| Date | 30 January 2002 |
|
|
| Judgment | William and David Oakley -v- Airclear Environmental Limited HC 4 October 2001 |
|
|
| The Issue | The use of statutory demands to force the payment of monies decided by an adjudicator. |
|
|
| Implication |
A statutory demand many be set aside where the debt is disputed on substantial grounds or where the debtor appears to have a counter-claim or set-off . Accordingly it will only rarely be appropriate for the enforcement of adjudication decisions. |
printThe case of William and David Oakley -v- Airclear Environmental Limited examined a number of interesting subjects including contract procurement, estoppel and obtaining payment against an adjudicator's decision by way of statutory demand. Oakley entered into a main contract with Scottish and Newcastle Retail for the refurbishment of premises known as Bar 38 at Mermaid Quay in Cardiff. The contract was in the form of the JCT Intermediate Form of Contract which allowed for the naming of sub-contractors. Airclear was listed in the main contract as one of a group of possible named sub-contractors in relation to mechanical and air conditioning works. The procedure for the nomination or naming of sub-contractors under JCT forms is far from simple and routinely leads to difficulties. The standard documentation for use with the Intermediate Form is known as NAM/T. The first and second parts of this document, that is the invitation to tender and the tender itself, have to be completed in a precise and formal manner. Otherwise, it may be impossible to properly secure the third part of NAM/T which contains the terms of the sub-contract agreement between the main contractor and the successful sub-contract tenderer. In the event these procedures were not properly followed and no formal written agreement between Oakley and Airclear was ever established. Despite this, the sub-contract works proceeded and Oakley made stage payments to Airclear from which various deductions were made in respect of retention, discount and contra-charges. When disputes arose concerning these payments Airclear were in two minds as to how best to proceed. One approach was to suggest that there was no sub-contract between the parties and that accordingly Airclear should be entitled to a fair commercial price based on quantum meruit without deductions. The disadvantage to this approach was, of course, that without a written sub-contract Airclear would not be able to take the disputed matters to adjudication. Accordingly, Airclear decided to contend that a sub-contract existed and gave a formal written notice of referral to adjudication. Oakley played no part in the adjudication process that followed and in due course the adjudicator gave a written adjudication decision. In summary he determined that he had jurisdiction, and that the monies deducted as set-off and discount by Oakley should be released to Airclear. Oakley refused to pay. It was in those circumstances that statutory demands were served by Airclear in an attempt to force Oakley to pay the monies directed by the adjudicator. More about that approach in a moment. The disputed statutory demands came before the Cardiff County Court, then on appeal to the High Court in London. In the County Court the Judge agreed that there was no written contract between the parties and accordingly statutory adjudication under the 1996 Construction Act did not apply. However, he held that the conduct of the parties amounted to an ad-hoc agreement to adopt the adjudication procedures contained in the standard named sub-contract. An equitable or promissory estoppel may arise where a party, having legal rights against another, unequivocally represents by words or conduct that it does not intend to enforce those legal rights, and the other party acts in reliance upon that representation. Here, an estoppel had arisen where both Oakley and Airclear had proceeded under a mutual assumption that adjudication was available to resolve any disputes between them. It was too late for Oakley to seek to resile from that position once an application had been made for the appointment of an adjudicator. In the High Court Mr Justice Etherton disagreed. Providing the adjudication had not proceeded beyond the appointment of the adjudicator and that there was no evidence that Airclear had incurred any substantial expenditure, Oakley were entitled to deny the common but erroneous assumption that adjudication applied between the parties. This is exactly what Oakley had done and as a consequence the adjudication had proceeded without jurisdiction. Accordingly the statutory demands for payment of the amounts ordered by the adjudicator did not properly show a legal basis for the debt demanded. The use of a statutory demand in the event of the non-payment of an adjudicator's decision will only rarely be appropriate. The statutory demand under the Insolvency Act 1986 is part of a procedure for winding up the debtor company. If payment is not received within 21 days of a valid demand, this will establish that the company is unable to pay its debts when they fall due. Taken to its logical conclusion therefore, this is the opposite of what the creditor is seeking to achieve. The force lies only in the threat. Under rule 65 of the Insolvency rules, the court will, however, set aside a statutory demand if the debtor appears to have a counter-claim, set-off or cross demand or the debt is disputed on grounds which appear to the Court to be substantial. Where there are arguments concerning the jurisdiction of an adjudicator or set-off or counter-claims still to be resolved between the parties, a court will normally hold that the threat of insolvency proceedings should not be the proper way to resolve the dispute between the parties.
CJ-0204
|
|||
|
© Brewer Consulting |
|||
 |
|||