107772.001 SH Construction Case Booklet

4. Enforcement – Fraud Birmingham City Council v Amey Highways Ltd 9

In Primus v Cannon , the Court held that the mere fact that a company was in a Company Voluntary Arrangement (CVA) did not mean that summary judgment should be refused or a stay granted. Each case depended on its own facts. Here the purpose of the CVA was to enable the company to trade out of its difficulties and recovering the monies owned to it were a key part of that objective. It was also held that a “general reservation” to challenge jurisdiction would only be effective if it was made “appropriately and clearly” and that the proper course was to make a specific challenge on every ground which was or should have been apparent. Where there was a mix of specific and general reservations, the express inclusion of the former might undermine or negative the latter. 6. Jurisdiction Skymist Holdings Ltd v Grandlane Developments Ltd 13 This was a Part 8 challenge to an adjudicator’s decision. Although the claim was issued before the decision was made, Fraser J refused to allow it to be heard in advance of the decision. Skymist engaged Grandlane to provide development and project management services. It was common ground the contract between the parties was a construction contract to which Part 1 of the Scheme applied. The challenge arose out of the appointment of the adjudicator, Mr Riches. Skymist had terminated the contract with Grandlane alleging it was owed substantial sums. Grandlane sent a first notice of adjudication and then requested CIArb 14 to nominate an adjudicator because it said the contract contained a clause providing for nomination by that body. They were relying on a document described as draft deed of appointment (referred to in the proceedings as the ‘DOA’). Skymist denied that the version of the DOA relied on was the contract and said that it did not on any view contain the adjudicator nominating clause relied by Grandlane. CIArb nominated a lawyer, Mr Silver as adjudicator. In light of Skymist’s challenge to Mr Silver’s jurisdiction, Grandlane withdrew its first notice of adjudication. Grandlane then served a second adjudication notice. Much but not all of it was identical to the first notice. It wrote to RICS Dispute Resolution Services to appoint an adjudicator under the Scheme and RICS appointed Mr Riches. It took that course on the basis that no adjudicator nominating body (ANB) was named in the contract so Grandlane could select any ANB. Grandlane’s solicitors Stephenson Harwood (SH) asked RISC to consider nominating Mr Silver or if not him some other senior construction lawyer. It did not then challenge the right of RICS to make a nomination. Thereafter Skymist by its response to referral took a jurisdiction issue: that since Grandlane’s case remained based on the DOA, the nominating body was CIArb and the request to RICS was to the wrong ANB. This was of course precisely what Skymist had objected to in the first adjudication. Mr Riches decided he had jurisdiction and would proceed.

The claimant (“BM”) sought enforcement of an adjudicator’s decision in its favour for £866,238 plus interest. The defendant (“Greyline”) opposed the application arguing that the adjudicator had failed to consider an allegation of fraud it had made in the adjudication proceedings. The adjudication concerned a final account dispute that arose out of a labour only sub-contract by which Greyline engaged BM to carry out kitchen and bathroom repairs on a council estate in London. Greyline’s case was that it had employed BM at the joint request of the local authority’s clerk of works and the main contractor site manager (one “C”), C being the sole director and major shareholder of BM. Not only did C have a conflict of interest but he colluded with the clerk of works resulting in the overvaluation of BM’s work. Greyline said the adjudicator had failed to consider its case that the payment applications underlying BM’s account were fraudulently produced, or if had considered that case, he had not given adequate reasons for rejecting it. The Court might refuse to enforce an award on the grounds of a breach of natural justice. In addition, fraud could be raised to resist enforcement unless that allegation was raised in the adjudication and considered by the adjudicator. 10 There had to have been a deliberate failure to consider a material issue. Here, the adjudicator had considered the issues of fraud when dealing with an objection to his jurisdiction and before he went on to consider the merits. He concluded the documents used in the valuation process had been genuinely prepared. There was insufficient evidence from Greyline to show a fraud had occurred, or that the effect of any such fraud was material as to the outcome, there being no evidence that the fraud had affected the valuations. The adjudicator had considered the defence and given adequate reasons for his decision. Application granted. 5. Insolvency – Effect on Enforcement Michael J Lonsdale (Electrical) Ltd v Bresco Electrical Services Ltd and Primus Build Ltd v Cannon Corporate Ltd 11 In these two conjoined appeals the Court of Appeal upheld both of the first instance rulings. 12 In Lonsdale v Bresco, the Court held that the adjudicator did have jurisdiction to hear the dispute despite the fact that the referring party was a company in insolvent liquidation. However, to allow the adjudication to continue was neither just nor convenient. It would have been an exercise in futility, as the adjudicator was only asked to deal with one claim out of several and that would have prevented the taking of an account as required by the Insolvency Rules 2016. An injunction had been properly granted.


Made with FlippingBook - professional solution for displaying marketing and sales documents online