ML Hart Builders Limited (in liquidation) v Swiss Cottage Properties Limited

Judgement date
Case reference
[2022] EWHC 1465 (TCC)
Mr Roger Ter Haar QC sitting as a Deputy High Court Judge
Key terms
Liquidation; Guarantee Bond; Termination; Liability; Settlement; Final Account; True Value

ML Hart Builders Limited (“Hart”), the Claimant in the Part 8 proceedings, sought declarations reversing an adjudicator’s decision in favour of the Defendant, Swiss Cottage Properties Limited (“SC”), so that Hart could launch a new adjudication to determine the true value of its final account. The Claimant brought this action on the basis that the adjudicator, in agreeing with the Defendant that the accounting exercise set out in the contract had been carried out, was wrong in his decision. 

The parties entered into a JCT contract for the design and build by Hart of 14 apartments with commercial space (the “Contract”). A guarantee bond was also entered into with Aviva for 10% of the contract sum (£332,500.00) to secure Hart’s performance of the Contract (the “Bond”). Around two years later, Hart went into liquidation triggering termination and the operation of an accounting exercise under clause 8.7.4 of the Contract (the “Accounting Clause”). The parties disagreed on the value of SC’s costs to complete the works. A further two years passed, and SC agreed to accept £235,000.00 in full and final settlement of the Bond (the “Acceptance Agreement”). Hart then commenced a true value adjudication on the basis of the Accounting Clause. SC contended that the Accounting Clause had been determined by the Acceptance Agreement to which Hart was bound, and so there could be no determination of value under the Accounting Clause by the adjudicator.  The adjudicator favoured this view. In the subsequent Part 8 proceedings, Hart disagreed and claimed that it was entitled to commence a new adjudication for a true value determination under the Accounting Clause in spite of the Acceptance Agreement.  

The Defendant maintained its position by arguing that there was nothing to be decided because the Claimant was bound by the Acceptance Agreement, and the Accounting Clause had already been covered off as part of that settlement.  It was submitted that even if the Acceptance Agreement was not binding on the Claimant, it should be estopped by conduct from seeking to invoke the Accounting Clause as it had apparently deferred to Aviva as to the settlement sum. The Defendant also noted that in any event the Claimant could not commence a new adjudication because two adjudications may not be heard on the same or substantially the same dispute (paragraph 9(2) of Part I of the Scheme of Construction Contracts 1998). 

Finding in favour of the Claimant, the Judge ruled that the Acceptance Agreement was not binding on the Claimant as it was not a party to it, and that the adjudicator was wrong to decide that the Accounting Clause had been determined by the Acceptance Agreement. No documents submitted in the case appeared to be evidence of an assessment under the Accounting Clause. The Judge also concluded that on the facts, estoppel by conduct was not made out. Critically, the Judge made clear that in considering paragraph 9(2), one should look to the disputes and the relevant decision. In this case, no true value decision had been made by the adjudicator, and so the Claimant did have a right to refer the matter to adjudication. The court gave the declarations sought by the Claimant. 

This judgment provides helpful guidance on how the court may analyse whether two disputes are the same or substantially the same with reference to paragraph 9(2) of Part I of the Scheme of Construction Contracts 1998. Ultimately, it will always turn on the facts. This case also establishes that an employer should not rely on a settlement under a bond to limit the contractor’s right to determine the true value of its final account under the contract. 

Determination of the Completion Period under clause 2.27.5, would determine any liability on the part of Elements’ for liquidated damages and finance charges. 

As for the impact of the Adjudication Decision on evaluation of the Final Trade Contract Sum, the Judge decided the Construction Manager is not required, or permitted, to reconsider or revalue variations that had been accepted and valued in accordance with the contractual procedure. So, to the extent that variations were agreed, or disputed and determined, the Adjudication Decision remained binding, pending any final resolution by litigation or settlement. Therefore, it was the Construction Manager’s obligation to consider the arguments and evidence before him and carefully assess whether any claim brought in calculation of the Final Trade Contract Sum was new or subject to a prior decision. Lastly, when deciding on the impact of the Adjudication Decision for any subsequent adjudications, the Judge held the parties were not entitled to re-adjudicate on any of the matters and claims previously decided. Mrs Justice O’Farrell emphasised it is a matter of fact and degree as to whether any matters which a party might seek to refer to a subsequent adjudication are the same, or substantially the same. Regard must be had to the basis of the claim made, whether it amounts to a new cause of action and whether such claim is permitted under the Contract.

This case serves as a useful reminder for parties to assess their contracts having regard to the contractual and factual matrix within which an adjudicators decision will be made. Additionally, it is a further example of courts enforcing the key principle that an adjudicator has no jurisdiction to re-adjudicate on any matters or claims already decided by a previous adjudicator.