ISG Construction Ltd v Seevic College [2014] EWHC 4007 (TCC)

This summary was provided by CMS Cameron McKenna LLP.

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

summary

Failure to serve payment notices and pay less notices in response to interim payment applications can result in the acceptance of the amount in the application, irrespective of the correct value, and preclude the paying party from bringing subsequent adjudications for a proper evaluation of the application.

Technology and Construction Court, Mr Justice Edwards-Stuart

background

Seevic College (“Seevic”) engaged ISG Construction Ltd (“ISG”) to carry out works pursuant to a JCT Design and Build Contract 2011 (the “Contract”).  The Contract provided for interim payments from Seevic to ISG at monthly intervals, and enabled Seevic to serve payment notices or pay less notices within prescribed timescales if it did not agree with or did not intend to pay the sum claimed by ISG.

In accordance with the Contract, ISG submitted Interim Application No 13 in May 2014 for approximately £1.1 million.  Seevic failed to pay the sum within the required timeframe and also failed to issue either a payment notice or pay less notice.  As a result, ISG referred the dispute to adjudication (the “First Adjudication”) and obtained a decision in its favour for the sum claimed in Interim Application No 13 plus interest.  This was decided on the basis that Seevic had failed to serve the requisite notices under the Contract and therefore had no grounds to dispute payment.

Seevic sought to reduce the impact of the decision by issuing a fresh Notice of Adjudication four days before the decision in the First Adjudication was issued (the “Second Adjudication”). Seevic sought a decision that the value of ISG’s works was less than the amount claimed by ISG in the First Adjudication.  The Adjudicator in the Second Adjudication agreed, concluding that the correct value of ISG’s works was £315,450.47, significantly less than the £1.1million originally awarded, and ordering ISG to repay the difference.

An application by ISG to enforce the decision in the First Adjudication was contested by Seevic on the basis of the decision in the Second Adjudication.  ISG applied for summary judgment to decide whether the decision in the Second Adjudication was invalid due to a lack of jurisdiction. 

issues

The Court was asked to decide whether the subject of the Second Adjudication was either the same or substantially the same as that which had been decided in the First Adjudication, to the extent that the value of the works in Interim Application No 13 had already been determined by the first decision.

DECISION

The Court granted summary judgment in favour of ISG and held that: 

  • As Seevic had failed to serve either a payment notice or pay less notice, the amount stated as the value of the works in Interim Application No 13 was deemed to be the correct value.  Following the judgment of His Honor Judge Humphrey Lloyd QC in Watkin Jones & Son Ltd v Lidl UK Gmbh [2002] EWHC 183 (TCC), this was irrespective of the true value of the works.  Neither party had the right to go back over old ground to revisit the valuation by issuing adjudication proceedings;   
  • Under the true construction of the Contract, ISG had no entitlement to be paid the value of works carried out except for through the contractual payment mechanism; and 
  • The value of the works in the Second Adjudication was therefore decided in the First Adjudication, which meant that the Adjudicator in the Second Adjudication did not have jurisdiction to act.

It should be noted that different conclusions as to similar issues were arrived at by the same judge in Harding 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

 

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