation to the sums ordered by the adjudicator.