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WWW.UKADJUDICATORS.CO.UK
MARCH 2019 NEWSLETTER
1 | P a g e
EDITORS’ COMMENTS
Our first event of the year, the Society of
Construction Law annual lunch in London was
a success, and the next event we can look
forward to is the 2019 Edinburgh Adjudication
and Arbitration Conference. The half day
conference takes place at the Scottish
Arbitration Centre in Edinburgh on the 15th
March from 11am to 5pm. The conference
will focus on the theme of Adjudication and
Arbitration and will look at both of these from
a United Kingdom and international
perspective.
We are vey lucky to have some of our
panellists speaking at the conference
including Lisa Cattanach of CDR, Iain Aitkinson
of Ankura, Natasha Peter of Gide and
Catherine Gilbert of Temple Bright, and look
forward to seeing our other panellists there.
I will be at the DRBF’s Central and Eastern
Europe Conference and Workshops in
Bucharest, Romania 25-27 March 2019 and
will be a tutor on the advanced workshop and
chairing day 2 of the conference.
I can’t urge our panellists strongly enough to
become actively involved with promoting UK
Adjudicators raising both their own profile as
an adjudicator and that of the nominating
body as both will see increased public
recognition and ensuing opportunities arising
more frequently.
We are planning an event in central London in
August 2019 if you could host us or you are
interested in speaking or acting as a sponsor
please do get in touch.
We also hope to hold further events in Bristol,
Birmingham, Manchester and Leeds, if you
are interested in speaking or acting as a
sponsor please do get in touch.
Many thanks to our guest contributors Rajiv
Bhatt and Katie Lee from Hardwicke
Chambers and Sandra Steele from K&L Gates
Australia.
Sean Gibbs is a director with Hanscomb
lntercontinental and is available to sit as an
arbitrator, adjudicator, mediator, quantum
expert and dispute board member.
sean.gibbs@hanscombintercontinental.co.uk
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MARCH 2019 NEWSLETTER
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THE PRIMACY OF INSOLVENCY LAW
OVER CONSTRUCTION LAW
With the Court of Appeal’s decision in Bresco
Electrical Services Ltd v Michael J Lonsdale
(Electrical) Ltd just a few weeks old, it is
hardly surprising that people are looking again
at the relationship between insolvency law
and adjudication, noting that in cases of
liquidation where parties have a cross claim,
construction law defers to insolvency law.
This was clearly illustrated in Gregg Nowak
Ltd v CSS Electrical Distributors Ltd, which
came before HHJ Bailey earlier this month.
Gregg Nowak Ltd v CSS Electrical Distributors
Ltd
Gregg Nowak Ltd (GNL) was employed by CSS
Electrical Distributors (CSS) to undertake
construction works. A dispute arose when
GNL failed to complete the contract by the
original completion date of 30 April 2009. As a
result, CSS issued a withholding notice to GNL
with the consequence that GNL then referred
the dispute to adjudication.
The adjudicator decided that GNL was entitled
to be paid. Key to that decision was the fact
that the architect had issued an extension of
time on 12 October 2010, revising the
completion date to 6 December 2009.
Although practical completion was achieved
in March 2010 (which was after the revised
completion date), the architect had failed to
issue a further notice of non-completion.
Consequently, CSS was not entitled to
withhold payment and GNL succeeded in the
adjudication on a technicality.
The matter did not end there. Shortly after
the adjudication, the architect issued a second
certificate of non-completion and CSS served
further withholding notices. CSS failed to
satisfy the adjudication award and GNL
commenced enforcement proceedings. The
parties then agreed a consent order which,
among other things, required CSS to pay to
GNL the adjudicator’s award in instalments.
However, it quickly transpired that there were
complications:
•Unbeknown to CSS, the day before the
consent order was signed, GNL assigned the
debt owed to it to a third party, Mortimer
Royal LLC. GNL was obliged to provide notice
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MARCH 2019 NEWSLETTER
3 | P a g e
to CSS and seek its agreement to assign if the
assignment was to be a valid legal assignment.
GNL did not do this.
•GNL entered into liquidation following a
winding-up petition from HMRC.
Due to those complications, in September
2012, CSS sought and successfully obtained a
stay of enforcement of the consent order in a
hearing before HHJ Hand QC. The present
case concerned an application by GNL’s
liquidator to vary that order and to lift the
stay on the enforcement of the consent order.
HHJ Bailey’s decision
HHJ Bailey rejected the application to lift the
stay of enforcement. He held that there had
been no material change in the circumstances
since the stay was ordered and the facts were
not misstated in the hearing in front of HHJ
Hand QC.
Crucially, he had to decide two key issues that
were put to the court:
•Were the issues in the adjudication “finally
determined” by the consent order so as to
estop CSS from instituting proceedings in
respect of the underlying dispute?
•What was the appropriate test for
considering the merits of the cross claims?
“Final determination” or temporarily binding?
GNL’s position was that the issues in dispute
had been “finally determined” in accordance
with section 108(3) of Construction Act 1996.
According to GNL, this was because the
adjudicator’s decision had not been
challenged at the time, and because the
parties had agreed to a consent order. In
essence, GNL argued that the consent order
had crystallised the adjudicator’s award into a
binding judgment in respect of the issues
between the parties.
Therefore, any further litigation or arbitration
instituted by CSS in respect of the underlying
dispute would be estopped on the basis of the
principle of res judicata.
The importance of this is that it was CSS’
position that its cross-claims showed that
there remained special circumstances
justifying the imposition (or continuance) of
the stay. This was because it was unlikely that
GNL in liquidation would be in a position to
repay monies paid in respect of an
adjudicator’s award in the event that CSS was
successful at the end of a substantive trial (as
per Bouygues (UK) Ltd v Dahl-Jenson (UK) Ltd
and Wimbledon Construction v Vago).
HHJ Bailey rejected the res judicata argument,
finding that the adjudicator’s award was only
temporarily binding and the consent order
only concerned the enforcement proceedings.
CSS was free to litigate the substantive
dispute between the parties.
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Appropriate test for considering merits of
cross claims
In addition to res judicata, GNL also argued
that CSS was not entitled to assert its cross-
claims because it could not prove that its
claims had a “reasonable prospect of
success”.
In contrast, CSS argued that, in the context of
a stay on enforcement of an adjudicator’s
award, the court only had to determine
whether the claims were “arguable”. The
court was not tasked with determining the
substantive merits of the claim. CSS relied on
Edwards-Stuart J’s judgment in Anrik v AS
Leisure Properties. Further, as this was an
application by GNL to vary HHJ Hand QC’s
order, CSS argued that the burden was on
GNL to establish that CSS’ claims were
unarguable. This placed a very high burden on
GNL.
HHJ Bailey accepted CSS’ submissions and
held that the correct test was merely whether
the claims were arguable. That being so, he
held that, in any event, CSS would have been
able to demonstrate that most of its cross
claims had reasonable prospects of success.
The key take-away for legal practitioners is
that, in the context of staying the
enforcement of adjudication awards, the test
for considering the merits of cross claims is
whether such cross-claims are arguable. This
is substantially easier than establishing that
the claims have reasonable prospects of
success.
Where a stay has already been imposed and
the insolvent party is seeking to lift it, it
should be noted that the burden of proof is
reversed and the applicant has to show that
the cross-claims are unarguable.
A practical benefit of this test is that, in an
application of this kind, parties will not be
forced to incur the costs of expensive expert
evidence. This is important as there is no
guarantee that such costs would be recovered
where one of the parties is in liquidation.
More generally, the result in this case aligns
with the Court of Appeal’s judgment in Bresco
v Lonsdale, where the Court of Appeal held
that although there was no jurisdictional bar
against an adjudicator determining cross-
claims against an insolvent claimant, it would
be redundant and futile to allow the
adjudication; Coulson LJ states:
“… judgment in favour of a company in
insolvent liquidation (and no stay), in
circumstances where there is a cross-claim,
will only be granted in an exceptional case.”
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MARCH 2019 NEWSLETTER
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This was justified on grounds of practical
utility. As Coulson LJ explains:
“… if we assume that the company in
insolvent liquidation is successful in the
adjudication and that, for whatever reason,
summary judgment is granted, the responding
party would then have to bring its own claim
in court to overturn the result of the
adjudication… The obvious risks would be that
any recovery may be rendered difficult or
impossible by the liquidation, and that further
costs would be lost in any event.”
What both cases show is that, where there is
conflict between adjudication and insolvency,
the policy considerations of insolvency,
particularly the risk that a creditor may be
deprived of their distribution, trumps that of
the cash flow considerations that are at the
heart of the adjudication framework in
construction law. In such a case, construction
law defers to insolvency law.
This article was first published for Practical
Law Construction
Rajiv Bhatt is a barrister at Hardwicke
Chambers and acted for CSS in the hearing
before HHJ Bailey.
https://hardwicke.co.uk/barrister/rajiv-bhatt/
Rajiv.bhatt@hardwicke.co.uk
CANNON CORPORATE LTD V
PRIMUS BUILD LTD - Bresco
Electrical Services Ltd v Michael J
Lonsdale (Electrical) Ltd [2019]
EWCA Civ 27 (24 January 2019)
Lord Justice Coulson gave judgement in the
Court of Appeal on two linked appeals. The
appeal of Cannon Corporate Ltd V Primus
Build Ltd will be discussed in this article and
its significance to the use of general
reservations as to an adjudicator’s
jurisdiction.
The judgement discussed in detail the use of a
general reservation but as will be appreciated
by the readers the case and judgement turned
on the specific facts.
Coulson LJ made it clear that a “general
reservation may not be effective” and in this
case decided it wasn’t. He dismissed Cannon’s
jurisdiction argument as the fact that Primus
was insolvent, did not preclude the
jurisdiction of the adjudicator.
Further, Coulson LJ found that the point was
not open to being advanced by Cannon in any
event. This was because Cannon had failed to
challenge the adjudicator’s jurisdiction on
previous occasions. As a result, Cannon had
waived any jurisdictional objection it had to
the adjudicator.
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MARCH 2019 NEWSLETTER
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Cannon’s solicitors tried to rely on its
reservation sent via email to the adjudicator
on 17 March 2018. In that email it stated that,
“…the Responding Party (Cannon) reserves its
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.”
Coulson LJ held that the reservation was too
vague and in any event had been superseded
by specific objections raised during the
adjudication that were unrelated to the
argument advanced in appeal. At no point had
an argument been raised, either in
adjudication or before HHJ Waksman QC, that
jurisdiction was excluded because Primus was
the subject of a CVA. Cannon’s attempt to
raise a new jurisdictional challenge was
therefore rejected.
Party representatives will no doubt take this
judgement on board and seek to protect their
client’s position.
FITNESS FOR PURPOSE AGAIN:
BEWARE THE LACK OF CONTRACT
TERMS
In Williams Tarr Construction Ltd v Anthony
Roylance Ltd and another, the TCC
considered a construction company’s breach
of contract and breach of warranty claim
against an engineer for the defective design
of a retaining wall.
Williams Tarr Construction Ltd v Anthony
Roylance Ltd and another
Williams Tarr Construction (WTC) was
engaged in construction works at the former
Albany Mill in Congleton, Cheshire. The works
included the construction of a retaining wall
as the construction site sloped. Construction
Site Services (UK) Ltd (CSS) was contracted to
install the retaining wall and Hy-Ten Gabion
Solutions (Hy-Ten) provided and designed the
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MARCH 2019 NEWSLETTER
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gabions to construct it of stone-filled gabion
baskets.
During construction of the wall in September
to October 2010, a band of running sand was
encountered which meant that water flows
behind the retaining wall were greater than
had been anticipated. This required a drain to
be put in behind the retaining wall.
In November 2010, one of the defendants was
engaged to provide civil engineering services.
There was a dispute about whether it was
Anthony Roylance Ltd (ARL) or Mr Roylance
personally that had a contract with WTC, but
there was no dispute about the fact that one
of them had a contract with WTC to provide
civil engineering services.
The main dispute between the parties was the
scope of the engineering services:
•The claimant argued that either of the
defendants had been engaged to provide a
solution to the problems with the retaining
wall, so as to provide an overall design for the
retaining wall that ensured the retaining wall
was fit for purpose.
•The defendants argued that either one of
them had only been engaged to design the
drain behind the retaining wall, and that the
obligation was only to exercise reasonable
care and skill in that respect.
It should be noted that Mr Royson had
produced a number of drawings in relation to
the retaining wall, but it was argued that
these merely reflected the design initially
provided by Hy-Ten.
Once the retaining wall (and the drain) were
constructed, the retaining wall was found to
be defective. Further works were needed to
the wall, including extensive piling. There was
no allegation that there was a deficiency in
the design of the drain behind the retaining
wall. WTC sued both defendants as CSS was
insolvent.
Which defendant contracted to provide the
services?
HHJ Eyre QC found that Mr Roylance had
contracted personally for the services. The
factors the influenced the court’s decision
were that:
•Mr Roylance had not at any time mentioned
his connection with ARL.
•The exchange of emails which constituted
the engagement appeared to be from Mr
Roylance in his personal capacity.
•The majority of the documents that Mr
Roylance had sent to WTC were sent from his
personal email account.
•His invoices stated payment was to be made
to “Anthony Roylance”.
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•“Anthony Roylance” was the name on the
professional indemnity insurance certificate.
•The company name was not on the
letterheads used by Mr Roylance or otherwise
mentioned in correspondence.
What was the scope of Mr Roylance’s
appointment ?
The court decided that Mr Roylance was only
engaged to design a drain using reasonable
care and skill, and not to design the retaining
wall. Furthermore, he had not warranted that
the retaining wall would be fit for purpose.
The court considered the fact that Mr
Roylance’s role in the retaining wall
construction before November 2010 (when he
was engaged) was before any agreement with
WTC. Any agreement or obligations Mr
Roylance may have had in relation to the
retaining wall with any other party (such as
CSS) did not automatically create obligations
to WTC in relation to the retaining wall. Such
obligations would have had to have been
carefully spelt out under the agreement with
WTC.
The court found that although others may
have subsequently contributed to the design
of the wall, the originator of the design was
Hy-Ten and, in substance, the design of the
wall was Hy-Ten’s. Mr Ryson produced
drawings that were used and intended to be
for construction purposes for the retaining
wall, but that was in a context where he was
developing the design produced by Hy-Ten
and adding material to it so it could be used
for construction. Therefore, Mr Royson was
not the designer of the retaining wall nor had
accepted overall responsibility for the
construction of it.
Interestingly, the judge did say, obiter, that if
he had found Mr Roylance subject to an
engagement to design the retaining wall, he
would have found himself subject to a fitness
for purpose obligation. This is because
(according to the judge):
“… if there had been such an engagement, it
would in context have been one to remedy
the problems with the Retaining Wall and not
just to exercise care and skill in the further
design work.”
Comment
The decision is interesting for the fact that a
designer who had taken another designer’s
drawings and added to them was found, in
this case, not to have taken on responsibility
for the whole of the design. However, the
decision is fact specific and so it cannot be
ruled out that a designer who adapts a
previous designer’s drawings may be found to
have accepted responsibility for the overall
design.
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The decision is also interesting for the
standard of care found not to have existed in
this case. Clearly the decision maintains the
view that a professional’s usual obligation is
to use reasonable care and skill. However, the
judge’s obiter comments appear to support
the proposition that, where the agreement or
engagement of the professional is one to
remedy problems with an existing
construction, the obligation will be one of
fitness for purpose and not just to exercise
reasonable care and skill. Designers should
therefore exercise extreme caution when
undertaking designs to remedy defects or
issues in existing construction works.
Decisions implying fitness for purpose
obligations into contracts with professionals
and/or designers are always a cause for
concern, because of the extent of coverage
provided by professional indemnity (PI)
policies. PI policies generally cover third party
claims arising from negligence (that is, a lack
of reasonable care and skill), but not any
further or more extensive standards of care
assumed under contract.
Therefore, concern is justified from both sides
of the litigation coin:
•Professionals will find that their liability is
not covered.
•Those suing them may find that they are
unable to recover the full extent of their
losses as against the designer due to a lack of
insurance cover.
An unhappy result for all concerned.
Designers and professionals will therefore
wish to review the wording of their
agreements, particularly in cases where they
are producing designs to provide a remedy for
defective works, to ensure they contain an
express term concerning the standard of care,
or otherwise to check with their insurer to
confirm what they are (and are not) covered
for.
This article was first published for Practical
Law Construction
Katie is a barrister at Hardwicke Chambers.
Katie has a busy practice and has particular
expertise in construction,telecommunications,
engineering, energy and technology-related
law. She has a wealth of experience as sole
counsel as well as with led work. She is known
for her cross examination, trial work,
attention to detail and commercial
awareness.
https://hardwicke.co.uk/barrister/katie-lee/
katie.lee@hardwicke.co.uk
WWW.UKADJUDICATORS.CO.UK
MARCH 2019 NEWSLETTER
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Barry M Cosmetics Ltd v Merit
Holdings Ltd [2019] EWHC 136
(TCC)
This adjudication enforcement case is of
interest as it touched upon natural justice
issues arising from a direction issued by the
adjudicator to limit the size of a rejoinder.
Merit served a delay analysis as part of their
Response to the adjudicator. Barry served
their own delay analyst’s report by way of
Reply. Barry said that Merit’s report had:
“ignored what actually happened on site at
the time” and was based on “theoretical
events”. Barry had conducted a “retrospective
analysis, looking back at what actually
happened and what actually delayed the
completion of the works”.
The adjudicator allowed Merit to serve a
Rejoinder but directed it be limited to 12
pages and to dealing with issues they felt that
Barry had tried to “fudge”.
Merit objected to the direction that the
Rejoinder be limited, and served a Rejoinder
which ignored the adjudicator’s direction and
a brief Sur rejoinder was allowed.
The Adjudicator’s Decision noted that the
adjudicator had considered all the
submissions and he had a preference for
Barry’s delay report.
The Judge confirmed that the need to give
each party an opportunity to meet the case
made against him is not an unlimited right,
indeed taken literally it might be understood
to afford a right to endless rounds of
pleadings.
The adjudicator’s direction that the Rejoinder
be limited was correct, and any award based
on a limited rejoinder would have been in
accordance with the principles of natural
justice.
Merit had ignored the direction as to the
Rejoinder; but the adjudicator had taken
Merit’s Rejoinder into account in arriving at
his decision as such there was no breach of
natural justice.
Adjudicators should find this judgement of
comfort as the court recognises that natural
justice is a relative concept when dealing with
the need for a decision in a tight timetable.
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NSW COURT OF APPEAL QUASHES
OSTWALD'S ADJUDICATION
DETERMINATION AND HOLDS THAT
FAÇADE CONTINUES TO BE
'PLAINLY WRONG'
On 12 February 2019 the NSW Court of
Appeal upheld an appeal by Seymour Whyte
Constructions Pty Ltd (Seymour Whyte),
represented by K&L Gates, relating to
proceedings concerning a claim for a
substantial progress payment under a Works
Contract between Seymour Whyte as
Contractor and Ostwald Bros Pty Ltd (in
liquidation) (Ostwald) as Subcontractor. The
adjudication determination was quashed on
the basis that the adjudication application
submitted by Ostwald was out of time.
The Court also held that although Ostwald
was in liquidation at material times, including
when it obtained an adjudication
determination and commenced its claim
under s 16 of the Building and Construction
Industry Security of Payment Act 1999 (NSW)
(SOPA), that did not prevent Ostwald having
rights under Part 3 of SOPA the conclusion in
Façade Treatment Engineering Pty Ltd (in liq)
v Brookfield Multiplex Constructions Pty Ltd
[2016] VSCA 247; 337 ALR 452 (Façade) to the
contract was plainly wrong and should not be
followed a claimant who makes an invalid
adjudication application and pursues it to
determination may nevertheless still sue a
claimant under s 16 of the SOPA.
The Facts
On 28 July 2017, Ostwald served a progress
payment claim on Seymour Whyte for the
amount of AUD6,351,066.08.
On 11 August 2017, Seymour Whyte
responded by providing a payment schedule
that stated it proposed to pay
AUD2,505,237.58 as a progress payment
(Scheduled Amount).
On 25 August 2017, Ostwald entered
administration. On 27 September 2017,
Ostwald purported to make an adjudication
application under s 17(2)(a)(ii) of SOPA
(Adjudication Application).
On 6 November 2017, the adjudicator
determined the amount due to Ostwald was
AUD5,074,218.27 (Adjudication Amount).
On 17 November 2017, Seymour Whyte
commenced proceedings in the Supreme
Court claiming that the Adjudication
Application was invalid because Ostwald
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made the application outside the time limit
specified by SOPA.
On 30 November 2017, the creditors of
Ostwald resolved that it should be wound up
under s 439C(c) of the Corporations Act 2001
(Cth) (the Corporations Act). By reason of ss
513B and 513C of the Corporations Act, the
winding up of Ostwald was taken to have
commenced on 25 August 2017, when
Ostwald entered administration.
Thereafter, Ostwald filed a cross-claim
seeking rectification of the construction
contract to alter the due date for payment of
progress payments and, accordingly, the date
on which the adjudication application was
due. It was common ground that if the claim
for rectification succeeded, Ostwald's
Adjudication Application was made within the
time prescribed by SOPA, but if the Works
Contract was not rectified the Adjudication
Application was made out of time and
therefore the Adjudication Determination was
invalid. In the alternative Ostwald claimed
that the unpaid Scheduled Amount of
AUD2,505,297.58 was a statutory debt
pursuant to s 16(2)(a)(i) of SOPA.
The main issues on appeal were:
(i) whether the primary Judge erred in
rectifying the Works Contract so as to alter
the due date for payment (with the
consequence that Ostwald's Adjudication
Application was not made within time) and
(ii) if yes to (i), whether Ostwald was
precluded from suing to recover the unpaid
amount as a statutory debt pursuant to SOPA
(i) if no to (ii), a builder or sub-contractor in
liquidation did not have the benefit of the Act,
as was held by the Victorian Court of Appeal
in Façade.
The Court of Appeal held that:
(i) The primary Judge had erred in rectifying
the Works Contract with the result that the
Adjudication Application was served out of
time and the Adjudication Determination was
invalid.
(ii) Ostwald was entitled to seek recovery of
the Scheduled Amount pursuant to the SOPA
even though it had made an adjudication
application and pursued that application to a
determination.
(iii) Entitlement to a progress payment does
not depend on the claimant continuing to
perform work under a contract.
Notwithstanding the winding up of Ostwald,
the SOPA continued to apply to its claim.
The Implication
The Court found that the SOPA, as a matter of
construction, is capable of operating for the
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benefit of a builder or sub-contractor which
has gone into liquidation for insolvency. The
Victorian Court of Appeal decision to the
contrary in Façade, was considered to be
plainly wrong and not to be followed.
There now exists a disparity between the
position in NSW and VIC, an argument for
another day. However, the disparity will not
last for long, as recent amendments to the
NSW Act will expressly adopt the position
argued by Seymour Whyte. Judges in other
jurisdictions will now have to decide whether
to follow the position articulated by the New
South Wales Court of Appeal or the Victorian
Court of Appeal.
Also, the respondent to an adjudication
process is now potentially exposed to multiple
proceedings. A claimant can pursue
adjudication and, if the adjudication
application turns out to be invalid, then sue
for any statutory debt under s 16. This may
incentivise upstream contractors to schedule
lower amounts.
Sandra Steele is a Partner at K&L Gates.
1 O'Connell Street, Sydney, New South Wales
2000, Australia
http://www.klgates.com/sandra-marianne-
steele/#background
sandra.steele@klgates.com
MMIR PTY LIMITED V ISKRA [2019]
NSWSC 35
The NSW Supreme Court recently allowed an
appeal in a Security of Payments claim
decided by an Adjudicator under the NSW
legislation.
The Court ultimately decided that the
Adjudicator had made an error in deciding the
case. Justice Parker said that the Adjudicator
had not squarely considered the
reasonableness of the amount claimed by the
builder.
Tthe case is important because it confirms
that, in a Security of Payments claim, an
adjudicator can’t simply accept the claim of
one party because the other party hasn’t
rebutted it. Instead, in addition to being
satisfied that the claim exists, an adjudicator
also has to be satisfied that the claim is
reasonable for the work done.
http://www.austlii.edu.au/cgi-
bin/viewdoc/au/cases/nsw/NSWSC/2019/35.
html?context=1%3Bquery%3DMMIR+Pty+Limi
ted+v+Iskra%3Bmask_path&fbclid=IwAR3QZe
grRZX4JAgIV77bbpgFuLpmQnIcP847QgYWZ1
WGjuyRk20gPB8KI8w
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HALF DAY CONFERENCE IN
EDINBURGH ON THE 15TH
MARCH
UK Adjudicators are participating in a half day
conference being held at the Scottish
Arbitration centre at 125 Princes St,
Edinburgh EH2 4AD on the 15th
March 2019.
The conference will discuss Adjudication &
Arbitration in both a domestic and
international context.
10.45 Registration
11.00 Conference start
12.00 Lunch
16.30 Close & networking drinks
UK Adjudicator panellists will have free entry
to the conference; though will need to book
through this link:
https://www.eventbrite.com/e/2019-
edinburgh-adjudication-arbitration-
conference-tickets-54799822745
If you are interested in sponsoring this event
please email :
sean.gibbs@hanscombintercontinental.co.uk
8TH EDINBURGH VIS PRE-MOOT
CALL FOR VOLUNTEER
ARBITRATORS, 16 AND 17 MARCH
2019
The organisers of this year’s Edinburgh Vis
Pre-Moot, sponsored by the Scottish
Arbitration Centre, are looking for volunteers
to act as arbitrators in the 8th Edinburgh
University International Vis Pre-Moot. This
year’s event will be held on Saturday 16
March 2019 and Sunday 17 March 2019 at the
University of Edinburgh with a drinks
reception on the evening of 16 March
following the conclusion of the day’s
pleadings to which all arbitrators are warmly
invited. This event is organised by the
University of Edinburgh as a preparatory moot
for the Willem C Vis Arbitration Moot. The
Willem C. Vis International Commercial
Arbitration Moot is an annual competition,
held in Vienna, with teams representing law
schools from throughout the world.
Events such as the Edinburgh Pre-Moot are an
important stage in teams’ preparation for
Vienna. Last year's Pre-Moot was a huge
success thanks to the high number of
arbitrators who volunteered their time and
the teams were immensely grateful for the
high quality of feedback they received from
volunteer arbitrators. If you are interested in
arbitrating then please email the organisers at
premoot@ed.ac.uk for more information
and registration.
WWW.UKADJUDICATORS.CO.UK
MARCH 2019 NEWSLETTER
15 | P a g e
DRBF CONFERENCES 2019
DRBF’s Central and Eastern Europe
Conference and Workshops in Bucharest,
Romania March 25-27 2019
"The Life Cycle of a DAB / DAAB: FIDIC 2017
vs. FIDIC 1999"
Sessions will give an in-depth look at the
DAAB process under the FIDIC 2017 contracts
and how to implement them, with an
emphasis on specifics of the region. Through
innovative, engaging workshops and
presentations, experts will review practical
aspects of DBs.
http://www.cvent.com/events/drbf-
bucharest-2019-central-eastern-europe-
conference-and-workshops/event-summary-
942ab9d8b03541259e2407d3d6ab7f8e.aspx?i
=625274d3-0882-4d66-ba54-1c74abd16a70
DRBF 19th Annual International Conference:
Berlin, Germany May 22 - 24, 2019
http://www.drb.org/events/calendar/
DRBF Northwest Regional Conference:
Seattle, Washington, USA June 06 - 07, 2019
http://www.drb.org/events/calendar/
ADJUDICATION SOCIETY
NI CONSTRUCTION LAW CONFERENCE,
BELFAST
Friday, 5 April, 2019 8.30am for 9am
Topics include: Evaluating Evidence; Payless
Notices; Dealing with delays; Expert Evidence;
Professional Negligence and many more
Speakers include: The Honourable Mr Justice
Horner; Anneliese Day QC; Michael
Humphreys QC; Jackie Simpson QC; Rob
McCausland BL; Craig Dunford BL; Dr David
Sharpe BL
ANNUAL CONFERENCE 2019
Thursday, 7 November, 2019 9.30 for 10am
The Society's Eighteenth Annual Conference
will be held at the Hilton London
Metropole,225 Edgware Rd, Paddington,
London W21JU.
WWW.UKADJUDICATORS.CO.UK
MARCH 2019 NEWSLETTER
16 | P a g e
SOCIETY OF CONSTRUCTION LAW
(UK)
The Society of Construction Law Annual
Spring Conference 2019
Friday, 8 March 2019 8.15 for 9.00am
Speaker(s):
The Honourable Mrs Justice Jefford DBE, TCC
London; HH Judge Mark Raeside QC; James
Howells QC, Atkin Chambers; David Pliener,
Hardwicke; William Webb, Keating Chambers;
Glenn Hide, GMH Planning & Crispin Winser,
Crown Office Chambers
Venue:
The Royal Armouries, Leeds LS10 1LT
'Choosing a JCT Contract’ - discussing the JCT
family and the strengths and weaknesses of
each contract
Cardiff 13 March February 2019
Speaker: Peter Brogden, Keating Chambers
Chair: Sean Gibbs & Rachel Gwilliam
5.30 for 6.00pm at Blake Morgan, One
Central Square, Cardiff CF10 1FS
Speaker is TBC
FIDIC CONFERENCES 2019
The FIDIC International Infrastructure
conference takes place from 8 to 10
September 2019 in Mexico City.
http://fidic2019.org/en
11th FIDIC Asia-Pacific Contract Users’
Conference, 25-27 June 2019
Main conference: Tuesday 25 and Wednesday
26 June 2019
Workshops: Monday 24 and Thursday 27 June
2019
Location: Hotel TBC, Hong Kong
3rd FIDIC Latin America Contract Users’
Conference, 10-12 September 2019
Main Conference: Wednesday 11 and
Thursday 12 September 2019
Workshops: Tuesday 10 September 2019
Location: Hotel TBC, Mexico City, Mexico
WWW.UKADJUDICATORS.CO.UK
MARCH 2019 NEWSLETTER
17 | P a g e
5th FIDIC Africa Contract Users’ Conference,
28-31 October 2019
Main Conference: Tuesday 29 and Wednesday
30 October 2019
Workshops: Monday 28 and Thursday 31
October 2019
Location: Avani Resort, Livingstone, Zambia
32nd FIDIC International Contract Users’
Conference, 2-5 December 2019
Main Conference: Tuesday 3 and Wednesday
4 December 2019
Workshops: Monday 2 and Thursday 5
December 2019
Location: Hotel TBC, London, UK
SCL INTERNATIONAL CONFERENCE
2020
The Society of Construction Law 9th
International Conference is being held from 4
to 6 November, 2020, in Auckland, New
Zealand. Further details can be found at :
http://www.constructionlaw2020.com/scl20
From 10-13 May 2020, the Scottish
Arbitration Centre plays host to the XXVth
International Council for Commercial
Arbitration Congress in Edinburgh.
For full information on the Congress, including
information on how to register, sponsor, or
reserve hotel accommodation, please visit the
Congress website www.icca2020.scot.
WWW.UKADJUDICATORS.CO.UK
MARCH 2019 NEWSLETTER
18 | P a g e
Please note that this is a newsletter
and does not provide legal advice.
Whilst every care has been taken in
the preparation of this document,
we cannot accept any liability for
any loss or damage, whether
caused by negligence or otherwise,
to any person using this document.
Independent legal advice should be
taken from a regulated lawyer.

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UK Adjudicators March 2019 newsletter

  • 1. WWW.UKADJUDICATORS.CO.UK MARCH 2019 NEWSLETTER 1 | P a g e EDITORS’ COMMENTS Our first event of the year, the Society of Construction Law annual lunch in London was a success, and the next event we can look forward to is the 2019 Edinburgh Adjudication and Arbitration Conference. The half day conference takes place at the Scottish Arbitration Centre in Edinburgh on the 15th March from 11am to 5pm. The conference will focus on the theme of Adjudication and Arbitration and will look at both of these from a United Kingdom and international perspective. We are vey lucky to have some of our panellists speaking at the conference including Lisa Cattanach of CDR, Iain Aitkinson of Ankura, Natasha Peter of Gide and Catherine Gilbert of Temple Bright, and look forward to seeing our other panellists there. I will be at the DRBF’s Central and Eastern Europe Conference and Workshops in Bucharest, Romania 25-27 March 2019 and will be a tutor on the advanced workshop and chairing day 2 of the conference. I can’t urge our panellists strongly enough to become actively involved with promoting UK Adjudicators raising both their own profile as an adjudicator and that of the nominating body as both will see increased public recognition and ensuing opportunities arising more frequently. We are planning an event in central London in August 2019 if you could host us or you are interested in speaking or acting as a sponsor please do get in touch. We also hope to hold further events in Bristol, Birmingham, Manchester and Leeds, if you are interested in speaking or acting as a sponsor please do get in touch. Many thanks to our guest contributors Rajiv Bhatt and Katie Lee from Hardwicke Chambers and Sandra Steele from K&L Gates Australia. Sean Gibbs is a director with Hanscomb lntercontinental and is available to sit as an arbitrator, adjudicator, mediator, quantum expert and dispute board member. sean.gibbs@hanscombintercontinental.co.uk
  • 2. WWW.UKADJUDICATORS.CO.UK MARCH 2019 NEWSLETTER 2 | P a g e THE PRIMACY OF INSOLVENCY LAW OVER CONSTRUCTION LAW With the Court of Appeal’s decision in Bresco Electrical Services Ltd v Michael J Lonsdale (Electrical) Ltd just a few weeks old, it is hardly surprising that people are looking again at the relationship between insolvency law and adjudication, noting that in cases of liquidation where parties have a cross claim, construction law defers to insolvency law. This was clearly illustrated in Gregg Nowak Ltd v CSS Electrical Distributors Ltd, which came before HHJ Bailey earlier this month. Gregg Nowak Ltd v CSS Electrical Distributors Ltd Gregg Nowak Ltd (GNL) was employed by CSS Electrical Distributors (CSS) to undertake construction works. A dispute arose when GNL failed to complete the contract by the original completion date of 30 April 2009. As a result, CSS issued a withholding notice to GNL with the consequence that GNL then referred the dispute to adjudication. The adjudicator decided that GNL was entitled to be paid. Key to that decision was the fact that the architect had issued an extension of time on 12 October 2010, revising the completion date to 6 December 2009. Although practical completion was achieved in March 2010 (which was after the revised completion date), the architect had failed to issue a further notice of non-completion. Consequently, CSS was not entitled to withhold payment and GNL succeeded in the adjudication on a technicality. The matter did not end there. Shortly after the adjudication, the architect issued a second certificate of non-completion and CSS served further withholding notices. CSS failed to satisfy the adjudication award and GNL commenced enforcement proceedings. The parties then agreed a consent order which, among other things, required CSS to pay to GNL the adjudicator’s award in instalments. However, it quickly transpired that there were complications: •Unbeknown to CSS, the day before the consent order was signed, GNL assigned the debt owed to it to a third party, Mortimer Royal LLC. GNL was obliged to provide notice
  • 3. WWW.UKADJUDICATORS.CO.UK MARCH 2019 NEWSLETTER 3 | P a g e to CSS and seek its agreement to assign if the assignment was to be a valid legal assignment. GNL did not do this. •GNL entered into liquidation following a winding-up petition from HMRC. Due to those complications, in September 2012, CSS sought and successfully obtained a stay of enforcement of the consent order in a hearing before HHJ Hand QC. The present case concerned an application by GNL’s liquidator to vary that order and to lift the stay on the enforcement of the consent order. HHJ Bailey’s decision HHJ Bailey rejected the application to lift the stay of enforcement. He held that there had been no material change in the circumstances since the stay was ordered and the facts were not misstated in the hearing in front of HHJ Hand QC. Crucially, he had to decide two key issues that were put to the court: •Were the issues in the adjudication “finally determined” by the consent order so as to estop CSS from instituting proceedings in respect of the underlying dispute? •What was the appropriate test for considering the merits of the cross claims? “Final determination” or temporarily binding? GNL’s position was that the issues in dispute had been “finally determined” in accordance with section 108(3) of Construction Act 1996. According to GNL, this was because the adjudicator’s decision had not been challenged at the time, and because the parties had agreed to a consent order. In essence, GNL argued that the consent order had crystallised the adjudicator’s award into a binding judgment in respect of the issues between the parties. Therefore, any further litigation or arbitration instituted by CSS in respect of the underlying dispute would be estopped on the basis of the principle of res judicata. The importance of this is that it was CSS’ position that its cross-claims showed that there remained special circumstances justifying the imposition (or continuance) of the stay. This was because it was unlikely that GNL in liquidation would be in a position to repay monies paid in respect of an adjudicator’s award in the event that CSS was successful at the end of a substantive trial (as per Bouygues (UK) Ltd v Dahl-Jenson (UK) Ltd and Wimbledon Construction v Vago). HHJ Bailey rejected the res judicata argument, finding that the adjudicator’s award was only temporarily binding and the consent order only concerned the enforcement proceedings. CSS was free to litigate the substantive dispute between the parties.
  • 4. WWW.UKADJUDICATORS.CO.UK MARCH 2019 NEWSLETTER 4 | P a g e Appropriate test for considering merits of cross claims In addition to res judicata, GNL also argued that CSS was not entitled to assert its cross- claims because it could not prove that its claims had a “reasonable prospect of success”. In contrast, CSS argued that, in the context of a stay on enforcement of an adjudicator’s award, the court only had to determine whether the claims were “arguable”. The court was not tasked with determining the substantive merits of the claim. CSS relied on Edwards-Stuart J’s judgment in Anrik v AS Leisure Properties. Further, as this was an application by GNL to vary HHJ Hand QC’s order, CSS argued that the burden was on GNL to establish that CSS’ claims were unarguable. This placed a very high burden on GNL. HHJ Bailey accepted CSS’ submissions and held that the correct test was merely whether the claims were arguable. That being so, he held that, in any event, CSS would have been able to demonstrate that most of its cross claims had reasonable prospects of success. The key take-away for legal practitioners is that, in the context of staying the enforcement of adjudication awards, the test for considering the merits of cross claims is whether such cross-claims are arguable. This is substantially easier than establishing that the claims have reasonable prospects of success. Where a stay has already been imposed and the insolvent party is seeking to lift it, it should be noted that the burden of proof is reversed and the applicant has to show that the cross-claims are unarguable. A practical benefit of this test is that, in an application of this kind, parties will not be forced to incur the costs of expensive expert evidence. This is important as there is no guarantee that such costs would be recovered where one of the parties is in liquidation. More generally, the result in this case aligns with the Court of Appeal’s judgment in Bresco v Lonsdale, where the Court of Appeal held that although there was no jurisdictional bar against an adjudicator determining cross- claims against an insolvent claimant, it would be redundant and futile to allow the adjudication; Coulson LJ states: “… judgment in favour of a company in insolvent liquidation (and no stay), in circumstances where there is a cross-claim, will only be granted in an exceptional case.”
  • 5. WWW.UKADJUDICATORS.CO.UK MARCH 2019 NEWSLETTER 5 | P a g e This was justified on grounds of practical utility. As Coulson LJ explains: “… if we assume that the company in insolvent liquidation is successful in the adjudication and that, for whatever reason, summary judgment is granted, the responding party would then have to bring its own claim in court to overturn the result of the adjudication… The obvious risks would be that any recovery may be rendered difficult or impossible by the liquidation, and that further costs would be lost in any event.” What both cases show is that, where there is conflict between adjudication and insolvency, the policy considerations of insolvency, particularly the risk that a creditor may be deprived of their distribution, trumps that of the cash flow considerations that are at the heart of the adjudication framework in construction law. In such a case, construction law defers to insolvency law. This article was first published for Practical Law Construction Rajiv Bhatt is a barrister at Hardwicke Chambers and acted for CSS in the hearing before HHJ Bailey. https://hardwicke.co.uk/barrister/rajiv-bhatt/ Rajiv.bhatt@hardwicke.co.uk CANNON CORPORATE LTD V PRIMUS BUILD LTD - Bresco Electrical Services Ltd v Michael J Lonsdale (Electrical) Ltd [2019] EWCA Civ 27 (24 January 2019) Lord Justice Coulson gave judgement in the Court of Appeal on two linked appeals. The appeal of Cannon Corporate Ltd V Primus Build Ltd will be discussed in this article and its significance to the use of general reservations as to an adjudicator’s jurisdiction. The judgement discussed in detail the use of a general reservation but as will be appreciated by the readers the case and judgement turned on the specific facts. Coulson LJ made it clear that a “general reservation may not be effective” and in this case decided it wasn’t. He dismissed Cannon’s jurisdiction argument as the fact that Primus was insolvent, did not preclude the jurisdiction of the adjudicator. Further, Coulson LJ found that the point was not open to being advanced by Cannon in any event. This was because Cannon had failed to challenge the adjudicator’s jurisdiction on previous occasions. As a result, Cannon had waived any jurisdictional objection it had to the adjudicator.
  • 6. WWW.UKADJUDICATORS.CO.UK MARCH 2019 NEWSLETTER 6 | P a g e Cannon’s solicitors tried to rely on its reservation sent via email to the adjudicator on 17 March 2018. In that email it stated that, “…the Responding Party (Cannon) reserves its 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.” Coulson LJ held that the reservation was too vague and in any event had been superseded by specific objections raised during the adjudication that were unrelated to the argument advanced in appeal. At no point had an argument been raised, either in adjudication or before HHJ Waksman QC, that jurisdiction was excluded because Primus was the subject of a CVA. Cannon’s attempt to raise a new jurisdictional challenge was therefore rejected. Party representatives will no doubt take this judgement on board and seek to protect their client’s position. FITNESS FOR PURPOSE AGAIN: BEWARE THE LACK OF CONTRACT TERMS In Williams Tarr Construction Ltd v Anthony Roylance Ltd and another, the TCC considered a construction company’s breach of contract and breach of warranty claim against an engineer for the defective design of a retaining wall. Williams Tarr Construction Ltd v Anthony Roylance Ltd and another Williams Tarr Construction (WTC) was engaged in construction works at the former Albany Mill in Congleton, Cheshire. The works included the construction of a retaining wall as the construction site sloped. Construction Site Services (UK) Ltd (CSS) was contracted to install the retaining wall and Hy-Ten Gabion Solutions (Hy-Ten) provided and designed the
  • 7. WWW.UKADJUDICATORS.CO.UK MARCH 2019 NEWSLETTER 7 | P a g e gabions to construct it of stone-filled gabion baskets. During construction of the wall in September to October 2010, a band of running sand was encountered which meant that water flows behind the retaining wall were greater than had been anticipated. This required a drain to be put in behind the retaining wall. In November 2010, one of the defendants was engaged to provide civil engineering services. There was a dispute about whether it was Anthony Roylance Ltd (ARL) or Mr Roylance personally that had a contract with WTC, but there was no dispute about the fact that one of them had a contract with WTC to provide civil engineering services. The main dispute between the parties was the scope of the engineering services: •The claimant argued that either of the defendants had been engaged to provide a solution to the problems with the retaining wall, so as to provide an overall design for the retaining wall that ensured the retaining wall was fit for purpose. •The defendants argued that either one of them had only been engaged to design the drain behind the retaining wall, and that the obligation was only to exercise reasonable care and skill in that respect. It should be noted that Mr Royson had produced a number of drawings in relation to the retaining wall, but it was argued that these merely reflected the design initially provided by Hy-Ten. Once the retaining wall (and the drain) were constructed, the retaining wall was found to be defective. Further works were needed to the wall, including extensive piling. There was no allegation that there was a deficiency in the design of the drain behind the retaining wall. WTC sued both defendants as CSS was insolvent. Which defendant contracted to provide the services? HHJ Eyre QC found that Mr Roylance had contracted personally for the services. The factors the influenced the court’s decision were that: •Mr Roylance had not at any time mentioned his connection with ARL. •The exchange of emails which constituted the engagement appeared to be from Mr Roylance in his personal capacity. •The majority of the documents that Mr Roylance had sent to WTC were sent from his personal email account. •His invoices stated payment was to be made to “Anthony Roylance”.
  • 8. WWW.UKADJUDICATORS.CO.UK MARCH 2019 NEWSLETTER 8 | P a g e •“Anthony Roylance” was the name on the professional indemnity insurance certificate. •The company name was not on the letterheads used by Mr Roylance or otherwise mentioned in correspondence. What was the scope of Mr Roylance’s appointment ? The court decided that Mr Roylance was only engaged to design a drain using reasonable care and skill, and not to design the retaining wall. Furthermore, he had not warranted that the retaining wall would be fit for purpose. The court considered the fact that Mr Roylance’s role in the retaining wall construction before November 2010 (when he was engaged) was before any agreement with WTC. Any agreement or obligations Mr Roylance may have had in relation to the retaining wall with any other party (such as CSS) did not automatically create obligations to WTC in relation to the retaining wall. Such obligations would have had to have been carefully spelt out under the agreement with WTC. The court found that although others may have subsequently contributed to the design of the wall, the originator of the design was Hy-Ten and, in substance, the design of the wall was Hy-Ten’s. Mr Ryson produced drawings that were used and intended to be for construction purposes for the retaining wall, but that was in a context where he was developing the design produced by Hy-Ten and adding material to it so it could be used for construction. Therefore, Mr Royson was not the designer of the retaining wall nor had accepted overall responsibility for the construction of it. Interestingly, the judge did say, obiter, that if he had found Mr Roylance subject to an engagement to design the retaining wall, he would have found himself subject to a fitness for purpose obligation. This is because (according to the judge): “… if there had been such an engagement, it would in context have been one to remedy the problems with the Retaining Wall and not just to exercise care and skill in the further design work.” Comment The decision is interesting for the fact that a designer who had taken another designer’s drawings and added to them was found, in this case, not to have taken on responsibility for the whole of the design. However, the decision is fact specific and so it cannot be ruled out that a designer who adapts a previous designer’s drawings may be found to have accepted responsibility for the overall design.
  • 9. WWW.UKADJUDICATORS.CO.UK MARCH 2019 NEWSLETTER 9 | P a g e The decision is also interesting for the standard of care found not to have existed in this case. Clearly the decision maintains the view that a professional’s usual obligation is to use reasonable care and skill. However, the judge’s obiter comments appear to support the proposition that, where the agreement or engagement of the professional is one to remedy problems with an existing construction, the obligation will be one of fitness for purpose and not just to exercise reasonable care and skill. Designers should therefore exercise extreme caution when undertaking designs to remedy defects or issues in existing construction works. Decisions implying fitness for purpose obligations into contracts with professionals and/or designers are always a cause for concern, because of the extent of coverage provided by professional indemnity (PI) policies. PI policies generally cover third party claims arising from negligence (that is, a lack of reasonable care and skill), but not any further or more extensive standards of care assumed under contract. Therefore, concern is justified from both sides of the litigation coin: •Professionals will find that their liability is not covered. •Those suing them may find that they are unable to recover the full extent of their losses as against the designer due to a lack of insurance cover. An unhappy result for all concerned. Designers and professionals will therefore wish to review the wording of their agreements, particularly in cases where they are producing designs to provide a remedy for defective works, to ensure they contain an express term concerning the standard of care, or otherwise to check with their insurer to confirm what they are (and are not) covered for. This article was first published for Practical Law Construction Katie is a barrister at Hardwicke Chambers. Katie has a busy practice and has particular expertise in construction,telecommunications, engineering, energy and technology-related law. She has a wealth of experience as sole counsel as well as with led work. She is known for her cross examination, trial work, attention to detail and commercial awareness. https://hardwicke.co.uk/barrister/katie-lee/ katie.lee@hardwicke.co.uk
  • 10. WWW.UKADJUDICATORS.CO.UK MARCH 2019 NEWSLETTER 10 | P a g e Barry M Cosmetics Ltd v Merit Holdings Ltd [2019] EWHC 136 (TCC) This adjudication enforcement case is of interest as it touched upon natural justice issues arising from a direction issued by the adjudicator to limit the size of a rejoinder. Merit served a delay analysis as part of their Response to the adjudicator. Barry served their own delay analyst’s report by way of Reply. Barry said that Merit’s report had: “ignored what actually happened on site at the time” and was based on “theoretical events”. Barry had conducted a “retrospective analysis, looking back at what actually happened and what actually delayed the completion of the works”. The adjudicator allowed Merit to serve a Rejoinder but directed it be limited to 12 pages and to dealing with issues they felt that Barry had tried to “fudge”. Merit objected to the direction that the Rejoinder be limited, and served a Rejoinder which ignored the adjudicator’s direction and a brief Sur rejoinder was allowed. The Adjudicator’s Decision noted that the adjudicator had considered all the submissions and he had a preference for Barry’s delay report. The Judge confirmed that the need to give each party an opportunity to meet the case made against him is not an unlimited right, indeed taken literally it might be understood to afford a right to endless rounds of pleadings. The adjudicator’s direction that the Rejoinder be limited was correct, and any award based on a limited rejoinder would have been in accordance with the principles of natural justice. Merit had ignored the direction as to the Rejoinder; but the adjudicator had taken Merit’s Rejoinder into account in arriving at his decision as such there was no breach of natural justice. Adjudicators should find this judgement of comfort as the court recognises that natural justice is a relative concept when dealing with the need for a decision in a tight timetable.
  • 11. WWW.UKADJUDICATORS.CO.UK MARCH 2019 NEWSLETTER 11 | P a g e NSW COURT OF APPEAL QUASHES OSTWALD'S ADJUDICATION DETERMINATION AND HOLDS THAT FAÇADE CONTINUES TO BE 'PLAINLY WRONG' On 12 February 2019 the NSW Court of Appeal upheld an appeal by Seymour Whyte Constructions Pty Ltd (Seymour Whyte), represented by K&L Gates, relating to proceedings concerning a claim for a substantial progress payment under a Works Contract between Seymour Whyte as Contractor and Ostwald Bros Pty Ltd (in liquidation) (Ostwald) as Subcontractor. The adjudication determination was quashed on the basis that the adjudication application submitted by Ostwald was out of time. The Court also held that although Ostwald was in liquidation at material times, including when it obtained an adjudication determination and commenced its claim under s 16 of the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOPA), that did not prevent Ostwald having rights under Part 3 of SOPA the conclusion in Façade Treatment Engineering Pty Ltd (in liq) v Brookfield Multiplex Constructions Pty Ltd [2016] VSCA 247; 337 ALR 452 (Façade) to the contract was plainly wrong and should not be followed a claimant who makes an invalid adjudication application and pursues it to determination may nevertheless still sue a claimant under s 16 of the SOPA. The Facts On 28 July 2017, Ostwald served a progress payment claim on Seymour Whyte for the amount of AUD6,351,066.08. On 11 August 2017, Seymour Whyte responded by providing a payment schedule that stated it proposed to pay AUD2,505,237.58 as a progress payment (Scheduled Amount). On 25 August 2017, Ostwald entered administration. On 27 September 2017, Ostwald purported to make an adjudication application under s 17(2)(a)(ii) of SOPA (Adjudication Application). On 6 November 2017, the adjudicator determined the amount due to Ostwald was AUD5,074,218.27 (Adjudication Amount). On 17 November 2017, Seymour Whyte commenced proceedings in the Supreme Court claiming that the Adjudication Application was invalid because Ostwald
  • 12. WWW.UKADJUDICATORS.CO.UK MARCH 2019 NEWSLETTER 12 | P a g e made the application outside the time limit specified by SOPA. On 30 November 2017, the creditors of Ostwald resolved that it should be wound up under s 439C(c) of the Corporations Act 2001 (Cth) (the Corporations Act). By reason of ss 513B and 513C of the Corporations Act, the winding up of Ostwald was taken to have commenced on 25 August 2017, when Ostwald entered administration. Thereafter, Ostwald filed a cross-claim seeking rectification of the construction contract to alter the due date for payment of progress payments and, accordingly, the date on which the adjudication application was due. It was common ground that if the claim for rectification succeeded, Ostwald's Adjudication Application was made within the time prescribed by SOPA, but if the Works Contract was not rectified the Adjudication Application was made out of time and therefore the Adjudication Determination was invalid. In the alternative Ostwald claimed that the unpaid Scheduled Amount of AUD2,505,297.58 was a statutory debt pursuant to s 16(2)(a)(i) of SOPA. The main issues on appeal were: (i) whether the primary Judge erred in rectifying the Works Contract so as to alter the due date for payment (with the consequence that Ostwald's Adjudication Application was not made within time) and (ii) if yes to (i), whether Ostwald was precluded from suing to recover the unpaid amount as a statutory debt pursuant to SOPA (i) if no to (ii), a builder or sub-contractor in liquidation did not have the benefit of the Act, as was held by the Victorian Court of Appeal in Façade. The Court of Appeal held that: (i) The primary Judge had erred in rectifying the Works Contract with the result that the Adjudication Application was served out of time and the Adjudication Determination was invalid. (ii) Ostwald was entitled to seek recovery of the Scheduled Amount pursuant to the SOPA even though it had made an adjudication application and pursued that application to a determination. (iii) Entitlement to a progress payment does not depend on the claimant continuing to perform work under a contract. Notwithstanding the winding up of Ostwald, the SOPA continued to apply to its claim. The Implication The Court found that the SOPA, as a matter of construction, is capable of operating for the
  • 13. WWW.UKADJUDICATORS.CO.UK MARCH 2019 NEWSLETTER 13 | P a g e benefit of a builder or sub-contractor which has gone into liquidation for insolvency. The Victorian Court of Appeal decision to the contrary in Façade, was considered to be plainly wrong and not to be followed. There now exists a disparity between the position in NSW and VIC, an argument for another day. However, the disparity will not last for long, as recent amendments to the NSW Act will expressly adopt the position argued by Seymour Whyte. Judges in other jurisdictions will now have to decide whether to follow the position articulated by the New South Wales Court of Appeal or the Victorian Court of Appeal. Also, the respondent to an adjudication process is now potentially exposed to multiple proceedings. A claimant can pursue adjudication and, if the adjudication application turns out to be invalid, then sue for any statutory debt under s 16. This may incentivise upstream contractors to schedule lower amounts. Sandra Steele is a Partner at K&L Gates. 1 O'Connell Street, Sydney, New South Wales 2000, Australia http://www.klgates.com/sandra-marianne- steele/#background sandra.steele@klgates.com MMIR PTY LIMITED V ISKRA [2019] NSWSC 35 The NSW Supreme Court recently allowed an appeal in a Security of Payments claim decided by an Adjudicator under the NSW legislation. The Court ultimately decided that the Adjudicator had made an error in deciding the case. Justice Parker said that the Adjudicator had not squarely considered the reasonableness of the amount claimed by the builder. Tthe case is important because it confirms that, in a Security of Payments claim, an adjudicator can’t simply accept the claim of one party because the other party hasn’t rebutted it. Instead, in addition to being satisfied that the claim exists, an adjudicator also has to be satisfied that the claim is reasonable for the work done. http://www.austlii.edu.au/cgi- bin/viewdoc/au/cases/nsw/NSWSC/2019/35. html?context=1%3Bquery%3DMMIR+Pty+Limi ted+v+Iskra%3Bmask_path&fbclid=IwAR3QZe grRZX4JAgIV77bbpgFuLpmQnIcP847QgYWZ1 WGjuyRk20gPB8KI8w
  • 14. WWW.UKADJUDICATORS.CO.UK MARCH 2019 NEWSLETTER 14 | P a g e HALF DAY CONFERENCE IN EDINBURGH ON THE 15TH MARCH UK Adjudicators are participating in a half day conference being held at the Scottish Arbitration centre at 125 Princes St, Edinburgh EH2 4AD on the 15th March 2019. The conference will discuss Adjudication & Arbitration in both a domestic and international context. 10.45 Registration 11.00 Conference start 12.00 Lunch 16.30 Close & networking drinks UK Adjudicator panellists will have free entry to the conference; though will need to book through this link: https://www.eventbrite.com/e/2019- edinburgh-adjudication-arbitration- conference-tickets-54799822745 If you are interested in sponsoring this event please email : sean.gibbs@hanscombintercontinental.co.uk 8TH EDINBURGH VIS PRE-MOOT CALL FOR VOLUNTEER ARBITRATORS, 16 AND 17 MARCH 2019 The organisers of this year’s Edinburgh Vis Pre-Moot, sponsored by the Scottish Arbitration Centre, are looking for volunteers to act as arbitrators in the 8th Edinburgh University International Vis Pre-Moot. This year’s event will be held on Saturday 16 March 2019 and Sunday 17 March 2019 at the University of Edinburgh with a drinks reception on the evening of 16 March following the conclusion of the day’s pleadings to which all arbitrators are warmly invited. This event is organised by the University of Edinburgh as a preparatory moot for the Willem C Vis Arbitration Moot. The Willem C. Vis International Commercial Arbitration Moot is an annual competition, held in Vienna, with teams representing law schools from throughout the world. Events such as the Edinburgh Pre-Moot are an important stage in teams’ preparation for Vienna. Last year's Pre-Moot was a huge success thanks to the high number of arbitrators who volunteered their time and the teams were immensely grateful for the high quality of feedback they received from volunteer arbitrators. If you are interested in arbitrating then please email the organisers at premoot@ed.ac.uk for more information and registration.
  • 15. WWW.UKADJUDICATORS.CO.UK MARCH 2019 NEWSLETTER 15 | P a g e DRBF CONFERENCES 2019 DRBF’s Central and Eastern Europe Conference and Workshops in Bucharest, Romania March 25-27 2019 "The Life Cycle of a DAB / DAAB: FIDIC 2017 vs. FIDIC 1999" Sessions will give an in-depth look at the DAAB process under the FIDIC 2017 contracts and how to implement them, with an emphasis on specifics of the region. Through innovative, engaging workshops and presentations, experts will review practical aspects of DBs. http://www.cvent.com/events/drbf- bucharest-2019-central-eastern-europe- conference-and-workshops/event-summary- 942ab9d8b03541259e2407d3d6ab7f8e.aspx?i =625274d3-0882-4d66-ba54-1c74abd16a70 DRBF 19th Annual International Conference: Berlin, Germany May 22 - 24, 2019 http://www.drb.org/events/calendar/ DRBF Northwest Regional Conference: Seattle, Washington, USA June 06 - 07, 2019 http://www.drb.org/events/calendar/ ADJUDICATION SOCIETY NI CONSTRUCTION LAW CONFERENCE, BELFAST Friday, 5 April, 2019 8.30am for 9am Topics include: Evaluating Evidence; Payless Notices; Dealing with delays; Expert Evidence; Professional Negligence and many more Speakers include: The Honourable Mr Justice Horner; Anneliese Day QC; Michael Humphreys QC; Jackie Simpson QC; Rob McCausland BL; Craig Dunford BL; Dr David Sharpe BL ANNUAL CONFERENCE 2019 Thursday, 7 November, 2019 9.30 for 10am The Society's Eighteenth Annual Conference will be held at the Hilton London Metropole,225 Edgware Rd, Paddington, London W21JU.
  • 16. WWW.UKADJUDICATORS.CO.UK MARCH 2019 NEWSLETTER 16 | P a g e SOCIETY OF CONSTRUCTION LAW (UK) The Society of Construction Law Annual Spring Conference 2019 Friday, 8 March 2019 8.15 for 9.00am Speaker(s): The Honourable Mrs Justice Jefford DBE, TCC London; HH Judge Mark Raeside QC; James Howells QC, Atkin Chambers; David Pliener, Hardwicke; William Webb, Keating Chambers; Glenn Hide, GMH Planning & Crispin Winser, Crown Office Chambers Venue: The Royal Armouries, Leeds LS10 1LT 'Choosing a JCT Contract’ - discussing the JCT family and the strengths and weaknesses of each contract Cardiff 13 March February 2019 Speaker: Peter Brogden, Keating Chambers Chair: Sean Gibbs & Rachel Gwilliam 5.30 for 6.00pm at Blake Morgan, One Central Square, Cardiff CF10 1FS Speaker is TBC FIDIC CONFERENCES 2019 The FIDIC International Infrastructure conference takes place from 8 to 10 September 2019 in Mexico City. http://fidic2019.org/en 11th FIDIC Asia-Pacific Contract Users’ Conference, 25-27 June 2019 Main conference: Tuesday 25 and Wednesday 26 June 2019 Workshops: Monday 24 and Thursday 27 June 2019 Location: Hotel TBC, Hong Kong 3rd FIDIC Latin America Contract Users’ Conference, 10-12 September 2019 Main Conference: Wednesday 11 and Thursday 12 September 2019 Workshops: Tuesday 10 September 2019 Location: Hotel TBC, Mexico City, Mexico
  • 17. WWW.UKADJUDICATORS.CO.UK MARCH 2019 NEWSLETTER 17 | P a g e 5th FIDIC Africa Contract Users’ Conference, 28-31 October 2019 Main Conference: Tuesday 29 and Wednesday 30 October 2019 Workshops: Monday 28 and Thursday 31 October 2019 Location: Avani Resort, Livingstone, Zambia 32nd FIDIC International Contract Users’ Conference, 2-5 December 2019 Main Conference: Tuesday 3 and Wednesday 4 December 2019 Workshops: Monday 2 and Thursday 5 December 2019 Location: Hotel TBC, London, UK SCL INTERNATIONAL CONFERENCE 2020 The Society of Construction Law 9th International Conference is being held from 4 to 6 November, 2020, in Auckland, New Zealand. Further details can be found at : http://www.constructionlaw2020.com/scl20 From 10-13 May 2020, the Scottish Arbitration Centre plays host to the XXVth International Council for Commercial Arbitration Congress in Edinburgh. For full information on the Congress, including information on how to register, sponsor, or reserve hotel accommodation, please visit the Congress website www.icca2020.scot.
  • 18. WWW.UKADJUDICATORS.CO.UK MARCH 2019 NEWSLETTER 18 | P a g e Please note that this is a newsletter and does not provide legal advice. Whilst every care has been taken in the preparation of this document, we cannot accept any liability for any loss or damage, whether caused by negligence or otherwise, to any person using this document. Independent legal advice should be taken from a regulated lawyer.