DurhamCounty Council V Kendall
Technology and Construction Court
Akenhead J
31 March 2011
THE FULL TEXT OF THE JUDGMENT OF AKENHEAD J
1. In this Claim, Durham County Council ("Durham") seeks to enforce the decision of an adjudicator, Mr Keith Pickavance ("the Adjudicator") dated 18 November 2010. The case raises issues as to the extent that the underlying contract or contracts were in writing or evidenced in writing as required by Section 107 of the Housing Grants, Construction and Regeneration Act 1996 ("HGCRA"), whether if disputes arise under more than one contract they are referable to a single adjudicator and issues as to waiver in relation to jurisdictional points taken only in court and not before the adjudicator.
The History and Factual Background
2. In about April 2003, Durham (then Sedgefield Borough Council which I will refer to as "Durham") invited tenders for the provision of services in connection with the design and construction of an extension to Spennymoor Leisure Centre ("the Project"). These were described in a document entitled "Lead Consultant's Brief" dated March 2003. HLB, a firm of architects of which the sole proprietor was Mr Jeremy Kendall, was one of the firms invited to tender. The Brief described the work which was mainly an extension to the Centre comprising a new gym with associated facilities. Paragraph 1.3 made it clear that the scheme would be project managed by the Lead Consultant and the project would be funded by Durham together with funding from Sport England and other sources. Paragraph 2.3 stated:
"Sufficient site investigations to determine ground conditions and location and adequacy of existing services will need to be carried out by the appointed Consultant once the outline details of the scheme are confirmed…"
Paragraph 3.1 stated:
"The appointed Lead Consultant will be required to bring together ideas, observations, perceptions and ultimately establish a common understanding of the building which will provide all the requirements and facilities for all the partners involved in the project…"
3. Paragraph 4 identified that the scheme was divided into four parts:
"Part 1-Pre Feasibility Concept Development Ideas (already completed)
Part 2-Confirm Part 1 and Feasibility Study with Cost Plan and Detailed Presentation
Part 3-Detailed Design, Bills of quantities and all Works prior to Tendering
Part 4-Construction Works, Contract Administration and all Work up to and including final account"
Paragraph 6 sets out what was involved in Part 2, which unsurprisingly dealt "with the feasibility of the scheme to establish the most appropriate form of construction, design and layout, infrastructure…external and internal appearance, landscaping and security". A detailed cost plan was needed together with a preliminary timetable. A detailed presentation with drawings, brochures, technical information and the cost plan was to be provided.
4. Part 3, described in Paragraph 7, involved the preparation of a detailed design with "the majority of the design works [to] be carried out by the Consultants…" and the production of all relevant information, and drawings and Bills of Quantities. Part 4, described in Paragraph 8, required the Lead Consultant to ensure that the construction process was carried out in accordance with the design drawings, Bills and other agreed specifications. Effectively, the Lead Consultant was to administer the construction contract.
5. Paragraph 9 required the Lead Consultant to be responsible for appointing and paying all other Consultants (Paragraph 9.1). Paragraph 9.11 required that the tender to be submitted was to include at each stage of the work for costs and disbursements. Paragraph 9.14 referred to an attached programme which showed that the Part 2 services were to be completed by 4 July 2003. Paragraph 9.18 stated that the "appointed Lead Consultant shall enter into a formal agreement with the Borough Counsel for the appointment and performance of professional duties in connection with this Brief". An Addendum to the Brief indicated that the Lead Consultant was to "include the provision of gymnastic equipment as part of the project", it having an additional budget of £150,000.
6. Mr Kendall, who described himself as partner of HLB Architects, filled in the prescribed form of tender and submitted it on 1 May 2003. The quoted price for the Part 2 services was £14,940. For Parts 3 and 4, he quoted 3.67% and 1.715% respectively, this clearly being related to the final construction costs. He also quoted rates for additional related work outside the scope of the brief; these rates related to the four relevant disciplines, Architect, Quantity Surveyor, Structural Engineer and Mechanical and Electrical Engineer. He stated:
"I understand that Parts 3 and 4 will only proceed once the council has agreed funding for the project".
At Paragraph 7 he stated:
"I/We agree to our tender remaining open for acceptance for a period of two months from the date set for submission of tenders."
7. However, more than two months elapsed before Durham wrote to HLB by way of the e-mail on 8 August 2003:
"I am pleased to advise you that the Council wish to appoint you as the Lead Consultant for the above project.
As the scheme is subject to funding from Sport England we do not have in place the full approval to proceed with carrying out the work contained within our 'Brief'. However, in order for the project to progress the Council are prepared to fund Part 2 of the scheme only. The work involved includes confirming Part 1 and to undertake a Feasibility study with a Costing Plan and Detailed Presentation to the Client, the cost of this work is as per your tender sum of £14,940.00.
Once I am in receipt of any further information regarding approvals from Sport England to proceed beyond Part 2 of the scheme I will advise you accordingly, meanwhile I would be obliged if you will contact me to arrange a meeting so we can progress the scheme..."
8. On 12 August 2003, a meeting was arranged between Mr Thompson of Durham and Mr Bulmer of HLB and was clearly a follow up meeting following the e-mail. It seems clear that HLB was tasked with minuting that meeting. It was primarily a technical discussion as to the implementation of the Part 2 services. So far as is material to the issues in the case the following was minuted:
"4.0 RTB to organise site investigation.
IT thought this was part of consultants and.
RTB said the consultants usually arranged but costs usually paid by client-as planning/building regulations.
RTB will check and confirm with IT.
9.0 Programme
9.1 Arrange survey of site existing/building perimeter within 10 days.
9.2 Arrange site investigation within next two weeks…
9.4 Develop Feasibility/Design Proposals/Services beginning Sept '03-3-4 weeks
9.5 Develop agreed layout, services and cost plan for presentation 2/3 weeks end of Sept/Oct '03."
9. Mr Kendall gives some evidence in his witness statement dated 8 March 2011 that the question of who should pay for the site investigation was discussed initially between Mr Bulmer and the consulting engineers to be retained and that as between them it was agreed that each would pay the costs on a 50:50 basis. He says then that he spoke to Mr Thompson of Durham and agreed orally with him that his firm would bear the costs. Be that as it may, this was confirmed in writing by Mr Thompson of Durham in its letter dated 10 September 2003 to HLB in the following terms:
"As discussed and agreed at the meeting between myself and Richard Bulmer the cost of the site investigation should be included in the fee bid for the Feasibility Study as stated in the Lead Consultant's Brief item 2.3, a copy of which is enclosed."
I will refer to this as the "site investigation issue".
10. There is no doubt that HLB then carried out and completed the Part 2 Services. On 5 February 2004 HLB submitted its Interim Fee Account No. 2 which sought payment for additional design changes "in accordance with Time Charges as our Accepted Form of Tender".
11. On 2 March 2004, Durham wrote to HLB in the following terms:
"I confirm the Council's request for you to commence work on Part 3 of your tender for the above project. This involves the Detailed design, Bills of Quantities and all works prior to tendering.
You should now be in a position to provide a detailed cost plan together with a preliminary timetable from design to construction and completion and a planned expenditure profile in accordance with the requirements of Part 2 of your tender.
Please contact me if you require any further information or have any queries with regard to the above."
Again, there is no issue that HLB proceeded to do what this letter called for.
12. On 9 August 2004, Durham sent to HLB letter stating:
"This letter is to confirm the Borough Council's intention to proceed with the project to construct a new regional gymnastics centre at Spennymoor Leisure Centre. Although the Borough Council's Cabinet do not meet until the 2 September 2004 at which time they will formally agree to the scope of the project in line with our recent discussions, this letter confirms the Council's intention to agree the purchase of the steel contents of the project…
As Director of Leisure Services I am authorised to send this letter of intent."
13. On the 6 August 2004 HLB wrote to Durham relating to meetings and discussions with a Mr Pirrie who was the gymnastics consultant retained by Durham. Mr Pirrie recommended certain changes. Mr Kendall indicated that he would have to charge fees for the consequential redesign and went on to say that Mr Pirrie's fee "could be in the region of £4500" and "no doubt you will make arrangements to settle his charges". It seems that there was a meeting with Durham on 10 September 2004 at which Durham agreed to the appointment of Mr Pirrie as part of the consultancy team led by HLB and that his fee to a maximum of £4500 would be payable by Durham to HLB with HLB responsible for paying Mr Pirrie. This was confirmed in a letter dated 15 September 2004 from HLB to Mr Pirrie. Mr Pirrie carried out work in this capacity. In its Interim Fee Account No. 4, HLB invoiced for Mr Pirrie's time and for their time in dealing with him. I will refer to this as the "Pirrie issue"
14. HLB broadly finished their work on all parts of the project by about May 2006, being the date of their last fee invoice. It is clear that apart from additional services, claimed for on the basis of the rates contained in HLB's tender to Durham, it claimed for percentage fees as tendered for.
15. The dispute with which the adjudication was concerned was an alleged failure of the below ground concrete floor of the gymnasium. It was said that the floor failed in October 2005 as a result of a large amount of water discharging into the foundations from rainwater pipes from the roof which, at that time, had not been connected to the drains. Durham's complaint was that the floor had not been designed to withstand the water penetration with the result that the floor lifted in the middle and water penetrated the basement affecting the floor and the walls. Durham asserted that it had been caused losses in connection with work involved in investigating and lowering the water table, installing and maintaining pumping equipment and in delay related losses associated with putting right the problem.
16. For reasons which are unclear but probably immaterial, it was not until 12 October 2010 that Durham served its Notice of Adjudication on HLB.
The Adjudication
17. The Notice of Adjudication and the Referral Notice which followed on 14 October 2010 were addressed to HLB Architects and not Mr Kendall as such. Broadly they sought damages in effect for a breach of contract in relation to the floor slab and water penetration problem. The sum of £149,841.20 plus VAT was sought together with interest of £29,327.82
18. By letter dated 18 October 2010 to the Adjudicator, HLB's or Mr Kendall's solicitors raised a number of jurisdictional objections. The first (no longer pursued) was that there was no dispute or difference. The second was that "HLB…does not exist". It seems clear that the solicitors were acting for Mr Kendall. The third was that there was no agreement in writing and it is part of this argument that is still maintained. Thus it was argued by the solicitors that the tender was not a concluded contract and that the Brief was not and was not intended to be the Consultant's appointment. It was said that not all the terms of the agreement were evidenced in writing; examples of this were given but none of these are currently pursued. They continued:
"Accordingly, all the contract terms are not evidenced in writing and there is no agreement in writing for the purposes of the Act. In the circumstances, there is no valid reference to adjudication and you do not have jurisdiction to determine this adjudication…
For the avoidance of doubt our client does not agree to be bound by any findings which you may make in regard to the matters raised in this letter and reserves the right to raise any or all of these points or related points in connection with any enforcement proceedings which may ultimately arise."
I will refer to this as "the first reservation". The "second reservation" followed in an e-mail to the Adjudicator on the following day reiterating its specific jurisdictional arguments and concluding:
"The Responding Party reserves the right to raise any jurisdictional and/or other issues, in due course, whether previously raised or not and whether within the forum of adjudication or other proceedings and the Responding Party's correspondence and/or submissions in this adjudication are made entirely without prejudice to this right."
19. Durham's solicitors responded on 22 October 2010 in a letter to the Adjudicator and Mr Kendall's solicitors responded to the points made by the letter, reiterating their specific earlier arguments and concluding:
"For the reasons given it is clear that, in each of the grounds we have raised there is no jurisdiction to you to determine this dispute. For the reasons given we invite you to resign…
For the avoidance of any doubt our client does not agree to be bound by any findings which you may make in regard to the matters raised in this response and reserves the right to raise any or all of these points or related points in connection with any enforcement proceedings which may ultimately arise."
I will refer to this as the "third reservation".
20. The Adjudicator replied thereafter that he believed that he had jurisdiction and would proceed with the adjudication. On 1 November 2010, HLB served its Response. Paragraph 1 deals with a reservation of rights ("the fourth reservation"):
"The Responding Party identifies three challenges to the Adjudicator's jurisdiction in correspondence as follows:
1.1 I There is no crystallised dispute between the parties;
1.2 The named Responding Party is not a legal personality capable of (a) being a party to an adjudication or (b) entering into a contract. It is a trading name only;
1.3 There is no agreement in writing (and in this respect submission 1.2 (b) is repeated).
2. These challenges remain and are not waived by this Response.
3. The named Responding party is not a legal personality. It is not capable of being a party to this adjudication or-and in any event-the alleged underlying agreement.
4. The Architect on this project was Jeremy Kendall, as the Referring Party well knew. He is not a party to this adjudication.
5. References to the Responding Party within this document are, therefore, wholly artificial and assume that HLB Architects is a legal personality. This assumption is incorrect. The submissions set out below are entirely without prejudice to this overarching point.
6. For the avoidance of doubt, Beachcroft LLP is instructed on behalf of Jeremy Kendall t/a HLB Architects…
8. Accordingly the Responding Party does not agree to be bound by any findings that the Adjudicator may make in regard to the matters raised in this adjudication and reserves the right to raise any or all of these points and the jurisdiction points previously raised and/or related points in connection with any enforcement proceedings which may ultimately arise."
21. The "fifth reservation" was made in an e-mail dated 17 November 2010 which addressed the merits that concluded with these words:
"For the avoidance of any doubt our client does not agree to be bound by any findings which you may make in regard to the matters raised in this e-mail and fully reserves all its rights in connection with the various jurisdictional objections previously made with regard to any enforcement proceedings which may ultimately arise."
22. The Adjudicator issued his decision on 18 November 2010 which broadly found in favour of Durham. He decided that HLB should pay Durham the sum of £166,930.53 (inclusive of interest) plus VAT and that HLB should be responsible for the payment of his fees which totalled £29,404.37 inclusive of VAT.
23. This decision was not honoured by HLB and thus it was that the current proceedings were issued to enforce that decision on 10 February 2011.
These Proceedings
24. The proceedings were issued by Durham against Jeremy Kendall trading as HLB Architects. Durham simply seeks the enforcement of the adjudication decision. It submitted apart from Particulars of Claim two witness statements from Mr Griffin its solicitor. They are answered by two witness statements from Mr Kendall.