ESTOR LTD V MULTIFIT (UK) LTD
Technology and Construction Court
Akenhead J
12 August 2009
THE FULL TEXT OF THE JUDGMENT OF COULSON J
Introduction
1. In these proceedings, there are competing applications between the parties arising out of an adjudicator's decision made on 1 July 2009. The issues which arise all relate to whether or not the adjudicator, Mr Slegg, had jurisdiction to do what he did. The primary issue relates to who the parties to the relevant contract were.
The factual background
2. From the evidence put before the Court, Estor Ltd ("Estor") was the holding company for what has been called the Ginger Group, which is a group of companies which operate hair dressing and beauty treatment salons. Mr Keith Warner effectively owns and runs Estor and the other Ginger companies. The group currently owns or franchises 10 salons in the United Kingdom and abroad. In the past, he has set up new companies for new ventures. Thus it is that he set up Ginger Westfield Ltd ("Ginger Westfield") for the purposes of setting up shop in the Westfield White City complex in London. The premises that were acquired required substantial fitting out works.
3. By a contract made in late September 2008, a company called Hub Design Ltd ("Hub") was employed to do these fitting out works. The price was £129,500 plus VAT and a contract ran into some seven pages but it was in a relatively simple form. The contract was signed by Mr Warner "of the Ginger Group" and the front page of the contract identifies "The Ginger Group" in effect as the employer.
4. There is no doubt that Mr Warner was anxious to ensure that the fitting out works were completed in the last week in October 2008 so that there could be a formal opening at that time. Accordingly work started in late September 2008. Hub subcontracted a sizeable part but not all of the works to Multifit (UK) Ltd ("Multifit"). Multifit's written quotation to Hub for the works was in the sum of £82,635. That quotation was based on drawings received but specifically excluded works to the resin floor and kitchen areas, which were to be done by other contractors.
5. Matters did not proceed smoothly. At a meeting held on 17 October 2008, attended by Mr Warner, four other Ginger Company employees, four Hub representatives and Messrs Khan and Singh of Multifit, Mr Warner outlined what he thought was wrong and indicated that he had lost all faith in Hub. Hub offered to leave the job; at that stage, as indicated in Mr Warner's statement in the adjudication, Messrs Khan and Singh indicated that they would be prepared to "finish the job for us". It is common ground that no agreement was reached at this meeting.
6. Multifit was never provided with a copy of the Ginger Group's contract with Hub. Over the following few days, there was some communication between Hub and Mr Warner about the state of the accounts between them and some talk of a possible novation but Multifit was not made aware of this.
7. On 20 October 2008, Multifit e-mailed to Mr Warner its quotation:
"Can you please [review] this and send me [an] order confirmation by return e-mail. I have also attached our company account form and my first quote to hub design.
I have also given Alan a cheque for £7850 plus vat (Total £9223.75p inc) for his payment for the manufacturing.
We still owe him £7050 plus Vat just to make sure that he can complete on time (originally not in our contract)
Summary of Works:
Main contract Value £82,635 plus Vat
Extras:
1. Plying floor areas £2660.00
2. Main shop £1200.00
3. Fire alarm £7000.00
4. Safety Beacon on back fire doors £500.00
5. Armour colour to visual wall areas only £5200.00
6. Plumbing costs to form changes and fit extra back wash and additional chemical pump £1265.00
7. Extra shot fitting costs due to changes in existing fire lobby £1450.00
8. Extra cost to move location of the fire alarm panel £250.00
9. Total costs of the bling ceiling feature £14,900.00 (excluding payment made by hub design
10. Specialist fittings required to the bling feature supplied by multifit £96.00
Total cost £117,156+ VAT
Balance paid so far from Hub design to Multifit UK Ltd £46,545.00 + Vat
Total remaining £70,611.00 plus VAT
Items Not allowed for:
payment of Air conditioning.
cost of the resin flooring.
Cost of armour colour if applied on all wall areas.
Any final connection charges for any services supplying unit 2025
Supplying Chelsea Artisan specialist glass."
8. There was then a meeting between Mr Warner and the Multifit representatives on either 20, 21 or 22 October 2008 (the date probably does not matter). There had clearly been some concern as to the creditworthiness of the Ginger Group company. Mr Warner was asked and agreed to have Estor's bankers provide a credit reference. Although the form provided by Multifit is headed "Application for Credit Facilities", it is clear that the purpose of it was to enable Multifit to obtain a credit reference. The form identifies the VAT and company registration numbers of Estor. There are two arguably relevant entries:
"I/We consent to My/Our Bankers providing a Credit Reference on me/us on an ongoing basis
I/We hereby apply for credit facilities to be granted to me/us and confirmed that we will comply with your Trading Terms and agreed to be bound by your standard terms and conditions of sale"
It was accepted by Multifit's Counsel that the second of these two entries was immaterial as both parties knew that Mr Warner did not want credit facilities.
9. There is some issue between the parties as to what was said or understood at this meeting as to who Multifit's contract was to be with. Messrs Khan and Singh say that they had done a credit check on Ginger Group Ltd and that it was adverse. This was, they say, raised with Mr Warner who rang his accountant and passed on his advice that the contract and credit facilities had to go through Estor. Later, they found that Estor had acceptable credit. Mr Warner however says that at the meeting Multifit wanted some comfort that he could pay for the work and he said that he told them that the creditworthiness of the Ginger Group as a whole would be clear from a search of Estor; he said that it was never the intention that a contract would be entered into between Estor and Multifit. He said also that he made it clear that he needed them to complete all of the remaining works. There was no discussion about the resin flooring.
10. By email of 23 October 2008, Mr Warner replied to Multifit's email of 20 October 2008 (see above):
"…that's fine can you carry the work out from the [revised] quote. thank you. if have any problems just call me"
There was no hint or indication in that email as to which company was accepting Multifit's quote.
11. Thereafter, Multifit carried out the work or at least that which it was employed to do, by the end of October 2008.
12. Multifit was paid money for the work which it did. It remains somewhat unclear as to which company paid Multifit. In November 2008, Multifit prepared a Statement of Account addressed to "The Ginger Group Ltd" which identified 5 payments from "Estor/The Ginger Grp". Estor's Bank statements identify Chaps transfers which are ambiguously represented as being to "Ginger Westfield…Multifit…" which could mean that the payments went direct to Multifit or through Westfield. A later bank statement of Westfield showed a payment being made to Multifit by Westfield in December 2008.
13. There was an issue as to defects in particular about the resin flooring which had been done by one of Hub's subcontractors, CT Flooring, but Mr Warner believed that Multifit had assumed responsibility for this work. Multifit had paid this subcontractor but, it was said, simply at Mr Warner's direction.
14. On 3 April 2009, Multifit produced a Notice of Adjudication addressed to Estor and on 9 April 2009 purported to serve its Referral to Adjudication. Mr Slegg was duly appointed adjudicator but, due to doubts about whether the Notice of Adjudication was served, Mr Slegg resigned.
The Adjudication
15. On 12 May 2009, Multifit served on Estor its Notice of Adjudication in which it claimed £37,624.05 inclusive of VAT. Mr Slegg was again appointed as adjudicator. Multifit's Referral to Adjudication was dated 21 May 2009. The issues were broadly:
(i) Was the contract between Multifit and Estor, Ginger Group Ltd and Westfield? If so, was it in writing for the purposes of the Housing Grants and Regeneration Act 1996 ("HGCRA")?
(ii) Was Multifit responsible for the resin flooring?
(iii) Were there defects in the resin flooring and elsewhere for which Multifit was liable?
(iv) Costs.
The first issue was obviously a jurisdictional issue. It is accepted that Estor reserved its position about the adjudicator's jurisdiction.
16. In his decision dated 1 July 2009, the adjudicator decided as follows:
(i) There was a contract between Multifit and Estor; in this context, he provided some detailed reasoning. He was impressed by the fact that the credit check was agreed to be done on Estor and he believed that no explanation had been offered as to why someone should "obtain a credit check on another and then contract with a different party that it knew had a poor credit rating". He formed the view that the contract was evidenced by the emails of 20 and 23 October 2009, Multifit's quotation of 23 September 2008, the credit reference form signed by Mr Warner and Multifit's Terms and Conditions referred to in that form.
(ii) There was no novation of the contract, by which Multifit was substituted for Hub.
(iii) As for the resin floor, he found on a balance of probabilities that CT Flooring was a sub-contractor of Multifit, that the contract between Multifit and Estor originally did not include the work but somehow thereafter Multifit became responsible for it and that Multifit was responsible to Estor for it.
(iv) None of the defects were proved on a balance of probability.
(v) £37,624 inclusive of VAT was due to Multifit.
(vi) So far as costs were concerned, he decided that Estor should pay £6,240 for Multifit's costs. In respect of his fees and expenses, he had an invoiced sum of £22,907.25, which he ordered Multifit to pay; of that sum, he ordered Estor to pay £17,760 exclusive of VAT. He had presented a bill after the abortive adjudication on 15 May 2009 in the sum of £4,347inclusive of VAT for time spent. He wrote to the parties saying that there was an "overlap" between his work on the abortive adjudication and the later one and in effect said, that where there was an overlap he proposed to take it into account. In effect, what he was saying was that, where there was work which he had done on the abortive adjudication which did not have to be duplicated second time round, he would take it into account but, where the time on the abortive adjudication was wasted, Multifit would have to bear it.
These proceedings
17. Estor did not pay out on the decision but issued its own proceedings seeking declarations that there was no contract in writing between Estor and Multifit and that accordingly Mr Slegg's decision is unenforceable. Pleadings were exchanged.
18. There are two applications before me, the first being Estor's application for the declarations claimed and the second being Multifit's for summary judgement on its Counterclaim for the enforcement of the adjudicator's decision.
19. Estor make five points:
(i) There was no construction contract between Estor and Multifit.
(ii) There was no construction contract in writing as required under Section 107 of the HGCRA.
(iii) The adjudicator decided that there was a different contract from that identified by Multifit in the Notice of Adjudication or Referral Notice.
(iv) The adjudicator decided that Multifit's terms and conditions were applicable and there were unwritten terms in respect of the resin floor.
(v) The adjudicator had no jurisdiction to decide that Estor should pay the lion's share of the costs or at least any part of his fee for the abortive adjudication.
This was opposed and challenged by Multifit which argues that there is simply no realistic defence to its application for summary judgement.
The law
20. Whilst the Court is constrained to consider astutely complaints that an adjudicator had no jurisdiction, the Court will need to be satisfied that it is only if Estor "advanced a properly arguable jurisdictional objection with a realistic prospect of succeeding upon it that [it] could hope to resist the summary enforcement of an adjudicator's award against" it (see Simon Brown LJ as he then was in Thomas Frederic's (Construction) Ltd [2004] blr 23 at Paragraph 32). It is common in the TCC that, if the jurisdictional point raised is simply a matter of law, for instance of contractual or statutory construction, the Court will be able to deal with the matter summarily even if there are proper arguments about jurisdiction.
21. The position is different, however, if the jurisdictional challenge is dependent upon fact and evidence. CPR Part 24.2 permits the Court to give summary judgment against the defendant if it considers that the defendant "has no real prospect of successfully defending the claim or issue". The question for consideration in the current case is therefore, since the issues are largely factual, whether, on the evidence before the court, it is satisfied that Estor has no or a realistic prospect of establishing that the contract was not between Estor and Multifit and that there were oral terms agreed which effectively prevent any contract between Estor and Multifit being a construction contract in writing.