VISION HOMES LTD V LANCSVILLE CONSTRUCTION LTD
Technology and Construction Court
Christopher Clarke J
4 August 2009
THE FULL TEXT OF THE JUDGMENT OF CHRISTOPHER CLARKE J
1. Vision Homes Limited ("Vision"), the claimant, is a property developer. It contends that a decision of Mr Tony Bingham in respect of an adjudication is null, void and of no effect because it was made without jurisdiction and because it is vague and ambiguous. There is also a separate action in which Lancsville Construction Ltd ("LCL"), the defendant, seeks to recover the amount of Mr Bingham's fees.
2. In October 2007, Vision entered into a contract ("the contract") in the form of the JCT Design and Build Contract 2005 Edition (with amendments) with LCL. Under the contract LCL was to construct the structural shell and external envelope (cladding, windows, doors and roofing) to five new blocks of residential apartments being developed by Vision at Paradise Dock, 142 Lea Bridge Road, London E5, together with other landscaping and infrastructure work. The contract sum was £ 7,975,000. Clause 9.2. of the Conditions provided for disputes under the contract to be referred to adjudication under the Scheme for Construction Contracts ("the Scheme").
3. Work under the contract began. By July 2008, LCL realised that they were unable to undertake the external envelope works as required by the Contract, because they were unable to provide adequate funding to their proposed sub-contractor for the cladding works. LCL told Vision of the difficulty. Following discussions, in or around July or August 2008 the parties agreed that the external envelope works would be omitted ("de-scoped") from the Contract, resulting in a 40% reduction in the value of the works. The agreement was preceded by an e-mail of 10th July in which Mr Freeman of Vision said to Mr Sherry of LCL:
"..we are not looking for compensation or to get caught in contractual negotiations..."
4. With regard to the remaining works which stayed with LCL, the parties agreed a revised method of working for Block 5 and other fundamental changes to the way the work was to proceed and be handed over. According to the evidence of Mr Wallace of Kingfisher Associates Ltd, LCL's advisor, the works then proceeded on the basis that LCL would complete the remaining sections of the frame to blocks 2 and 3 and hand them over floor by floor. This contrasted with the original arrangement in which it had been envisaged that LCL would complete the whole frame including envelope works and then hand them over to Vision for internal fit out and completion. By 21st July LCL notified Vision that blocks 1 and 4 had reached practical completion, which Vision accepted at the time. Block 5 had fallen substantially behind schedule on account of problems with planning permission. It was agreed that the works would be carried out but again on an entirely different basis. LCL would complete the ground floor slab. Vision's employees would then carry out the brick and block work on the slab and then LCL would return and cast the next floor on the metal sheeting provided and installed by Vision and so on.
5. The effect of the changes (according to LCL) is summarised at pages 5 and 6 of Mr Bingham's decision as follows:-
"LCL says: This Agreement substantially altered and drastically reduced the scope of Works. It altered the nature of the possession of the site and/or sections or parts thereafter and the issue of Practical Completion, LADS and the issuing of non-completion notices. The 'Notice of Adjudication' then particularises the effects of LCL position and continues: This project has an original contract value of £7.9 million. The contract indicates the amended document JCT 2005 Design and Build set of rules signed under seal and dated 05 October 2007. The subsequent July 2008 Agreement reduced the contract value by approximately £3 million down to £4.9 million. One of the effects of this agreement is an intention not to deduct Liquidated & Ascertained Damages. Further, or alternatively partial possession was taken with the effect of proportionate reduction of LADS. Further, the Agreement fundamentally altered the contractual matrix. Vision became in full control of the site, it was doing the majority of the Works and had CDM implications. Further, various practical completion status arose. The right to insist on performance of the contract in respect of time was lost and became at large. LCL effectively became a Vision subcontractor. Alternatively says LCL the Agreement had the effect of LCL taking partial possession of the whole site. Alternatively the effect of the Agreement is that it provides "yet another series of dates".
6. According to LCL by October 2008, the remaining contract works were substantially complete, although no Certificates of Practical Completion or Sectional Completion were issued. However, on 21st and 28th November 2008, Vision issued Non-Completion Certificates for the works. On 28th November LCL submitted to Vision a draft final account. On 26th March 2009, Vision purported to determine LCL's employment under the Contract.
Adjudications Nos 1 and 2
7. In April 2009, LCL commenced an Adjudication ("Adjudication No. 1") .in relation to whether the determination of the contract was unlawful, but this was withdrawn before a decision was made and the adjudicator, Mr Lorne Alway of Always Associates, who had been appointed by the RICS, stood down. LCL commenced a second adjudication ("Adjudication No. 2"), with Mr Alway as adjudicator, relating to the non-payment of part of an interim valuation. Vision paid the sum in question and Mr Alway stood down.
8. By a letter dated 1st May 2009 Vision claimed against LCL £509,254 in Liquidated Damages for alleged late completion in accordance with clause 2.29 of the contract. LCL denied liability on the grounds that the contract dates for completion had been superseded by the agreement reached between the parties in July and August 2008 when the cladding was omitted. There was, therefore, a dispute over whether Vision was entitled to payment under the contract of Liquidated and Ascertained Damages ("LADs") and what contractual Completion Dates (if any) still applied.
14th May 2009
Adjudication No 3: LCL's first Notice of Intention to Refer
9. At 0622 on 14th May Mr Wallace on behalf of LCL faxed to Maxwell Winward on behalf of Vision a letter inviting them to agree one of three candidates to act as Adjudicator and enclosing a Notice of Intention to Refer a Dispute. The Notice included the following:
"6. It is Lancsville's intention to try to agree a nomination for adjudicator and if not apply to the President of the RICS in accordance with the provisions of the Contract for the appointment of an adjudicator for the resolution of the dispute or difference, the terms of which are set out below.
......
The Dispute
8. The dispute or difference between the parties arises out of or in connection with the aforesaid written construction contract in respect of the Works at Paradise Dock, Lea Bridge Rd, London.
9. The Employer has in breach of contract decided to levy LADs in respect of purported late completion. The Adjudicator is requested to investigate all the issue of the agreement and/or the change to the Employer's Requirements and the Change instruction issued by Vision Homes whereby LCL's scope of work was substantially altered and drastically reduced. This agreement then altered the nature of the possession of the site and/or sections or parts thereafter and the whole issue of practical completion, LADs, time and the issuing of non-completion notices. However the Adjudicator is not given jurisdiction to investigate and make any decision as to Lancsville's application for an extension of time."
LCL included in this notice a "Statement of Relief" sought which read as follows:
"Declarations that:
A: In respect of blocks 1 to 5 Vision Homes amended the Employer's Requirements, by agreement with LCL, and removed from their scope of works the obligations to complete the external envelope including cladding, windows and doors or such other elements as the Adjudicator in his discretion shall decide.
B: The Employer's Requirements were fundamentally changed in respect of Block 5 whereby Vision Homes and LCL carried out the construction Work jointly.
C: Vision Homes issued a Change instruction under clause 3.9 of the Contract to alter the Employer's Requirements.
D: Due to Vision Homes changing the Employer's Requirements and then undertaking either by themselves or through sub contractors all the External envelope work then, for the purposes of possession and/or Practical completion the situation was:
Practical completion of blocks 1 and 4 took place on a date not later than the 21st July 2008.
Phased partial possession by Vision Homes took place under clause 2.30 of the Contract of blocks 2, 3 and 5 in accordance with Mr Naude's letter of the 4th August 2008 reference AD/cc/2410/2 save for the stairwells of blocks 2 and 3.
Practical completion of block 2 took place on a date not later than 27th February 2009 and block 3 on a date not later than 6th March 2009. Block 5 was practically complete on a date not later than 27th March 2009.
Partial possession of section 6, save for the basement car park took place on or about the 21st July when Vision Homes commenced work on the external envelope of blocks 1 and 4 and practical completion as at 26th March still had not been achieved.
Or such other arrangement or arrangements and date or dates as to practical completion and/or part possession of the various parts or parts, section or sections as the Adjudicator in his discretion shall decide.
E: When the Employer's Requirements were amended by Vision Homes their failure to thereafter amend the Sectional Completion dates as set out in the Particulars to the Contract thereby caused time to become at large.
F: When the Employer's Requirements were amended by Vision Homes their failure to amend the amounts entered into the Sectional Completion Supplement in respect of LADS had the effect that in respect of blocks 1 to 5 they became a penalty because they were no longer a genuine pre estimate of their loss if there was late completion as the amounts entered therein failed to recognize the revised scope of works.
G: The e-mail of Mr D, Freeman of Vision Homes on the 10th of July at 0810hrs to Mr Sherry is such that Vision Homes thereafter agreed not to seek financial compensation in respect of delays for completion of the Works or the reduction in LCL's scope.
H: The notice of non compliance of the 21st November is invalid as it refers to a scope of works for which LCL was not responsible.
I: The notice of non completion of the 28th November is invalid as it refers to a scope of works for which the LCL was not responsible".
Adjudication No 4: Vision's Notice of Intention to Refer
10. At 1635 on 14th May Vision's solicitors, Maxwell Winward, served on LCL a Notice of Intention to Refer a Dispute regarding Vision's entitlement to LADs of £509,254. That notice included the following:
"The Dispute
4a. The dispute referred to Adjudication concerns the Referring Party's [i.e. Vision's] entitlement to Liquidated and Ascertained Damages in accordance with clause 2.29 of the Contract…..
h. On 1 May 2009 [Vision] wrote to [LCL] requesting payment of FIVE HUNDRED AND NINE THOUSAND POUNDS STERLING (£509,254.00) in respect of LADs within 7 days……
i. On 8 May 2009 [LCL] wrote to [Vision] requesting an extension of the payment deadline until Wednesday 13 May 2009…..
j. On 14 May 2009 [LCL's] legal representative stated that the Respondent did not intend to pay LADs……
k. A dispute accordingly exists which is capable of reference to Adjudication.
Redress sought
5a. [Vision] will request that the Adjudicator orders [LCL] to pay [Vision] the sum of FIVE HUNDRED AND NINE THOUSAND POUNDS STERLING (£509,254.00), or such other sum as the Adjudicator considers appropriate, within 7 days of the date of the Adjudicator's decision being delivered to the parties, or within such other period as the Adjudicator shall deem appropriate."
11. The dispute referred to in the Vision notice was referred for determination by Mr Alway by a Referral Notice dated 21st May 2009. I refer to this adjudication as "the Alway Adjudication".
12. At 1636 Mr Wallace, LCL's claims consultant, requested the RICS to appoint Mr Bingham as adjudicator. At 1450 on the same date Maxwell Winward applied to the RICS to nominate an adjudicator.
LCL's modified Notice of Intention to Refer
13. At 1654 on the same day Mr Wallace e-mailed to Vision a slightly modified Notice of Intention to refer. The only change consisted of the addition of a claim for a declaration that Vision should pay the adjudicator' costs, fees and expense.
14. On 19th May Mr Tony Bingham accepted nomination in respect of LCL's Notice and proceeded to conduct what I will call "the Bingham adjudication".
15. Both the Alway and the Bingham adjudications proceeded.
16. On 20th May LCL served a Referral Notice. It also served a Final Account Statement which was expressed to be in accordance with clause 4.12.2 of the Contract. On 21st May Vision served a Referral Notice.
LCL's Referral Notice
17. The LCL Referral Notice set out and relied upon a series of provisions under the contract relating to practical completion, partial possession by the employer (which Vision was alleged to have taken), liquidated damages, defects and changes. The Notice claimed that there had been what amounted to a change instruction to omit the external envelope, an agreement that block 1 and 4 had reached practical completion and that blocks 2 and 3 were to be the subject of a series of phased partial possessions. The Notice gave four possible analyses of what had happened under the contract. It claimed that, because of the omission of the works, the LADs in respect of blocks 1 and 5 had become penal, that Vision had elected not to rely on them, and that time was now at large because of the omission of works and Vision's partial possession of the site. The Notice did not suggest that the contract had been abandoned.