Victory House General Partner Ltd v RGB P&C Ltd

[2018] EWHC 102 (TCC)

This was an adjudication enforcement case arising out of the development and conversion of an existing office building into a hotel in London. The employer, VH, brought a Part 8 claim, which was met by an application for summary judgment to enforce an adjudicator’s decision by RGB.

Deputy Judge Smith QC did not consider that the case was suitable for a Part 8 application as it raised matters of disputed fact. The Part 8 procedure should only be used where a claimant seeks a court decision on a question which is unlikely to involve a substantial dispute of fact. It was not an answer to this point to suggest that issues could be resolved in the Part 8 proceedings on the basis of assumed facts. This would potentially result in the unsatisfactory situation where a party, if dissatisfied with the Part 8 decision, would still then be in a position to challenge any disputed matters of fact at a later time in further substantive proceedings. There would be no saving of costs and resources and no advantage in permitting determination of the issues to be expedited.

Under the contract, RGB was obliged to procure a transformer or substation. Until the transformer was installed, the electrical and mechanical services could not be completed. The project fell into delay and there was a disagreement about payment. In March 2017, the parties entered into a short Memorandum of Understanding (“MoU”). The MoU provided for three stage payments. The first two were made, VH said in accordance with the MoU, and it was common ground that the transformer was installed. The next month, RGB issued Application 30 in the sum of some £680k plus VAT. VH refused to pay this sum, saying that the payment terms were now governed by the MoU. RGB said that the payment notice was late, there was no pay less notice and, contending that the MoU was not binding, referred this dispute to adjudication. During the adjudication, RGB’s position shifted to noting that whilst the MoU was legally binding the parties did not intend it to replace the provisions of the Contract.

Towards the end of the adjudication process, the Adjudicator asked a series of questions. Both parties replied. In the Decision, the Adjudicator rejected RGB’s primary case that the MoU was not legally binding but also rejected VH’s case that the MoU superseded the Contract and effectively governed what payments were to be made by VH to RGB up to the date of Practical Completion. Instead, the Adjudicator held that the true effect of the MoU was to suspend the obligation on VH to make interim payments under the Contract until such time as the transformer was installed. Given that Application 30 was made after that date, it was valid and, in the absence of any valid pay less notice, was payable. VH said that the Adjudicator’s decision as to the true construction of the MoU did not reflect an argument that had been advanced by either party. The Adjudicator had invented a new point on construction which was central to his Decision and so was a material breach of natural justice.

The Judge disagreed. The parties were aware from the outset that a central question in the adjudication concerned the true and proper construction of the MoU. They each made detailed submissions on this issue. Echoing the words of Mr Justice Fraser in the case of AECOM Design Build Ltd v Staptina Engineering Services Ltd [2017] EWHC 723 (TCC), the Judge noted that a party wishing that they had put more comprehensive submissions to the adjudicator on the point he had highlighted was “not the same as there having been a breach of natural justice, still less a material breach”. The Adjudicator did not go off on a frolic of his own. The Decision was made against the background of having posed a specific question about the purpose, scope and effect of the MoU and Contract; a question which both parties had the opportunity to answer. 

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