Jerram Falkus Construction Ltd V Fenice Investments Inc

JERRAM FALKUS CONSTRUCTION LTD V FENICE INVESTMENTS INC

Technology and Construction Court

Coulson J

21 July 2011

THE FULL TEXT OF THE JUDGMENT OF COULSON J

1: INTRODUCTION

1. The claimant, Jerram Falkus Construction Limited ("JFC"), was engaged by the defendant, Fenice Investments Inc ("Fenice") to carry out the development of a site at 150 Loudoun Road, Camden, London NW8. The contract incorporated the JCT Design and Build Form 2005, although the form was the subject of a number of bespoke amendments. The works were delayed, and the parties fell out as to the causes of that delay.

2. The parties have been extraordinarily promiscuous in their attempts at dispute resolution. There have been no less than three adjudications between the parties, the first being the subject of a disputed enforcement hearing before me ([2009] EWHC 3272). The third, which is referred to in greater detail below, led to an acrimonious dispute about the adjudicator's fees, which was resolved recently (against JFC) in a judgment of HHJ Waksman QC at [2011] EWHC 1678 (TCC). The present proceedings, began by JFC in March of this year, sought a number of declarations, but strayed so far into the facts that the court has had to adopt a hybrid CPR Part 7/CPR Part 8 procedure in order to meet the needs of the parties. All of this activity and acrimony relates to a dispute worth at most £300,000, and the parties have told me that, although this Judgment will resolve the critical issues as to time, it will not address all the remaining disputes between them.

2: THE ISSUES

3. The original contract completion date was 25 May 2009. That was extended by Fenice's agent (Sawyer & Fisher) to 15 June 2009. The works were not practically complete until 9 September 2009, a delay of 86 days, for which Fenice have levied liquidated damages. JFC maintain that Fenice and/or their servants or agents prevented completion and that, by reason of the deletions to the extension of time provisions, which meant that no extension of time could be granted in relation to such acts of prevention, time was set at large. This would then mean that Fenice were not entitled to any liquidated damages at all. Moreover, JFC claim an entitlement to loss and expense under the contract. There is an issue as to the extent to which these claims were the subject of the decision in the third adjudication. That is because Fenice claim that the issues which JFC now seek to raise are precisely the same as those decided by the adjudicator, and that, pursuant to the terms of the contract, JFC's failure to challenge the decision in the third adjudication in the stated time means that that decision is conclusive.

4. In addition, each side maintains that the other is prevented from arguing the substance of these points because of other conclusivity arguments, this time arising out of the Final Account and Final Statement. Again these arguments turn on the terms of the contract. Thereafter, assuming the conclusivity arguments fail, it is necessary to analyse both the prevention principle and the factual delay issues which arise in this case. There was also a separate dispute about an alleged agreement to discount the amount of liquidated damages. On those matters of fact, I heard evidence from Mr Foskett of JFC, and Miss Stockhammer and Mr Christmas on behalf of Fenice.

5. Accordingly, the particular issues that arise in this case can perhaps be summarised as follows:

Conclusivity Issues

a) Is the decision of the adjudicator in the third adjudication, dated 28.10.10, conclusive, such that JFC's arguments as advanced before the court are simply not open to them?

b) Are JFC's Final Account and Final Statement conclusive as to the matters contained therein, such that Fenice cannot challenge JFC's claim for loss and expense?

c) Conversely, in the events that occurred, is it JFC who are prevented now from raising their delay claims as a result of the conclusivity of their own Final Account and Final Statement?

Prevention Issues

d) What caused the delays to the works?

e) Did Fenice prevent JFC from completing the contract works?

f) If Fenice did prevent completion, but the delay so caused was concurrent with delays which were JFC's fault, was time set at large?

Liquidated Damages

g) Was there an agreement to vary liquidated damages and, if so, what was the effect of that agreement?

h) Are Fenice entitled to £209,840 (gross) or £122,102.36 (net) by way of liquidated damages?

JFC's Final Account Claim

i) Are JFC entitled to £311,393.78 by way of their Final Account or some other sum?

6. I propose to set out in the next section of this Judgment the relevant contract terms, as amended. In Section 4, I set out an outline chronology. Then, in Section 5, I deal with the three different conclusivity arguments. Thereafter I set out in Section 6 an outline of the delay issues, and in Section 7 I address what I have called the prevention principle. There is an analysis of the factual delay issues in Section 8. I deal with the other matters in dispute in Section 9, and there is a short summary of my conclusions in Section 10.

3: THE CONTRACT TERMS

7. Clause 1.9 was entitled 'Effect of Final Account and Final Statement'. It was in these terms:

"1.9 1 The Final Statement, when it becomes conclusive as to the balance due between the Parties in accordance with clause 4.12.4, or the Employer's Final Statement, when it becomes conclusive as to the balance due between the parties in accordance with clause 4.12.7, shall, except as provided in clauses 1.9.2, 1.9.3 and 1.9.4 (and save in respect of fraud), have effect in any proceedings under or arising out of or in connection with this Contract (whether by adjudication, arbitration or legal proceedings) as:

1 conclusive evidence that where and to the extent that any of the particular qualities of any materials or goods or any particular standard of an item of workmanship was described expressly in the Employer's Requirements, or in any instruction issued by the Employer under these Conditions, to be for the approval of the Employer, the particular quality or standard was to the reasonable satisfaction of the Employer, but the Final Account and Final Statement or the Employer's Final Account and Employer's Final Statement shall not be conclusive evidence that they or any other materials or goods or workmanship comply with any other requirement or term of this Contract;

2 conclusive evidence that all and only such extensions of time, if any, as are due under clause 2.25 have been given; and

3 conclusive evidence that the reimbursement of direct loss and/or expense, if any, to the Contractor pursuant to clause 4.19 is in final settlement of all and any claims which the Contractor has or may have arising out of the occurrence of any of the Relevant Matters, whether such claim be for breach of contract, duty of care, statutory duty or otherwise.

2 If any adjudication, arbitration or other proceedings have been commenced by either Party before the Final Account and Final Statement or the Employer's Final Account and Employer's Final Statement, as the case may be, the Final Account and Final Statement or the Employer's Final Account and Employer's Final Statement, as the case may be, shall have effect as provided in clause 1.9.1 upon and from the earlier of either:

1 the conclusion of such proceedings, in which case the Final Account and Final Statement or the Employer's Final Account and Employer's Final Statement, as the case may be, shall be subject to the terms of any decision, award or judgment in or settlement of such proceedings; or

2 the expiry of any period of 12 months from or after the submission of the Final Account and Final Statement or the Employer's Final Account and Employer's Final Statement, as the case may be, during which neither Party takes any further step in such proceedings, in which case the Final Account and Final Statement or the Employer's Final Account and Employer's Final Statement, as the case may be, shall be subject to any terms agreed in settlement of any of the matters previously in issue in such proceedings.

3 If any adjudication, arbitration or other proceedings are commenced by either Party within 28 days after the Final Account and Final Statement or the Employer's Final Account and Employer's Final Statement, as the case may be, would otherwise become conclusive by the operation of clause 4.12.4 or 4.12.7, the Final Account and Final Statement or the Employer's Final Account and Employer's Final Statement, as the case may be, shall have effect as conclusive evidence as provided in clause 1.9.1 save only in respect of the matters to which those proceedings relate.

4 In the case of a dispute or difference on which an Adjudicator gives his decision on a date which is after the date of submission of the Final Account and Final Statement or the Employer's Final Account and Employer's Final Statement, as the case may be, if either Party wishes to have that dispute or difference determined by arbitration or legal proceedings, that Party may commence arbitration or legal proceedings within 28 days of the date on which the Adjudicator gives his decision."

8. As to the time for completion, the original contract completion date was 25 May 2009. That date could be adjusted pursuant to the extension of time mechanism at clauses 2.23-2.25. Clause 2.26 set out the Relevant Events, that is to say those events which would or might trigger an entitlement on the part of JFC to an extension of time. These provisions were the subject of detailed amendment. Two particular provisions were deleted altogether. They would have read:

"2.26.5 Any impediment, prevention or default, whether by act or omission, by the Employer or any of the Employer's Persons, except to the extent caused or contributed to by any default, whether by act or omission, of the Contractor or of any of the Contractor's Persons.

2.26.6 The carrying out by a Statutory Undertaker of work in pursuance of its statutory obligations in relation to the Work, or the failure to carry out such work…"

9. Clause 2.28 provided for the issue by the employer of a notice in writing, known as a non-completion notice, identifying the contractor's failure to complete the works by the completion date (as adjusted). Clause 2.29 was entitled 'Payment or Allowance of Liquidated Damages' and was in these terms:

"2.29.1 Provided:

1 the Employer has Issued a Non-Completion Notice for the Work or a Section; and

2 the Employer has Informed the Contractor in writing before the date when the Final Account and Final Statement (or, as the case may be, the Employer's Final Account and Employer's Final Statement) became conclusive as to the balance due between the Parties that he may require payment of, or may withhold or deduct, liquidated damages,

the Employer may, not later than 5 days before the final date for payment of the debt due under clause 4.12, give notice in writing to the Contractor in the terms set out in clause 2.29.2."

10. Clauses 4.19 and 4.20 dealt with the contractor's entitlement to loss and expense. The Relevant Matters entitling JFC to loss and expense under this contract were, as is usual, much more limited than those matters which entitled them to an extension of time.

11. The provisions relating to loss and expense arise in clause 4, which is concerned, amongst other things, with the contractor's Final Account. Clause 4.12 is entitled 'Final Account and Final Statement – submission and payment'. The relevant parts are in these terms:

"4.12.1 Within 3 months of practical completion the Contractor shall submit the Final Account and the Final Statement referred to in clause 4.12.3 for agreement by the Employer, and the Contractor shall supply the Employer with such supporting documents as the Employer may reasonably require.

2 The Final Account shall set out the Contract Sum together with the adjustments referred to in clause 4.2.

3 The Final Statement shall state:

1 the Contract Sum adjusted as necessary in accordance with clause 4.2; and

2 the sum of the amounts already paid by the Employer to the Contractor;

and the difference (if any) between the two sums shall be expressed as a balance due to the Contractor from the Employer of to the Employer from the Contractor, as the case may be. The Final Statement shall state the basis on which that amount has been calculated.

4 The Final Account and the Final Statement as submitted by the Contractor in accordance with clause 4.12.1 shall on the expiry of one month from whichever of the following occurs last:

1 the end of the Rectification Period in respect of the Works or (where there are Sections) the last such period to expire;

2 the date named in the Notice of Completion of Making Good under clause 2.36 or (where there are Sections) in the last such notice to be issued; or

3 the date of submission of the Final Account and the Final Statement to the Employer by the Contractor,

be conclusive as to the balance due between the Parties in accordance with the Final Statement except to the extent that the Employer disputes anything in that Final Account or Final Statement before the date on which, but for the disputed matters, the balance would be conclusive…

8 Not later than 5 days after the Final Statement becomes conclusive as to the balance due between the Parties in accordance with clause 4.12.4 or after the Employer's Final Statement becomes conclusive as to the balance due between the Parties in accordance with clause 4.12.7 the Employer shall give a written notice to the Contractor which shall, in respect of any balance stated as due to the Contractor from the Employer in the Final Statement or in the Employer's Final Statement, specify the amount of the payment proposed to be made, to what the amount of the payment relates and the basis on which that amount was calculated.

9 The final date for payment of the balance by the Employer to the Contractor or by the Contractor to the Employer, as the case may be, shall be 28 days from the date the Final Statement becomes conclusive as to the balance due between the Parties in accordance with clause 4.12.4 or after the Employer's Final Statement becomes conclusive as to the balance due between the Parties in accordance with clause 4.12.7. Not later than 5 days before the final date for payment of the balance the Employer may give a written notice to the Contractor which shall specify any amount proposed to be withheld and/or deducted from any balance due to the Contractor, the ground or grounds for such withholding and/or deduction and the amount of withholding and/or deduction attributable to each ground."

4: OUTLINE CHRONOLOGY

12. As I have already noted, the contract completion date was extended by Sawyer & Fisher to 15 June 2009 pursuant to clause 2.25. There was therefore an actual delay between that date and 9 September 2009 of 86 days.

13. JFC provided their Final Account on 17 November 2009. It included a claim for just under £200,000 by way of loss and expense. The total balance payable was said to be £311,393.78. The Final Statement in this sum was provided on 1 July 2010.

14. Thereafter, in September and October 2010, the parties fought out a third dispute in adjudication. The notice of adjudication was served by Fenice and sought declarations that JFC were not entitled to any further extension of time for, amongst other things, the alleged delays by British Gas and EDF and the alleged late instructions in respect of the problem of the levels in Houses 4 and 5. In their lengthy response document, JFC said that, as a result of the deletion of clause 2.26.5 and 2.26.6 (paragraph 8 above), these events (that is to say, the delays by British Gas and EDF and the delay in the instructions as to the levels) "rendered time for completion of JFC's obligations under the contract at large". References were also made to various authorities as to the meaning of 'statutory undertaker'.

15. In a careful and detailed decision provided by the well-known construction adjudicator, Dr Franco Mastrandrea, the adjudicator found in favour of Fenice on all these points. Amongst other things he said, at paragraph 6.6, that he was satisfied "that there was no act of prevention by the Employer render time at large…"

16. The adjudicator's decision was dated 28 October 2010. It is common ground that it was not the subject of an arbitration notice or the issue of proceedings within 28 days of that date.

17. It is also common ground that the remediation period under the contract ended on 13 January 2011 and that, as a result, subject to the issue of whether and to what extent there was a challenge to the Final Account by Fenice, this rendered the Final Statement conclusive as at 13 February 2011 (clause 4.12.4) and made 13 March 2011 the final date due for payment of the £311,393.78 (clause 4.12.9).

18. However, whether or not those arguments are right turns in large part on the status and proper interpretation of Fenice's letter of 24 January 2011. That letter came from Sawyer and Fisher and was in these terms:

"150 Loudoun Road

Employer Response to Final Account/Final Statement

I refer to your Final Account submission of 17th November 2009 and Final Statement dated 1st July 2010 in relation to the above project.