Galliford Try Building v Estura Ltd [2015] EWHC 412 (TCC)

This summary was provided by CMS Cameron McKenna LLP.

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

summary

The paying party under a JCT Design and Build form of contract who has (a) failed to provide pay less or payment notices to dispute an interim payment application, and (b) been found at adjudication to owe the sum due, has no right to commence a second adjudication to determine the true valuation of the interim application. For final account payments, however, subsequent adjudication may still be an option.

Technology and Construction Court, Mr Justice Edwards-Stuart

background

Galliford Try Building (“GTB”) was employed by Estura to carry out works at the Salcombe Harbour Hotel, Devon under an amended JCT Design and Build Contract 2011 (the “Contract”).

GTB served Interim Application 60, which was one of the last Interim Applications due under the Contract. This anticipated a Final Account of £12.66 million, significantly more than the Contract value and including more than £1 million in respect of a disputed variation account and almost £3 million for loss and expense. Estura failed to serve either a Payment Notice or Pay Less Notice to dispute the sum within the contractual timescales, and also failed to pay the sums due. GTB referred the dispute to adjudication and obtained a decision in its favour ordering payment based on the absence of any Payment or Pay Less Notice by Estura.

One week after adjudicator’s decision, Estura commenced a second adjudication, seeking a declaration that the correct amount owed in respect of the Interim Application was the lower figure of £9.892 million. The second adjudicator declined to proceed, finding that he had no jurisdiction to act due to the first adjudication. While it was not expressly stated by the second adjudicator, it was likely that this was due to the approach of the Court in the earlier case of ISG Construction Ltd v Seevic College, where it was found that an adjudicator in a similar scenario considering the calculation of an Interim Payment did not have jurisdiction.

GTB applied for summary judgment to enforce the decision made by the first adjudicator.

issues

The Court was asked to decide:

  • Whether the first adjudicator answered all of the questions put to him or whether there was a breach of natural justice; 
  • Whether the second adjudicator had jurisdiction to consider the amount owed under the Interim Application in light of the judgment in ISG v Seevic, or whether the judgment in Harding v Paice should be followed, in which an adjudicator deciding the same position in light of a Final Account was found to have jurisdiction; and 
  • Whether Estura should be awarded a stay of execution due to its impecuniosity.

DECISION

The Court granted summary judgment in favour of GTB : 

  • The first adjudicator answered all of the questions put to him and did not breach the rules of natural justice. 
  • The court’s previous decisions in Seevic and Harding v Paice were not contradictory due to the different mechanisms in the JCT Design and Build form for Interim Applications and payments on termination: 
  • In the case of an Interim Application, such as in this case and in Seevic, the amount of the Interim Payment is stipulated by the relevant JCT DB clause to be the “sum stated as due in the Interim Application”, unless a Payment Notice or Pay Less Notice is correctly served by the employer. Once an adjudicator has found that these Notices have not been correctly served, the employer has no right to commence a second adjudication to consider the true valuation of the Interim Application. As a result, Estura did not have a right to question the Interim Application and the second adjudicator was correct to find that he did not have jurisdiction to act. 
  • In the case of a payment on termination, the entitlement under the JCT is for the amount “properly due”. This allows the employer to commence a second adjudication to challenge the contractor’s Final Account, as was the case in Harding. 
  • Estura was granted a stay of execution. This was an unusual decision made in exceptional circumstances, as GTB was the innocent party and had not caused Estura’s financial situation. The Court found that it was necessary, however, as GTB did not have any incentive to submit its Final Account or reach practical completion as things stood after the first adjudication. By granting the stay, the contractual programme could continue, allowing the true value of the Interim Application to be assessed on the Final Account. 

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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