ISG Construction Ltd v Seevic College

JurisdictionEngland & Wales
JudgeMr Justice Edwards-Stuart,Mr. Justice Edwards-Stuart
Judgment Date03 December 2014
Neutral Citation[2014] EWHC 4007 (TCC)
Docket NumberCase No: HT-2014-000030
CourtQueen's Bench Division (Technology and Construction Court)
Date03 December 2014

[2014] EWHC 4007 (TCC)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

TECHNOLOGY AND CONSTRUCTION COURT

Royal Courts of Justice

Rolls Building

7 Rolls Buildings, London EC4A 1NL

Before:

Mr. Justice Edwards-Stuart

Case No: HT-2014-000030

Between:
ISG Construction Ltd
Claimant
and
Seevic College
Defendant

Alexander Hickey Esq (instructed by Pinsent Masons LLP) for the Claimant

Rupert Choat Esq (instructed by Birketts LLP) for the Defendant

Hearing dates: 14 th November 2014

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.

Mr Justice Edwards-Stuart Mr. Justice Edwards-Stuart

Introduction

1

This is an application for summary judgment by the Claimant ("ISG") to enforce an adjudicator's decision dated 5 September 2014 ("Adjudication No 1") and for a declaration that a decision by the same adjudicator (dated 10 October 2014) following a Notice of Adjudication dated 1 September 2014 ("Adjudication No 2") is invalid for want of jurisdiction.

2

In Adjudication No 1 the adjudicator, a Mr. Robert Juniper, decided that ISG was entitled to £1,097,696.29, being the sum claimed in ISG's Application No 13 plus interest, because the Defendant ("Seevic") had not served either a payment notice or a pay less notice in accordance with the provisions of the contract.

3

The Notice of Adjudication in Adjudication No 2 was served four days before Mr. Juniper made his decision in Adjudication No 1. It is clear that Seevic, aware that it had not served the relevant notices in time, was seeking to frustrate or reduce the impact of the likely decision in Adjudication No 1 in the hope that it could obtain a decision in Adjudication No 2 that the value of ISG's works up to the date of the application was less than the amount claimed by ISG.

4

In that it succeeded. By his decision dated 10 October 2014 (as corrected under the slip rule on 13 October 2014) the adjudicator decided in Adjudication No 2 that the value of ISG's works as at the date of Application No 13 was £315,450.47. In fact, the adjudicator accepted ISG's valuation of its measured works but did not accept the sum claimed by ISG for loss and expense, which was a little over £1 million. He concluded that the true value of the loss and expense claim was a little over £300,000 so that ISG had been overpaid. He therefore directed, on the assumption that Seevic had already paid ISG against Adjudication No. 1 that ISG should repay the difference, which was £768,525.36..

5

Seevic did not comply with the decision in Adjudication No 1, although it now accepts that it must do so, subject to the decision in Adjudication No 2. On 15 October 2014 Seevic issued a cheque in the sum of £315,450.47 in favour of ISG.

6

Mr. Alexander Hickey, instructed by Pinsent Masons, appeared for ISG. Mr. Rupert Choat, appeared for Seevic, instructed by Birketts,

The contract

7

A contractor's right to payment for work carried out depends on the terms of the contract. Prior to the passing of the Housing Grants, Construction and Regeneration Act 1996 ("the Act"), a builder who agreed to construct the building on the employer's land was not entitled to any payment if the work was abandoned before completion: Sumpter v Hedges [1898] 1 QB 673 (which is still good law — see Keating on Construction Contracts, 9 th edition, at 4–003) 1. In order to alleviate this position and to provide the contractor with adequate cash flow standard forms of

building contract usually made provision for the contractor to receive payment by instalments. There is now a statutory right to payment by instalments under section 109 of the Act (as now amended by Part 8 of the Local Democracy, Economic Development and Construction Act 2009).
8

The contract in this case is the JCT Design and Build Contract 2011. In accordance with the Act, this provides for interim payments to the contractor at defined intervals. The provisions are compliant with the statutory requirements.

9

The Contract Particulars provided that interim applications for payment were to be at monthly intervals from the date of possession, which was 11 February 2013. By clause 4.7.2, the sum due as an interim payment is an amount equal to the gross valuation of the work properly executed 2, as assessed by the contractor, less the sums already paid (and one or two other items, such as retention). The application by the contractor has to state the amount that the contractor considers to be due to him, and the basis on which that sum has been calculated. Following practical completion, applications are to be made at intervals of two months until the expiry of the Rectification Period.

10

The final date for payment of an interim payment is 14 days from its due date (which is the later of the specified date and the date of receipt by the employer of the interim application). If the employer disagrees with the amount of the contractor's interim application, it can serve a payment notice stating the amount that it considers to be due and the basis on which that sum has been calculated. That payment notice has to be served not later than five days after the due date.

11

The sum due to the contractor on an interim application is either the amount stated in the application or the lesser amount stated in the employer's payment notice, if it has served one. If the employer intends to pay less than the sum stated in the payment notice or interim application, as appropriate, because it claims to be entitled to withhold money on other grounds, it may give the contractor notice of that intention by serving a pay less notice no later than five days before the final date for payment. So, if the employer either does not agree with the sum claimed by the contractor in an interim application, or in any event does not intend to pay it, it must serve either a payment notice or a pay less notice, or both.

12

The only other circumstance under which the contractor is entitled to payment follows the submission of the Final Statement by the contractor. That sets out the Contract Sum, as adjusted in accordance with the provisions of the contract, and the sum of the amounts already paid. The Final Payment is the difference between these two sums (and so it may be a repayment).

13

There is no other entitlement to payment under the contract. The regime for payment under interim applications is set out in clauses 4.7 –4.10. There are ancillary provisions in clauses 4.13 and 4.14 (which are the two alternative bases for valuation) and clause 4.15 (in relation to payment for off-site materials). The regime for the Final Payment is set out in clause 4.12.

14

It follows that the contractor has no entitlement to be paid the value of his work at any arbitrary date during the course of the contract. His only entitlement to payment is either through the machinery for interim applications or, at the end of the project, following issue of the Final Statement. Conversely, if it has not complied with the notice provisions the employer has no right to seek a repayment of money paid to the contractor on the ground that either at the date of the last interim application or some subsequent date, the true value of the contractor's work was less than the gross amount stated in that application.

15

Section 108(1) of the Act gives a party to a construction contract the right to refer a dispute "arising under the contract" to adjudication at any time. This wording is reflected in Article 7 of the present contract, which provides that the parties may refer to adjudication any dispute that "arises under this contract".

The issues

16

In this application for summary judgment ISG seeks, not only to enforce the decision in Adjudication No 1, but also a declaration that the adjudicator in Adjudication No 2 had no jurisdiction to decide the matters referred in that adjudication because those matters are the same or substantially the same as those decided in Adjudication No 1.

17

The Contract Particulars state that any disputes were to be resolved finally by litigation and not by arbitration. There is, therefore, no jurisdictional impediment to the court making a final decision and giving a declaration on the rights of the parties in relation to the dispute that was the subject of Adjudication No 2.

18

Seevic has now accepted that, subject to the decision in Adjudication No 2, it has no defence to the application in respect of Adjudication 1. In relation to Adjudication No 2, ISG submits that, as between ISG and Seevic, the value of ISG's works as at the date of Application No 13 has been agreed because, in the absence of any notices served by Seevic, the value must be taken to be that stated in the application. Alternatively, ISG submits that, for essentially the same reason, there can be no dispute between the parties forming the subject matter of Adjudication No 2.

19

I now turn to ISG's first argument.

The value has already been determined

20

On behalf of ISG Mr. Hickey submitted that the question of the value of the works which Mr. Juniper decided in Adjudication No 2 had necessarily been decided by in Adjudication No 1 because the effect of the payment notice regime meant that there could be no dispute about the value of the work the subject of Application No 13.

21

Mr. Choat submitted that the valuation of ISG's works had been specifically excluded from Adjudication No 1. This submission is correct insofar as Mr. Juniper stated expressly in Adjudication No 1, at paragraph 5.9, that:

"For the avoidance of doubt I record that I have made no decision as to whether or not that is the correct value of work undertaken by ISG."

22

The facts of this case are very similar to those of Watkin Jones & Son Ltd v Lidl UK GmbH [2002] EWHC 183...

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