HT-2023-000006 - [2024] EWHC 2914 (TCC)

Fecha: 15-Nov-2024

The Offers Made

19.

As I have recorded in paragraphs 136 to 141 of Judgment No. 5, the last day upon which anybody on behalf of A & V attended site was 22 March 2021.

20.

As referred to in paragraph 145 of Judgment No. 5, on 11 May 2021 a meeting was held which was partly open and partly without prejudice.

21.

Following that meeting, on 8 June 2021, Mr Judd, on behalf of A & V, sent an email which attached a document headed “A&V Without Prejudice save as to costs proposals”. This set out various sums said to be due to A & V totalling £513,017.42 from which was deducted £389,226.40 in respect of amounts paid to date, leaving a proposed payment by J&BH to A&V of £123,791.02.

22.

The figure of £123,791.02 is more than the amount net of interest which in due course I awarded. However, it is to be noted that the amount included for the first two and largest items (measured works and variations) totalled £458,459.60, slightly less than I eventually awarded (£460,356).

23.

Where the calculation was too optimistic was in a claim for uneconomical working and delays in the sum of £25,000. That claim was in substance pursued before me as a disruption claim (although in higher figures) and was dismissed by me (paragraphs 411 to 421 of Judgment No. 5).

24.

In my judgment, apart from that claim for £25,000, the amount for which A & V offered to settle was in the right ball park.

25.

In response, J&BH asked for further details. Eventually, on 13 August 2021 Mr Niziolek of J&BH wrote by email as follows:

Again, on a without prejudice basis.

The sums involved are significant & in an informal arena ball park numbers are often [bandied] about, I acknowledge this, however they still have to have a level of explanation so the recipient can understand why they are being presented in that [fashion].

For example, I cannot see why retention is being added to the sum. I accept that retention is normally deducted however to me it appears that the revised [valuations] of works and variations are gross, so why the addition again on top of these numbers?

Therefore, while I agree in an informal take it or leave it situation a figure is all that is needed & on the basis of the figure that has been presented in your email below I can confirm that we are not prepared to accept the offer. In order to close this matter I am prepared to offer a payment of £10,000 in full and final settlement of all issues regarding this project.

26.

As is apparent from my Judgment No. 5, this counter-offer significantly undervalued A & V’s claim. I do not accept that J&BH had inadequate information upon which to assess a more accurate offer.

27.

Attempts to settle having failed, on 17 November 2021 A & V commenced the Blizzard adjudication.

28.

As I have recorded in paragraph 209 of Judgment No. 5, the Court of Appeal was critical of J&BH’s obstructive approach to this adjudication.

29.

On 2 December 2021 J&BH issued Part 8 proceedings against A & V in which, amongst other things, J&BH sought declarations as to the invalidity of Application 14.

30.

On 19 January 2021 Mr Blizzard issued his Decision, determining that J&BH owed A & V £138,010.86, net of interest costs and fees.

31.

J&BH did not pay. Instead it continued with its Part 8 proceedings.

32.

On 27 January 2022 J&BH’s solicitors wrote a “Without Prejudice Save As to Costs” letter to A & V saying as follows:

Introduction

It is apparent, for the reasons set out in our Open Letter, that the Adjudicator's Decision does not in fact represent a victory for A&V. Our client is confident that it will be able to defeat the Adjudicator's Decision and would, in further proceedings, ultimately demonstrate that it has significantly overpaid your client.

Nevertheless, our client is aware that if the parties continue with this dispute, they will both incur significant legal costs and time, that is particularly the case for A&V who has not yet instructed legal representatives. Our client is also conscious of A&V's precarious financial position.

Our client is therefore willing to "cut its losses" on this dispute and the Sub-Contract.

The Offer

Subject to contract (the terms of a formal settlement being agreed), our client will offer to pay A&V the sum of £75,000.00 including any applicable VAT, interest and costs in full and final settlement (excluding latent defects) of any and all disputes arising out of and/or in connection with the Sub-Contract ("the Offer").

For the avoidance of doubt:

The Offer would cover the Adjudicator's Decision, any liability JBH has to A&V for the Adjudicator's fees, the Part 8 proceedings started by JBH, any interest on any of the above amounts and all legal/ representative costs.

Latent defects refers to defects which are not known to the parties or which could not be discovered with reasonable diligence.

The Offer is open for 7 days until 5pm on 3 February 2022, at which point it is automatically withdrawn.

33.

In form, this offer did not comply with Part 36, mainly because it did not refer to Part 36, and also because it was inclusive of costs.

34.

In amount, it significantly undervalued A & V’s claim.

35.

The Part 8 proceedings came before Eyre J. on 12 April 2022. He held that Application 14 was a day late and therefore invalid.

36.

Shortly before that hearing, on 8 April 2022, A & V sent an offer of settlement:

Claim Number: HT-2022-000101

A&V Building Solution Limited v J&B Hopkins Limited

Without Prejudice Save as to Costs

We are writing to set out our settlement offer in relation to the above case, in accordance with Part 36 of the Civil Procedure Rules.

We will settle this case for the payment of £150,000, including interest, plus VAT. This offer is open for acceptance for 21 days from the date of this letter, in accordance with Part 36 of the Civil Procedure Rules. If the offer is not accepted within this time period, then interest, at the rate set out in the claim, with continue to accrue.

37.

Given the imminence of the hearing before Eyre J., and the result of that hearing, it is perhaps unsurprising that J&BH did not accept that offer. However, it appears to me to have been a good faith attempt by A & V to settle the disputes between the Parties.

38.

I have not been referred to any counter-offer.

39.

On my calculations, the amount I have awarded plus interest at the rates I have ordered would come to a little over £130,000 by 21 days after the date of that offer. Accordingly, A & V cannot claim that J&BH failed to better this offer.

40.

However, it was not a large overestimate of the valuation of A & V’s entitlement as at that date.

41.

On 26 May 2022 Coulson LJ granted A & V permission to appeal against Eyre J.’s decision.

42.

In June 2022 A & V commenced a second adjudication before Mr Smith.

43.

On 27 June 2022 A & V made another offer:

Re: CA-2022-0008481 A&V Building Solution Limited v J&B Hopkins Limited

Without Prejudice Save as to Costs – Part 36, Civil Procedure Rules

A&V wants to resolve this matter without both parties incurring significant costs and therefore, we are putting forward an offer, set out below, under Part 36 of the Civil Procedure Rules (‘the Offer’).

We are prepared to settle the above claim and proceedings in the Court of Appeal for payment in the sum of £150,000 plus VAT, and plus costs in accordance with Part 36 of the Civil Procedure Rules.

For the avoidance of doubt, the Offer is made pursuant to Part 36. Therefore, if the offer is accepted within 21 days of the date of this letter, the relevant costs consequences set out in Part 36 of the Civil Procedure Rules will apply …

44.

That offer was not accepted, and at that stage no counter-offer was made.

45.

On 6 July 2022 Mr Smith issued his Decision holding that the true value of the sub-contract works was less than A & V had already been paid. He ordered A & V to pay J&BH a net sum of £82,956.88.

46.

On 25 August 2022 J&BH made another “Without Prejudice Save as to Costs” offer.

47.

Again this did not comply with the formalities of Part 36.

48.

The offer contained in the letter was as follows:

In the circumstances, we are instructed to put forward the following offer with a view to bringing all ongoing disputes between the parties to a conclusion:

The parties agree to drop hands and bear their own costs in full and final settlement of all claims arising from the Sub-Contract. The effect of this being that:

◦

A&V agrees to discontinue the Appeal with no order as to costs;

◦

A&V agrees not to pursue its alleged entitlement to Mr Blizzard’s fees in the sum of £17,400;

◦

JBH agrees not to pursue A&V for the outstanding Part 8 costs; and

◦

JBH agrees not to pursue A&V for payment of the sum due to JBH in accordance with the Smith decision.

This offer is conditional upon A&V paying the sum of £13,962 to Mr Smith forthwith in settlement of Mr Smith’s fees.

This offer is open for acceptance until 4 pm on 2 September 2022 after which it will be automatically withdrawn.

49.

In the event, A & V has achieved a much better result than this offer as it now has a judgment for £120,000 in its favour, before allowing for interest.

50.

On 8 September 2022 J&BH made another “Without Prejudice Save as to Costs” offer. Again this did not comply with Part 36. This now offered:

In the circumstances, we are instructed to put forward the following offer in full and final settlement of the Proceedings, including the Appeal and associated claims regarding Application 14 and the Blizzard Decision as follows:

JBH agrees that the Order made in the Proceedings on 12 April 2022, including the declarations granted and costs awarded to JBH by Mr Justice Eyre are set aside;

The Proceedings including the Appeal are discontinued;

There is no order as to costs of the Proceedings or the Appeal (meaning the parties each bear their own costs);

JBH agrees that the sums due from A&V to JBH pursuant to the Smith decision are reduced by £17,400 (including VAT) to reflect and therefore set-off Mr Blizzard’s fees (for the avoidance of doubt, liability for this sum is accepted as a set-off only and JBH will not make any payment to A&V of this sum, or any part thereof); and

A&V agrees that it will not pursue (a) any sums allegedly due to it under the Blizzard Decision including any interest thereon, or (b) any claim for a notified sum or any other payment in respect of Application 14. Item (a) is subject to the set-off of Mr Blizzard’s fees in the amount of £17,400 including VAT at point 4.

Please note:

This offer is open for acceptance until 4pm on 22 September 2022 after which it will be automatically withdrawn.

For the avoidance of doubt, this offer does not compromise the parties’ ongoing claims as to the value of the final account or the Smith Decision.

51.

In the event, A & V have achieved a much better result than this offer as it has a substantial judgment in its favour.

52.

On 9 January 2023 A & V issued the present proceedings.

53.

On 27 January 2023 the Court of Appeal handed down its judgment. In the course of that judgment Coulson LJ made the following comment in paragraph [23]:

23.

The judgment given at the hearing on 12 April 2023 is at [2022] EWHC 1186 (TCC). Perhaps because of the way in which the matter had come before him, the judge did not deal with the adjudicator’s decision at all, save to note at [2] that the adjudicator’s findings were not binding on him. He said that he would “approach the matter on the footing of my interpretation of the documents and of the submissions before me”. He did not therefore approach the hearing from the starting-point that there was an outstanding adjudication decision in AVB’s favour, and that JBH were in a breach of clause 20.3 of the Sub-Contract in failing to make payment of the sum due to AVB.

54.

Coulson LJ also said at paragraph [43]:

So, as at the hearing on 12 April 2022, the position was that JBH were in breach of contract because they had not paid the first adjudicator’s decision and that, in the light of the ‘pay now, argue later’ mantra, that should have been the first order of business. Having determined the enforcement position, the secondary question for the judge was whether AVB should lose their entitlement to enforce the decision in the first adjudication on the basis of JBH’s Part 8 claim.

55.

The Court of Appeal rejected A & V’s submission that the Part 8 proceedings were an abuse of process. However, the Court of Appeal decided that, contrary to Eyre J.’s decision, Application 14 was valid.

56.

To that extent A &V was successful, but in the final paragraph of his judgment Coulson LJ said:

74.

Although I consider that AVB were entitled to enforce the first adjudicator’s decision back in April 2022, that entitlement has long since been overtaken by events and, in particular, by the result of the second Final Account adjudication, which result JBH have applied to enforce. Moreover, as Mr Frampton correctly noted, no part of this appeal sought the payment of any sum by JBH to AVB, so this court does not have the power to award any such sum in any event. This all reflects the largely academic nature of this appeal, to which I referred at the outset of this judgment.

57.

On 24 January 2023 J&BH made a “Without Prejudice Save as to Costs” offer in respect of the costs of the Part 8 proceedings and the Appeal. In the event the Court of Appeal determined that each party should bear their own costs of the Part 8 Proceedings and the Appeal.

58.

On 15 February 2023 I handed down my judgment enforcing Mr Smith’s decision.

59.

In Judgment No. 2, amongst other issues, I considered the state of the Particulars of Claim. I struck out certain claims and allowed/required A & V to replead other parts.

60.

In Judgment No. 3, amongst other issues, I considered the redrafted Particulars of Claim. I gave directions in that regard, which reflected that parts of that pleading were unsatisfactory.

61.

On 9 November 2023 J&BH made a further written offer.

62.

I accept that this offer complied with the formalities required by Part 36. It was in the following terms:

We write with reference to ongoing proceedings between A&V and JBH. For the reasons made clear in previous correspondence, JBH remains confident that it will successfully defend A&V's claims and it will ultimately be determined that Mr Smith's Decision in the final account adjudication accurately reflects the true value of A&V's account and its further alleged entitlements.

Nonetheless, JBH remains mindful that under the Civil Procedure Rules that litigants are expected to try to resolve their disputes whenever possible and that proceeding to trial, even if successful, is likely to lead to irrecoverable costs. We are, therefore, authorised to make A&V the following offer to settle under Part 36 (the "Offer").

Please note the Offer takes account of any counterclaim or set-off for the following sums which are payable by A&V to JBH irrespective of the outcome of claim number HT-2023- 000006:

Mr Smith's fees in the final account adjudication £13,962.00

JBH costs awarded in claim number HT-2022-000444 £20,822.00

Total £34,784.00

Terms of the Offer

This Offer is made pursuant to Part 36 of the Civil Procedure Rules ("CPR"), and is intended to be JBH's (the Defendant's) Part 36 offer. Therefore, JBH will be liable for A&V's costs of the proceedings in accordance with CPR 36.13, if the offer is accepted within 21 days of the deemed service date of this Offer, i.e. by 4 December 2023 (the "relevant period").

The terms of the Offer are as follows:

•

JBH will pay A&V the sum of £100,000, including interest, (the "Settlement Sum") in full and final settlement of claim no. HT-2023-000006 and all claims either party may have against one another in respect of and/or arising out of the Mouslecoomb Campus project.

•

The Settlement Sum will be paid within 14 days of acceptance of the Offer, by electronic bank transfer to A&V's bank account (the details of which JBH already has).

•

For the avoidance of doubt, the Offer takes account of any counterclaims.

•

The settlement sum does not include the costs of the proceedings and, as indicated above, JBH will pay A&V's costs in respect of claim number HT-2023-000006 on the standard basis to the date of notice of acceptance of this Offer, if it is accepted within the relevant period. Such costs to be assessed if not agreed. A&V's entitlement to the costs of the proceedings will need to take account of (and not include) prior costs orders already made.

•

Following acceptance of the Offer, the parties will file a Consent Order staying Claim Number HT-2023-000006 upon the terms of the Offer.

Consequences of Failure to Accept

If A&V does not accept the Offer, and JBH obtains a judgment which is equal to or more advantageous than the Offer, JBH intends to rely on CPR 36.17. In other words, JBH will be seeking an order that A&V pays JBH its costs from the date when the relevant period expires and interest on those costs.

If A&V considers the Offer to be in any way defective or non-compliant, please let us know by return.

63.

It is J&BH’s submission that A & V failed to beat this offer. A & V submits that it did beat this offer.

64.

In the Defendant’s Costs Submission Bundle which accompanied its first round of Submissions on Costs, there is a helpful calculation of the state of account as at the date of this Part 36 Offer. This shows the amounts awarded in the following sums:

Contract Sum	£96,535.83
Interest on Contract Sum	£25,566.13
Damages	£6,096.64
Interest on damages	£963.34
Mr Blizzard’s fees	£17,400
Interest on Mr Blizzard’s fees	£2,210.87
Total	£148,772.81

65.

Thus, stopping there, A & V comfortably beat this offer. However, there are two further factors to consider.

66.

The first is that by the offer JBH offered to forego claims totalling £34,784.00 which are treated as being counterclaims in the proceedings.

67.

I have held in Judgment No. 7 that J&BH is entitled to recover Mr Smith’s fees in the sum of £13,962. As to the costs, I have also held in paragraph 512 of Judgment No. 5 that I have no jurisdiction to interfere with this order.

68.

Accordingly, I accept that the real value of this offer should include these amounts. Accordingly the comparison is between £134,784.00 plus interest and the final result. J&BH’s calculations show that when interest is taken into account on both sides of the equation the amount recovered is equivalent to £111,595.48 at the relevant date. Thus taking into account the sum of £34,784 does not on its own change the result so far as the 9 November 2023 offer is concerned.

69.

There is a second point: this relates to the Construction Industry Scheme.

70.

As I set out at paragraphs 28 to 36 of Judgment No. 7, J&BH contends that the amount payable to A & V should be reduced by 20% because of a requirement on J&BH to account to the HMRC for amounts which A & V might owe HMRC in respect of taxes.

71.

It is J&BH’s submission that in considering the amount recovered by A & V for the purposes of assessing the 9 November 2023 offer, I should take a figure after deduction of the 20% said to be payable to HMRC. The point is put as follows in paragraphs 13 and 14 of the Defendant’s Cost Submissions:

13.
The Defendant’s calculation of the account following Judgments No. 5 to 7, is that the net sum due to the Claimant as at 4 December 2023 (before any CIS deduction) was £111,585.48….
14.
The Judgment would be more advantageous to the Claimant (by £11,585.48), save that if the CIS Deduction is applied to the amount to be paid to A & V under the Judgment (a deduction of £19,307.17), then it is less advantageous. A & V would only have received £92,288.31 under the Judgment.

72.

I reject this submission.

73.

Firstly, I refer to what I said in paragraphs 32 to 34 of Judgment No 7:

32.
On one view, this point is a point which should have been raised by J&BH before the hand down of my Fifth judgment, insofar as it goes to the amount payable by J&BH to A & V. I do not understand that to be how J&BH puts its case, and, for the avoidance of doubt, I record that my Fifth judgment stands as determining the amounts due from one Party to the other subject to the exceptions in respect of adjudicators’ fees and interest, and in respect of the enforcement proceedings between the Parties (Mr Smith’s fees and the Enforcement Costs).
33.
If the point does not go to the state of account between J&BH and A & V, then no issue of res judicata arises.
34.
In my judgment, the time at which this point will become relevant is when I decide whether there should be a stay on any part of the judgment in favour of A & V against J&BH, and, if so, upon what terms.

74.

In my judgment, what J&BH now seeks to do goes directly against what I said in paragraph 32 of Judgment No. 7:

I record that my Fifth judgment stands as determining the amounts due from one Party to the other subject to the exceptions in respect of adjudicators’ fees and interest, and in respect of the enforcement proceedings between the Parties (Mr Smith’s fees and the Enforcement Costs).

75.

Secondly, it seems to me that J&BH’s submissions miss an important point: whilst the CIS arrangement may require a payment to be made in part to HMRC rather than to A & V, it is a payment made in effect on behalf of A & V on account of A & V’s liability for taxes, and thus A & V is benefitted to the extent that its account with HMRC is credited with that amount.

76.

Thirdly, J&BH’s liability for payment overall is not reduced: it still has to pay the amount which I have adjudged to be due, but pays part to HMRC rather than to A & V. Accordingly, J&BH is in no way advantaged.

77.

Fourthly, it would be fundamentally unfair for me to hold against A & V a point of which neither party was aware when the 9 November 2023 offer was made by J&BH and considered by A & V.

78.

Finally, the point, although known about by J&BH by 15 March 2024 (see paragraph 36 of J&BH’s submissions recorded at paragraph 30 of Judgment No. 7) was not raised by J&BH until I was considering the consequential matters covered by Judgment No. 7: all that time both Parties were incurring costs.

79.

For those reasons, when considering the effect of the 9 November 2023 offer, I hold that it was an inadequate offer. Alternatively, it would be unjust to take the CIS deduction into account when considering the 9 November 2023 offer in accordance with the terms of CPR Part 36.17(3), particularly having regard to the fourth and fifth points I have made above.

80.

On 10 November 2023 A & V made a Counter-Offer:

We are writing to respond to your Part 36 Offer dated 9 November 2023. After careful consideration, and while A&V are confident of being successful in this matter A&V are willing to make a counteroffer in an effort to reach an amicable resolution.

Details and Terms of the Counteroffer:

Amount Offered for Settlement: £600,000, including interest+ VAT.

Time Limit for Acceptance: This counteroffer is valid until l51 December 2023 [21 days from the date of this letter], in accordance with Part 36 rules.

Costs: The settlement sum includes costs of the proceedings up to the date of acceptance.

JBH to pay A&V the sum of £600,000, including interest + VAT [the Settlement Sum] in full and final settlement of claim no. HT-2023-000006 and all claims either party may have against one another in respect of and/or arising out of the Mouslecoomb Campus project….

81.

It is doubtful whether this offer complied with Part 36, but, in any event, J&BH very comfortably beat this offer.

82.

On 8 February 2024 J&BH made a further offer. Again, in my judgment, as with the 9 November 2023 offer, it complied with Part 36.

83.

The only difference from that offer, apart from irrelevant changes to the opening paragraphs, was that the offer was now for £160,000, rather than £100,000.

84.

To return to the calculations to which I referred above, the equivalent to the £148,772.80 figure relevant for consideration of the 9 November 2023 offer is £152,380.67.

85.

On the basis of this calculation, in my judgment A & V failed to beat this offer.

86.

Further, by the same reasoning as in respect of the 9 November 2023 offer, this offer was worth not just £160,000, but rather £194,784.

87.

Having reached those conclusions as to the efficacy of the various offers and counter-offers, I turn now to the effect of those conclusions.