Construction

Practice - Adjudication - Jurisdiction

WW Gear Construction Ltd v McGee Group Ltd: Queen's Bench Division, Technology and Construction Court (Mr Justice Edwards-Stuart): 1 June 2012

The claimant employer (the employer) and the defendant contractor (the contractor) entered into a contract (the trade contract) by which the contractor agreed to carry out the excavation and associated groundworks for a development in London. The trade contract was the amended form of the JCT Trade contract. The original contract sum was about £1.8m and the original contract period was 30 weeks. Clause 4.4 of the trade contract provided that all variations should be valued under the provision of one or other of two alternatives (Alternative A and Alternative B).

Alternative A was a procedure whereby the contractor submitted a price for the work for the employer to accept. Alternative B provided rules for the valuation of variations. Clause 4.4.2 of the trade contract provided, inter alia, that: 'The Price Statement shall state the Trade Contractor’s price for the work which shall be based on the provisions of clause 4.5 and clause 4.6 (Valuation Rules) and may also separately attach the Trade Contractor’s requirements for: 1. any amount to be paid in lieu of any ascertainment under clause 4.21 of direct loss and/or expense not included in any accepted 3A quotation or in any previous ascertainment under clause 4.21, 2. any adjustment to the time for the completion of the Works to the extent that such adjustment is not included in any revision of the period or periods for completion that has been made by the construction manager under clause 2.9 or in his confirmed acceptance of any 3A Quotation… .'

The proviso at the end of clause 4.6 stated that: 'Provided that no allowance shall be made under clause 4.6 for any effect upon the regular progress of the Works or any other direct loss and/or expense for which the trade contractor would be reimbursed by payment under any other provision of this.'

The contractor claimed some £2.5m for work carried out, a significant proportion of which consisted of claims based on variations. A dispute arose over the interpretation of the trade contract. There had been several adjudications in the instant case. The employer brought part 8 proceedings seeking a declaration as to the meaning of a clause in the trade contract. The instant matter was before adjudication and the decision of the adjudicator was due two days from the date of issue of the draft judgment in the instant case.

Issues arose as to: (i) whether the court had jurisdiction to entertain the claim where there was an ongoing adjudication, and if it did, whether a declaration should be granted; and (ii) the true construction of the trade contract, in particular, whether there was any provision in it that prevented the contractor from claiming such loss and expense under clause 4.6. In respect of issue (i), the contractor contended that intervention by the court at the instant point would be an unwarranted interference with the adjudication process and that the court ought to decline to exercise its discretion in favour of doing so.

The contractor relied on paragraph 9.4.1 of the Technology and Construction Court Guide and a general principle that the court would only consider intervention in an ongoing adjudication in rare cases. In respect of issue (ii), the employer sought a declaration that on a true construction of the trade contract, any claim by the contractor for payment of direct loss and/or expense under clause 4.6 because the regular progress of the works had been materially affected by any of the matters listed at clause 4.22 of the trade contract was barred by and/or could not succeed due to the proviso at the end of clause 4.6. Any claim for direct loss and/or expense concerning the effect of a variation, or any other matter listed in clause 22, on the regular progress of the works had to be made under clause 4.21 of the trade contract and could not be made under clause 4.6. Consideration was given to Civil Procedure Rule 40.20.

The court ruled: (1) The court's power to grant a declaration was to be found in CPR 40.20. The jurisdiction was unfettered. However, it was settled law that, where there was an ongoing adjudication, the court should intervene only rarely and in those limited circumstances where it was appropriate to do so. A court might consider granting a declaration where both parties had agreed that the court should grant a declaration, with a view to assisting the adjudicator, and had also agreed to extend the adjudicator's time for making the decision in order to accommodate any determination by the court. There were obvious practical difficulties in permitting an application for a declaration where there was an ongoing adjudication.

First, it might distract the respondent from giving full attention to the adjudication at a critical point when the timetable was very tight. Second, it might seriously interfere with the adjudicator's ability to conduct the referral properly. In general, adjudications were commenced without notice to the responding party and so, if the responding party wished to make an application to the court in relation to the adjudication, it would not normally have the opportunity to do so until the adjudication had begun. The court might well not be in a position to grant the requested declaration until very shortly before the adjudicator was required to make his decision.

The provisions of the TCC Guide did not have the status of rules of court. Paragraph 9.4.1 simply provided an indication of the types of application the court would usually entertain. However, paragraph 9.4.1 should be taken into account when the court was considering how to exercise its discretion in any case where the court was being asked to grant a declaration in relation to adjudication (see [20], [22], [25], [26], [28] of the judgment).

In the instant case, the court did have jurisdiction to grant a declaration. The power to do so was very wide and there was no relevant fetter that would apply to the circumstances of the instant case. Nevertheless, it would not be appropriate to make a declaration. If the adjudicator was required to take the judgment into account when preparing his decision, he would have had just over one working day in which to do so. That was a very short time.

It would be an unacceptable imposition on an adjudicator and one that might well result in unfairness, misunderstandings or mistakes, not least because the parties might well have no right or opportunity to make submissions to the adjudicator in the light of the judgment (see [19], [21], [27], [28] of the judgment. Financial Services Authority v Rourke [2001] All ER (D) 266 (Oct) considered; Dorchester Hotel Ltd v Vivid Interiors Ltd [2009] All ER (D) 264 (Feb) considered.

(2) The proviso at the end of clause 4.6 of the trade contract did not have the effect stated in the declaration that was sought by the claimant. The concluding words of clause 4.6 were precluding the recovery of any loss and/or expense for which the contractor would be reimbursed by payment under any other provision of the contract. Accordingly, if there was no prospect of a recovery under another provision of the contract, then there was no bar to recovery under clause 4.6. 

That was so irrespective of whether that was because of a failure to comply with the terms of the relevant provision or for some other reason. If, therefore, there were items of loss and/or expense which were potentially recoverable under either clause 4.6 or clause 4.21 and the contractor was unable, for whatever reason, to make a claim under clause 4.21, there was nothing to prevent him from recovering that loss and expense under clause 4.6, provided that it fell within the terms of that clause (see [44], [45], [49] of the judgment). The application for a declaration failed and the claim would be dismissed (see [28], [50] of the judgment).

Gaynor Chambers (instructed by Birketts LLP) for the employer; Sarah Hannaford QC (instructed by Birketts LLP) for the contractor.