Kersfield Developments (Bridge Road) Ltd v Bray and Slaughter Ltd
| Jurisdiction | England & Wales |
| Judge | Mrs Justice O'Farrell |
| Judgment Date | 18 January 2017 |
| Neutral Citation | [2017] EWHC 15 (TCC) |
| Docket Number | Case No: HT-2016-000299 & HT-2016-000305 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 18 January 2017 |
[2017] EWHC 15 (TCC)
Mrs Justice O'Farrell DBE
Case No: HT-2016-000299 & HT-2016-000305
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justin Mort QC (instructed by Royds Withy King) for the Claimant
Mr Michael Wheater and Mr Michael Levenstein (instructed by Temple Bright LLP) for the Defendant
Hearing date: 13 December 2016
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.
Introduction
There are two matters before the court. By way of a Part 8 application the claimant ("Kersfield") seeks against the defendant ("Bray"):
i) a final determination of the dispute between the parties determined in the adjudication decision of Mr Peter Gracia dated 31 October 2016; and
ii) a declaration that:
"Without prejudice to the claimant's obligation arising under section 111(1) of the Housing Grants, Construction and Regeneration Act 1996 as amended ("the Act") to pay the "notified sum," the claimant is entitled to dispute such valuation if and insofar as it conflicts with what the parties have agreed is to be paid at clauses 4.7 and 4.14 of the contract conditions, and to refer such dispute to adjudication or other proceedings."
By way of separate proceedings, Bray seeks summary judgment pursuant to Part 24 of the Civil Procedure Rules to enforce the adjudication decision of Mr Peter Gracia dated 31 October 2016, in which he directed Kersfield to pay Bray the sum of £1,131,751.96 plus VAT and interest, and to pay the adjudicator's fees and expenses in the sum of £17,836.50.
Kersfield's case is that Bray is not entitled to the sums awarded by the adjudicator because, on a proper interpretation of the contract and relevant documents, Bray's application for interim payment no.19 was not in accordance with the contract and/or Kersfield issued a valid payment notice and/or a valid pay less notice. There is also an objection to enforcement of the award on the grounds of procedural unfairness. Kersfield's alternative case is that, even if the adjudication decision is correct, it is entitled to dispute Bray's contractual entitlement to the interim application payment on the substantive merits of the valuation and is entitled to refer such dispute to a further adjudication.
Bray's case is that the adjudicator was correct to find that the application was in accordance with the contractual requirements and that Kersfield failed to serve a valid payment or pay less notice. There was no procedural unfairness and Bray is entitled to the sum claimed in full. Bray opposes the declaration sought by Kersfield on the basis that a further adjudication in respect of the underlying valuation of the works would be an improper attempt to refer to adjudication the same or substantially the same dispute decided by Mr Gracia.
Kersfield applies for a stay of any judgment in favour of Bray on the grounds that it is not in a position to pay the sum awarded by the adjudicator and Bray will not be in a position to repay that sum if found not to be due on a proper valuation of the claim. On the application of Kersfield, I permitted the parties to submit further evidence and written submissions following the oral hearing so as to provide the court with the best available information in respect of this issue.
Factual Background
By a contract dated 5 January 2015 made between Kersfield and Bray, Bray agreed to carry out the refurbishment and conversion of a mansion house and stable block, and construction of detached houses at Burwalls, Bridge Road, Leigh Woods, North Somerset BS8 3PD for the contract sum of £4,959,000 or such other sum as should become payable in accordance with the contract.
The contract incorporated the conditions of the JCT Design and Build Contract (2011 edition) as further amended by the parties.
The contract makes provision for periodic interim payments to be made, the first payment being due on 5 February 2015 and thereafter on the same date in each month or the nearest Business Day in that month.
On 5 August 2016 Bray issued an interim application for payment ("Application No.19") in the sum of £1,208,279.39 exclusive of VAT.
It is common ground that the final date for payment in respect of the application was 19 August 2016.
Kersfield failed to pay the sum claimed by Bray by 19 August 2016.
Article 7 and clause 9.2 of the contract provide for disputes between the parties to be referred to adjudication in accordance with the Statutory Scheme.
On 23 September 2016 Bray commenced adjudication proceedings in respect of the unpaid sum. In the adjudication, Bray claimed that it was entitled to payment in full in respect of the sums claimed in Application No.19 by reason of Kersfield's failure to serve a valid 'payment notice' or 'pay less notice' as required by the contract.
Kersfield's position was that Application No.19 did not clearly or unambiguously set out how the sum claimed had been calculated and therefore was not a valid application for payment in accordance with the contract.
In his adjudication decision dated 31 October 2016, Mr Gracia determined that the application for payment by Bray was valid and that no valid payment notice or pay less notice was given by Kersfield. He ordered Kersfield to pay Bray the sum of £1,131,751.96 (the value of the interim application less the sum already paid by Kersfield) plus VAT and interest, and to pay the adjudicator's fees and expenses in the sum of £17,836.50.
Bray now seeks to enforce this adjudication decision.
Kersfield's position is that the adjudicator's decision was wrong and seeks a substantive determination on the matter. In addition, its seeks a declaration that it is entitled to have the underlying valuation dispute in respect of Application No.19 referred to and determined in a further adjudication.
The Issues
The issues before the court are:
i) whether Application No.19 was a valid application for payment under the contract and/or whether Kersfield is estopped from challenging its validity;
ii) whether Bray is precluded from relying on the late service of the payment notice to challenge its validity;
iii) whether the pay less notice was late and therefore invalid;
iv) whether the court should decline to enforce the adjudication award on the ground of procedural unfairness;
v) whether Kersfield is entitled to refer to adjudication a dispute concerning the proper valuation of the claims in Application No.19;
vi) whether there should be a stay of any judgment.
Application No.19
Clause 4.7.1 of the contract provides that interim payments shall be made by the employer to the contractor in accordance with section 4.
Clause 4.7.2 provides that the sum due as an interim payment shall be an amount equal to the gross valuation of the works less retention, any advance payment and amounts paid in previous interim payments.
Clause 4.8.1 states:
"In relation to each Interim Payment, the Contractor shall make an application to the Employer (an 'Interim Application') in accordance with the following provisions of this clause 4.8, stating the sum that the Contractor considers to be due to him and the basis on which that sum has been calculated."
Clause 4.8.3 states:
"Where Alternative B applies, for the period up to practical completion of the Works, Interim Applications shall be made as at the monthly dates specified in the Contract Particulars for Alternative B up to the date of practical completion or the specified date within one month thereafter… The due date in each case shall be the later of the specified date and the date of receipt by the Employer of the Interim Application."
Clause 4.8.4 states:
"Interim Applications may be made on or after completion of the relevant stage or the monthly date and shall be accompanied by such further information as may be specified in the Employer's Requirements."
The Employer's Requirements contain the following provisions in respect of interim payment applications at section 462 of volume 1, section 1:
"1. At least 2 days before the established dates for interim payments submit to the Employer's Agent a detailed application for amounts due under the Contract together with all necessary supporting information.
2. Such application details are to be based on the elemental breakdown of the Contract Sum Analysis to the approval of the Quantity Surveyor including:
Percentage completions in respect of each element of the Contract Sum Analysis …
Supporting evidence of the above by means of progress reports …
Full substantiation of all sums claimed in respect of changes including labour, plant and material expenditure, detailed calculations, measurements and invoices (where applicable) together with a copy of the instruction giving rise to the change …
No variations will be included in the valuation until a valid Change Order is issued.
Comprehensive list of materials on site with proof of cost.
3. At the same time submit a statement from each of the specialist sub-contractors stating:
The gross amount claimed for inclusion in the current valuation …"
The application
Application No.19 was issued on 5 August 2016 in the sum of £1,208,279.39 exclusive of VAT and comprised:
i) an excel spreadsheet, setting out a breakdown of the works, percentage completion and value, materials on site and variations;
ii) a loss and expense claim, set...
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