PC HARRINGTON CONTRACTORS LTD V TYRODDY CONSTRUCTION LTD
Technology and Construction Court
Akenhead J
25 March 2011
THE FULL TEXT OF THE JUDGMENT OF AKENHEAD J
Introduction
1. These Part 8 proceedings are brought by PC Harrington Contractors Limited ("Harrington"), who were sub-contractors employed by Multiplex Constructions (UK) Limited ("Multiplex") in relation to certain aspects of the Wembley Stadium project. Harrington were also contractors or subcontractors retained on two other projects, one at Mansfield and the other at Liverpool, but it has been agreed for the purposes of today that the Wembley history, contract and issues are representative of the other two. It is, therefore, unnecessary to go into any detail on the Mansfield and Liverpool contracts and issues that arise on those. This is, however, to be a judgment on all three projects, but by looking at Wembley I can deal with all the issues on the other two projects as well. Harrington were, as I have said, the subcontractor retained by Multiplex and Tyroddy Construction Limited ("Tyroddy") were fix-only, reinforcement sub-subcontractors retained by them on that project.
2. These proceedings relate to the enforceability of the adjudicator's decisions arising out of adjudications on all three projects that were commenced by Tyroddy against Harrington earlier this year. Issues are raised on the enforceability of those decisions, which were made in favour of Tyroddy and also issues are raised as to the interpretation or the impact of the sub-subcontract that existed between them.
The History and the Contract
3. I deal here only with Wembley for the reasons I have indicated. It is clear that at some stage prior to 6 June 2003, Harrington had approached Tyroddy with a view to them quoting for the provision of labour and small tools in relation to the fixing of steel reinforcements for various parts of the Wembley project. Thus it was, on 6 June 2003 that Harrington effectively sent an order by way of letter confirming rates
"for providing all labour and small tools necessary to offload, check, distribute and fix steel reinforcement on the above contract from your commencement on this project on 9th June 2003."
There are then set out the various reinforcement bar diameters and rates per tonne that were to be applicable to Tyroddy's work and other rates such as a day work rate was also set out in that letter. There then appears this:
"The above rates are fixed for the duration of our works. Valuations will be weekly and subject to 5% retention for a period of six weeks from your Commencement Date and will then be twice monthly, subject to 5% retention."
Various other matters were called for in this letter, but it seems clear that Tyroddy started their work thereafter. It is accepted that this letter evidences the contractual terms between the parties.
4. Following the commencement of work, there was an agreement between the parties by which it is accepted that the retention was to be reduced to 3%. It is clear from the interim valuations that were issued by Harrington that a retention of 3% was used.
5. The first valuation took place for the period ended 15 June 2003. Harrington issued what was called a "Subcontractor's Payment Certificate" and the form of that certificate was to identify a figure for the value of measured works, day works and materials on site, and on this Certificate No. 1 £41,400 was identified. The words "On Account" are handwritten beside this figure. That was subject to a retention of 3%, which reduced the gross amount to £40,158. There were then deductions of 18% to reflect an income tax reduction. That may have something to do with labour only subcontracts. To the net resulting figure VAT is added and payment of, in this case, £39,957.21 was said to be due and payable to Tyroddy by Harrington. Indeed, the box says "Cheque enclosed".
6. It is clear that the works proceeded over the next year or two and thus it was that what was apparently the last certificate from Harrington was issued on 28 May 2006. It is said to be Payment No. 111 and it may be that payments had been made previously on a weekly or fortnightly basis. Again, the format is identical and, as before, against the value of "measured works, day works and materials on site" there has been written in hand the words "on account". That identified a retention at 3% of £66,628.50.
7. For reasons it is unnecessary for me to go into (and, indeed, there is not much evidence before me about it), following the completion of their work by Tyroddy, no final accounting process was embarked on. There is no evidence before me that Tyroddy made a claim for any more money, but the position was that, on this project as on the other projects, the retention remained as retention. Thus it was that, four and a half years later, Tyroddy decided that it wished to refer a number of these contracts to adjudication, in effect, to claim for the outstanding retentions. In so far as the Wembley project was concerned, that adjudication was instituted by a Notice of Intention to Adjudicate on 17 January 2011.
Adjudication
8. The Notice of Adjudication was encouragingly simple. It said:
"2. The Contract provided for the deduction and retention at 5%. There was no express provision for the release of such retention.
3. PCH have failed to repay any or all or the retention. As a consequence, a dispute exists as to the method and timing in which the retention should have been repaid…
6. The Adjudicator is asked to decide that the retention should have been repaid by reason of an implied term and what that term shall be.
7. The Adjudicator is asked to decide the final dates or date that the retention should have been repaid.
8. The Adjudicator is asked to decide that the total retention of £66,628.50 or such other sum as the Adjudicator shall decide is to be repaid forthwith."
Claims for interest and the Adjudicator's fees and expenses were also identified.
9. Mr Doherty was appointed as the Adjudicator and the Referral Notice was dated 20 January 2011. Paragraphs 2.3 and 4 of the Referral Notice were as follows:
"2.3 The contract at the bottom of the first page provides for the deduction of 5% retention. In fact retention was deducted at 3%. Tyroddy aver that consequently a term must be implied for such repayment. Tyroddy further aver that the correct term to be so implied should be based on normal trade custom and practice. Such normal trade custom and practice requires the payment of ½ of the sum withheld upon completion of the contract and the balance 12 months thereafter or upon making good defects, whichever is the later…
4.1 The Adjudicator is asked to decide that the retention should have been repaid by reason of an implied term and that that term should be as described in paragraph 2.3 above or such other implied term as the Adjudicator shall decide.
4.2 The Adjudicator is asked to decide the final dates or date that the retention should have been repaid..
4.3 The Adjudicator is asked to decide that the total retention of £66,628.50, or such other sum as the Adjudicator shall decide, is to be repaid forthwith…"
10. That was met by the Response of Harrington, the relevant paragraphs of which were as follows:
"1.8. The amount to be paid to Tyroddy would be established from the amount of reinforcement fixed by Tyroddy at the agreed rates and for the Slipform walls at the rates to be agreed. In order to ascertain Tyroddy's final account, the quantity of steel and mesh that Tyroddy fixed would therefore be required to be established…
1.11. As the entire valuation of all of the work carried out by Tyroddy is therefore presently no more than an 'on account' assessment of Tyroddy's overall entitlement under the Contract, including the amount of retention, the amount of money that Tyroddy is properly entitled to be paid under the Contract, including the amount of retention that may become due, cannot be established until the final account is agreed. Tyroddy therefore has no basis for asserting that the amount of money retained on the basis of an on-account valuation have become due to Tyroddy until the final account is agreed.
1.12.Consequently, as the final account has not been ascertained and agreed, any amount that may be owed to Tyroddy by way of retention or otherwise has not been established and as such cannot become due. Tyroddy therefore has no basis to assert that it is due any amount under the Contract-at this stage…
1.15. This adjudication which has suddenly been instigated by Tyroddy is therefore in contradiction with the previous normal dealings and with the agreement on the payment of retentions arising from the overpayment at Crossharbour. This adjudication is an ill founded and opportunistic ambush on P.C. Harrington by Tyroddy in whose full knowledge the entire valuation in respect of the Contract is 'on-account' and that it has not submitted or proposed a final account for the Contract and that the final account is not agreed and as a consequence, the value of the retention has not been ascertained, or agreed or otherwise established.
1.16. Finally, Tyroddy in attempting to utilise an unsubstantiated, interim 'on-account' valuation of its works as its basis to assert an entitlement to a final payment of retention, is fundamentally flawed. P.C. Harrington here by disputes that the valuation of the last interim 'on-account' valuation is the correct and proper value of the Contract…
2.3. ..P.C. Harrington accepts that it has not paid the 'on-account' retention of £66,628.50. P.C. Harrington submits that until such time as the final account is agreed, the amount of the retention that will or may become due, cannot be ascertained and until then cannot become due and/or be paid…
2.7. …P.C. Harrington accepts that the Contract sets out the frequency of payments but does not set out the final date for payment…P.C. Harrington denies however that any payment is due to Tyroddy because the final account is not agreed or otherwise established and therefore the amount of the retention that is or may become due is not agreed or otherwise established. Consequently P.C. Harrington asserts that until an amount is agreed or otherwise established it cannot become due and as such no payment is due to Tyroddy…
2.10. P.C. Harrington denies the assertion from Tyroddy that as a consequence of there not being an express provision in the Contract for the repayment of the retention that a term must be implied for such repayment…
2.20. P.C. Harrington denies that the amount of retention stated on Certificate 9171, or any other amount of it has become due to Tyroddy. The final account for the works is not agreed and as a consequence the final amount of retention has not been established and therefore any retention cannot become due…
3.6. P.C. Harrington asserts that the works carried out by Tyroddy have not been measured and as a consequence the correct and proper value of Tyroddy's works under and in accordance with the Contract has not been established. See statement from Mr Tony McGann in Appendix 5 at paragraphs 14 to 33 as evidence of this assertion.
3.7.P.C. Harrington asserts that Tyroddy has not submitted a final account, but the final account is not agreed and as a consequence that any further amounts that may become due to Tyroddy have not been this ascertained and established. See statement from Mr Tony McGann in Appendix 5 at paragraphs 14 to 33 as evidence of this assertion. As a consequence no further amounts can become due to Tyroddy until such time as the final account is agreed or otherwise ascertained…
4.6. Tyroddy has failed to present a final account for the works it has completed in order to establish and agree with P.C. Harrington the correct and proper value of the works carried out and completed under the Contract.
4.7. P.C. Harrington asserts that in the absence of an agreed final account, or in the absence of Tyroddy providing evidence of the correct and proper value of the works it carried out, the value of the works as stated on Sub-Contractor Payment Certificate No 9171 is and remains an interim 'on-account' value and is therefore subject to re-measurement of the quantities of reinforcement actually and properly fixed by Tyroddy in order to establish the correct and proper value of their works.
4.8. P.C. Harrington asserts that until the final account is agreed, the amount becoming due to Tyroddy cannot be established and therefore Tyroddy cannot assert and has no basis to assert that the amount retained under… Certificate No 9171, or that any other amount, has become due to Tyroddy…
4.13. P.C. Harrington asserts that in the absence of an express provision in the Contract for the release of the retention, any implied term must include a requirement that the final account must be agreed or settled in order to ascertain the value of any retention becoming due under the Contract.
4.14. P.C. Harrington asserts that the Adjudicator cannot and should not, on the basis of natural justice, imply a term into the Contract that would result in Tyroddy being placed in a position in which Tyroddy could assert monies have become due to it on the basis of interim 'on-account' valuations without ever having provided P.C. Harrington with a final account or any details to enable a final account to be agreed and without ever having to establish or demonstrate the correct and proper valuation for the works it carried out under the Contract…
5.0 The Decisions Requested by P. C. Harrington
5.6. The Adjudicator is asked to decide the amount of the final account under the Contract and from which to decide the amount of retention, if any becoming due to Tyroddy.
5.7 The Adjudicator is asked to decide that the amount of retention that becomes due for payment to Tyroddy is calculated from the value of the final account for the works, less the amount paid to date to Tyroddy as evidence from Sub-Contractors Payment Certificate 9171.