M Davenport Builders Ltd v Mr Colin Greer
| Jurisdiction | England & Wales |
| Judge | Mr Justice Stuart-Smith |
| Judgment Date | 20 February 2019 |
| Neutral Citation | [2019] EWHC 318 (TCC) |
| Docket Number | Case No: HT-2018-000369 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 20 February 2019 |
[2019] EWHC 318 (TCC)
Mr Justice Stuart-Smith
Case No: HT-2018-000369
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
The Royal Courts of Justice
Rolls Buildings, Fetter Lane,
London, EC4A 1NL
Robert Scrivener (instructed by JMW Solicitors LLP) for the Claimant
Jonathan Ward (instructed by Turner Parkinson) for the First Defendant
Jonathan Ward (instructed by Turner Parkinson) for the Second Defendant
Hearing dates: 24th January 2019
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
This is an application to enforce an adjudication decision by Mr Sutcliffe dated 24 October 2018. The decision awarded the Claimant £106,160.84 plus interest on a claim based on the Claimant's final account. On non-payment by the Defendants, the Claimant issued these proceedings and seeks summary judgment. The sum claimed by the Claim Form is £106,160.84 plus interest.
The Defendants initially put up a raft of unmeritorious defences that have been abandoned. It is now accepted that Mr Sutcliffe's award was valid and enforceable subject only to the existence of a “true value” adjudication by another adjudicator, Mr Sliwinski. The Defendants wish to rely on that award by way of set off or counterclaim. The Claimant says that the Defendants are not entitled to do so because they did not pay Mr Sutcliffe's award before commencing the Sliwinski adjudication. The Defendants say that they were not obliged to pay the Sutcliffe award before obtaining and relying on the Sliwinski decision. That is the central issue today.
Background facts
The dispute arises out of a contract made between the Claimant and the Defendants for construction operations to be carried out at a building in Stockport 1. The contract was made by the Defendants' acceptance of the Claimant's quotation to carry out the works. Neither the quotation nor the acceptance made provision for adjudication or for the amount or date of payments under the contract, with the result that the relevant provisions of the Scheme for Construction Contracts applied: see s. 108(5) and 109 of the Housing Grants, Construction and Regeneration Act 1996 (“the Act”). Because this case concerns an application for a payment of a final account, Clause 5 of the Scheme applied, so that the final payment became due on whichever was the later of (a) the expiry of 30 days following completion of the work or (b) the making of a claim by the Claimant.
The Claimant's payment application was made on 22 June 2018 in the sum of £106,160.84. The due date for payment was 25 June 2018 and the final date for payment calculated in accordance with Clause 8 of the Scheme was 12 July 2018. Pursuant to Clause 9(2) of the Scheme, if the Defendants wanted to submit a Payment Notice, they were obliged to do so not later than five days after the payment due date i.e. by 30 June 2018. They did not do so. Pursuant to s. 111(3) of the Act and Clause 10 of the Scheme, if they wished to give notice of intention to pay less than the notified sum there were obliged to give it not later than seven days before the final date for payment i.e. on 5 July 2018. They did not do so.
Accordingly, on 6 July 2018 the Claimant issued a payee's notice in default pursuant to Section 110B of the Act, which had the effect of adjusting the final date for
payment to 18 July 2018. Once again the Defendants failed to issue a Pay Less Notice; nor did they pay the sum demanded either on 18 July 2018 or thereafterIt is not necessary to go into the details of the Sutcliffe adjudication process as it is now common ground that his award was valid. Mr Sutcliffe awarded the Claimant the sum demanded on its final account plus interest. The Defendants have not paid the sums ordered by Mr Sutcliffe or any part of them.
The Sliwinski adjudication was commenced by a notice of intention to refer dated 30 October 2018, six days after Mr Sutcliffe's decision. Mr Sliwinski expressed doubts about his jurisdiction but proceeded to make his award on 30 November 2018. He concluded that the gross value of the final account was £867,557.54 excluding VAT and that no sum was payable by the Claimant to the Defendants. He directed each side to pay 50% of his fees and directed that VAT should also be paid if appropriate.
Is the Sliwinski decision enforceable by way of defence, set-off or counterclaim?
It is commonplace for parties to a construction contract to which the Scheme or analogous contractual conditions applies to rely upon the absence of a Payment Notice or a Pay Less Notice as entitling them to recover the full amount of a disputed application for payment. That is what the Claimant did in the Sutcliffe adjudication in the present case. If successful, it provides a short route to a right to immediate payment of the sum claimed. It does not require the adjudicator to undertake a valuation exercise: see Harding v Paice [2016] 1 WLR 4068, [2015] EWCA Civ 1231 at [64].
It is now established by the Court of Appeal in Harding and, more recently, in S&T(UK) Ltd v Grove Developments Ltd [2018] EWCA Civ 2448 that where a party to an initial adjudication has successfully taken the short route to immediate payment, the fact of the initial decision does not necessarily preclude a further adjudication requiring the later adjudicator to undertake the valuation exercise that was not undertaken by the first adjudicator. The second adjudication (which I shall call a “true value” adjudication) is not necessarily precluded by the first adjudication because the dispute in the true value adjudication is not the same or substantially the same dispute as the contractual issue resolved by the first adjudication: see Harding; and Grove at [95].
It is common ground (and I would accept) that a party required to make immediate payment because of an adjudication decision based upon the contractual route will be entitled to commence and rely upon the results of a true value adjudication if and when he has made the immediate payment required by the first adjudication. The question in the present case is whether he is entitled to commence and/or rely upon a true value adjudication (such as the Sliwinski adjudication in the present case) without having first made the immediate payment required by the first adjudication. Resolution of that question requires consideration of the 1996 Act, the Scheme, questions of policy, and previous authority of which Harding and Grove are the most important.
The starting point is s. 111(1) of the 1996 Act, which provides:
“Subject as follows, where a payment is provided for by a construction contract, the payer must pay the notified sum (to the extent not already paid) on or before the final date for payment.”
At [87] of Grove Jackson LJ characterised this (together with the statutory provisions for payment notices and pay less notices) as creating an “immediate” payment obligation. It is a provision dealing with cashflow and immediate payments in accordance with the well-known policy of the 1996 Act to promote cashflow to the construction industry: see Grove at [88] and [108]. It is now clearly established that s. 111 of the 1996 Act applies equally to interim and final payments: see Adam Architecture v Halsbury Homes Ltd [2017] EWCA Civ 1735, [2018] 1 WLR 3739.
I am unable to identify anything in the provisions of the 1996 Act or the Scheme that either states or implies that different policy considerations should apply to final applications rather than interim applications. Although there are specific provisions relating to possible insolvency in s. 111(10) of the 1996 Act and different time-scales for payment of instalments or other sums, neither of these differences seems to me to signify material differences in policy as between interim and final applications for payment.
Harding demands close attention as a case involving an application for payment of a final account. The chronology as set out by the Court of Appeal and at first instance lends some support to the Defendant's position that it was entitled to start the Sliwinski adjudication before paying the sum ordered by the Sutcliffe adjudication:
...i) After termination of the contract between the parties, Harding commenced what was the third adjudication between the parties by notice dated 1 September 2014. Harding's claims in the third adjudication included a claim for immediate payment based upon Paice's failure to serve a Payment Notice or Pay Less Notice. The adjudicator found in favour of Harding on this “short route” claim on 6 October 2014, and directed Paice to pay the sum claimed, namely £397,912 plus VAT;
ii) Harding commenced proceedings in the TCC to enforce the third adjudication decision.
iii) On 14 October 2014, without having paid the sum ordered in the third adjudication and while the enforcement proceedings were in progress 2, Paice launched the fourth adjudication, which was a true value adjudication requesting the adjudicator to value the contract works and valuations. In effect, the adjudicator was asked to value Harding's final account;
iv) Harding tried to stop the fourth adjudication by separate proceedings issued on 21 October 2014 (also before Paice had paid the sum ordered by the third adjudication). He did so initially on two grounds, namely (a) that Paice had launched the fourth adjudication without first complying with the decision in
the third adjudication and (b) that all the issues raised by Paice in the fourth adjudication had been decided by the adjudicator in the third adjudication. His
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