Allied P&L Ltd v Paradigm Housing Group Ltd [2009] EWHC 2890 (TCC) [Lawtel AC0122766]

In this recent case, the court gave guidance as to how and when a party may reserve its position on jurisdiction, if there is an issue about whether a particular point has been referred to adjudication.

Allied, a building contractor, was engaged by Paradigm in May 1997 to construct 40 new houses. The contract provided for interim payments, based upon a monthly ‘Notice of Payment’ issued by the Employer’s Agent. Subject to any entitlement to an extension of time, Allied was obliged to complete the work by 15 April 2008.

In 2008, work was delayed. The reasons and responsibility for these delays remained in issue between the parties. On 29 January 2009, the Employer’s Agent issued its Notice of Interim Payment No 15. Paradigm issued a Withholding Notice in May 2009, setting out eight allegations of contractual breach by Allied and requiring that Allied remedy these omissions and faults within ten working days. Allied denied the allegations. Paradigm then sent a First Notice, in accordance with Clause 10.1 of the contract, notifying Allied that it would terminate the contract if Allied’s alleged contractual breaches were not remedied in nine working days. Allied again denied they were in breach of contract. On 19 May 2009, Paradigm served a Notice of Determination, requiring Allied to vacate the site. There was then a factual dispute over an email that Allied said it sent to Paradigm on 17 June 2009. That email notifi ed Paradigm that Allied would be seeking losses that fl owed from Paradigm’s unjustifi ed determination of the contract.

Allied commenced adjudication for wrongful determination of the contract. The Notice of Adjudication sought damages for the amount owing, as well as damages for losses incurred as a direct consequence of the repudiatory breach of contract and for the profi t Allied would have made had the contract been performed. Paradigm took the view that Allied had served its Notice of Adjudication prematurely, because Allied had not yet served a letter of claim (Paradigm’s solicitors seem to have confused the procedure governing adjudication with that governing litigation). Paradigm reserved its position “in respect of the jurisdiction of the adjudicator, bearing in mind that the contract is now at an end, and will properly be the subject of either legal proceedings or arbitration.”

The adjudicator found in Allied’s favour and awarded the sum outstanding, together with damages and loss of profi t. Paradigm took the position that the adjudicator’s decision was invalid, because the dispute Allied had referred to the adjudicator had not yet arisen at the point of referral. Allied issued enforcement proceedings.

The court dismissed the ‘no dispute’ defence, save in relation to Allied’s claim for damages and loss of profi t fl owing from Paradigm’s wrongful termination. Whether or not there was a ‘dispute’ in relation to that claim at the time Allied served the Notice of Adjudication was dependent on the factual dispute as to whether or not Paradigm had received Allied’s email dated 17 June. For the purposes of enforcement, the court had to assume that the email had not been received.

Allied tried to argue that it must have been obvious to Paradigm that there would be a claim for the outstanding value of unpaid work and for damages if there was to be an unlawful termination. The court noted that, whilst one can imply from conduct or even silence that a claim or assertion made, or position taken, is disputed, it will rarely be the case that a claim, assertion or position of a party can be implied from silence. The fact that Paradigm may or must have known that there would be the usual fi nancial consequences fl owing from the termination procedure that it had invoked, if it turned out to be unlawful, was broadly immaterial in determining what the ambit of the dispute was at the time of the Notice of Determination. It would, of course, have been open to Allied to intimate or assert a claim for the fi nancial consequences of what it expected to be an unlawful termination, but it did not do so prior to the Notice of Determination. There is nothing logically or intrinsically unacceptable or wrong in there being a dispute about liability only; indeed, there have been a number of adjudication enforcement cases before the court that are concerned with decisions solely about liability.

Allied was saved, however, because Paradigm had not effectively reserved its position in relation to Allied’s fi nancial consequences claim. Its reservation only extended to whether or not the adjudicator had jurisdiction on the grounds that no dispute had yet arisen. Since it had not reserved its position effectively, and since the adjudicator’s decision on damages and loss of profi t had been ancillary to the dispute actually referred to him, Paradigm could not avoid enforcement on jurisdictional grounds.

The court made the following comments on reservations:

“‘It must follow that there may be numerous types of jurisdictional challenge and there can also be different types of reservation. One can reserve generally or specifi cally. I will leave open the issue as to whether a general reservation as to jurisdiction without any hint or suggestion as to what the grounds are can be effective; it may be so indefi nite as to be a meaningless and ineffective reservation but it may be that in a particular context a general reservation may suffi ce. In this case, however, counsel both accepted, properly and correctly in my judgment, that if a specifi c reservation was made on one ground and it was established that the ground in question was an invalid jurisdictional objection, the party in question must be taken to have acceded to the jurisdiction only subject to the specifi c failed ground; in those circumstances, the parties will be taken to have submitted to the jurisdiction even if there are other good grounds which existed but were not mentioned. “

To read the judgment, please go to: http://www.bailii.org/ew/cases/EWHC/TCC/2009/2890.html