Bexheat Ltd v Essex Services Group Ltd
| Jurisdiction | England & Wales |
| Judge | Mrs Justice O'Farrell |
| Judgment Date | 19 April 2022 |
| Neutral Citation | [2022] EWHC 936 (TCC) |
| Docket Number | Case No: HT-2021-000450 |
| Court | Queen's Bench Division (Technology and Construction Court) |
[2022] EWHC 936 (TCC)
Mrs Justice O'Farrell DBE
Case No: HT-2021-000450
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
TECHNOLOGY AND CONSTRUCTION COURT (QBD)
Royal Courts of Justice
Rolls Building
London, EC4A 1NL
Nicholas Kaplan (instructed on a direct access basis, through Harris Consulting International as intermediary) for the Claimant
Lucie Briggs (instructed by Druces LLP) for the Defendant
Hearing date: 13 th January 2022
APPROVED JUDGMENT
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
This is an application by the claimant (“BHL”) for summary judgment to enforce the adjudication decision of Mr Silver dated 12 November 2021 (“the Second Adjudication Decision”), directing the defendant (“ESG”) to pay to BHL £706,029.62 plus interest and the adjudicator's fees.
ESG resists enforcement on the grounds that:
i) the true value of the application payment the subject of the Second Adjudication Decision had already been determined in an earlier adjudication by another adjudicator, Mr Cope (“the First Adjudication”);
ii) ESG has a contractual entitlement to set off or make deductions against the adjudicator's award in respect of any amounts which may at any time be due or have become due from BHL to ESG;
iii) BHL deprived ESG of its contractual right to elect to have the true value of the application payment in dispute determined at the same time by the same adjudicator as the notified sum dispute;
iv) the adjudicator had no jurisdiction to award compensation pursuant to the Late Payment of Commercial Debts (Interest) Act 1998 (“the 1998 Act”) and that part of the award should not be enforced.
Alternatively, ESG seek a stay of enforcement on the grounds that:
i) there is a real risk that any subsequent determination requiring return of any part of the judgment sum would go unsatisfied by reason of BHS's financial position; and/or
ii) BHL has organised its financial affairs with the purpose of dissipating or disposing of the judgment sum.
The Contract
The dispute arises out of a project for the construction of a residential and extra care facility, comprising a double level basement and ground floor plus five storey building. ESG was engaged as sub-contractor for the MEP works.
By a contract dated 8 October 2019, BHL was engaged by ESG as sub-sub-contractor to carry out the plumbing works (“the Contract”).
The contract sum was £1,035,000, subject to adjustment in accordance with the Contract.
The Contract contains provisions for interim payments to be made on specified dates as set out in clause 19 and the Second Schedule:
“19.4 In accordance with the dates specified in the Second Schedule (or as the Parties otherwise agree), the Sub-subcontractor shall as a condition precedent to being paid submit an application for payment for work carried out specifying the sun the Subsubcontractor considers to be due and the basis on which it has been calculated 7 days before the end of the calendar month (“ Interim application”). The payment due date in relation to each payment to be made under this Sub-subcontract will be the last calendar day of the month of a valid interim application (the “ Due Date”).
19.5 Within 15 days of the last calendar date of the month of a valid Interim Application, the Sub-Contractor may give to the Sub-subcontractor a notice specifying the sum that the Sub-Contractor considers to be due as at the payment due date and the basis on which it has been calculated (“ Payment Notice”).
19.6 Subject to clauses 19.7 and 19.8, the Sub-Contractor shall pay to the Sub-subcontractor on or before the final date for payment the amount specified in the Payment Notice in accordance with clause 19.5 or, if no such notice is given, the amount specified in the Interim Application.
19.7 Not later than one working day before the Final Date for Payment, the Sub-Contractor may give to the Sub-subcontractor a notice of its intention to pay less than the amount which becomes due under clause 19.6 specifying the sum that the Sub-Contractor considers to be due on the date the notice is given and the basis upon which it has been calculated (“ Pay-Less Notice”). In such a case the amount due will be the amount specified in the Sub-Contractor's notice under clause 19.7.
19.8 The final date for payment of any amount which becomes due under an Interim Application is 45 days after the Due Date (“ Final Date for Payment”). The Sub-Contractor shall pay to the Sub-subcontractor the sum stated in the Pay Less Notice on or before the Final Date for Payment.
19.9 For the avoidance of doubt all payments made in respect of and in response to Interim Applications shall be on account only and not conclusive as to the final value of any part thereof.”
Clause 30 of the Contract provides for adjudication as follows:
“30.1 Any dispute or difference between the Parties arising from, under or in connection with this Sub-Subcontract may be referred to adjudication at any time by either Party and the adjudication shall be conducted in accordance with the Scheme for Construction Contracts (England and Wales) Regulations 1998 (or as amended), save that the appointed Adjudicator shall also have the power to decide how the Party's legal costs of the adjudication shall be paid.
30.2 The Sub-Contractor shall be entitled to set off or make deductions against an Adjudicator's award in respect of any amounts which may at any time be due or have become due from the Sub-Subcontractor to the Sub-Contractor under the Sub-Subcontract or otherwise.
30.3 If the Sub-Contractor shall so elect the Adjudicator shall be entitled to adjudicate on more than one dispute at the same time and the parties agree that the Adjudicator shall so have jurisdiction and shall be entitled to set off one decision against another.”
The works achieved practical completion on 30 September 2021.
Disputes arose between the parties as to BHL's entitlement to payment, in particular, in respect of variations and prolongation costs.
There have been two adjudications in respect of those disputes.
The First Adjudication
On 19 July 2021 BHL submitted Payment Application 22 (dated 16 July 2021) in the gross sum of £1,832,071.87 for the valuation period to 31 July 2021, seeking a net payment of £678,885.78.
On 13 August 2021 ESG issued a Pay Less Notice, setting out its cumulative valuation of the works for that period of £1,170,729.19, giving rise to a net sum due to BHL of £4,808.44.
On 18 August 2021 BHL commenced the First Adjudication, seeking the following relief as set out in its Notice of Adjudication:
“1. That the true value of BHL's Application for Payment Number 22 dated 16 July 2021 is £2,010,121.83, plus any applicable VAT or such other value as the Adjudicator shall decide.
2. That the Respondent, ESG, shall pay to BHL on 13 September 2021 (the final date for payment of AFP22) the sum of £797,423.01 plus any applicable VAT or such other sum as the Adjudicator shell determine.
[3]. Should ESG fail to make payment of the sum due to BHL on 13 September 2021 that BHL is entitled to payment of interest in accordance with clause 19.18 of the Sub-Subcontract.
[4]. That BHL is entitled to be reimbursed compensation of £100.00 as compensation in accordance with the Late Payment of Commercial Debts (Interest) Act 1998, as amended, or such other sum as the Adjudicator shall determine.
[5]. That the Respondent immediately pays or reimburses the fees and expenses of the Adjudicator.”
Mr Jonathan Cope was appointed as the adjudicator in the First Adjudication.
In its response document, ESG sought the following orders by way of relief in the First Adjudication:
“10.1.1 That the true value of BHL's application for payment 22 is £8,740.553, or such other sum as the adjudicator may decide;
10.1.2 That BHL is not entitled to any further payment at this time under application for payment 22 dated 19 July 2021;
10.1.3 That BHL pay the adjudicators fees and expenses; and
10.1.4 The adjudicator gives reasons for his decisions.”
On 12 October 2021 the adjudicator issued his decision. The dispute was described in his decision as follows:
“4. The dispute concerns the true value of BHL's interim application for payment 22 dated 19th July 2021 (“AP22”), and BHL's entitlement to payment.
5. BHL valued the Sub-Subcontract Works, including the measured works, preliminaries, variations and claims, in the gross sum of £1,832,071.87 in AP22 and sought payment of the sum of £678,885.78. In ESG's Payless Notice issued on 13th August 2021 ESG valued the Sub-Subcontract Works in the sum of £1,170,729.19, and stated that the sum due for payment was £4,808.44. There is no dispute as to the validity of ESG's Payless Notice.
6. BHL now claims that the true value of the Sub-Subcontract Works set out in AP22 is £2,010,121.742 and that, taking into account the sums previously paid by ESG, it is entitled to payment of £797,423,01 in this adjudication. ESG now submits that the true value is £1,031,700.00, and that the resulting sum due is £3,932.11.
7. The difference between the parties' valuations mainly results from differing valuations of the variations and BHL's claims in the form of direct additional costs …
8. ESG notes that it currently has a contra-charge account against BHL in the current sum of £75,252.04, but it accepts that as this was not deducted...
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