St Austell Printing Company Limited v Dawnus Construction Holdings Limited [2015] EWHC 96 (TCC)

St Austell Printing Company Limited v Dawnus Construction Holdings Limited [2015] EWHC 96 (TCC)

Judgment date: 21 January 2015

(1) Cherry-picking parts of a claim or dispute and referring only those parts to adjudication is not only permitted, but it is to be encouraged.

(2) Arguing that a dispute has not crystallised is a difficult argument to run as a referring party only needs to show that: (a) a claim had been asserted prior to issuing the adjudication notice, and (b) that claim was not admitted. Inactivity or non-responsiveness for an eight month period may serve as evidence that a claim is not admitted.

Technology and Construction Court, Mr Justice Coulson

Background

Dawnus Construction Holdings Limited (“Dawnus”) was employed by St Austell Printing Company Limited (“St A”) to carry out and complete the design and construction of two warehouse/industrial units in St Austell, Cornwall.

After practical completion of the works in February 2013, the contract administrator, AECOM, issued an interim valuation for just over £6 million in April 2013. This was followed by consultations between Dawnus and AECOM regarding the final account.

On 10 December 2013, Dawnus issued an interim application for payment quoting a total account figure of almost £8 million and claiming a net sum of £2.3 million. Dawnus’ claim included amounts for loss and expense and variations. The due date for payment of the interim application was 4 January 2014. On 17 December 2013, Dawnus issued a sales invoice in the sum of £2.3 million, again seeking payment by 4 January 2014.

AECOM responded that the just over £6 million already paid to Dawnus in April 2013 was the correct valuation and that no further sum was due to Dawnus. AECOM also provided Dawnus with a letter of clarification, stating that they were reviewing the final account and would respond early in the New Year.

Neither AECOM nor St A reverted to Dawnus in the New Year or at all. No version of the final account was provided, no defects were identified and no response was made to Dawnus’ claims for loss and expense and in relation to variations. Dawnus therefore commenced adjudication limiting the Notice of Adjudication to 115 specific variations. St A challenged the Adjudicator’s jurisdiction, arguing that (1) no dispute had crystallised, and (2) the Adjudicator had no power to order payment of only a cherry-picked part of the interim valuation issued on 10 December 2013.

The Adjudicator rejected both challenges and ordered St A to pay Dawnus £417,919.66 together with the Adjudicator’s fees and expenses. Instead of complying with the Adjudicator’s award, St A commenced court proceedings seeking declarations that the Adjudicator did not have jurisdiction for the two reasons stated above raised during adjudication. Dawnus brought a separate application for enforcement of the Adjudicator’s award.

Issues

• Whether a dispute had sufficiently crystallised due to AECOM’s response and/or St A’s silence in response to Dawnus’ claim.
• Whether it was permissible for Dawnus to limit its Notice of Adjudication in the way it did.

Decision

The Court held that:

• The dispute had crystallised. The court considered that Dawnus had asserted its claim by way of its interim application on 10 December, and that AECOM, on behalf of St A, had expressly rejected this claim in its response dated 19 December 2013. It held that, “[n]othing more is required for a dispute to have crystallised”. The court additionally noted that the long period of inactivity that followed AECOM’s promise to respond to the loss and expense claim also “clearly and obviously amounted to a rejection of Dawnus’ claim”.
• The Adjudicator had power to determine the dispute. The process of pruning an original claim for the purposes of adjudication is not only permitted, but to be “encouraged”. In making this decision, the Court considered that the Adjudicator’s decision reflected an existing liability on St A to pay rather than creating a liability pay where none existed before. Further, the Court noted that St A was not prevented from raising any legitimate cross-claim by way of a defence to Dawnus’ limited claim in the adjudication (which St A had failed to do).
• Therefore, summary judgment was granted to Dawnus in the sum of the Adjudicator's decision. Additionally, the relief claimed by St A, seeking declarations in respect of the Adjudicator’s lack of jurisdiction, was dismissed.

For a full judgment please click here