Bovis Homes Ltd v Kendrick Construction Ltd  EWHC 1359 (TCC)
Kendrick sought a stay of court proceedings to arbitration. Bovis did not object to this, but sought the costs thrown away by Kendrick’s failure to raise the arbitration point at an early stage. In particular, Bovis said that such costs included at least some of the costs incurred in the lengthy Pre-Action Protocol process.
Bovis had engaged Kendrick to carry out and complete the design and construction of 48 sheltered housing apartments and three retail units. The contract incorporated the JCT Standard Form of Building Contract with Contractor’s Design (1981 Edition). There was no dispute that Article 5 of that Standard Form contained a valid and binding arbitration agreement. The works were completed in about October 1997. Almost nine years later, in June 2006, Bovis put Kendrick on notice of alleged defects in the works. On 11 October 2007, Bovis sent Kendrick what was referred to as “a pre-action letter of claim”. This letter set out the details of Bovis’ claim and sought agreement from Kendrick that they would rectify the defects identified. Although, this letter was treated as a letter of claim under the Pre-Action Protocol, the parties failed to conduct the protocol process in accordance with the prescribed timetable and no pre- action meeting was ever arranged.
In Kendrick’s letter of response, a reference was made to limitation. As a result, Bovis’ new solicitors advised that proceedings should be issued for limitation reasons. On 17 March 2009, Kendrick’s solicitors both acknowledged service and wrote to Bovis, referring to the contract documents which they had received on 2 March. They said, for the first time, that because of the existence of the arbitration agreement, they wanted the dispute to be dealt with in arbitration. When Bovis’ consent was not forthcoming, they issued an application for a stay. One of the aims of the Pre-Action Protocol is to try and ensure that before court proceedings commence:
- Each party has provided sufficient information for the other to know the nature of it’s case;
- Each party has had an opportunity to consider the other’s case, and to accept or reject all or any part of the case made against him at the earliest possible stage;
- Better and earlier exchange of information occurs; and
- The parties have met formally at least once with a view to defining and agreeing the issues in dispute and exploring possible ways by which the claim may be resolved.
Paragraph 4(ii) of the Protocol notes that if a defendant intends to object to all or any part of the claim on the grounds that the matter should be referred to arbitration then that objection should be raised within 28 days after receipt of the letter of claim. The issue before Mr Justice Coulson was whether or not Kendrick’s failure to raise their preference for arbitration at an early stage was a matter for which they should be penalised in costs.
The Judge noted that the Kendrick response was a very detailed document which took a variety of points. It did not say that Kendrick did not have a copy of the Standard Form of Contract, but equally did not request a copy from Bovis. However there were other requests which in the words of the Judge appeared to “operate on the basis that Kendrick did have at least some parts of the contract documentation.” The overall impression created by this letter was that Kendrick did have all or at least some of the contract documents, and nothing was said to give rise to a contrary conclusion. No suggestion was made that the claim should be referred to arbitration. Kendrick said that the reason for this was that they did not have a copy of the Standard Form Contract itself. This omission only became apparent in the correspondence subsequently. The Judge disagreed for a number of reasons:
- There was no obligation on Bovis to provide a copy of the entire executed contract with their letter of claim. Bovis was entitled to assume that Kendrick had their own copy;
- Kendrick had not requested a copy of the contract.
- Kendrick, as experienced contractors, knew that the Standard Form of Contract was likely to contain an arbitration clause; and
- What appeared to have happened was that the question of arbitration was considered by Kendrick in late 2007/early 2008, and that a decision was taken not to raise it, perhaps because of the absence of the executed Standard Form. The question of arbitration was therefore in Kendrick’s mind, but they took a deliberate decision not to raise it.
Accordingly, the Judge considered that Kendrick’s behaviour was not in accordance with either the spirit of co-operation required by, or the detailed provisions of, the Pre-Action Protocol. It is important for parties to exchange fully their views, not only on the underlying dispute, but, if relevant, how that dispute should be tried. Whilst, it was accepted by everyone that that did not stop Kendrick from raising the arbitration point now, they were liable for those costs incurred by Bovis, which would not otherwise have been incurred if the stay for arbitration had been referred to in the response letter.