Michael J Lonsdale (Electrical) Ltd v Bresco Electrical Services Ltd, Court of Appeal - Technology and Construction Court, July 31, 2018, [2018] EWHC 2043 (TCC)

Resolution Date:July 31, 2018
Issuing Organization:Technology and Construction Court
Actores:Michael J Lonsdale (Electrical) Ltd v Bresco Electrical Services Ltd

Neutral Citation Number: [2018] EWHC 2043 (TCC)

Case No: HT-2018-000186




Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 31 July 2018

Before :


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Between :

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Thomas Crangle (instructed by Fladgate LLP) for the Claimant

David Sears QC and Niall McCulloch (instructed by Blaser Mills LLP) for the Defendant

Hearing dates: 11 July 2018

Draft distributed to parties 25 July 2018

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Mr Justice Fraser:

1. This is a claim brought in proceedings under CPR Part 8 by Michael J Lonsdale (Electrical) Ltd, the Claimant (``Lonsdale''), against Bresco Electrical Services Ltd (in Liquidation), the Defendant (``Bresco''). As can be gathered from the title of the Defendant company, it is in liquidation, a liquidator having been appointed on 12 March 2015. It is the liquidation that is at the heart of this dispute. The claim by Lonsdale is for declarations and a permanent injunction to prevent Bresco from bringing a claim to adjudication, on the basis that the liquidation operates in law in such a way as to extinguish the claim(s) relied upon by Bresco in that adjudication.

2. The two parties had entered into a contract (actually a sub-sub-contract) dated 21 August 2014 whereby Bresco agreed to perform electrical installation works for Lonsdale. The works were at premises occupied by Rio Tinto, a major conglomerate, situated at 6 St James Square, London SW1 (which also have the address Apple Tree Yard, which was the delivery or site address). Bresco became insolvent and entered into voluntary liquidation on 12 March 2015, with one Mr Ailyan of Abbot Fielding Ltd being appointed as the liquidator.

3. The precise terms of the contract between the parties are not material to this Part 8 claim, other than to say it is a construction contract governed by the Housing Grants Construction and Regeneration Act 1996, as amended by later enactments. This means, as is well known, that the adjudication provisions of those statutes either have to be expressly included by the parties into the construction contract, or if not, they will be statutorily imposed upon the parties, and the terms of The Scheme for Construction Contracts (England and Wales) Regulations (SI 1998 No. 649) (``the Scheme'') will apply. Whether expressly included by the parties, or imposed by the Scheme, adjudication is a mandatory requirement of such contracts. In this case, Lonsdale was a sub-contractor on the JCT 2011 CM/TC form with certain amendments, which is a standard form of building contract, and the contract between Lonsdale and Bresco was on the standard order form of Lonsdale and was given Order No. SC/162048/EE1251/1301. The contract sum was £360,000.

4. The chronological sequence of the parties' dealings need not be considered in any great detail, as it does not have any material impact upon the issues to be decided. Bresco left the site in December 2014 in controversial circumstances, with each of Bresco and Lonsdale alleging wrongful termination against the other. On 12 March 2015 Bresco, the company, became controlled by the liquidator as a result of the liquidation. He performed his duties under the relevant legislation and prepared three annual reports on Bresco's affairs, as required by the Insolvency Act 1986. In late October 2017, Lonsdale intimated a claim against Bresco alleging that Bresco had wrongfully terminated the contract, and claiming the direct costs of completing the works said to have been caused by this termination, those works having been performed by GSV Electrical Ltd. GSV Electrical had been appointed by Lonsdale, it was said, to complete works left undone by Bresco. Bresco, on the other hand, maintained in response that it was Lonsdale who had wrongfully terminated Bresco's employment under the contract, and that it was Lonsdale who owed Bresco money. At about this point an entity called Pythagoras Capital Ltd commenced writing letters, said to be for and on behalf of the liquidator.

5. On 18 June 2018 Lonsdale received a Notice of Intention to Refer a Dispute to Adjudication (``the Notice''). That was signed by Mr Greg McMahon, described as a Director of Pythagoras Capital Ltd, for and on behalf of Bresco. There was some controversy between the parties about what the role of Pythagoras was, and whether the necessary authority had been granted by the liquidator to Pythagoras to act on Bresco's behalf. I do not need to resolve that for this reason; in these proceedings Bresco was represented by both solicitors and leading and junior counsel, the legal nature of the matters under consideration does not depend upon the status of Pythagoras and the extent of its authority or otherwise, and I was not asked to consider this point at all. No issue arises in these proceedings regarding the validity of the Notice due to any lack of authority to issue or serve such a document. The matter has proceeded on the basis that it was a valid Notice in the sense that (absent Lonsdale's legal objections which I will determine) Bresco initiated an adjudication against Lonsdale in relation to a dispute under the contract to which I have referred in [2] above.

6. The Notice defined this dispute in the following way in paragraph 7:

``A dispute has arisen between the parties under the Contract. Bresco seeks the appointment of an Adjudicator to make the following decisions:

  1. Whether Lonsdale committed a repudiatory breach on 8 December 2014 by employing others to complete the Works.

  2. Whether Bresco is entitled to be paid for the work that it had completed prior to Lonsdale's repudiatory breach.

  3. Whether Bresco had completed works to the value of £219,884.80, £193,067.80 or such other sum as the Adjudicator may decide prior to Lonsdale's repudiatory breach.

  4. Whether Bresco is entitled to be paid for the works that it had completed, but for which it has not been paid, pursuant to the Contract, as a matter of quantum meruit or otherwise.

  5. Whether Bresco is also entitled to damages for loss of profits for Works that it had not completed as a consequence of Lonsdale's repudiatory breach.

  6. Whether Lonsdale is not entitled to deduct, from the sums that it owes Bresco, any completion costs or other sums. Alternatively, what sums is Lonsdale entitled to deduct.

  7. What interest is Bresco entitled to be paid pursuant to the Contract, the Late Payment of Commercial Debts (Interest) Act 1998 or otherwise.''

7. This Notice arguably seeks to refer more than one dispute to the adjudicator. Indeed, there are potentially at least four disputes contained in paragraph 7 of the Notice. They are whether Lonsdale committed a repudiatory breach of contract; whether Bresco completed works to a particular value; whether Bresco is entitled to be paid for work it had completed, and what amount it had in fact been paid in respect of work it had performed; and also whether Bresco was entitled to damages for loss of profits (and potentially, how much those damages were). There is no further reference at all within the Referral Notice (``the Referral'') itself further to identify with precision (or at all) what ``the dispute'' is, so the Notice is the only relevant document that permits one to construe what was being referred. All the Referral did was to reproduce paragraph 7 of the Notice.

8. However, both parties before me maintained that this Notice referred a single dispute to adjudication. Given that the nature of the issues that arise on this Part 8 claim require resolution in any event, I proceed on that basis. However, Mr Sears QC accepted that at least three of the decisions sought from the adjudicator were in relation to a decision that a particular money sum was due to Bresco from Lonsdale. That is clearly right - and the Notice does indeed do this, whether the matters referred to the adjudicator are properly seen as being one dispute, or a greater number than that. The relevance of seeking a decision (or decisions) concerning sums due will be seen in due course. It is therefore the case that the dispute (if there is only one), however it is framed, seeks a decision from the adjudicator that particular sums are due to Bresco from Lonsdale, by way of payments under the contract for works done and/or damages for loss of profits.

Procedural history

9. There is no substantial dispute of fact between the parties, which is a requirement for proceedings to be commenced under CPR Part 8. I had witness statements from Mr Digby Hebberd of Lonsdale's solicitors, and Mr Gregory McMahon of Pythagoras for Bresco, but these together simply provided the necessary background facts, none of which are controversial.

10. In Merit Holdings Ltd v Michael J Lonsdale Ltd [2017] EWHC 2450 (TCC) Jefford J at [17] to [28] made certain comments about the appropriateness (or more accurately in that case, the inappropriateness) of the Part 8 procedure being seen by parties to adjudication business in the Technology and Construction Court as constituting a convenient short-cut for them to avoid the usual waiting times for litigants. Part 8 proceedings are also seen (by some parties) as a way of keeping the interval between the two components of the ``pay now, argue later'' ethos of adjudication as short as humanly possible. The comments of Jefford J were then repeated in Victory House General Partner Ltd v RGB P&C Ltd [2018] EWHC 102 (TCC) by Ms Joanna Smith QC sitting as a Deputy High Court Judge, who found herself facing a party whose counsel submitted (as explained in the judgment at [6]):

``that issues could be resolved in the Part 8 proceedings on the basis of assumed facts, but that in the event of the decision being unfavourable to his client, he would then be in a...

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