Universal Piling & Construction Ltd v VG Clements Ltd

This matter concerns the claimant's Part 8 claim for:

(i) a declaration that the adjudicator, appointed by the Royal Institution of Chartered Surveyors pursuant to a notice of adjudication dated 7 October 2016 issued by the defendant, lacks jurisdiction to act as adjudicator on the ground that the reference amounts to a referral of the same dispute in respect of which an adjudicator's decision has already been obtained;

(ii) alternatively, such further order as the court may deem appropriate in order to enforce compliance with the earlier decision of Mr Silver, acting as an adjudicator in what I will refer to as the first adjudication, dated 5 July 2016.

The background to the case is that Universal Piling and Construction Limited ("UPAC") and VG Clements Limited ("VGC"), entered into a written contract dated 14 January 2014, incorporating the terms of the NEC short form contract, including Contract Data, Parts 1 and 2 and the documents they refer to, under which UPAC was engaged as subcontractor to undertake civil engineering works and re-signalling works for the railway system on the Victoria to Ramsgate lines.

Clause 93 of the contract provides for the parties to refer any dispute or difference arising out of the contract to adjudication. Clause 93.3(8) provides that the adjudicator's decision is binding on the parties, unless and until revised by "the tribunal", and is enforceable as a matter of contractual obligation between the parties, not as an arbitral award.

On completion of the claimant's works a dispute arose in respect of UPAC's application for payment dated 18 September 2015 ("the September Application"). On 9 May 2016 UPAC served on VGC a notice of intention to refer the dispute to adjudication. Richard Silver of Shemmings LLP was appointed as the adjudicator. On 5 July 2016 he produced his decision, in which he found that VGC had failed to serve any valid payment notice or pay less notice, and therefore the sum due was the sum claimed by UPAC in the September Application.

Initially VGC commenced a further adjudication seeking determination of the proper valuation of the works under the September Application, but eventually that was settled by agreement and Mr Silver's first adjudication decision was enforced.

Thereafter, UPAC issued no further applications for payment or assessment of sums due. On 28 July 2016 VGC issued a defects certificate confirming that there were no defects in UPAC's works. On 26 August 2016 VGC issued a purported payment notice and pay less notice, valuing the subcontract works and showing a negative valuation ("the August Application"). The August Application is stated to be the value of the works up to August 2016.

On 7 October VGC commenced what I will describe as the second adjudication. Mr Jenson was appointed as adjudicator. In the second adjudication, VGC invites Mr Jenson to assess the proper sum due under the subcontract by reference to the August Application. Pending determination by this court of the jurisdictional issue raised by the claimant in its part 8 claim, the parties have agreed that those adjudication proceedings should be stayed.

There are two limbs to UPAC's argument in relation to the jurisdictional dispute. The first is that there is no contractual basis on which VGC can issue an assessment and / or payment application under the terms of the subcontract; therefore, there is nothing that can be referred properly to adjudication. The second is that the substance of the dispute that VGC attempts to submit to Mr Jenson in the second adjudication, is the same, or substantially the same, as the dispute that has already been decided by Mr Silver in the first adjudication.

Turning first to the contractual basis of the August Application, the payment provisions in the contract are set out in clause 50. Clause 50.1 provides that the subcontractor assesses the amounts due and, by each assessment day, applies to the contractor for payment. There is an assessment day each month until the month after the defect certificate has been issued.

Clause 50.2 states:

"The subcontractor's application for payment includes details of how the amount has been assessed. The first application for payment is for the amount due. Other applications are for the change in the amount due since the previous payment."

Clause 50.3 states:

"The amount due is the price of the work done to date plus other amounts to be paid to the subcontractor, including any tax which the law requires a contractor to pay the subcontractor, less amounts to be paid by or retained from the subcontractor."

Clause 50.4 states:

"The contractor corrects any wrongly assessed amount due and notifies the subcontractor of the correction before paying the subcontractor.

An amount is retained from the subcontractor in the assessment of each amount due until completion. This amount is the retention applied to the Price for Work Done to Date. The amount retained is halved in the first assessment made after completion and remains at this amount until the assessment day after the Defects Certificate is issued. No amount is retained in the assessment made after the Defects Certificate has been issued.

The Contractor pays within three weeks after the next assessment day which follows receipt of an application for payment by the Contractor.

The price for work done to date is defined in clause 11.1(9) as:

"the total of the price by reference to the items on the price list which the subcontractor has completed and where a quantity is stated for an item in the price list an amount calculated by multiplying the quantity for which the subcontractor has completed by the rate."

Clause 10.1 provides that the contractor and the subcontractor shall act as stated in the subcontract and in the spirit of mutual trust and co-operation.

On analysis, clause 50.1 imposes an obligation on the subcontractor, in this case UPAC, to assess the amounts due and to issue an application to the contractor for payment by each assessment day. I arrive at that conclusion by combining the obligation in clause 10.1 for the parties to act as stated in the subcontract with the provision in clause 50.1 that the subcontractor assesses the amount due and by each assessment day and applies to the contractor for payment.

Mr Jinadu submits that this simply gives an option to the subcontractor to make an assessment and application, but in my view the words of the contract are tolerably clear (albeit expressed in the informal language of this form of contract) and it imposes an obligation on the subcontractor to make applications for payment in accordance with the subcontract.

Clause 50.2 provides that the first application for payment is in respect of the value of work done and other applications are for the change in the amount due since the previous payment. This means that the first application is for the amount of work, material and equipment supplied by the date of that application, and subsequent applications are for any work done, materials and equipment supplied since the previous application up to the date of the subsequent application. It provides for a change in the amount due since the previous payment and it appears to be common ground between the parties that that change can be upwards or downwards, i.e. there can be negative assessments.

Clause 50.3 sets out the way in which the amounts are to be ascertained, including the price of work done to date. In my view, what is contemplated is an objectively ascertainable sum due in respect of work carried out to the date of the application. Clause 50.4 provides for the contractor to correct any wrongly assessed amounts due. Mr Jinadu's submission is that it only entitles the contractor to correct an assessment when made by the subcontractor. Mr Selby's submission is that it could be construed so as to enable the contractor to issue its own assessment in relation to what it perceives to be an incorrect earlier assessment by the subcontractor.

The thrust of UPAC's submission is that clause 50 provides a complete code and scheme under...