Dalkia Energy and Technical Services Ltd V Bell Group Uk Ltd

DALKIA ENERGY AND TECHNICAL SERVICES LTD V BELL GROUP UK LTD

Technology and Construction Court

Coulson J

21 January 2009

THE FULL TEXT OF THE JUDGMENT OF COULSON J

A. BACKGROUND

1. This is a claim under CPR Part 8 arising out of an ongoing adjudication between the same parties. The claimant ("Dalkia") seeks a variety of declarations against the defendant ("Bell") relating to the terms of the contract agreed between the parties and the alleged lack of jurisdiction on the part of the adjudicator. Many of the points taken by Dalkia are unashamedly technical and devoid of any obvious merit, but that does not mean that they can be peremptorily dismissed. The courts have repeatedly made it clear that, because of the potentially draconian effects of the summary adjudication process, the parties are obliged to follow the proper procedure for appointing an adjudicator with the necessary jurisdiction to decide the dispute between them, and that failure to do so can be fatal to the validity of an entire adjudication.

2. It is agreed by the parties that, in May 2007, Dalkia subcontracted to Bell certain repair and painting works at 143 stations and 22 footbridges owned or controlled by Central Trains. The parties are agreed that this was a construction contract in writing, but they disagree over whether or not the Bell conditions of contract were incorporated into that contract.

3. In 2008 Bell sought payment of sums allegedly due under the contract, together with payment for variations. Having not received any further monies from Dalkia, they decided to commence adjudication proceedings. Following one false start, the second notice of intention to adjudicate ("the adjudication notice") was dated 8th December 2008 and delivered by post to Dalkia on 9th December 2008.

4. The same day Bell sought a nomination of the adjudicator from the RICS. Their letter was received by the RICS on 10th December. Mr Geoff Brewer was nominated on 11th December and was appointed as the adjudicator on 15th December. It is common ground that this nomination and appointment occurred by reference to Bell's standard terms and conditions. Both before and after the appointment of Mr Brewer, Dalkia took a number of points to the effect that the adjudicator did not have the necessary jurisdiction to determine the dispute. Some of those contentions are now no longer relied on. But Dalkia argued - and maintained in these proceedings - that either the Bell conditions were not incorporated into the contract, or, if they were, they did not comply with section 108 of the Housing Grants, Construction and Regeneration Act 1996 ("the 1996 Act") and that, as a result, the Scheme for Construction Contracts applied instead. Dalkia submitted that in such circumstances the adjudicator, who had been appointed under the Bell standard terms and conditions, had no jurisdiction to determine the dispute.

5. On 18th December the adjudicator decided that the Bell conditions were incorporated into the contract and that he did have the necessary jurisdiction. He reiterated this view in writing on 22nd December 2008. On 14th January 2009, having played no active part in the adjudication in the meantime, and having failed to serve a response on 9th January in accordance with the adjudicator's order, Dalkia commenced these proceedings under CPR Part 8 seeking declarations that:

a) The Bell standard terms and conditions were not incorporated into the contract between the parties.

b) If they were, the Bell standard terms and conditions did not comply with section 108 of the 1996 Act, and so therefore the Scheme applied instead.

c) The adjudicator did not have the jurisdiction to decide the dispute referred to him, principally because:

i) He had been appointed under the Bell standard terms and conditions and not the Scheme;

ii) The approach to the RICS took place before the provision of the notice of adjudication to Dalkia;

iii) The notice of adjudication purported to refer more than one dispute to the adjudicator.

6. Dalkia's entitlement to these declarations is disputed, but, in addition to those points, Mr Black QC, on behalf of Bell, contends that this entire claim is unsuitable for CPR Part 8 and/or amounts to an abuse of the process. He also submits that the court has no jurisdiction to deal with the application. Obviously, given the threshold nature of these submissions, they are the most appropriate place to start. I deal with the suitability/abuse argument in Section B below and the arguments as to the court's jurisdiction in Section C below.

B. SUITABILITY/ABUSE OF THE PROCESS

B1 Suitability

7. Mr Black contends that this claim is unsuitable for CPR Part 8 because two matters of fact are in dispute which cannot be resolved without hearing oral evidence. The first issue concerns whether or not a document referring to Dalkia's terms and conditions was sent to Bell in April 2007 and the second relates to the provision of the notice of adjudication in early December 2008.

8. I accept that there is an issue, which cannot be resolved on paper, as to the provision or otherwise by Dalkia to Bell of their prequalification form in April 2007. Bell say they did not receive it until the beginning of May. However, that debate seems to me to be of very limited relevance to the contract issue, because Dalkia do not say that their terms and conditions (which were apparently sent out with the prequalification form) formed any part of the contract between the parties. Indeed, this document was never even referred to in any of the correspondence or emails which both parties agree make up the relevant contract in writing.

9. It is also right to say that, when theses Part 8 proceedings were commenced, Dalkia may not necessarily have known that this matter was going to be in issue at all. It seems to me that the TCC's procedure should be flexible enough to avoid the result that one, potentially unexpected, issue, in connection with what is an almost entirely irrelevant factual matter, should derail an otherwise valid Part 8 claim.

10. As to the issue relating to the service of the notice of adjudication, I am satisfied that, on analysis of the written material before me, there is, in truth, no dispute at all on the facts. It appears clear that the notice of adjudication was faxed to one of Dalkia's outlying offices on 8th December 2008 and delivered by recorded delivery to the correct address on 9th December, although it was not marked for the attention of Ms Maria Gonoude, the individual at Dalkia dealing with the dispute. The only issue is whether the date of delivery of the notice of adjudication should be taken to be 8th or 9th December, or, on Dalkia's primary case, 11th December, which is when it was first seen by Ms Gonoude.

11. That issue (as explored in Section F3 of this judgment, paragraphs 85-87 below) would seem to me to be a matter of law. There is no dispute as to the underlying facts. It is therefore suitable for determination under CPR Part 8.

12. For those reasons, therefore, I do not accept Mr Black's contention that the dispute between the parties is unsuitable for CPR Part 8. More widely, it seems to me that the application is at least broadly in accordance with paragraph 9.4.1 of the TCC Guide, which sets out the TCC's jurisdiction to deal with proceedings arising out of ongoing adjudications, and the relevant guidance summarised in Vitpol Building Service v Samen [208] EWHC 2283 (TCC).

B2 Abuse of Process

13. The abuse of process argument is more complicated, because it involves a consideration of the communications between the parties and the adjudicator during December 2008. However, it can be simply summarised. Bell say that, because of the delays on the part of Dalkia, and their repeated taking of points before the adjudicator - which were misleading or at the very least were so bad that they have now been abandoned - Dalkia are, as Mr Black neatly put it, "an unworthy recipient" of a discretionary remedy, such as the granting of the declarations currently sought. In support of that proposition Mr Black relies on the decision of Neuberger J (as he then was) in FSA v. Rourke (19th October 2001, unreported).

14. The first notice of adjudication was dated 1st December 2008 and sent out by Bell on 2nd or 3rd December. It suggested that a Mr Mackinnon should be appointed as the adjudicator, and enclosed his CV.

15. Dalkia did not respond to that notice until very late on 8th December. They did not agree to the appointment of Mr Mackinnon because there was no information as to his fees. Amongst the other points they took was the suggestion that Bell had failed to serve the referral notice or appoint the adjudicator within seven days of the notice of adjudication. I am bound to say that that seems to me to be an extraordinarily bad point, since that delay was almost entirely due to Dalkia themselves.

16. In addition, they also took the points, both subsequently abandoned, that there was no contract in writing between the parties and that no dispute had yet crystallised. It is difficult not to conclude that, at least at that stage, Dalkia were prepared to take every possible point - whether good, bad or indifferent - in the hope of avoiding, or at least delaying, the adjudication process.

17. In any event, Bell had realised that the seven-day period had, or might have, elapsed, and so on 8th December 2008 they sent a second notice of adjudication. That is the operable notice of adjudication for present purposes. It was that notice that was faxed on 8th December and sent to the right address on 9th December and to which I have previously referred.

18. On 9th December 2008 Bell wrote to the RICS seeking the nomination of an adjudicator in connection with that (second) notice of adjudication. The RICS received that letter on 10th December, and they wrote to the parties on the 11th to say that "they will nominate" an adjudicator. They nominated Mr Brewer the following day, 12th December.

19. In the meantime, there was continuing correspondence between the parties over the range of points taken by Dalkia in their letter of 8th December. Dalkia now maintained that the second notice of adjudication was invalid because of the existence of the first notice, another thoroughly bad point.

20. On 16th December 2008 Dalkia wrote to the adjudicator. This lengthy letter made plain that Dalkia contended that he did not have jurisdiction for a variety of reasons, some at least of which have now been abandoned. At page 10 of that letter Dalkia said this:

"The Way Forward

For the reasons set out above, Dalkia contends that you lack the jurisdiction to decide the dispute referred to you by Bell and respectfully invite you to withdraw forthwith.

Pending the outcome of your investigations into your own jurisdiction, Dalkia strictly reserves its position as to participation in the adjudication thereafter. However, for the avoidance of doubt, at present, Dalkia is not prepared to sign up to your terms of appointment.

In the event that you do decide that you have jurisdiction, this letter is intended to put you on notice that, should Dalkia wish to participate further, such participation of course being strictly without prejudice to the fact that you have no such jurisdiction, Dalkia will advance a robust defence of set-off and a substantial counterclaim."

21. The following day they wrote to the adjudicator again, and they said this:

"We trust that you are now in receipt of our fax of yesterday's date in which we challenge your jurisdiction to decide the dispute before you. We invite you to consider these challenges and inform us of your conclusions in this regard as soon as practicable.

Until you have ruled accordingly upon your jurisdiction (and it remains our view that you have no option but to withdraw), we consider that it is premature to order directions in relation to the dispute.

As you are aware, we are currently reserving our position with regard to participation in the adjudication, but, should you decide that you have jurisdiction to decide the dispute and should we decide to participate, for the reasons set out in our letter of yesterday's date we would request that time be extended for the service of a response until mid-January 2009."

22. Dalkia followed up that letter with another long letter (10 pages in total) which was largely a rehash of the points previously made. This letter said, amongst other things, that there was no agreed price in writing and therefore no construction contract, a point that is now clearly contrary to Dalkia's principal submissions. The letter concluded:

"Now that you have received our submissions in reply, we look forward to receiving your rulings as to your jurisdiction as soon as is practicable. Should you rule that you have jurisdiction, Dalkia hereby requests that the time for service of a response be extended beyond 22nd December 2008 and that Bell be asked to properly reconsider its refusal to extend the time for the communication of your decision."

This last was a reference to the adjudicator's original order that Dalkia respond to the substantive matters in issue in the adjudication by 22nd December

23. The following day, 18th December, Dalkia wrote yet again to the adjudicator on the jurisdiction points. The letter restated Dalkia's principal submission that "you do not have jurisdiction at all", and again sought the adjudicator's ruling as to his jurisdiction.

24. On the same day the adjudicator decided as follows:

"I have considered the above submissions and I conclude that the Issue for me to decide upon at this stage is one of threshold jurisdiction. That is, whether despite the opposing arguments of the parties concerning jurisdiction, I consider that I nevertheless have jurisdiction to move the matter forward, although not being in a position at this point to decide on the matters contended by each side.

I conclude that I do have jurisdiction to proceed at this stage and set out below my reasoning in respect of the main issues raised."

The adjudicator then went through and rejected each of Dalkia's propositions on jurisdiction. In so doing, he expressly found that the Bell standard terms and conditions were incorporated into the contract between the parties.

25. On 19th December 2008 Dalkia wrote to ask the adjudicator to reconsider his decision on jurisdiction and warned the adjudicator that they were "taking advice with regard to issuing Part 8 proceedings in the TCC". They somewhat peremptorily sought a response from the adjudicator by 22nd December 2008, which was the next working day.

26. The adjudicator complied with that request, reiterating in writing on 22nd December his conclusions as to jurisdiction and the incorporation of the Bell standard terms and conditions. He also extended Dalkia's time to respond in writing to Bell's substantive claims in the adjudication until 9th January 2009.

27. Thereafter, for reasons which have not been clearly explained to me, nothing happened for over three weeks. Dalkia did not comply with the adjudicator's order; nor did they commence Part 8 proceedings until 14th January 2009. Thus the requirement that they imposed on the adjudicator to respond to their request for clarification by 22nd December 2008, with which he complied, seems to have had no purpose or point at all. I also note that the time for the adjudicator's decision has now been extended by agreement to 29th January 2009.

28. In addition to those events, Mr Black also complains about events regarding the service of some of the evidence in the Part 8 proceedings at the end of last week. From what I have heard, I am not willing to make findings of fault or blame in relation to those events and, in any event, I do not consider that they are relevant to the abuse of the process argument.

29. In essence, the chronology which I have set out above provides some support for the two principal criticisms made by Mr Black of Dalkia's behaviour: the taking of points before the adjudicator which were palpably wrong, if not misleading; and the delays concerning the commencement of these Part 8 proceedings. I am particularly troubled by the unacceptable and unexplained delay of over three weeks from 19th December to 14th January prior to the commencement of these Part 8 proceedings, at a time when the adjudication was continuing but Dalkia were apparently playing no part in it.

30. However, all of that said, I have reached the conclusion that, on balance, I should not dismiss Dalkia's Part 8 claim simply because of that conduct, however regrettable I may regard it. If Dalkia are entitled to a declaration to the effect that the adjudicator does not have the necessary jurisdiction to decide this dispute, it would still be better for everyone if, having got this far, that declaration were granted now, rather than everyone waiting for the point to arise in subsequent enforcement proceedings.

31. For those reasons, I do not accept the submission that I should decline to deal with these matters on the grounds of abuse of process.

C. THE COURT'S JURISDICTION

C1 Introduction

32. Mr Black took two separate points as to the court's jurisdiction. First, he submitted that Dalkia had given the adjudicator the authority to reach a binding decision on his own jurisdiction, which could not therefore be opened up by the court. Secondly, he contended that, because the parties were agreed that there was a written construction contract, the adjudicator's decision as to whether or not that contract incorporated a particular set of contract conditions was a decision which he was entitled to reach as part of the dispute referred to him, and thus the court had no jurisdiction to review, let alone overturn, that decision. I deal with each of those points in turn below.