The Facts

Loppingdale Plant Ltd (“Loppingdale”) was appointed under a Framework Agreement with Stansted Airport Ltd to carry out various works at Stansted Airport. Loppingdale sub-contracted certain M&E works to Imtech Inviron Ltd (“Inviron”).

A dispute arose between the parties as to payment under an interim application, which was referred to adjudication. The Adjudicator (Mr Ben Sareen) decided that Loppingdale should pay Inviron the sum of £643,283.04. Loppingdale refused to pay and challenged the enforcement of the Adjudicator’s decision on the grounds that:

1. the adjudicator had not been properly appointed;
2. the adjudicator purported to adjudicate different disputes arising under different contracts because Inviron’s application for payment included sums that were attributable to other sub-contracts.

The Arguments

Loppingdale argued that the adjudication provisions of the Framework Agreement were incorporated into the sub-contract such that the adjudicator ought to be one of three named individuals (not including Mr Ben Sareen) or, in default, appointment by the Institution of Civil Engineers.

Further, Loppingdale relied on what referred to as the “September Conditions” which were terms and conditions stated in the sub-contract as “per contract+Stansted Airport September 2012”. Clauses 1.1 and 1.3 of the sub-contract provided as follows:

“1.1            These Terms and Conditions together with the Framework Agreement attached to these Terms and Conditions (‘the Framework Agreement’) together with the Purchase Order to be issued by LPL to the contractor for each sub-contract and the Task Order to be issued to LPL and a copy provided to the Subcontractor for each subcontract (‘the Task Order’) set out all the rights and obligations of the parties each to the other and no other terms or conditions shall be implied saved the extent that such terms and conditions are implied by statute save as may be agreed by the parties in writing.

…

1.3               The subcontract Works are executed as part of work to be carried out by LPL for its Customer under the Principal Contract as set out in the Framework Agreement and the Task Order (together ‘the Principal Contract’). The Subcontractor shall be deemed to have read the Principal Contract and to be fully aware of the obligations, risks and liabilities assumed by LPL under them.  The Subcontractor shall perform and assume, as part of its obligations under this contract, LPL’s obligations, liabilities and risks contained within the Principal Contract that relate to the carrying out of the Task Order and/or Purchase Order as if they were expressly referred to in the subcontract as obligations, liabilities and risks of the subcontractor, all things being equal …

Inviron argued that, as a matter of construction of the sub-contract, only the primary obligations of the Framework Agreement (i.e. those relating to Loppingdale’s obligations and liabilities to the works to be carried out and how it was to be done) that were incorporated, rather than secondary obligations (such insurance and indemnities).

Inviron contended that there was no room for incorporating the adjudication provisions of the Framework Agreement as these were secondary, or even tertiary, obligations as they governed the way in which disputes about substantive rights and obligations were to be resolved.

Further, Inviron contrasted clause 1.23 of the sub-contract which made specific provision for compliance with certain secondary obligations (liability, insurance and indemnities in respect of death or injury to persons and loss or damage to property), which, as Environ argued, would not have been necessary if these obligations were already covered. Inviron also relied on clause 1.25, which provided a different choice of jurisdiction from that in the framework agreement and thus showed an intention not to incorporate such non-primary matters.

In the context of the incorporation of terms, Inviron referred to Habas Sinai v Sometal SAL [2010] EWHC 29 (Comm) where Christopher Clarke J (as he then was) said that:

“48. … Whenever some terms other than those set out in the incorporating document are said to be incorporated it is necessary to be clear what those terms are.  Since arbitration clauses are not terms which regulate the parties’ substantive rights and obligations under the contract but are terms dealing with the resolution of disputes relating to those rights and obligations it is also necessary to be clear that the parties did intend to incorporate such a clause. …

49. There is a particular need to be clear that the parties intended to incorporate the arbitration clause when the incorporation relied on is the incorporation of the terms of a contract made between different parties, even if one of them is a party to the contract in suit.  In such a case it may not be evident that the parties intended not only to incorporate the substantive provisions of the other contract but also provisions as to the resolution of disputes between different parties, particularly if a degree of verbal manipulation is needed for the incorporated arbitration clause to work.”

Environ argued for the adjudication provisions of the Framework Agreement, applied to the “Parties” which were defined as Loppingdale and its Employer, to be carried over into the sub-contract, a degree of verbal manipulation was required.

On the other hand, Loppingdale pointed out the need for evidence such that there should be a full trial on the point of construction. Environ contended that the court could and should determine the point of construction on an application for summary judgment and relied on the Court of Appeal’s decision in Khatri v Co-operative Centrale Raiffeisen-Boerenleenbank BA [2010] EWCA Civ 397.

The Decision

In rejecting Loppingdale’s grounds of challenges, Edwards-Stuart J concluded:

“In relation to the adjudication clause in particular, I consider that it is far from evident that the parties intended this to be incorporated into the [sub-contract]. In my judgment it is certainly not clear that this was intended and accordingly I conclude that the provisions of the Scheme are to be incorporated into the sub-contract or sub-contracts made between [Loppingdale] and Inviron.”

On whether or not the Court could and should decide the point of construction at the enforcement proceedings, the Judge held that the court must always exercise great care when approaching the summary disposal of a claim, particularly having regard to the warning given by the Court of Appeal in Royal Brompton Hospital NHS Trust v Hammond (No. 5) [2001] EWCA Civ 550, and that that it is hard to see what sort of evidence might emerge which could assist the court on what is, essentially, a straightforward matter of construction of the documents.

The court also rejected Loppingdale’s argument that the adjudicator purported to decide different disputes arising under different contracts. The Judge held that the fact that Inviron’s application for payment comprised of other sums due under other purchase orders did not prevent the adjudicator having jurisdiction in relation to one specific purchase order.  If Loppingdale had any objection to the sums included in the valuation, it ought to have served appropriate payment notice or a pay less notice. Similarly, even if it was arguable that the adjudicator made an error in not picking this issue up, he still answered the correct question referred to him in the Notice of Adjudication, which meant his decision could not be impugned in enforcement proceedings.