Is it unreasonable and oppressive to launch multiple adjudications at the same time?

Beck Interiors Ltd v Eros Ltd [2024] EWHC 2084 (TCC)

Factual Background

Eros Ltd (Eros) engaged Beck Interiors Ltd (Beck) as a design and build fit out contractor for a development known as The Residence, Mandarin Oriental in Hanover Square, London. The works included the fit out of a hotel with 50 rooms, a retail space, and 79 residential apartments. The contract sum was in the region of £40.2 million.

Since the parties entered into the contract, they have been busy with multiple adjudications:

1. Beck commenced an adjudication against Eros on 8 March 2024 in relation to an extension of time claim (Adjudication 1).
2. Beck then commenced a further adjudication against Eros on 18 March 2024 relating to liability for a smoke extract ventilation system. Beck argued that the Employer’s Agent’s instruction to fit or retrofit this system was a Change, a Relevant Event and a Relevant Matter under the contract (Adjudication 2).
3. On 17 May 2024, Eros commenced an adjudication claiming for the additional costs incurred by Eros as a result of the hotel opening later than the date forecasted by Beck (Adjudication 3).
4. On 21 May 2024, Eros launched a further adjudication seeking a determination of the true value of an interim certificate (Adjudication 4).
5. Eros commenced another adjudication on 28 May 2024 to claim £8.6 million by way of liquidated damages (Adjudication 5).
6. Eros then issued a sixth adjudication on 30 May 2024 to claim approximately £15.5 million in additional financing costs which they claimed to have incurred because of a delay in selling apartments. Eros argued that this was a consequence of defects in the apartments caused by breaches of Beck’s obligations (Adjudication 6).

Adjudications 3 to 6 were all issued by Eros within a 13-day period in May 2024. On 18 June 2024, Eros wrote to Beck threatening a further adjudication intimating a claim of £36.9 million arising from lost opportunity or lost profit.

On 21 June 2024, Beck made an application to the TCC seeking an injunction preventing Eros from issuing any further adjudications. Beck’s argument was that all of Eros’s claims were weak and that Beck could not reasonably defend itself or fairly represent itself in all of the adjudications at once.

Judgement

The judge confirmed that the court has jurisdiction to grant an injunction preventing a party from pursuing an adjudication but emphasised that “it is also a jurisdiction that will rarely be exercised“.

The court referred to various cases including:

• The Dorchester Hotel Limited v Vivid Interiors Limited [1] which stated “it is important that, wherever possible, the adjudication process is allowed to operate free from the intervention of the court”.
• Bresco Electrical Services Ltd v Michael J Lonsdale [2] which held that “although the court has the necessary jurisdiction to grant an injunction in respect of an ongoing adjudication, it will only do so very rarely and in very clear cut cases”.
• Jacobs UK Ltd v Skanska Construction UK Ltd [3] which held that the court has power to grant an injunction if it is established that it is “unreasonable and oppressive” to commence further adjudications.

Here the judge did not consider Eros’ conduct to be unreasonable and oppressive so as to justify the grant of an injunction.

The court did not accept Beck’s arguments and stated that whilst there is an inevitable administrative burden of having to act in multiple adjudications at once, that is the product of the statutory right to commence an adjudication at any time. The judge went on to say that there would be a real risk if the court was to halt an adjudication because one party is acting unreasonably as that would open the door to the court policing adjudication which is not the intention of the process.

As such, the court rejected Beck’s injunction application.

Takeaway Points

The judgment highlights:

• The courts are unwilling to interfere with the adjudication process, except in exceptional circumstances.
• The “unreasonable and oppressive” test which must be satisfied for a court to grant an injunction is a very high bar and one which is yet to be met in any reported English judgment.

Will an established course of dealings be taken into account when establishing whether a contractual provision has been waived?

ATG Services (Scotland) Ltd v Ogilvie Construction Ltd [2024] CSOH 94

Factual Background

Ogilvie Construction Limited (Ogilvie) were engaged by ATG Services (Scotland) Limited (ATG) as main contractor to undertake works at a housing and care facility in Newmills Road, Dalkeith.

ATG made an interim application for payment. Ogilvie failed to pay and argued the application was invalid due to not having been served in the manner prescribed in the contract. Under the contract, it stated that an application by email must be sent to one of two specific email addresses. The disputed application was sent to a different Ogilvie email address. It was accepted that the application had in fact been received by Ogilvie.

ATG argued that they had established a course of conduct, in which applications would be served in the same manner, outside of the contractual requirements, and Ogilvie would treat them as valid.

After Oglivie failed to pay, ATG issued adjudication proceedings. The adjudicator found in ATG’s favour. Oglivie still failed to pay so ATG referred this matter to the Scottish court for enforcement.

One of the key points of discussion in the adjudication was whether the English case of Jawaby Property Investment Ltd v Interiors Group Ltd [4] applied (which established the principle that the parties conduct throughout the contract will be taken into account when assessing whether contractual provisions have been waived).

Oglivie’s argued that there is no established principle of Scottish law which supported ATG’s argument that applications can be validly served where there is an established course of conduct between the parties.

Oglivie also argued that there had been a breach of natural justice and that Oglivie had been materially prejudiced because the adjudicator never provided that English law applied, or that Scots law was the same as English law or that there was a Scots law principle that was the same as the English principle established in Jawaby.

Judgment

The judge rejected Ogilvie’s argument and held that the adjudicator was entitled to rely on ATG’s submissions and look at English court decisions. The principles in Jawaby could be relied on by the adjudicator and ATG because the case had similar facts to the present. Furthermore, natural justice was not breached as Ogilvie had the opportunity to submit evidence in response to the assertation but failed to do so effectively.

Further, the judge went on to say that the reasonable reader of the adjudicator’s decision would be aware of the basis of the decision, without being left in any material doubt about whether any arguments submitted by either party were overlooked.

Ogilvie’s focus on the distinction of Scots and English law was an “immaterial distraction from the true questions in this case“. The judge reiterated the fact that the court is not a “general appeal tribunal” and that parties should not raise frivolous defences to avoid enforcement of an adjudicator’s decision.

The judge held that Oglivie’s defence was entirely without merit and stated that ATG had made a valid application for payment through the parties’ adopted course of conduct.

Take Away Points:

• Courts take a robust approach to enforcing an adjudicator’s decision and the court should not be used as a “general appeal tribunal” to avoid enforcement of the adjudicator’s decision.
• This case reiterates that an established course of dealings between parties will be taken into consideration when deciding whether provisions in a contract have been waived.
• English law can be taken into account in adjudications subject to Scottish law.

Are adjudicator’s fees recoverable when a decision is reversed by the courts? and if so, what is the approach taken towards damages and interest?

Background:

A & V Building Solutions and J & B Hopkins have been before adjudicators and judges many times over the past 2 years so they have made frequent appearances in our past issues of Adjudication Matters with the previous judgments having been discussed in our March 2023, July 2023,  November 2023 and our July 2024 publications.

The latest updates in this long running saga are two judgments published in September and October 2024 which are  A & V Building Solutions Ltd v J & B Hopkins Ltd [2024] EWHC 2295 (TCC) and A & V Building Solutions Ltd v J & B Hopkins Ltd [2024] EWHC 2516 (TCC) respectively.

First some background, Hopkins was appointed as a mechanical and electrical contractor on a student accommodation development for the University of Brighton and sub-contracted the plumbing works to A&V. A dispute crystalised in relation to a payment application, which led to AV leaving the project before practical completion of their sub-contracted works. Ultimately, across the subsequent adjudications and judgments, the court determined that AV was owed £101,543.17, after accounting for the sums already paid in relation to the works. Note, this sum includes the award to AV for loss of profits on the remaining work and variations.

Recent Developments

The decision on monies due under the sub-contract and damages has been settled as outlined above, but what does this mean for the payment of the adjudicator’s fees and the interest claimed by the parties?

A & V Building Solution Ltd v J & B Hopkins Ltd [2024] EWHC 2295 (TCC) (6 September 2024) The 6 September 2024 judgment concerned the fees from the first adjudication under Mr Blizzard (the Blizzard Adjudication) and the second adjudication under Mr Smith (the Smith Adjudication).

Re the Blizzard Adjudication, AV sought to recover 100% of Mr Blizzard’s fees. The judge decided that AV was entitled to seek 50% of these fees from Hopkins. This is because in the Blizzard Adjudication, Mr Blizzard had ordered Hopkins to pay 50% of the costs (which to this point had remained unpaid by Hopkins as a result of the Court of Appeal decision). With regards to the other 50%, the judge could not find a basis for this to be re-examined and was left apportioned to AV.

Re the Smith Adjudication, the fees did not form part of the currently pleaded claim, and no decision was made despite AV being largely successful being awarded monies for the measured works. This meant that the position reverted to where AV were held liable for the adjudicator’s fees in accordance with the earlier judgment and for which the judge awarded the aforementioned stay.

Interest

The court had therefore awarded to AV sums in relation to:

• The measured works claim.
• The loss of profits damages claim.
• The fees for the Blizzard Adjudication.

The parties disputed how interest ought to apply to these sums.

The Measured Works Claim:

The judge accepted Hopkins’ submission that the starting date of interest is 5 May 2021, which was the final date for payment of AV’s payment application 13/14 submitted in March 2021. The statutory rate of 8% over the Bank of England base rate was awarded.

The Loss of Profits Damages Claim:

When considering the damages in relation to loss of profits, the judge used his discretion to account for AV’s financial position. He determined that simple interest at 4% over base was the fair rate to apply given that by 2021, AV were in financial problems. The judge said this rate was likely to represent the bottom end of the range of rates at which AV would be able to borrow in any conventional market. (By contrast, Hopkins were likely to be able to borrow at far more advantageous rates, making 4% flat a more appropriate rate in the case of sums due to it).

The Fees for the Blizzard Adjudication

Hopkins argues that the appropriate starting date for interest to run was 3 March 2022. That submission was accepted. For the same reasons as for the loss of profits damages claim, it was also determined that simple interest at 4% over base was the fair rate to apply.

A & V Building Solution Ltd v J & B Hopkins Ltd [2024] EWHC 2516 (TCC) (03 October 2024)

• This seventh judgment concerned The calculation of the sum due for the measured works claim
• VAT
• The effect of the Construction Industry Scheme
• Interest
• The sums due to J&BH
• Appropriate order at this stage

The Award:

In calculating the amount due from Hopkins to AV, credit was given for £364,909.64 which had already been paid by Hopkins to AV.

That sum had been at all stages been the agreed amount in respect of amounts already paid.

AV submitted that there was an error in the amount paid stated in the sixth judgment and that it should have been the sum of £344,255.75, not £364,909.64.

Hopkins, in response, submitted that the calculation was correct and argued, in any event, it was too late for any change to be made to the sum previously paid. The sum previously paid was common ground between the parties and was determined in the June Judgment for this case.

The judge agreed with this point and declined to ‘correct’ the alleged error citing a lack of jurisdiction.

VAT:

AV’s Claim Form and Particulars of Claim claimed VAT.

The amounts claimed by AV, were net of VAT.

Both Parties acknowledged that the amount to be awarded in respect of VAT was to be determined within this seventh judgment.

• The parties agreed that the amount of £6.096.56 awarded in respect of loss of profit was an award for damages, of which VAT is not payable.
• On the other sums awarded, AV’s position was that 20% should be awarded in respect of VAT.
• Hopkins’ position was that most of the works was zero rated as they were for new student accommodation (which is generally subject to a zero rating). Hopkins accepted that a small portion of the works (those relating to commercial areas) was subject to VAT at the standard rate.
• The agreed approach between the parties was that 5.66% of the value of the works would be subject to VAT (at 20%).

The judge agreed that 5.66% of the amount due from the measured works would be subject to VAT at 20%. This resulted in a sum of £1,069.22. The Judge also stated that AV was at liberty to apply within 6 months of the handing down of this judgment to vary this order in the event HMRC disagreed with the interpretation of the application of VAT.

Construction Industry Scheme:

Hopkins argued that it was required to deduct 20% of the payment due to AV in order to comply with the Construction Industry Scheme. The judge said this was a point that Hopkins should have raised before the hand down of the fifth Judgment. Hopkins was required to make payment of the full sum to AV without deduction.

Interest

Some further issues arose in respect of interest.

• On the fees of Mr Blizzard, Hopkins argued that interest should only be payable on the net fees payable to Mr Blizzard, not the VAT element of those fees. The court found that it was too late for this point to be raised.
• Interest was calculated on the full sum of £17,400. The resulting sum was £3,428.04 – there is a minor difference of £17.16 between parties with the lower figure being taken.
• On damages, there was a minor difference between the Parties. Hopkins’ figure of £1,389.81 was accepted as part of this judgment.

Key Takeaway Points:

These further judgments between the parties highlight the need for parties to ensure that any matters which they wish to be decided by the courts are included in the original claim. The court will not welcome a further hearing to deal with consequential matters which should have been raised earlier.

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[1] The Dorchester Hotel Limited v Vivid Interiors Limited [2009] EWHC 70 (TCC)

[2] Bresco Electrical Services Ltd (In Liquidation) v Michael J Lonsdale (Electrical) Ltd [2020] UKSC 25

[3] Jacobs UK Ltd v Skanska Construction Ltd [2017] EWHC 2395 (TCC)

[4] Jawaby Propery Investment Ltd v Interiors Group Ltd [2016] EWHC 557 (TCC)