Matthew Harding t/a M J Harding Contractors v Paice [2014] EWHC 3824 (TCC)

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-cmck.com/Construction/Construction-Disputes

summary

An Adjudicator’s Decision that a Pay Less Notice was invalid did not preclude the referral of a subsequent dispute which alleged that the amount “properly due” under a Contract was less than the amount awarded in the earlier Decision.

Technology and Construction Court, Mr Justice Edwards-Stuart

background

The Claimant contractor, M J Harding Contractors (“Harding”), was employed by the Defendants, Gary George Leslie Paice and Kim Springall (“Paice and Springall”) under an amended JCT Intermediate Form of Building Contract 2011 dated 25 March 2013 (the “Contract”).  The Contract incorporated the adjudication provisions of the Scheme for Construction Contracts (the “Scheme”).

 There were a number of adjudications under the Contract.  In what became known as “the Third Adjudication”, Harding requested a declaration from the Adjudicator (the “Third Adjudicator”) that Paice and Springall should pay the sums due in respect of his latest account, being £397,912.48 plus VAT, following Harding’s termination of the Contract.  The Adjudicator decided that Harding had terminated the Contract correctly and, in the absence of a valid Pay Less Notice from Paice and Springall as required under the Scheme, Paice and Springall were required to pay the £397,912.48 applied for in Harding’s account. The Adjudicator expressly noted, however, that he was not deciding whether that figure represented a correct valuation of the Works.

In October 2014, Paice and Springall commenced a fresh adjudication, known as “the Fourth Adjudication”.  They relied upon Clause 8.12.5 of the Contract, which stated that they were only required to pay “the amount properly due in respect of the account within 28 days”, rather than the amount stated in Harding’s account.  From this Paice and Springall requested a declaration from the Adjudicator (the “Fourth Adjudicator”) that the lower sum of £340,032.60 was due, rather than the £397,912.48 awarded in the Third Adjudication.

Harding applied to the Court for an injunction to restrain Paice and Springall from proceeding with the Fourth Adjudication.

issues

The Court was asked to decide: 

  • Whether Paice and Springall acted unreasonably and/or oppressively by pursuing the Fourth Adjudication without first complying with the Decision of the Third Adjudication; and 
  • Whether the Fourth Adjudicator had jurisdiction, or whether the dispute was the same or substantially the same as that which had been decided in the Third Adjudication.  The latter would require the resignation of the Fourth Adjudicator under Paragraph 9(2) of Part I of the Scheme. 

DECISION

The Court refused to grant the injunction in favour of Harding, and held that: 

  • A letter from Paice and Springall stating that they would not defend an enforcement application in relation to the Third Adjudication but requesting further time for payment undermined Harding’s argument that they had acted unreasonably and/or oppressively; 
  • The Fourth Adjudicator had jurisdiction as the Third Adjudicator had not determined the “amount properly due” under Clause 8.12.5 of the Contract.  The Third Adjudicator had specifically stated that they had “not decided that £397,912.48 represents a correct valuation of the works”, and had instead focused his Decision on the validity of the Pay Less Notice; 
  • The fact that there was not a valid Pay Less Notice did not mean that the sum claimed by Harding was “properly due” to the extent that Paice and Springall could not reopen the issue.  To determine this would produce draconian results.  For example, a failure to serve a valid Pay Less Notice in time would deprive an employer of the right to challenge the contractor’s account, which could lead to an irrecoverable windfall in the event that the contractor had overvalued his account; and 
  • Paragraph 9(2) the Scheme requires an adjudicator to resign “when the dispute is the same or substantially the same which has previously been referred to adjudication, and a decision has been taken in that adjudication”. Under the proper construction of this paragraph, the decision by a first adjudicator on a party’s primary case does not preclude a second adjudicator from deciding an alternative case.  Therefore the fact that the Third Adjudicator had considered that the Pay Less Notice was invalid did not preclude the Fourth Adjudicator from deciding whether the sum due in Harding’s account was correct.

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-cmck.com/Construction/Construction-Disputes

 

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