Factual and Procedural Background
In November 2002, the Plaintiff engaged Company B to perform extensive building works at a property known as Queen's Lodge, located at 53-55 Queen's Avenue, Muswell Hill. The First Defendant provided engineering services related to the works, though there was a significant dispute regarding which party he was working for at the relevant time. On 5 February 2004, a large part of the flank wall of the property collapsed.
The collapse led to three separate sets of proceedings, all transferred to the current court and assigned to the presiding judge:
- An action originally commenced in a county court, later transferred, where the Plaintiff alleged trespass by Company B for wrongfully remaining at the property until February 2005. Company B counterclaimed a sum of £145,192.52 based on an adjudicator's decision dated 18 April 2005.
- An action seeking a restraining order against the First Defendant concerning his house, due to potential liability and threat of asset dissipation.
- The main action, issued in the Technology and Construction Court (TCC) on 13 July 2006, where the Plaintiff claimed damages estimated at least £700,000 against both defendants arising from the collapse.
In the main action, the Plaintiff obtained default judgment against Company B on 31 July 2006. Company B applied to set aside that judgment and also sought summary judgment on their counterclaim, effectively an application to enforce the adjudicator's decision. Both applications were resisted by the Plaintiff.
Legal Issues Presented
- Whether the default judgment entered against Company B in the main action should be set aside due to issues concerning the validity and timing of service of the claim form and related documents.
- Whether the adjudicator's decision awarding Company B sums under the counterclaim should be enforced, considering questions about the adjudicator's jurisdiction and the existence of a valid written contract under the Housing Grants (Construction and Regeneration) Act 1996.
- Whether judgment should be entered on Company B's counterclaim or stayed due to Company B's insolvent liquidation status and the mutuality of claims and cross-claims.
Arguments of the Parties
Appellant's Arguments (Company B)
- Service by fax was invalid as there was no prior written indication of willingness to accept service by electronic means, rendering the default judgment irregular or invalid.
- Effective service by post should be deemed to have occurred on Tuesday, 18 July 2006, making their acknowledgement of service timely.
- The default judgment was obtained on an incorrect certificate of service date and the request for default judgment was premature.
- The adjudicator's decision should be enforced as the referral notice delay was minimal and the adjudicator had jurisdiction.
- The liquidation status of Company B justifies setting aside the default judgment or staying enforcement of the counterclaim judgment.
- Company B has a real prospect of successfully defending the claim, contending that the collapse was due to design issues for which the First Defendant was responsible, not Company B.
Appellee's Arguments (Plaintiff)
- Service by fax was valid and effective on 14 July 2006, so the 14-day period for acknowledgement of service expired before the default judgment.
- If service was by post, the deemed service date was Sunday, 16 July 2006, making the acknowledgement of service late.
- The adjudicator had jurisdiction, and the adjudicator's decision should be enforced despite delays in the referral notice.
- The letter of intent and related documents constituted a binding contract in writing under the 1996 Act.
- The insolvency of Company B does not prevent entry of judgment on the counterclaim or enforcement of the adjudicator's decision.
- The delay in applying to set aside the default judgment (59 days) was excessive and militates against exercising discretion in Company B's favor.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Molins Plc v. G.D. SpA [2000] 1 WLR 1741 |
Requirements for valid service by fax under CPR 6PD3.1 |
Supported the conclusion that service by fax was invalid absent prior written indication of willingness to accept service by electronic means. |
| Hannigan v. Hannigan [2000] 2 FCR 650 |
Effect of failure to serve response pack on validity of service |
Held failure to serve response pack does not invalidate service but is relevant to discretion in setting aside default judgment. |
| Godwin v. Swindon Borough Council [2001] EWCA Civ 1478 |
Calculation of deemed service period excluding weekends |
Not followed; court bound by later conflicting authority. |
| Anderton v. Clwyd [2002] EWCA Civ 933 |
Calculation of deemed service period including weekends |
Followed; deemed date of service was Sunday, 16 July 2006. |
| Harris v. Bolt Burden [2000] L.T.L. February 2 |
Test for setting aside default judgment for real prospect of success |
Applied to assess Company B's defence as having a realistic prospect of success. |
| Lazard Brothers & Co. v. Bank Industrielle de Moscow [1932] 1 KB 617 |
Effect of liquidation or dissolution on validity of judgment |
Distinguished; liquidation does not automatically justify setting aside judgment. |
| RJT Consulting Engineers Ltd. v. DM Engineering (Northern Ireland) Ltd. [2002] 1 WLR 2344 |
Requirement that entire contract be in writing for adjudication under 1996 Act s.107(2)(c) |
Applied to find the letter of intent did not satisfy the requirement of a contract in writing. |
| Macob v. Morrison [1999] BLR 93 |
Enforcement of adjudicator's decision absent breach of natural justice or jurisdictional error |
Referenced to confirm general approach to enforcement of adjudicator's decisions. |
| Bouygues UK Ltd. v. Dahl-Jensen UK Ltd. [2000] BLR 522 |
Enforcement of adjudicator's decisions and insolvency considerations |
Applied to conclude judgment should not be entered where insolvency and mutual claims exist. |
| C & B Scene Concept Design Ltd. v. Isobars [2002] BLR 93 |
Limits on court interference with adjudicator's decisions |
Referenced in relation to jurisdiction and enforcement issues. |
| Carillion Construction Ltd. v. Devonport Royal Dockyard Ltd. [2006] 1 BLR 15 |
Strict enforcement of adjudicator's decisions unless jurisdiction or fairness issues arise |
Quoted for the principle that courts should rarely interfere with adjudicators' decisions. |
| Barnes & Elliott Ltd. v. Taylor Woodrow Holdings [2004] BLR 111 |
Validity of adjudicator's decision delivered on last day of time limit |
Distinguished due to contract-specific terms not applicable here. |
| Simons Construction Ltd. v. Aardvark Developments Ltd. [2004] BLR 117 |
Effect of late adjudicator's decision beyond 28-day limit |
Rejected by higher court; decision beyond time limit is nullity. |
| Ritchie Brothers Plc v. David Phillip Commercials Ltd. [2005] BLR 384 |
Strict interpretation of 28-day limit for adjudicator's decision |
Followed; decision outside time limit is nullity. |
| BCCI v. Prince Fahd Abdul Asis Al-Soud [1996] |
Mutuality requirement for set-off under Insolvency Rules |
Applied to reject argument that claims lacked mutuality. |
| Wimbledon Construction v. Vago [2005] BLR 374 |
Principles governing stay of execution of judgment |
Referenced regarding stay of execution where contractor is insolvent. |
| Cunningham v. Collett & Farmer [2006] EWHC 1771 |
Commonality and enforceability of letter of intent contracts |
Referenced as authority questioning the common use of such arrangements. |
| Regency Rolls v. Carnell (2000) EWCA 379 |
Delay in applying to set aside default judgment |
Applied to assess whether delay in making application was too long. |
| Stein v. Black [1996] 1 AC 243 |
Insolvency Rules and mutual set-off |
Referenced in argument concerning stay of execution and mutuality of claims. |
Court's Reasoning and Analysis
The court first examined whether the default judgment against Company B was irregular or invalid, focusing on the timing and validity of service of the claim form and related documents. It found that service by fax was invalid because there was no prior written indication from Company B (or its liquidator) consenting to service by electronic means, as required by CPR 6PD3.1. The court rejected the Plaintiff's argument that the liquidator's legal department staff constituted Company B's legal representatives for this purpose.
Consequently, effective service was by post. The court considered conflicting Court of Appeal authorities on whether weekends are included in the calculation of deemed service dates under CPR 6.7. It concluded it was bound by the later authority, which includes weekends, making the deemed date of service Sunday, 16 July 2006. Therefore, Company B's acknowledgement of service filed on 1 August 2006 was out of time.
Despite this, the court found the default judgment irregular because the certificate of service stated an incorrect date (14 July 2006) and the request for default judgment was premature, filed before the expiry of the 14-day period required. These technical irregularities justified setting aside the default judgment mandatorily under CPR 13.2.
In the alternative, the court exercised its discretion under CPR 13.3 to set aside the default judgment. It took into account the confusion over service, the absence of a response pack at the relevant time, the conflicting case law on calculation of service periods, and the Plaintiff's aggressive conduct in filing an incorrect certificate and premature request. Furthermore, Company B demonstrated a real prospect of successfully defending the claim by distinguishing its role from that of the First Defendant, who was responsible for design issues leading to the collapse.
The court acknowledged the delay of 59 days in applying to set aside but found it excusable given Company B's status as a litigant in person through a liquidator and the complex interlocutory proceedings ongoing.
Regarding the enforcement of the adjudicator's decision, the court analysed the adjudication process under the Housing Grants (Construction and Regeneration) Act 1996 and the Scheme for Construction Contracts. It found two separate jurisdictional defects:
- The referral notice was served one day late (eight days instead of seven), which was not waived by the Plaintiff. The court held that the adjudicator had no jurisdiction to extend this time limit retrospectively, and the delay rendered the adjudication null and void.
- The underlying contract was not in writing as required by s.107(2)(c) of the 1996 Act. The letter of intent provided only a very basic framework without clear, complete terms such as parties, workscope, price, and time. The court followed the Court of Appeal's decision in RJT Consulting Engineers Ltd. v. DM Engineering to conclude that partial or vague written terms do not satisfy the statutory requirement.
Consequently, the adjudicator's award was not enforceable, and the court declined to enter judgment on Company B's counterclaim.
Finally, the court considered whether judgment should be entered or stayed due to Company B's insolvent liquidation. It found clear mutuality between the Plaintiff's claim and Company B's counterclaim. Applying the Insolvency Rules and relevant case law, the court agreed that entering judgment would risk inaccurately asserting substantive rights based on a provisional adjudicator's decision. It therefore held that insolvency justified refusing summary judgment or ordering a stay of execution.
Holding and Implications
The court set aside the default judgment entered against Company B in the main action. This was a mandatory setting aside due to irregularities in service and the premature request for default judgment, and also supported by the court’s discretion given Company B’s real prospect of success and the circumstances of the case.
The court declined to enforce the adjudicator's decision and refused to enter summary judgment on Company B's counterclaim. The adjudicator lacked jurisdiction because the referral notice was served late and the contract was not in writing as required by the 1996 Act. Additionally, Company B’s insolvency justified refusal of summary judgment.
The direct consequence is that the Plaintiff’s claims and Company B’s counterclaims remain unresolved and will proceed to trial or further interlocutory hearings. The decision does not establish new legal precedent but applies existing principles strictly, emphasizing procedural compliance and statutory requirements in construction adjudications and default judgments.