ANRIK LTD V AS LEISURE PROPERTIES LTD
Technology and Construction Court
Edwards-Stuart J
8 January 2010
THE FULL TEXT OF THE JUDGMENT OF EDWARDS-STUART J
1. There are three applications before the court. The first is Anrik Limited's application for summary judgment under Part24 against the defendant in that action, AS Leisure Properties ("AS Leisure"), for £516,793 and interest.
2. The next application is AS Leisure's application for astay of the enforcement of that judgment until judgment on the preliminary issue as to whether the claimant and the defendant entered into two contracts by two letters dated 17th November 2006 in respect of Uxbridge Road and Providence Place contracts.
3. The third application is in aseparate action brought by AS Leisure in which they seek orders that there be atrial of the preliminary issue of the following, whether the two letters dated 17th November 2006 relating to the claimant's projects at Uxbridge Road and Providence Place give rise to contracts between the claimant and the defendant and for certain other relief in relation to costs, and that Anrik's application for summary judgment be heard at the same time as the application for the trial of the preliminary issue. Those matters have all been ordered to be heard today by an order made by RamseyJ on 16th December 2009.
4. Turning to the facts, Anrik is abuilding contractor. AS Leisure is adeveloper. The actions concern two projects which have already been mentioned, one known as Uxbridge Road and the other known as Providence Place. It is acknowledged and agreed between the parties that Anrik had been invited to tender and had indeed tendered for both these projects in 2006, following which there was acertain amount of negotiation and discussion which eventually culminated in atelephone conversation or conversations on 17th November 2006 followed by two letters of that date.
5. The letters set out the terms of what had been discussed and included, in particular, aproject price for each of the two contracts. Taking as an example the letter in relation to Uxbridge Road, it began:
"Further to our recent telephone conversation Iam writing to confirm that AS Leisure Properties Limited would like you to undertake this project for us at afixed cost of £1.4 million. Because the project is new build, please note that all invoices should be made out to AS Leisure. The project is being carried out on afixed costs basis to construct the building as shown on the architect's plans. We understand that you have priced this project on the basis of using a timber frame construction and as such you will need to provide apriced bill of quantities to reflect this work so that valuations can be carried out accordingly. The following provisos will also apply..."
and anumber of matters were set out dealing with items such as provisional sums, prime cost sums and so forth.
6. Under the heading "Programme" the letter said:
"Works will commence in the early part of 2007 (exact start date to be agreed closer to that date once discussions with Coral have been concluded) and will take 52 weeks to complete."
7. Ishould interpose that Coral was atenant at Uxbridge Road and certain preliminary works had to take place with the agreement of Coral before the main works could begin. There was then areference to carrying out certain precontract steps in relation to health and safety and access management. In relation to specific precontract works, the letter provided that:
"In addition, there is aconsiderable amount of work to be carried out in the existing grounding floor tenants' premises" (that being Coral). "At this stage, we anticipate that most of this work will be carried out by Anrik Limited. There may be items in the bill of quantities, however, which are carried out by the tenants' own contractor. Under such circumstances all costs associated with such will be deducted from the bill of quantities accordingly."
8. There was then areference to "subcontract design" and that pointed out that Anrik would need to liaise with AS Leisure's architects and acoustic consultants to ensure that the proposed design was capable of meeting all acoustic, thermal and fireresistant requirements of the Building Regulations.
9. Then finally the letter concluded:
"This letter is to be read as an addendum to the IFC 98 contract document and subsequent amendments. That contract will be signed by AS Leisure Properties Limited and Richard Fitzgerald and Anrik Limited jointly and severally. Please countersign this letter below as confirmation of your agreement to the above."
10. That letter was duly countersigned by Richard Fitzgerald on behalf of Anrik. It is to be noted that it was also signed jointly and severally, this perhaps being arecognition that Anrik was asmall company and was effectively controlled by Mr Fitzgerald.
11. Turning back to the story, in fact what happened was that apart from the preparatory works, neither of the two projects actually went ahead and Anrik was never given possession of either of the sites. Sometime later in March 2009 Anrik terminated the contracts and put forward aclaim for losses of the order of about £2.7 million. In June 2009 Anrik's solicitors wrote to AS Leisure setting out Anrik's claim. AS Leisure then instructed their solicitors Lucas McMullan Jacobs, and their followed aperiod of correspondence between solicitors both on the merits of the claim and the process of resolving the dispute.
12. In due course AS Leisure served adraft response, but most importantly the parties entered into an adhoc agreement to adjudicate dated 2nd October 2009 nominating the adjudicator as aMr.Ennis. The adjudication agreement provided in addition to the appointment of Mr.Ennis that, so far as applicable, the Scheme for Construction Contracts (England and Wales) Regulations 1998 ("the Scheme") would apply to the adjudication, that the adjudicator had jurisdiction to consider both disputes under both contracts in the same adjudication, and that he had jurisdiction to decide on the matters in dispute even if some of the terms of the contract had only been agreed orally.
13. The referral was duly served on 14th October 2009. There were no significant challenges to Mr.Ennis' jurisdiction, and on 24th November he published his decision. He decided in principle, first, that AS Leisure should pay Anrik the sum of £516,793, being £4,093.20 plus interest, together with any VAT and that AS Leisure should pay his fees which he determined in the amount of £15,000 plus VAT, and those fees were in due course paid by AS Leisure.
14. So far as the main sum awarded is concerned, AS Leisure has refused to pay. It has instead offered to pay the money into court if the enforcement application is unsuccessful and the enforcement is stayed. However, AS Leisure accepts that there is no ground upon which the application for summary judgment can be resisted on its merits. Its position is simply that there should be a stay of execution because of Anrik's, it says, inability to repay the sum.
15. The referral notice raised the following matters. It referred to the letters of 17th November 2006 and then went on to say at paragraph 2.3:
"On the basis of the aforesaid letters, Anrik incurred expenses in preparing to make astart on the Uxbridge Road project towards which AS Leisure contributed the sum of £13,450.
2.4On the basis of the aforesaid letters, Anrik incurred expenses in preparing to make a start on the Providence Place project towards which AS Leisure contributed the sum of £5,000.
2.5It is now apparent that neither project will proceed and Anrik have terminated their employment under the contracts referred to above.
2.6In this referral notice Anrik are claiming the total value of work properly executed and their direct loss and expense arising as a result of theproject delay and such determination on both of the above the properties. Anrik are claiming damages for breach of contract in the alternative.
2.7Anrik assert that had they been allowed to fulfil their contractual obligations they would have made agross profit of 30% on both projects. That loss of profit and asimilar loss of profit on other projects they would have been able to secure but for the delay to the Uxbridge Road and Providence Place projects prior to termination form part of the claim by Anrik against AS Leisure."
16. As Ihave already indicated, in the event no starting dates were ever given. The projects did not go ahead beyond the precontract preparation and the preliminary works. Anrik's position throughout is that the two letters of 17th November 2006 constitute binding contracts. AS Leisure by contrast deny that and say that they were not binding and that, in effect, in the case of both projects any agreement was subject to contract.
17. The issues before me are as follows: AS Leisure contends that the adjudicator's decision was obviously wrong insofar as he held the two letters of 2nd November 2006 constituted binding contracts. Mr.Mark Raeside QC, who appears for AS Leisure, submits that the adjudicator wholly failed to address particular points that were put to him during the course of the adjudication, in particular the history and detail of the prior dealings between the parties for the five or so years before these two projects came into existence.
18. Ihave been taken through documents relating to those previous contracts with aview to demonstrating, first, the importance of some of the matters on which agreement, so AS Leisure says, had not been reached in the letters of 17th November 2006, and also to indicate the general course of dealing and the importance that AS Leisure placed on having signed contracts.
19. To the extent that it is necessary to do so, I find that it is arguable that the adjudicator was wrong and that accordingly it is appropriate to entertain AS Leisure's application for astay. However, Istress that that is only afinding that it is arguable. It would be inappropriate on this application to express any view beyond that as to the merits of AS Leisure's case in relation to the two letters.
20. So the principal issues on the application to stay are these. First, whether it has been shown that it is probable that Anrik would be unable to repay the award of sum £500,000 odd if the adjudicator's decision were subsequently to be set aside. Second, whether Anrik's financial position has materially changed during the relevant period. The real issue here concerns the extent of that period. AS Leisure say that it starts with the letters of 17th November 2006. Anrik says that it starts with the date of the agreement to adjudicate in October 2009. Iwill in fact deal with these two issues in reverse order, but before Ido that I will turn to the law.
21. For present purposes in the context of these applications, it is not necessary to look at any decision apart from the decision of CoulsonJ (as he now is) in the case of Wimbledon Construction Company 2000 v. Derek Vago [2005] BLR 374. At paragraph 13 of his judgment when considering the relevant authorities, CoulsonJ said this:
"It has been said on anumber of occasions by the Court of Appeal that the decision of an adjudicator is intended to be enforced summarily. The contract provisions in this case, which Ihave just read and which are by no means untypical, make that point clear. The presumption is that the successful party, the likely claimant in any enforcement proceedings, should not be kept out of its money."
22. In this case, as Ihave already indicated, the adjudication agreement was subject to the statutory scheme. So these comments of CoulsonJ apply with equal force to this case. Then at paragraph 26 of his judgment he went on helpfully to consider the applicable principles. He said this:
"In anumber of the authorities which Ihave cited above the point has been made that each case must turn on its own facts. While Irespectfully agree with that, it does seem to me that there are anumber of clear principles which should always govern the exercise of the court's discretion when it is considering astay of execution in adjudication enforcement proceedings. Those principles can be set out as follows:
a) Adjudication (whether pursuant to the 1996 Act or the consequential amendments to the standard forms of building and engineering contracts) is designed to be aquick and inexpensive method of arriving at atemporary result in aconstruction dispute.
b) In consequence, adjudicators' decisions are intended to be enforced summarily and the claimant (being the successful party in the adjudication) should not generally be kept out of its money.
c) In an application to stay the execution of summary judgment arising out of an Adjudicator's decision, the court must exercise its discretion under Order 47 with considerations a) and b) firmly in mind (see AWG).
d) The probable inability of the claimant to repay the judgment sum (awarded by the Adjudicator and enforced by way of summary judgment) at the end of the substantive trial, or arbitration hearing, may constitute special circumstances within the meaning of Order 47 rule 1(1)(a) rendering it appropriate to grant astay (see Herschell)."
Pausing there, Ishall turn to that case in amoment.
"e) If the claimant is in insolvent liquidation, or there is no dispute on the evidence that the claimant is insolvent, then astay of execution will usually be granted (see Bouygues and Rainford House).
f) Even if the evidence of the claimant's present financial position suggested that it is probable that it would be unable to repay the judgment sum when it fell due, that would not usually justify the grant of astay if:
(i) the claimant's financial position is the same or similar to its financial at the time that the relevant contract was made (see Herschell); or