Norwest Holst Construction Ltd v. Co-Operative Wholesale Society Ltd

Factual and Procedural Background

This opinion concerns a series of appeals from two awards of an arbitrator arising out of a building contract between Company A (appellant) and Company B (appellee). The appeals were brought with the consent of both parties. The judgment addresses nine discrete appeals related to various contractual issues including remeasurement, delay and liquidated damages, loss and expense, retention and discount, and cross-appeals by Company B. The appeals were dismissed with costs awarded against the appellant. The judgment is part of a complex arbitration process and is closely connected to a prior judgment, both of which are to be read together.

Legal Issues Presented

1. Whether the arbitrator was entitled to include amounts for "uninstructed work" in the final award despite an earlier interim award ruling that only instructed work should be included.
2. On the true construction of the subcontract, whether Prime Cost sums are to be allowed on the basis of actual or estimated cost.
3. Whether certain sub-subcontractors, although theoretically domestic sub-subcontractors of Company B, should be considered as nominated subcontractors for the purposes of delay and extensions of time.
4. Whether the arbitrator was correct to award an extension of time but deny loss and/or expense for delay caused by nominated subcontractors.
5. Whether the arbitrator was entitled to use a formula to ascertain direct loss and/or expense incurred by way of overheads, including additional and unabsorbed overheads.
6. Whether the arbitrator was entitled to ascertain loss and/or expense for plant hire on a basis other than actual amounts incurred.
7. Whether the arbitrator had jurisdiction to make an award on matters not in dispute at the date of the notice to concur or appointment.
8. Whether Company A is entitled to contractual discounts ("First Discount" and "Second Discount") and the conditions for such entitlement.
9. Whether the arbitrator properly exercised discretion in denying loss and/or expense for a specified period of delay.
10. Whether the arbitrator erred in awarding interest on sums due under the contract.

Arguments of the Parties

Appellant's Arguments

• The arbitrator improperly included amounts for uninstructed work contrary to the interim award.
• Prime Cost sums should be valued at actual cost, not estimated or tendered rates.
• Sub-subcontractors responsible for delay should not be treated as nominated subcontractors for extensions of time.
• The arbitrator erred in awarding an extension of time without awarding corresponding loss and expense.
• The formula used for overhead loss is inappropriate without a finding of reduction in turnover caused by delay.
• Plant hire loss should be assessed on actual costs, not discounted or notional hire rates.
• The arbitrator lacked jurisdiction to award sums relating to retention or discounts not in dispute at appointment.
• The entitlement to discounts is not absolute and depends on prompt payment; late payments negate discount entitlement.
• The arbitrator’s denial of loss and expense for certain delay periods was erroneous.
• Interest awards were incorrect as payments were due earlier and should have attracted interest from practical completion.

Appellee's Arguments

• The phrase "uninstructed work" was a shorthand for work that was in fact instructed and properly valued.
• The arbitrator’s valuation of Prime Cost sums using agreed tendered rates was correct and contractual provisions supported this.
• The sub-subcontractors were effectively nominated subcontractors due to employer selection and contractual interpretation.
• The arbitrator correctly applied discretion in awarding extensions of time without loss and expense for nominated subcontractor delays.
• The arbitrator made findings of fact supporting the use of formulae to assess overhead losses including additional and unabsorbed overheads.
• The plant hire valuation was a reasonable assessment of actual loss, using discounted market rates as a fair valuation.
• The arbitrator had jurisdiction to decide on retention and discount matters as they related to the final contract sum and final payment.
• The discount provisions in the contract require prompt payment and no claw-back of discount is permitted for late payments.
• The arbitrator’s findings on loss and expense for delay periods were consistent with the contract and evidence.
• Interest was awarded appropriately based on the timing of when sums became due following remeasurement and loss and expense agreement.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Edwards v. Bairstow	Defines the ambit of "question of law" including erroneous application of fact to law and when courts may intervene.	Applied to conclude that findings of fact are not reviewable unless no reasonable tribunal could have reached them.
The "Baleares"	Limits the court's power to review findings of fact on grounds of no evidence supporting them under Arbitration Act 1979.	Considered obiter but influential in concluding no appeal on pure findings of fact for no evidence.
Tsakiroglou & Co. v. Noble Thorl GmbH	Establishes that mixed questions of law and fact can be appealed if no reasonable tribunal could reach the conclusion.	Supported the principle that courts may intervene on errors of law involving mixed questions.
Peak Construction (Liverpool) Ltd. v. McKinney Foundations Ltd.	Applied Edwards v. Bairstow to official referees’ appeals and confirmed limits on review of findings of fact.	Used to support the approach to appeals on questions of law in arbitration awards.
Tersons v. Stevenage Development Corporation	Held that whether a finding of fact was supported by evidence was a question of law, though rare to succeed.	Discussed in relation to the scope of appeals on questions of law from arbitration awards.
The Nema	Clarifies the meaning of "question of law" and when courts must intervene on erroneous decisions.	Relied on to confirm that courts intervene if no reasonable person could have reached the decision.
Investors Compensation Scheme Limited v. West Bromwich Building Society	Sets out principles of contractual interpretation focusing on the meaning conveyed to a reasonable person.	Applied to interpret contract terms such as "Nominated Sub-Contractor" and scope of works.
Allied Maples Group Ltd. v. Simmons & Simmons	Allows recovery of damages based on likelihood (real or substantial chance) rather than certainty in certain claims.	Used to support the arbitrator’s finding that loss could be assessed on a substantial chance basis.
Crosby v. Portland Urban District Council	Upholds lump sum awards for combined heads of loss where separate assessment is impractical.	Supported the arbitrator’s approach to combining overhead losses in a single formula-based award.
McAlpine v. Property and Land Contractors	Sets evidential requirements for establishing loss and expense claims, including plant hire costs and overheads.	Discussed in relation to the appropriateness of formulae and actual cost basis for loss ascertainment.
Team Services plc v. Kier Management and Design Ltd.	Considers contractual interpretation principles regarding deleted or amended contract terms.	Referenced to assess the impact of deletion of the word "cash" on discount entitlement.

Court's Reasoning and Analysis

The court undertook a detailed analysis of the nature of questions of law arising under section 1 of the Arbitration Act 1979, particularly focusing on whether findings of fact can be challenged as questions of law. It concluded that pure findings of fact, including whether there was evidence to support them, are not reviewable as questions of law, aligning with the prevailing interpretation of the Arbitration Act and key precedents such as Edwards v. Bairstow and The Baleares.

Regarding the remeasurement issues, the court found that the phrase "uninstructed work" was used as a shorthand and that the arbitrator’s findings that the relevant work was instructed or directed were findings of fact not open to appeal. The court also accepted that extrinsic material expressly or impliedly incorporated into the award could be considered but refused to admit other extraneous evidence.

On the delay caused by sub-subcontractors, the court found that due to an error in the Bills of Quantities and contractual correction mechanisms, the relevant sub-subcontractors effectively qualified as nominated subcontractors. The arbitrator’s findings that extensions of time were properly granted and that no loss and expense was recoverable for delay caused by these nominated subcontractors were consistent with the contract terms.

In relation to loss and expense claims for overheads, the court accepted the arbitrator’s factual findings that loss was suffered and that the use of a formula (Emden) was a permissible method of quantification, including a composite formula for additional and unabsorbed overheads. The arbitrator’s decision to discount the formula was a factual judgment not subject to challenge.

For plant hire charges, the court held that the arbitrator’s approach of using discounted market hire rates as a basis for valuation was a reasonable factual finding, and the appellant’s challenge failed due to lack of admissible evidence beyond the award.

On retention and discount, the court found that the arbitrator had jurisdiction to consider the matters before him, that retention was only relevant to interim payments and not the final sum, and that discount entitlement was conditional on prompt payment. The arbitrator correctly concluded that no retention should be withheld and that the appellant was not entitled to the discounts claimed.

Finally, on interest, the court supported the arbitrator’s decision to award interest from dates when sums became properly due following remeasurement and agreement on loss and expense, rejecting the appellant’s contention that interest should have run from practical completion.

Holding and Implications

The court DISMISSED all appeals and cross-appeals brought by Company A and Company B respectively. The arbitrator’s awards were upheld in their entirety, including findings on remeasurement, delay, loss and expense, retention, discount, and interest.

The direct effect of this decision is the final affirmation of the arbitrator’s awards and the dismissal of all challenges to those awards on questions of law. No new legal principles or precedents were established beyond the application of existing arbitration law and contract interpretation principles to the facts of this case.