THE FULL TEXT OF THE JUDGMENT OF AKENHEAD J
1. These are adjudication enforcement proceedings between consultants and their employer, issues being raised about the extent to which the construction contract between the parties was in writing for the purposes of Section 107 of the Housing Grants, Construction and Regeneration Act 1996 ("HGCRA") and in relation to the extent and scope of the incorporation of the Scheme for Construction Contracts in circumstances in which the underlying contract does not comply with Section 108 of the HGCRA. This latter issue encompasses another issue which is whether the adjudicator was appointed by the correct nominating body
Background
2. Sprunt Ltd ("Sprunt") provides building consultancy services, primarily as architects. In 2001, the London Borough of Camden ("Camden"), invited Sprunt, amongst others, to tender for the provision of building consultancy services pursuant to a Framework Agreement. It is common ground that Sprunt was successful in this context (amongst others) and that there was a written contract made in July 2001 ("the Framework Agreement"). This contract was contained in or evidenced by Camden's "Tender Document for Building Consultancy Services 2001-2004/6". The returned tender dated 24 May 2001 from Sprunt provided time charge rates and percentage fees for projects ranging from values of less than £10,000 to over £1.25 million, such percentage fees extending from 15% down to 5.5%.
3. There were extensive Conditions of Contract within the Framework Agreement. Clause 4.1 envisaged that Camden would issue "instructions in the form of Commissions" to Sprunt. Sprunt would then be required to produce a "Proposal" in respect of the proposed Commission which would include timescale, method and fee required. If Camden decided to proceed with the Commission, its representative would issue a written "Order" accepting the Proposal. Clause 2.1 made it clear that the terms of the Framework Agreement were to apply to any Commission commenced before the end of the Contract Period.
4. Clause 25 addressed dispute resolution and provision was made for adjudication:
"25.2 …if any dispute shall arise between the parties at any time out of or in connection with this Contract or a Service, either party may refer such dispute for adjudication in accordance with the Scheme for Construction Contracts SI 1998 No. 649, Part 1 – Adjudication(Part III) as amended by this Condition and;
25.4 The Council shall be the specified nominating body for the purposes of paragraphs 2(1)(b) and 6(1)(b) of Part 1;
25.11 Where any decision [of] the adjudicator requires either party to make payment(s) to the other, such decision shall be suspended in relation to the requirement to make payment(s) until the earlier of any of the following:
a) after thirty…days of delivery of the adjudicator's decision if neither party has served notice on the other party in accordance with Condition [25.9].
b) receipt of a true copy of the Court judgement following the final determination by legal proceedings following a referral of the matters in dispute under Condition 25.9;
c) the matters of the dispute having been referred under Condition 25.9 to legal proceedings by either the parties, the referring party's formal withdrawal from such action;
d) Contract in writing between the parties following the expiry of the period referred to in Condition 24.2.6 as to the agreed allocation and/or award of such sums in full and final settlement of matters in dispute."
The English Court had jurisdiction for final dispute resolution.
5. Clause 34 provided:
"If any provision of the Contract shall become or shall be declared by any court of competent jurisdiction to be invalid or unenforceable in any way such invalidity or unenforceability shall in no way impair or affect any other provision of the Contract all of which shall remain in full force and effect."
6. There is unchallenged evidence that Camden placed some 37 Commissions with Sprunt over the following few years.
7. In the first half of 2003, Camden invited Sprunt to tender for the provision of building consultancy services in a number of disciplines for two projects, the Ampthill Square Estate and the Godwin & Crowndale Estate. This was to become known as the "Ampthill Square Estate" project. Sprunt submitted its tender dated 8 May 2003, offering to carry out the work at the Ampthill Square Estate for 6.9% of construction cost (or "Total Works Costs") and at the Godwin and Crowndale Estate for 8.2%. Hourly rates for services not covered were also quoted for individual grades of staff. By letter dated 15 July 2003, Camden wrote to Sprunt accepting that tender "at the rates and prices contained therein". "For clarification", the letter went on to say that Sprunt was appointed for both projects. It is common ground that this contract, to cover both projects, was not procured or ordered through the Framework Agreement; that is at least partly evident from the fact that the percentage fees were significantly above those quoted for the purposes of the Framework Agreement. However, the conditions of contract were virtually identical to those set out in the Framework Agreement referring amongst other things to the placing of Commissions and Orders. Although the numbering of the sub-clauses is somewhat different, the dispute resolution clause is effectively the same.
8. There is no dispute that the Ampthill Square Estate project was later split into two separate phases, A and B. It is not absolutely clear from the evidence precisely how this happened. However, by about June 2006, Phase A had largely been completed. The documentation disclosed by the parties in these proceedings suggests that prior to this date there had been issues between the parties about the payment of fees. An e-mailed letter dated 17 November 2005 from Camden to Sprunt suggests that Phase A related to the Godwin and Crowndale Estate and that works were being incorrectly certified and possibly that there were defects in the design and the works. The letter goes on to state:
"We agreed that Sprunt consequentially acknowledge and agree our contention that the contractual relationship in respect of phases 2, 3, 4 (now phase B) is Sprunt's general consultancy agreement is and that the Godwin, Crowndale Ampthill agreement is specific to phases 1 and 1A"
Further correspondence ensued and there were meetings between the parties on 23 May and 7 June 2006, in respect of which no minutes or even notes about what was discussed were put before the Court.
9. On 12 June 2006, Sprunt wrote to Camden in the following terms:
"Further to my letter dated 22 February 2006 and our meetings on 23 May and 7 June 2006 regarding various fee issues relating to Ampthill Square Estate I confirm the current position on both Contracts which incorporates the additional fees as discussed, as follows:
1. Phase A
Our fee percentage is 6.659% in accordance with our tender dated 8 May 2003 and your acceptance dated 15 July 200[3].
Currently, based on our anticipated Final Account figure of £7,575,878… the basic fee commitment for the Contract is £522,660.07
We have undertaken additional works at your request and the fees associated therewith, calculated in accordance with our Agreement, are as follows…
Based on the forgoing the current total fee commitment for the Phase A contract is £540,889.82.
2. Phase B
Based on our fee percentage of 6.659% in accordance with our Agreement for the Phase A contract and the current works budget of £9,035,783 for Phase B, plus the previously agreed community safety works designed statement and alternative scheme proposal of £6971.26, the basic fee commitment for the Contract is £608,664.04
We have undertaken additional work to your request and calculate the fees associated there with as follows:
Pre-Contract fee adjustment to reflect completion of the design of the scheme is up to and including Stage E on Phases 2, 3 and 4, now designated Phases B details of which had been agreed by Camden and residents… £61,163.90
Design of the landscaping scheme…all as detailed in my letter dated 22 February 2006 £126,536.33
The production of Option Appraisals… all as detailed in my letter dated 22 February 2006 £3750.00
Based on the forgoing the current total fee commitment for the Phase B contract would be £800,114.
However based on our discussions and agreement, subject to your written confirmation, I am prepared to abate our fee for the Phase B Contract only to that contained in the Kentish Town Fee Agreement, i.e. a fee of 5.5% in lieu of 6.659%.
This therefore reduces the above fee for the Phase B Contract as follows…
Current Revised Total Fee Commitment for Phase B £695,389.55
…The fee for Phase B will, of course, be adjusted in accordance with any agreed changes to the overall cost of the works….
I trust that the forgoing is in order and a true reflection of our discussions. I would welcome your early agreement in writing to the forgoing in order for us to be able to invoice in accordance with the attached Invoicing Schedule No 21 dated 12 June 2006 and move positively forward with the Phase B Contract."
10. There is no dispute that the parties proceeded thereafter on the basis that Phase B was to be dealt with separately, at the reduced fee of 5.5% and on the basis of the terms of the Framework Agreement. That this is so is clear from the fact that Mr Sutherland, Camden's in-house solicitor who has provided a statement in these proceedings, accepts Paragraph 8 of the Particulars of Claim which asserts that the Framework Agreement applied to the Phase B contract, albeit that he does say (Paragraph 23 (5) of his statement) that the Framework Agreement "is only part of the contract".
11. Phase B proceeded, starting in March 2007 with the works being completed, albeit late, in July 2009; the contractor was Apollo London Ltd. Disputes arose about Sprunt's fee entitlement. On 9 February 2011, Sprunt's claims consultants sent a document entitled "Contractual basis of Sprunt's claims for reimbursement of additional fees on Ampthill Square Phase B". Material parts are:
"1…Sprunt was engaged by…Camden to provide 'Building Consultancy Services for the period 2001-2004/6'…
6. It is provided in the Pricing Document [within the original tender document] that Sprunt will provide the services required for a fee of 5.5% against the total value of the Construction Contract (being over £1,250,000). It is noted that Sprunt reduced their fee percentage from 6.659% to 5.5% in or around June 2006 in order to assist Camden being able to appoint Sprunt for the Phase B works within the existing framework arrangements.
28. In consideration of the above Contract Conditions it is evident that:
…(v) There is no dispute that [Camden] has instructed Sprunt to carry out and provide the services that are the subject of the Building Consultancy Services Agreement referred to herein…
(vii) By agreement of the Parties [Sprunt letter to Camden dated 12 June 2006] the applicable fee for the Phase B works at Ampthill Square is 5.5%..."
12. Camden responded to this on 12 April 2010 almost on a pleading basis with a document entitled "Reply":
"1. Paragraph 1 is admitted.
6. It is admitted that the Pricing Document referred to in Paragraph 6 stated that Sprunt would provide the services required for the fee of 5.5% against the total value of the Construction Contract (being over £1,250,000). It is denied that Sprunt reduced their percentage fee from 6.659% in or around June 2006 in order to assist [Camden] to appoint Sprunt for the Phase B works within the existing framework arrangements.
28…(v) Paragraph 28 (v) is admitted…
(vii) It is admitted that the fee rate between the parties referred to in Paragraph 28 (vii) is 5.5%, but this is in accordance with the rate in the Agreement. It is denied that the rates relate to the letter dated 12 June 2006 from Sprunt to [Camden]…"
13. Correspondence and discussions continued until Sprunt instituted adjudication proceedings in July 2011.
The Adjudication
14. The Notice of Adjudication dated 8 July 2011 identified at Paragraph 3 that the parties had entered into the Framework Agreement and that the Framework Agreement applied to "the project known as 'Ampthill Square Estate Phase B'". It was asserted at Paragraph 12 that the adjudication provisions of the Framework Agreement applied. Paragraph 14 states:
"In and around June 2006 Sprunt were in negotiation with Camden for the provision of services with respect to the works to the Ampthill Square Estate Phase B. Sprunt's letter dated 12 June 2006 evidences Sprunt's agreement to reduce their fee to 5.5%. It is common ground that the Services would be provided under the Building Consultancy Services 2001-2004/6 Agreement."
The Notice then went on to set out in general terms the nature of the disputed claim.
15. The Referral Notice followed on 15 July 2011. This exhibited the Framework Agreement and the letter of 12 June 2006. Paragraph 16 states:
"In and around June 2006 Sprunt were in negotiation with Camden for the provision of services with respect to the works to the Ampthill Square Estate Phase B. Sprunt's letter dated 12 June 2006 evidences Sprunt's agreement to reduce their fee to 5.5% plus the additional payments as set out in the aforementioned letter. The Adjudicator will note that the letter of 12 June 2006 also provided for Camden reimbursing Sprunt for other services not included in the 5.5% fee, which services are being provided and the associated sums had been paid and are therefore not in dispute. Importantly, the further additional costs claimed in this Adjudication arising from the Services to be provided under the [Framework Agreement] are entirely separate to the additional services referred to in the said letter of 12 June 2006."
16. Mr Siamak Soudager was appointed as adjudicator by the RICS at the request of Sprunt. By letter dated 19 July 2011, Camden asserted that Mr Soudager did not have jurisdiction on the basis that the specified nominating body was Camden and in effect not the RICS. The Adjudicator wrote by letter dated 20 July 2011 to the parties saying that he had concluded that he did have jurisdiction.
17. Camden submitted its Response on 4 August 2011. Apart from dealing with Sprunt's claim on the merits, it repeated its jurisdictional reservations made in its letter of 19 July 2011 but also raised an additional jurisdictional reservation to the effect that the agreement was not in writing for the purposes of the HGCRA. It referred to the Framework Agreement and to the fact that under its terms there were to be commissions which were to be the subject of further agreements between the parties. It continued at Paragraphs 9 and 10:
"9. The material commission relates to property referred to as Ampthill Square Estate (phase B).The commission in respect of the phase B works at that property was not in writing. The only potentially contractual document identified by the referring party is specific to this commission is a letter dated 12 June 2006…That document does not contain all of the terms of the commission: it simply refers to an agreement to provide the services for a fee of 5.5% which, contrary to the terms of that letter, is in fact the fee set by the framework agreement for a building contract of this value.
10. In the circumstances the parties' agreement was not in writing for the purposes of section 107 of the [HGCRA]."
18. Other parts of the Response shed light on what Camden's position was. Paragraphs 27 to 33 deal with its case in relation to contracts and agreements:
"28(2) The referring party refers at paragraph 4 of the referring notice to "the Building Consultancy Services 2001-2004/6 Agreement" or "the Agreement"…[Camden] refers to this agreement between the parties as "the framework agreement"…
(3) In addition, pursuant to the framework agreement Camden engaged Sprunt to provide professional services in relation to phase B of works carried out at the Ampthill Estate, in other words in relation to the works required of Apollo under the building contract. This contract, made under the framework agreement in relation to the Ampthill B works, is referred to as "the commission". Notwithstanding the requirements of the framework agreement the commission was not in writing as has been acknowledged by Sprunt in writing.
29. For completeness the adjudicator should also note the following:
…(3) Sprunt provided the same professional services in relation to works required at the Ampthill Square estate under phase A (albeit not under the framework agreement) as were required in connection with phase B which is the subject of this adjudication.
30. (The reason why Sprunt's work for phase B was procured under the framework agreement but provided not under the framework agreement for phase A need not concern the adjudicator…)
32. The adjudicator should also note that there is no issue between the parties but that the services required of Sprunt in relation to Ampthill B were provided pursuant to a commission given under the framework agreement (albeit not in writing). That is apparent from the terms of the referral notice and all prior correspondence…"
19. There then followed a Reply from Sprunt which amongst other things stated in Paragraph 7 that the parties were agreed that the Framework Agreement "applies to the contract that is the subject of this adjudication and the Services provided by Sprunt". This provoked a Rejoinder which stated in relation to jurisdiction that "the services required under Ampthill B were necessarily the subject of a contract other than the framework agreement…"
20. On 5 September 2011, the Adjudicator issued his decision, but which adds nothing of substance relating to jurisdiction. In the result, he decided that Camden was to pay Sprunt £151,861.25 within seven days of receipt of a valid invoice from Sprunt, £31.88 interest per day from 5 September 2011 until payment and £12,702 in respect of his fees and expenses.