- RMC Building and Civil Engineering Ltd ("RMC") is a ground works contractor. UK Construction Ltd ("UKC") is a main contractor. By a sub-contract, the terms of which are in issue, UKC engaged RMC to supply labour, plant and materials for the installation of ground works and drainage for a housing project at Hitchin Road, Arlesley, Bedforshire. This is an application by RMC for summary judgment to enforce the decision of an adjudicator made on 18 November 2015.
- On 6 May 2015 RMC submitted an application for payment (Application No 8) in which it claimed £248,053. No pay less or other notice was served by UKC and so RMC claimed that it was entitled to payment of this sum under the provisions of the Housing Grants, Construction and Regeneration Act 1996 (as amended) ("the Act") and the Scheme for Construction Contracts (as amended) ("the Scheme") which became terms of the sub-contract. Apart from a small payment on account, the sum stated in the application was not paid. After four or five months of fruitless negotiation RMC issued the Notice of Adjudication. As a result of the payment on account the sum claimed in the adjudication was reduced to £216,129.
- UKC raised various challenges to the adjudicator's jurisdiction but he rejected them and continued with the referral. By a Decision dated 18 November 2015 the adjudicator ordered UKC to pay the sum claimed, together with further sums by way of costs and expenses and interest.
- Mr James Bowling, instructed by Fenwick Elliott, appeared for RMC and Mr David Fearon, instructed on a direct access basis, appeared for UKC.
The facts in outline
- In August 2014 RMC was invited by UKC to tender for the groundworks package. On 11 September 2014 RMC submitted a tender, which was subsequently revised during the following month. On 14 October 2014 UKC issued an order by e-mail to RMC for the groundworks package on the basis of the revised tender. The sum stated in the e-mail was £383,119 for the works stated in the revised tender, but certain other work in respect of roads and external works (such as foundations, storm drainage and foul water) were to be paid for on the basis of rates which had yet to be agreed. On the face of it, therefore, this appeared to be an order to carry out certain works for a lump sum together with other works that were to be measured and priced at rates that were yet to be agreed.
- On the following day it appears that there came into existence a document that was described as a Letter of Appointment. It was expressly stated to be "Subject to Contract". UKC asserted that this document formed the basis of the contract between the parties, but neither during the adjudication nor since has it provided any evidence that the document was actually sent to RMC. RMC denies categorically that it ever received it.
- In addition, UKC faced a further difficulty presented by the fact that this document, if sent, was stated to be subject to contract and appeared to be incomplete. In the context of this application the relevance of the Letter of Appointment was that it prescribed TecSA as the adjudicator nominating body. Since the adjudicator was not nominated by TecSA, UKC submitted that the adjudicator had not been properly appointed and therefore had no jurisdiction.
- Following the issue of the order of 14 October 2014, RMC carried out the work - most of which, it contends, was completed in February 2015, or at least completed so far as RMC had been able to in the absence of further instructions or information. UKC has alleged that RMC wrongly left site on 22 April 2015 and thereby repudiated the contract.
- As I have already said, on 6 May 2015 RMC issued what has become known as Application No 8. In June 2015 Mr Andrew Brazier replaced Mr Abbott, who had until then been responsible for the management of the sub-contract on behalf of RMC. The person acting on behalf of UKC was a Mr John Hallam, who is a Quantity Surveyor engaged by UKC (as I understand it, he is not an employee of the company).
- It seems that Mr Brazier found Mr Hallam a difficult person with whom to deal. Mr Brazier was naturally anxious to secure payment of at least some of the sum claimed in Application No 8, but he had difficulty in tying Mr Hallam down to a figure. Mr Hallam, for his part, appears to have taken the view that the sum claimed by RMC had been grossly overstated and he was concerned to establish a correct figure for the value of RMC's work up to 30 April 2015. One particular bone of contention was the quantity of spoil that had been removed by RMC. It was taken away in lorries and Mr Hallam's consistent position was that the quantities claimed by RMC were not supported by appropriate tickets for the lorries. An aggravating feature of this dispute may have been the fact that Mr Hallam took the view that the average load for a lorry was 8.5 m³, whereas Mr Brazier contended that the capacity of the lorries was 15 m³ and that the average load taken by Mr Hallam was too low. It seems that the tickets simply evidenced the movement of a vehicle and did not provide any information as to the extent to which it was loaded. For present purposes nothing turns on this aspect of the dispute, but it may go some way to explaining why the negotiations in respect of RMC's account were so fraught.
- A point which lies at the heart of the present dispute arises out of the fact that UKC put before the adjudicator some of the e-mail exchanges between the parties during the subsequent negotiations over Application No 8 that took place between June and September 2015. RMC contends that it should not have done so because these documents were all without prejudice, being evidence of negotiations to resolve a dispute. Since the dispute was not resolved, RMC submits that none of the documents, and certainly not those which are said to contain admissions against interest by RMC, should have been put before the adjudicator. Further, RMC submits for the same reason that they cannot be relied on for the purposes of this application. I will revert to this issue later.
- As I have already indicated, by the end of September RMC's patience had run out and it issued a Notice of Adjudication on 30 September 2015.
- By an order dated 5 January 2016 the hearing of RMC's application was fixed for 3 February 2016. On 29 January 2016, a Friday, UKC issued a claim form under Part 8 for declarations that:
(1) RMC's claim cannot exceed £85,450.26 (being the sum that Mr Brazier agreed to accept by an e-mail of 1 September 2015); and/or
(2) that the true value of RMC's account leads to a net payment due of £39,752.29 (being Mr Hallam's valuation of 28 August 2015).
- As I understand it, an unsealed and undated copy of this claim form was sent by e-mail to RMC late on the afternoon of Friday, 29 January 2016. Mr Fearon indicated in his skeleton argument (dated 2 February 2016) that he would be applying to have this hearing adjourned so that the issues raised by this application could be heard and determined at the same time as UKC's Part 8 claim. For the reasons given later in this judgment, I refused that application.
The issues
- Mr Bowling summarised the issues that arose on this application as the following:
(1) Whether or not the adjudicator had been appointed by the wrong nominating body.
(2) Was there a dispute at the time when RMC issued its Notice of Adjudication, and was Application No 8 withdrawn?
(3) .Whether the adjudicator exceeded his jurisdiction by awarding a sum that was in excess of the "cap" imposed by paragraph 2(4) of Part II of the Scheme?
(4) Whether RMC's application for summary judgment should be adjourned in order to be heard at the same time as UKC's Part 8 claim? If not, whether there should be a total or partial stay of enforcement of any judgment?
(5) Whether or not there had been a repudiation of the contract by RMC which was accepted by UKC, thereby discharging it from performance of any further obligations under the contract?
- So, as far as issue (1) is concerned, Mr Fearon very realistically accepted that if RMC's application for summary judgment was to be heard today, this was not a point upon which he could rely because there was no evidence before the court to show that the Letter of Appointment had ever been sent to RMC. Accordingly, I find that TecSA was not the adjudicator nominating body and so the adjudicator was properly appointed. Accordingly, this ground of challenge to his jurisdiction falls away.
- I will take the remaining issues in turn.
Was there a dispute and was application No 8 withdrawn?
- Before I consider this issue I need to deal with the important preliminary point raised by Mr Bowling, which is this: were the communications upon which UKC relies made without prejudice and therefore not admissible in evidence?
- Mr Fearon's submission was that, whilst Mr Brazier, of RMC, may have been attempting to negotiate a figure for the value of the work done to 30 April 2015 (which I understood him to accept would attract without prejudice privilege), Mr Hallam, of UKC, was not in the business of negotiating anything but instead was seeking to establish the true value of RMC's account.
- The exchanges between the parties between April and the end of September 2015 were not mentioned in either the Notice of Adjudication or the Referral Notice. Some of the exchanges (in particular, those in July 2015) were set out for the first time in UKC's Response (it was actually headed "Respondents Reply"). There was therefore no waiver of the without prejudice protection by RMS. A further exchange in September 2015 relied upon by Mr Fearon in the hearing was not referred to in UKC's Response.
- UKC's "Respondents Reply" made, amongst many others, the following points:
(1) The contract was governed by a Letter of Appointment dated 15 April 2014 (sent to the Referring Party).
(2) Application No 8 was "withdrawn by RMC by the issue of an amended Application No 8 on 16 July 2015" (paragraph 12).
(3) Following issue of Application No 8 there was a meeting between the parties on 14 May 2015, the purpose of which was "to resolve outstanding payment issues and to negotiate the fair value of the work being carried out under the external works" (paragraph 43 - my emphasis).
(4) A further meeting was arranged for 19 June 2015 "to discuss the account" and, in particular, "the invoices and applications raised to date and the basis for pricing for the roads and sewers" (paragraph 46).
(5) At this meeting "It was agreed that Mr Brazier would review the information and submit an amended valuation. This was received on 16 July 2015" (paragraph 47).
(6) "The decision to withdraw the Application No 8 submitted on 6th May 2015 was made at the meeting on the 19th June 2015, this was before the final date for payment and before the final date of issue of a payless notice. As the application was withdrawn there was no requirement for any notice to be issued" (paragraph 48).
(7) RMC submitted "a reappraisal of previously submitted application 7 (8) for works to end of April 2015 on 16th July 2015 reducing the sum claimed to a gross application of £566,750.47 giving an amount claimed of £124,821.14" (paragraph 49).
(8) "No payment has been made as on another contract being carried out by RMC, they have been overpaid in excess of the amount due on this contract" (paragraph 51).
(9) "Details of additional items/information required regarding the account received on the 16th July 2015 was sent to RMC on 24 July 2015 . . . but with supporting information missing it was part of an ongoing negotiation process" (paragraph 52 - my emphasis).
- In addition, in an e-mail dated 6 August 2015 Mr Brazier wrote to Mr Hallam saying:
"If we are unable to reach an agreement with UK Construction Ltd as to payment for the outstanding work completed up to 30.4.15 then we reserve the wright (sic) to pursue all remedies available to us under the contract to recover these outstanding monies and any additional associated costs."
- In his e-mail dated 1 September 2015 Mr Brazier said this:
"Further to your e-mail of 24th August 2015 (11.22) enclosing your assessment of our Application for payment Nr 7 (8) for works completed to the end of April 2015.
I have reviewed your assessment and where I agree I have amended our latest Application Nr 7 (8) for works completed to the end of April 2015 accordingly.
Our order for the works at Arlesley is based upon an agreed lump sum plus variations instructed by UK Construction.
This is recorded in your Dave Alonso's e-mail of the 14.10.14 (07.32) to our Max Abbott.
Your entitlement to modify our agreement and withhold payment of a portion of the excavation and its subsequent removal from site is refuted in its entirety.
Please ensure the balance of £85,454.26 currently outstanding for payment is paid to us within 7 days from the date of this e-mail."
- This e-mail has been strongly relied on by UKC, particularly the words "where I agree" in the second paragraph. This is said to be an admission that the sums referred to (as amended) are correct, with the result that RMC can no longer rely on the sum stated in its Application No 8 as a sum that is due.
- In my view, the reference in paragraph 52 of the Reply to all the relevant exchanges between Mr Hallam and Mr Brazier (of which the 6 August and 1 September 2015 emails plainly formed part, even if UKC did not refer to them in terms) being "part of an ongoing negotiation process" speaks for itself. These exchanges were, in my judgment, exactly that. There is nothing in the Reply to suggest that Mr Brazier's e-mails of 6 August 2015 or 1 September 2015 were of a different nature. These were part and parcel of a continuing attempt to "reach an agreement" about the value of the works completed up to 30 April 2015.
- In my view, the exchanges between the parties referred to in the Reply are a classic example of the type of discussions that are protected by the without prejudice rule. That is to say, that admissions against interest made in the course of such discussions are not admissible in evidence. This is because those discussions took place against the background of a dispute and were part of an attempt to resolve it.
- Mr Bowling referred me to the decision of the Court of Appeal in Sang Krok Suh v Mace (UK) [2016] EWCA Civ 4, in which the court cited a passage from the judgment of Robert Walker LJ in Unilever v Proctor & Gamble [2000] 1 WLR 2436, which was as follows:
"To dissect out identifiable admissions and withhold protection from the rest of without prejudice communications (except for a special reason) would not only create huge practical difficulties but would be contrary to the underlying objective of giving protection to the parties . . . "To speak freely about all issues in the litigation . . ."."
- In my judgment, that approach applies here: the evidence of these discussions or any admissions made in the course of them should not have been put before the adjudicator in the first place and they cannot be relied on by UKC in these proceedings as admissions against interest by RMC.
- But if I am wrong about that, it is of interest that UKC relied on the fact that Application No 8 was allegedly withdrawn before the date by which it contended that it had to issue a pay less notice under the terms of the Letter of Appointment. UKC had to make this point (bad though I conclude it was for the reasons given below) because once the date for service of a pay less notice had passed in relation to the 6 May application, the amount stated in that application became a sum that UKC had to pay: this is because there was no longer an application in existence that was capable of being amended or withdrawn, but instead there was an accrued entitlement to payment of the sum stated in the application.
- Section 110A of the Act requires that a construction contract shall, in relation to every payment provided for by the contract, require the payer to give a payment notice that complies with the Act not later than 5 days after the payment due date. UKC's e-mail of 14 October 2014, which accepted RMC's order, included the following provision:
"Payment 30 days from month end valuation"
To the extent that it is a matter in dispute, I agree with RMC that this means that the payment due dates in the contract are the last day of every month, and that the final date for payment is 30 days thereafter. Since, in my view this is an adequate mechanism for determining when payments become due under the contract and when they become due for payment, the provisions of Part II of the Scheme that would apply where there is no such adequate mechanism are not relevant.
- By virtue of section 110A of the Act UKC was required to give a compliant payment notice not later than five days after each valuation date (ie. 5 days after the end of each month). If it failed to do so, then, by section 110B, RMC was entitled to issue its own payee notice. Accordingly, RMC was entitled to issue Application No 8 on 6 May 2015 as it did. Any pay less notice that UKC wished to issue had to be issued not later than the "prescribed period" before the final date for payment. Since no "prescribed period" had been agreed, by virtue of sub-section 111(7) of the Act and paragraph 10 of Part II of the Scheme, it was 7 days. It is common ground that no pay less notice was issued by UKC during May 2015, so I do not need to determine the precise date by which it was due during that month.
- In these circumstances, the result was that RMC became entitled to payment of the sum stated in its application of £248,053, although (as I have already mentioned) by the time of the Notice of Adjudication UKC had made a small payment on account and so the sum claimed was reduced to £216,129. Thus, by June 2015, the withdrawal or amendment of Application No 8 was no longer an available option.
- UKC does not contend, as indeed it could not on the facts, that there was a binding agreement to vary the sum claimed in respect of Application No 8. Accordingly, the only way in which UKC can put its case about there being no dispute is on the basis that RMC promised to forego the balance of its claim above a particular figure, or to forbear from enforcing it to that extent, and that UKC relied to its detriment on RMC's promise to do this. Mr Bowling submitted that, in a situation such as this, one could treat the requirement for detriment as a substitute for the consideration that would be required in the case of a contract. Whilst I do not consider that this proposition can be elevated to a rule of law, as a working rule of thumb it may be useful.
- Mr Bowling referred me to a passage from the judgment of Akenhead J in VGC Construction Ltd v Jackson Civil Engineering Ltd [2008] EWHC 2082 (TCC). He said, at paragraph 49:
"There seems to be no authority (and certainly none was put before me) as to what happens when a claim or assertion is made by a potential claiming party which, although disputed, is then withdrawn by the claiming party. In the ordinary course of events, there can be nothing wrong with the proposition that a dispute may cease to be a dispute by reason, for instance, of an agreement between the parties or an unconditional withdrawal of the claim or assertion which gave rise to the dispute. It might be possible in certain circumstances to apply the principles of estoppel or waiver to a disputed claim which the claiming party indicates clearly and unequivocally to a responding party that it is withdrawing that claim or assertion; if the responding party acts on that representation about withdrawal to its detriment then the claiming party may find it difficult in practice to pursue the claim at all."
- Unguided by any other authority, this accords with my own view. It is therefore necessary to consider what UKC did following receipt of Mr Brazier's e-mail of 1 September 2015, the terms of which I have already set out above.
- On 28 August 2015, so very shortly before he received Mr Brazier's e-mail, Mr Hallam issued a document entitled "Payment Notice" which stated that the value of RMC's measured works was £472,340.34 which, after deduction of the sum previously paid, showed a payment due of £30,411.01. It appears that during the morning of 9 September 2015 Mr Hallam and Mr Brazier spoke by telephone, after which Mr Hallam sent the following e-mail to Mr Brazier:
"Further to our discussions morning revaluation number 7 Sutton Road South end on Sea in the sum of - £40,123.92 (we have to date received no response from you on this) and valuation 8 Hichin (sic) Road Arseley in the sum of £30411.01 I would reiterate that this puts UKC Ltd in a "money owed" position in the sum of £9712.91."
- To my mind, this shows that, far from relying on any statement made by Mr Brazier in his e-mail of 1 September 2015 (or in any earlier e-mail), Mr Hallam simply pressed on with his own valuation of RMC's account.
- Now is the point at which to stand back and look at the position overall. In my view, two things emerge from the events between the end of April and the end of September 2015. First, the dispute about RMC's application of 6 May 2015 was still live and remained unresolved. In effect, RMC had offered to accept a sum of about £85,000 in respect of the amount outstanding but UKC had declined to accept it. Unless RMC is to be taken as having withdrawn part of its claim in a manner that now binds it, the dispute was still in existence at the time when the Notice of Adjudication was issued at the end of September 2015.
- The second thing that emerges from these events is that, on the material before the court, there is no evidence that UKC relied, let alone relied to its detriment, on RMC's willingness to agree various items in the account. The adjudicator decided, on the material that was put before him, that RMC had not withdrawn its claim. At paragraph 4.2.7 of his Decision, he said this:
"There is no dispute that RMC issued its application for payment No. 8 on 6 May 2015. I find that [UKC] has not evidenced that RMC agreed to replace or withdraw its application for payment no. 8 issued at that time. There is simply no evidence provided by [UKC] that support (sic) this position. What is apparent is that RMC were endeavouring to obtain payment from [UKC] which payment was not forthcoming."
- In my view, this conclusion was plainly open to the adjudicator and was a response to one of the questions that he had to determine. Whether it is right or wrong is irrelevant: the question was squarely before him and he answered it. Indeed, on the material that was before him it seems to me that his decision was amply justified.
- As I have already said, the question of whether or not RMC limited its claim to £85,000 odd is the subject of a declaration that UKC seeks in its Part 8 claim. It may be that UKC will put material before the court in those proceedings that is not before the court today. In these circumstances I make no finding on this question and confine myself to the observations that I have already made. It is sufficient to dispose of this ground of defence to the application for summary judgment that the finding that the adjudicator made was one that was within his jurisdiction and that he was entitled to make.
Did the adjudicator exceeded his jurisdiction by awarding a sum in excess of the "cap"?
- Paragraph 2(4) of Part II of the Scheme provides as follows:
"An amount [of any interim payment] shall not exceed the difference between-
(a) the contract price, and
(b) the aggregate of the instalments was stage or periodic payments which have become due."
Paragraph 12 of the Scheme defines the contract price as
"the entire sum payable under the construction contract in respect of the work."
- At paragraph 4.127 of Coulson on Construction Adjudication, 3rd edition, the author says this:
"Paragraph 2(4) seeks to provide a cap on the amount of any stage payments. The cap is said to be the difference between the contract price and the aggregate of the instalments stage payments. It is slightly unclear what the purpose of paragraph 2(4) really is. If it is intended to state that the total amount of interim payments cannot be greater than the contract price, it might not be thought to have added very much, particularly as paragraph 12 defines the "contract price" as the "the entire sum payable under the construction contract in respect of the work". As Judge Lloyd QC pointed out in Elsdon, the use of the word "entire" is unfortunate because it has connotations of "entire contract". Judge Lloyd went on:
It means the final sum due. The Scheme has to cover a wide variety of contracts. It is not be assumed that in promulgating Part II of the Scheme the Government was unaware of re-measurement or other contract in which the contract price is no more than the tender sum and the "price" is arrived at by the application of rates and prices to the quantities of work executed. In order to find out what is meant by the "entire sum" it is necessary to examine the construction contract, to ascertain the work done under it and then to determine what is payable for that work. The buffer [the total amount of interim payments could not be greater than the contract price] may still apply e.g. where interim payments prove to be over-estimates or other mistaken assessments. It is probably directed to the mundane situations where a contractor or sub-contractor is paid generally on account what is asked for (e.g. by way of "drawings") which then get close to the total sum payable. It is aimed at over-payments which are always difficult to recover.
The author concludes by saying that, in adopting this common sense analysis, the judge found that the "entire sum" was what turned out to be payable to the contractor in accordance with the detailed provisions of the contract.
- In my view, this challenge fails on the very simple ground that UKC has not shown what the contract price is. In his skeleton argument Mr Fearon submitted that the original contract was in the sum of £383,119 and "that was the contract sum recorded by RMC in its Referral". In fact, that is not correct. At paragraph 3 of the Referral it was asserted that the work was be carried out for the "lump sum of £383,119 plus VAT, or such other sum or sums as might become due thereunder". It is quite clear that the contract price is not £383,119 because, as I have already mentioned, on 28 August 2015 UKC itself has certified a far greater amount as being the value of the work as at 30 April 2015. At no stage has UKC attempted to prove, let alone proved, what the entire sum payable is.
Should this application be adjourned?
- I will deal with this part of the fourth issue at this stage and leave the question of any stay of enforcement until the end.
- Although Mr Fearon did not abandon his submission that this application should be adjourned so that it could be heard at the same time as UKC's Part 8 claim, sensibly he did not press it very strongly. In my view, the submission was almost hopeless. RMC issued its claim on 23 December 2015. As a result of the intervention of Christmas, I did not make the usual order for directions until 5 January 2016. That required UKC to serve its evidence on or by 21 January 2016. The order specifically gave the parties permission to apply to set aside or vary the directions on two working days' written notice to the other.
- No explanation has been provided to the court as to why UKC made no application to vary the order. The nearest that it came to doing so was in paragraph 49 of the witness statement of Ms Waring, which was served on 21 January 2016, where she said that "UKC will shortly be starting Part 8 proceedings for a declaration as to the true sum due to RMC in respect of the work carried out by it up to 22 April 2015 when it walked off site" and, at paragraph 49, "UKC intends to ask RMC to agree to a stay of these proceedings pending the outcome of the Part 8 proceedings". I have not been told whether or not UKC did in fact make such a request, and if so when, but it clearly had not been made by 21 January 2016. In my view, this was already too late. Whilst I accept that having two hearings rather than one will increase the costs, the onus was clearly on UKC to take prompt action if it wished to have the hearing of this application adjourned so that all the issues could be resolved at one hearing. It failed to do so. I therefore refused the application at the outset of the hearing.
Was there an accepted repudiation of the contract?
- It is UKC's case that RMC abandoned the works by walking off site on 22 April 2015. At paragraph 8 of his skeleton argument Mr Fearon submitted that:
"In doing so it repudiated the contract, releasing the Defendant from further performance of the contract."
At paragraph 11, Mr Fearon said this:
"As the Claimant had already repudiated the contract, there was no obligation on the Defendant to further performance of the contract, and that included the issuing of new notices."
49. Mr Fearon is correct to this extent, namely that where one party commits a repudiatory breach of a contract, the innocent party may either accept the repudiation, and thereby discharge itself from any further performance of its obligations under the contract, or it may treat the contract as subsisting. In addition to either option, it may make a claim for damages for breach of contract.
- In my view, it is clear on the facts that UKC did not accept the (alleged) repudiatory breach by RMC for at least three reasons. First, it continued to issue certificates for payment, which is the very thing that Mr Fearon, in his skeleton argument, submitted that it was discharged from doing. Second, it made no formal statement to the effect that it was accepting a repudiatory breach of contract by RMC. Third, on 16 December 2015, it wrote to RMC in these terms:
"We refer to RMC's unilateral withdrawal from site on or around 24th August 2015 and subsequent refusal to return.
RMC withdrew without notice, and accordingly was in repudiatory breach of contract, a repudiation which UK Construction has accepted."
- This assertion by UKC of a breach of contract by RMC on 24 August 2015 is consistent only with there being a subsisting contract. It is quite inconsistent with the contract having been brought to an end on 22 April 2015, or shortly thereafter.
- For these reasons, I regard UKC's assertion that it accepted a repudiatory breach of contract by RMC on 22 April 2015 as wholly unsustainable.
Should there be a stay of enforcement of some or all of the judgment sum?
- As I have now rejected UKC's challenges to the jurisdiction of the adjudicator and its complaint that the adjudicator wrongly decided the question of whether or not Application No 8 had been withdrawn, there must be summary judgment for RMC as claimed.
- The application for a stay of enforcement is based on the assertion that not to do so would amount to a manifest injustice to UKC. The grounds put forward in Mr Fearon's skeleton argument are as follows:
(1) The sum claimed by RMC and awarded by the adjudicator is significantly greater than RMC's own QS recorded was due and would constitute a windfall.
(2) The decision is founded upon a failure on the part of UKC to issue a pay less notice in respect of an interim certificate.
(3) Even before submitting the application in question RMC walked off site, repudiating the contract.
(4) As a consequence, any overpayment could not and cannot be remedied in subsequent interim certificates.
(5) Making the windfall payment would inevitably adversely affect UKC's cash flow and could potentially cause significant damage.
- Mr Fearon submitted that the injustice to UKC would greatly outweigh any detriment suffered by RMC, which could in any event be compensated by a subsequent award of interest.
- I can deal with the last point shortly. The provisions introduced by the Act and the Scheme are all about maintaining cash flow. That purpose is not achieved by simply giving judgment for a sum and then staying its enforcement: interest is often no compensation for a lack of cash flow.
- Mr Fearon relied on my decision in Galliford Try Building Limited v Estura Ltd [2015] BLR 321. That was a case where a contractor submitted a very large interim application towards the end of the contract and in an amount which was only slightly less than its anticipated final account. In addition, the amount stated in the application was very substantial - nearly £4 million. In that case the contractual provisions relating to the submission of a Final Statement by the contractor were detailed and drawn out with the result, in effect, that the process could take many months if the contractor was not under any incentive to move quickly. That is not the position in this case. There are no similar provisions here and there is nothing to stop UKC issuing proceedings forthwith for a determination of the true amount due to RMC (which in effect is what it has attempted to do in the Part 8 claim).
- As I indicated in argument, I can see no reason why, given the history of this case, there would be any need for a pre-action protocol - the parties have already been through all that. Of course, Part 8 is unlikely to be an appropriate procedure for the determination of a contested final account, and so the litigation may take some time. However, if there is a stay on the full amount awarded by the adjudicator, UKC will have little incentive to pursue it diligently.
- In my judgment, therefore, it would be unjust to RMC to impose a stay of enforcement up to the full amount of the judgment sum. That leaves the question of whether I should order a stay of part of the amount.
- I do not propose to repeat what I said in Galliford Try v Estura, which I adopt for the purposes of this judgment, save in relation to one point. At paragraph 62 of the judgment I referred to the decision of the House of Lords in M V Yorke Motors (a firm) v Edwards [1982] 1 WLR 444. In that decision the House made it clear that where a defence appeared to be decidedly weak, the defendant could not complain because a financial condition imposed on it as a condition of the grant of leave to defend was difficult to fulfil; he could complain only if it was impossible to fulfil and that impossibility was or should have been known to the court on the basis of evidence placed before it.
- I appreciate that is not this case, because UKC has not been given leave to defend: on the contrary, it has had judgment given against it. However, it cannot be said that its assertion that RMC has received a windfall - in the sense that the sum awarded by the adjudicator is likely to be far greater than its true entitlement - is "decidedly weak". The reality is that the court is in no position to say whether it is weak or strong: one can only observe that contractors do not usually understate the amounts claimed in their interim applications.
- Nevertheless, at the very least the court is entitled to expect that a party seeking a stay of enforcement of a judgment must show either (a) that it will suffer severe financial hardship if required to pay the full amount or (b) that there is a real risk that it may be unable to recover any overpayment (if it is subsequently shown that there was one) from the other party when the dispute is finally resolved.
- In this case UKC has put forward no evidence as to its financial situation. The only information before the court as to this comes, somewhat ironically, from RMC's evidence. Mr Brazier said that in 2015 UKC "seemed to be struggling for cash", and he mentioned an example where RMC had to place an order with a supplier because UKC's account had been placed on "stop".
- In my judgment, this evidence falls very short of showing that, as at today, UKC would find it very difficult to pay sum claimed by RMC. Mr Fearon submitted that I should take into account the very substantial difference between the £216,000 odd claimed and the £85,000 odd that RMC was prepared to accept in September 2015. I decline to do that. To do so would be to allow UKC to rely on the without prejudice material that I have already said it should not have introduced into the adjudication.
- In paragraph 21 of my judgment in Galliford Try v Estura I said this:
"I should make it very clear that I regard the facts of this case as being exceptional, and those in the industry should take note that the course that I propose to adopt in this case will be appropriate only in rare cases."
- UKC must have known that if it wished to avoid enforcement of all or part of any judgment, it would have to put forward some credible evidence as to its financial position. Having failed to do so, it cannot expect the court to make assumptions in its favour. Further there is no evidence to the effect that RMC will be unable to repay the balance (if any) between the judgment sum and its true entitlement, if less. In the circumstances, I do not regard this is one of those rare cases in which there should be a stay of enforcement of any part of the judgment sum.
