Adjudication – Award – Summary judgment – Defendant subcontractor engaging claimant to carry out plumbing works on residential care facility – Dispute arising about contract sum – Claimant seeking to enforce award by adjudicator – Whether true value of application payment determined in earlier adjudication – Whether second adjudicator’s decision valid and enforceable – Application granted
The claimant applied for summary judgment to enforce an adjudicator’s decision which directed the defendant to pay to the claimant £706,029.62 plus interest and the adjudicator’s fees. The dispute arose out of a project for the construction of a residential and extra care facility comprising a double-level basement and ground floor plus five-storey building. The defendant was engaged as subcontractor for the mechanical, electrical and plumbing works. By a contract dated 8 October 2019, the claimant was engaged by the defendant as subcontractor to carry out the plumbing works. The contract sum was £1,035,000, subject to adjustment in accordance with the contract.
The defendant argued that: the true value of the application payment had already been determined in an earlier adjudication; it had a contractual entitlement to set off or make deductions against the adjudicator’s award in respect of other amounts due from the claimant; it had been denied its contractual right to elect to have the true value of the disputed application payment determined at the same time by the same adjudicator as the notified sum dispute; and the adjudicator had no jurisdiction to award compensation pursuant to the Late Payment of Commercial Debts (Interest) Act 1998 and that part of the award should not be enforced.
In the alternative, the defendant sought a stay of enforcement on the grounds that there was a real risk that any subsequent determination requiring return of any part of the judgment sum would go unsatisfied by reason of the claimant’s financial position and/or the claimant had organised its financial affairs with the purpose of dissipating or disposing of the judgment sum.
Held: The application was granted.
(1) Where a valid application for payment had been made by a contractor in accordance with the terms of a construction contract falling within the Housing Grants, Construction and Regeneration Act 1996, an employer who failed to issue a valid payment notice or pay less notice had to pay the “notified sum” in accordance with section 111 of the 1996 Act by the final date for payment. If the employer failed to do so, the contractor was entitled to seek payment of such sum by obtaining an adjudication award in its favour. The courts took a robust approach to adjudication enforcement, enforcing the decisions of adjudicators by summary judgment regardless of errors of procedure, fact or law, unless the adjudicator had acted in excess of jurisdiction or in serious breach of the rules of natural justice: Carillion v Devonport Royal Dockyard [2005] EWHC 778 (TCC); [2005] EWCA 1358 (CA) and Bresco Electrical Services Ltd v Michael J Lonsdale (Electrical) Ltd [2020] UKSC 25; [2020] EGLR 29 followed.
Where a party was required to pay the notified sum by reason of its failure to issue a valid payment notice or pay less notice, it was entitled to embark upon a “true value” adjudication in respect of that sum, but only after it had complied with its immediate payment obligation under section 111 of the 1996 Act: S&T (UK) Ltd v Grove Developments Ltd [2018] EWCA Civ 2448 applied.
(2) A material issue in these proceedings was the impact of the first adjudication decision; whether it affected the validity of the second adjudication decision; and whether the defendant was entitled to rely on the true valuation in the first adjudication against any obligation to satisfy the second adjudication decision. The parties were bound by the decision of an adjudicator on a dispute or difference until it was finally determined by court or adjudication proceedings or by an agreement made subsequently by the parties. They could not seek a further decision by an adjudicator on a dispute or difference if it that had already been the subject of a decision by an adjudicator. On analysis, the dispute or difference that was the subject of the first adjudication was not the same or substantially the same as the dispute or difference in the second adjudication: HG Construction Ltd v Ashwell Homes (East Anglia) Ltd [2007] EWHC 144 (TCC) and Benfields Construction Ltd v Trudson (Hatton) Ltd [2008] EWHC 2333 considered.
(3) An employer who was subject to an immediate obligation to discharge the order of an adjudicator based upon the failure of the employer to serve either a payment notice or a pay less notice had to discharge that immediate obligation before he would be entitled to rely upon a subsequent decision in a true value adjudication. That applied equally to interim and final applications for payment. Unless and until an employer had complied with its immediate payment obligation under section 111, it was not entitled to commence, or rely on, a true value adjudication under section 108: S&T (UK) Ltd v Grove Developments Ltd applied.
In the present case, as the defendant failed to comply with its immediate payment obligation in respect of the notified sum, it was not entitled to adjudicate on the true value dispute. Further, even if both disputes were before the adjudicator, the claimant would be entitled to rely on section 111, which required the defendant to pay the notified sum by the final date for payment, unless it had specified a lesser sum in a timeous payment or pay less notice, prior to any determination of the true value dispute. Therefore, the defendant had no defence to the application for enforcement of the second adjudication award and the claimant was entitled to summary judgment: Cantillon Ltd v Urvasco Ltd [2008] EWHC 282 (TCC) and Willow Corp SARL v MTD Contractors Ltd [2019] EWHC 1591 (TCC) considered.
(4) CPR 83.7 empowered the court to grant a stay of execution of a judgment for payment of money if it was satisfied that there were special circumstances which rendered it inexpedient to enforce the judgment or the applicant was unable for any reason to pay the money. In the present case, the claimant was not at risk of insolvency and there was no evidence that it intended to dissipate any sums that would be paid pursuant to the decision. Accordingly, the circumstances of the case were not so exceptional as to justify a stay of execution: Wimbledon Construction Company 2000 Ltd v Vago [2005] EWHC 1086 applied.
It followed that the second adjudication decision was valid and enforceable and the claimant was entitled to summary judgment.
Nicholas Kaplan (instructed by Direct Access) appeared for the claimant; Lucie Briggs (instructed by Druces LLP) appeared for the defendant.
Eileen O’Grady, barrister
Click here to read a transcript of Bexheat Ltd v Essex Services Group Ltd
