Three cases this month reveal the hidden complexities of arbitration and adjudication...
Pain of debt
Cases: Treasure & Sons Ltd v Martin Dawes and Martin Dawes v Treasure & Son Ltd
15 September 2008
Treasure was unsure whether or not Mr Dawes had settled a judgment debt of £1,239,310.12 due from a previous adjudication, even though it had received the money.
The problems had started when Treasure refurbished Mr Dawes’ home in Hertfordshire. They fell out and the dispute was referred to an adjudicator, Mr Paul Greenwood. On 21 August 2007, he decided Mr Dawes had to pay Treasure £1,018,828.12 plus VAT and interest, as well as his own fees and expenses.
Mr Dawes did not pay and on 25 October 2007 Treasure obtained a court order for £1,222,818.05 plus interest. By early November, the parties agreed the debt stood at £1,239,310.12. Treasure then discovered that Mr Dawes’ daughter had paid the sum, not Mr Dawes, and it was concerned that the debt had not been properly discharged and the money could be reclaimed.
In court, Treasure said it had not used the money and kept it separate. However, it transpired that it had used part of the sum to pay the VAT and Mr Greenwood’s bill.
Mr Dawes said Treasure was trying to have it three ways by holding onto all the money, using some of it and alleging there had not been valid discharge of the judgment debt. He said that loan agreements he had made with his son and daughter in January 2008 for £500,000 and £739.310.12 showed the debt had been fully paid on his behalf in November 2007.
The judge agreed with Mr Dawes, but said an earlier and clearer statement from him would have made the court proceedings unnecessary.
Moral: Once started, disputes can go on and on.
Case: Birmingham City Council v Paddison Construction Ltd
25 September 2008
The new community and training centre in Handsworth, Birmingham was due for completion on 24 February 2006. That date was later revised to April 17, 2006. However, practical completion was not certified until 23 June 2006.
Although Paddison blamed Birmingham City Council (BCC) for the delays, BCC denied Paddison was entitled to any additional time or to more than the £40,541.59 it had already certified for loss and/or expense.
On 16 April 2008, the first adjudicator, Mr Bullock, decided that Paddison could have an extension of time (EOT) of 119 days to June 23, 2006, BCC should repay the £26,800 it had withheld in liquidated and ascertained damages (LADs) and pay £25,363.69 for variations.
He also said that Paddison’s claim for £294,158.83 for loss and expense was extravagant and exaggerated. It was an attempt to claim as much as possible, and he was not prepared to grant any further monies for the loss and/or expense claim.
He did concede that Paddison may be due more than the £40,541.59 and gave it leave to pursue the claim through another adjudication if it wished.
BCC and Paddison argued about the meaning of Mr Bullock’s decision. Paddison thought he had made no decision in relation to its loss and/or expense. BCC, however, said he had made a decision, which was that Paddison was not entitled to any more money.
Paddison then issued a second notice of adjudication. This time it claimed loss and expense of £216,418.31 or, on an alternative overhead calculation, £164,208.04.
A second adjudicator, Mr Paul Jensen, was appointed.
BCC objected to Mr Jensen’s appointment, arguing he was to consider the same, or essentially the same, dispute as the previous adjudication.
Paddison argued that this was essentially a different dispute as only the full EOT had been awarded under the previous adjudication and Mr Bullock had given Paddison permission to re-adjudicate on the loss and/or expense.
BCC asked the court to decide if the second adjudication was valid. The judge held it was not.
She said Mr Bullock had made a decision on April 16, 2008 and although Paddison was now using different figures, the dispute was essentially the same. Mr Jensen had no jurisdiction to act and must resign as adjudicator.
Moral: You only get one bite at adjudication.
Case: Mylcrist Builders Ltd v Mrs G Buck, TCC
19 September 2008
The 1996 Housing Grants Construction and Regeneration Act exempts residential occupiers from adjudication. However, there is no similar restriction in the 1996 Arbitration Act. So since Mrs Buck had signed Mylcrist’s contract, which included an arbitration clause, Mylcrist decided to use arbitration to resolve its dispute.
Mrs Buck was building a single-storey extension to her home in Herne Bay, Kent.
The plans were drawn up by a qualified architect, but he did not advise her on the building contract.
Mylcrist quoted £23,080 on 2 December 2004 which she accepted by signing Mylcrist’s terms and conditions on 7 December. These included a clause that in the event of a disagreement the matters in dispute were to be referred in accordance with the Arbitration Act 1950 or any modification or re-enactment thereof. After five months, the two parties were in dispute about extras and Mylcrist threatened arbitration.
Mrs Buck then received advice from Kent Trading Standards and two solicitors that arbitration was a restriction of her rights under the 1999 Unfair Terms in Consumer Contracts Regulations. Although she told Mylcrist, it still issued a notice of arbitration in March 2006.
Mylcrist’s consultants proposed Mr David Hannent as arbitrator. When he contacted Mrs Buck, she said it was a legal matter and did not wish to participate in the arbitration. Nevertheless, the arbitration proceeded and on 1 February 2007 Mr Hannent decided Mrs Buck should pay £5,230.21 (inc VAT) plus Mylcrist’s costs of £4,366.29 and £2,079.75 for his fees.
When Mylcrist tried to enforce the award, the court refused, saying Mr Hannent had not been properly appointed and Mylcrist should first have applied to the court under section 17 of the 1996 Arbitration Act. It also said the arbitration clause was unfair within the 1999 regulations, noting in particular the fees Mrs Buck was expected to pay for a relatively small dispute.
Moral: Consumer disputes may need litigation.
Ann Wright is an adjudicator and quantity surveyor. Tel: 01675 466 009