Adjudication – Enforcement – Summary judgment – Claimant contractor applying for summary judgment to enforce adjudication award in its favour – Whether defendant being required to submit to summary judgment – Whether defendant entitled to stay of enforcement – Claim allowed in part
The claimant contractor was engaged by the defendant, as employer, under an amended JCT Design and Build Contract 2011, to design and build certain works at the Salcombe Harbour Hotel in Devon. The contract contained payment terms that complied with the Housing Grants Construction and Regeneration Act 1996, as amended.
The contract provided that if, following receipt of an application for an interim payment, the defendant did not agree with the amount stated in the application, it was entitled to serve a payment notice within five days of the due date or, if later, receipt of the application. If it did not serve a payment notice, the amount payable under the application became the amount stated in the application. In addition, the defendant had a right to serve a further pay less notice if it considered that it was entitled to set off against the amount claimed other sums which were not the subject of the application.
A dispute between the parties concerning the amounts payable under interim application IA 60 was referred to adjudication. It was not disputed that the defendant had failed to serve either notice with the result that the claimant became entitled to the sum stated in the application. About a week after the adjudicator’s decision, the defendant commenced a second adjudication seeking a decision that the amount of the gross valuation stated in IA 60 should have been much lower. The adjudicator appointed in the second adjudication declined to proceed on the basis that he lacked jurisdiction.
The claimant applied for summary judgment to enforce the adjudicator’s award. The defendant resisted the claim, arguing that, in the exceptional circumstances of this case, it should not be required to submit to summary judgment. The defendant said that the effect of the adjudicator’s award was that the claimant had recovered almost everything that it was hoping for so that it had no incentive to submit its final account to enable the sum that was properly due to it to be challenged and reassessed.
Held: The claim was allowed in part.
(1) If an employer failed to serve the relevant notices under this form of contract, it was deemed to have agreed the valuation stated in the relevant interim application. Accordingly, the adjudicator was to be taken to have decided the question of the value of the work carried out by the contractor for the purposes of the interim application in issue. However, the agreement as to the amount stated in a particular interim application (and hence as to the value of the work on the relevant valuation date) could not constitute any agreement as to the value of the work at some other date. That meant that the employer could not bring a second adjudication to determine the value of the work at the valuation date of the interim application in question. But there was nothing to prevent the employer challenging the value of the work on the next application, even if he was contending for a figure that was lower than the unchallenged amount stated in the previous application: Rupert Morgan Building Services (LLC) Ltd v Jervis [2004] 1 WLR 1867 and ISG Construction Ltd v Seevic College [2014] EWHC 4007 (TCC); [2015] PLSCS 72 applied.
(2) Parties had to comply with the decisions of adjudicators in the order in which they were made, even if an earlier decision was overtaken by a later decision. A potential anomaly was presented by the application of that principle in that the rights of the parties might be determined differently, albeit on a provisional basis, only, depending on the order in which the adjudications took place. It was not the case that a party could never challenge a palpably wrong interim application but what it could not do, except by way of CPR, part 8 proceedings or otherwise by litigation, was challenge the adjudicator’s decision as to the sum to which the claimant became contractually entitled on the due date in respect of IA 60. Alternatively, the defendant could start proceedings for a determination of the claimant’s final account, although that would not help the defendant in terms of cash flow. Since there was no arbitration clause in the contract, any final determination of a matter decided by an adjudicator would be resolved by litigation, not by arbitration: Interserve Industrial Services Ltd v Cleveland Bridge [2006] EWHC 741 (TCC) and ISG Construction Ltd v Seevic College [2014] EWHC 4007 (TCC); [2015] PLSCS 72 considered.
(3) Although the claimant was entitled to judgment, the purpose of the 1996 Act was to provide a statutory framework which would enable justice to be done between parties to a dispute. In appropriate cases, that could be dealt with by the grant of a stay, although the jurisdiction in adjudication enforcement cases to grant a stay under the Civil Procedure Rules had to be limited to cases where there was a risk of manifest injustice. In the present case, there was no suggestion that the claimant might not be good for the money if the adjudicator’s decision was overruled in subsequent litigation. However, on the evidence, the court was bound to find that payment of the award in full would probably be impossible for the defendant to achieve. Although there was no available defence to the application for summary judgment, in the very unusual circumstances of this case it would not be fair to the defendant to refuse to grant any stay at all. Accordingly, enforcement of the judgment would be stayed above the sum of £1.5 million, subject to certain conditions, with liberty to the claimant to apply to vary the stay in the event that fresh information came to light in relation to the defendant’s financial circumstances or if there was any other significant change in circumstances: Hillview Industrial Developments (UK) Ltd v Botes Building Ltd [2006] REWHC 1365 (TCC) followed.
Alexander Hickey (instructed by Pinsent Masons LLP) appeared for the claimant; Adrian Williamson QC (instructed by Mishcon de Reya) appeared for the defendant.
Eileen O’Grady, barrister
