Building contract – Adjudication – Summary judgment – Dispute arising between claimant contractor and defendant concerning building contract – Matter being referred to adjudication — Claimant applying for summary judgment to enforce second adjudication decision – Whether court having jurisdiction to consider, in enforcement proceedings, issues previously addressed by adjudicator in first adjudication – Whether documents sent by claimant to defendant amounting to valid claim or payee’s notice – Application dismissed
Pursuant to a letter of intent, the defendant employer engaged the claimant contractor to carry out construction works at a site at Greenpoint, in Colindale, north London. Following the non-payment of an interim application, the claimant suspended works at the site, although they had already been largely completed. The matter was referred to adjudication and an award was made in favour of the claimant (the first adjudication). The defendant made some payments in respect of that award, but failed to pay the balance. The claimant later contended that the defendant had failed to pay further sums due under the contract and that matter was also referred to adjudication (the second adjudication). An award was made in favour of the claimant, based on the date on which the claimant had notified the defendant of the sum due.
The defendant did not deny that the balance in respect of the first adjudication was due and payable. However, it challenged the award made in respect of the second adjudication on the ground that the claimant had not made the relevant claim until 19 March 2015, which meant that the defendant’s “payless notice” dated 25 March, which was required if it wished to avoid paying the sum claimed, had been within the requisite time and provided a complete defence.
The claimant contended that it had made a fresh claim for payment in documents sent to the defendant on 13 February 2015. Accordingly, the defendant’s payless notice of 25 March had been issued out of time. The defendant argued that those documents did not amount to a claim for a payee’s notice of the sum due for payment as they did not state that the claimant was making a fresh application for an interim payment.
The claimant applied to enforce the decision in the second adjudication. Issues arose as to: (i) whether the judge dealing with enforcement had jurisdiction to deal with an issue which had already been decided by the adjudicator as to whether it was open to a defendant to seek to avoid payment of a sum found to be due by the adjudicator in the second adjudication, raising the same issue in which the adjudicator had ruled against it in the adjudication; and (ii) whether the documents sent by the claimant to the defendant on 13 February amounted to a valid claim so that the adjudicator in the second adjudication had erred in making the award.
Held: The application was dismissed.
(1) In order to determine the legal effect of the documents sent by the claimant to the defendant on 13 February 2015, the court had to have regard to both the contractual terms and the factual context in which those documents were sent. It was common ground that, if the adjudicator was wrong, and the documents did not constitute a proper claim for payment or a payee’s notice, it was not open to a defendant to seek to avoid payment of a sum found due by an adjudicator, by raising the very issue on which the adjudicator ruled against the defendant in the adjudication. However, if the issue was a short and self-contained point, which required no oral evidence or any other elaboration than that which was capable of being provided during a relatively short interlocutory hearing, the defendant might be entitled to have the point decided by way of a claim for a declaration. That procedure would rarely be used, because it was very uncommon for the point at issue to be capable of being so confined. However, in the present case, because of the common ground between the parties, this was one of those rare cases where the substantive point in issue could be determined at the enforcement hearing: Bouygues (UK) Ltd v Dahl-Jensen (UK) Ltd [2000] BLR 522 applied. Maxi Construction Management Ltd v Mortons Rolls Ltd [2001] CILL 1784-1787 and Geoffrey Osbourne Ltd v Atkins Rail Ltd [2010] BLR 363 considered.
(2) One of the more baleful effects of the amendments to the Housing Grants (Construction and Regeneration) Act 1996 had been a large increase in the number of cases before adjudicators (and thus before the Technology and Construction Court), in which the claimant contractor argued that the employer failed to serve its notices on time, and that therefore there was an automatic right to payment in full of the sum claimed. The employer’s failure to serve a payless notice within a short period challenging the payee’s notice could have draconian consequences. A failure to serve a notice in time would usually mean a full liability to pay. However, if contractors wanted the benefit of those provisions, they were obliged, in return, to set out their interim payment claims with proper clarity. If the employer was to be put at risk that a failure to serve a payless notice at the appropriate time during the payment period would render him liable in full for the amount claimed, he had to be given reasonable notice that the payment period had been triggered in the first place. In the present case, all of the claimant’s previous applications for interim payments properly set out the sum due by way of interim payment. But on 13 February, they did not say, clearly or at all, that they were making a fresh application for an interim payment. Moreover, when asked what the documents were, they did not say that they amounted to a fresh claim for an interim payment or a payee’s notice. It would therefore be wrong to treat the documents of 13 February as if they were. In the light of the lack of any express claim for an interim payment, and the absence of anything within them that could amount to a payee’s notice, the claimant’s case as to the meaning and effect of the documents of 13 February would be rejected. Accordingly, since it was common ground that, if there was no valid application on 13 February, both the preceding and the following applications for payment were the subject of legitimate payless notices, no sums in addition to the sum awarded in the first adjudication, were due from the defendant to the claimant in consequence of the second adjudication: ISG Construction Ltd v Seevic College [2014] EWHC 4007 (TCC); [2015] PLSCS 72 and Galliford Try Building Ltd v Estura Ltd [2015] EWHC 412 (TCC); [2015] PLSCS 74 considered.
William Webb (instructed by Hawkswell Kilvington Ltd, of Wakefield) appeared for the claimant; Christopher Lewis (instructed by Fenwick Elliott LLP) appeared for the defendant.
Eileen O’Grady, barrister
Click here to read the transcript: Caledonian Modular Ltd v Mar City Developments Ltd
