A & v Building Solutions Ltd v J & B Hopkins Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Coulson,Lord Justice Popplewell,Lady Justice King |
| Judgment Date | 27 January 2023 |
| Neutral Citation | [2023] EWCA Civ 54 |
| Docket Number | Case No: CA-2022-000848 |
| Court | Court of Appeal (Civil Division) |
[2023] EWCA Civ 54
Lady Justice King
Lord Justice Coulson
and
Lord Justice Popplewell
Case No: CA-2022-000848
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS ANS PROPERTY COURTS OF ENGLAND AND WALES
TECHNOLOGY AND CONSTRUCTION COURT (KBD)
Mr Justice Eyre
Royal Courts of Justice
Strand, London, WC2A 2LL
Charles Edwards (instructed by Direct Access) for the Appellant
James Frampton (instructed by Hawkeswell Kilvington Limited) for the Respondent
Hearing date: 17 January 2023
Approved Judgment
This judgment was handed down remotely at 10.30am on 27 January 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives
Introduction
This appeal raises issues arising out of the parallel jurisdictions of a construction adjudicator, on the one hand, and the courts, on the other. It also raises a number of discrete points about the proper interpretation of the Sub-Contract agreed between the parties. One curious feature of the case is that, although between January and April 2022 the appellant (“AVB”) was in possession of an adjudicator's decision in their favour, the sum due in consequence was never paid by the respondent (“JBH”), and the judgment of Eyre J (“the judge”), given ex tempore on 12 April 2022 and granting various declarations in favour of JBH, barely made any reference to the adjudicator's decision at all.
Since permission to appeal against the judge's order was granted, there has been a second adjudication which was resolved in favour of JBH. AVB did not pay the sum identified by the second adjudicator. The hearing of the enforcement application in respect of the second adjudicator's decision was due to take place after the hearing of this appeal but, for our purposes, it is sufficient to note that, on the face of it, the second decision means that no sums are now due to AVB. That confirms that this appeal is academic from a financial point of view, and one can only lament the costs that have been incurred to achieve such a stalemate. One thing, however, is clear: the guiding principle of construction adjudication, namely ‘pay now, argue later’, has been comprehensively ignored by both parties in this case. How that happened, and how it is to be avoided in future cases, forms another element of this judgment.
The Sub-Contract
JBH were the main mechanical and electrical contractors on the Moulsecoomb University Project, in Sussex. Pursuant to a written Sub-Contract dated 18 December 2019, JBH engaged AVB to carry out certain mechanical and electrical engineering works at the site. The Sub-Contract sum was £368,000.
It is only necessary to set out a few of the general terms, which were in JBH's own standard form. Clauses 9.1–9.8 were concerned with interim payments. Clauses 9.1–9.4 provided as follows:
“9.1. The Sub-Contractor shall be entitled to payment by instalments.
9.2. It is a condition precedent to payment that the Sub-Contractor shall make monthly applications (“Interim Application”) for payment to the Contractor on the dates specified in Appendix 6. Such applications for payment must specify the sum that the Sub-Contractor considers to be due to him and the basis on which that sum has been calculated identifying:
(1) The total value of the work properly executed (including the value of any materials or goods intended for incorporation into the works in a priced Schedule format provided the same had been delivered to or adjacent to the site); and
(2) Variations, if any, carried out pursuant to clause 8 of this Agreement itemised separately and fully substantiated and costs referenced to instructions issued; and
(3) Any other amounts properly due to the Sub-Contractor under this Agreement.
9.3. The payments shall be in accordance with Appendix 6.
9.4. Interim payments shall be due at regular intervals calculated from the date when the first payment was due. The final date for payment shall be in accordance with Appendix 6”
This case is concerned with the interim payment application which, in the Sub-Contract at least, was designated as number 17. The relevant entries in Appendix 6 were as follows:
It is clear that each of the dates in column A were mechanically calculated, in that they were always 10 days before the valuation dates in column B, which were in turn always the last day of each month.
| (A) | (B) | (C) | (D) | (E) | (F) | |
| Application No. | Date which Sub-Sub Contractors to Issue Application to J&BH | The Valuation Date | Due Date as Required by Construction Act | Payment Notice Date | Notice to Pay Less | Final Date for Payment |
| 17 | 21/03/2021 | 31/03/2021 | 14/04/2021 | 19/04/2021 | 03/05/2021 | 05/05/2021 |
In essence, these various dates (which were required by the complexities of the amendments to the Housing Grants (Construction and Regeneration) Act 1996 (“the 1996 Act”)) suggested the following timetable. AVB would make interim payment application number 17 on 21 March 2021. The valuation date was 31 March. JBH would respond, indicating their valuation by way of a Payment Notice, on 19 April 2021. If JBH wished to serve a Payless Notice they had to do so by 3 May 2021. The final payment date was 5 May 2021.
Appendix 6 went on to provide as follows:
“In the event that Interim Payments become due beyond the dates set out in the schedule above then the Due Dates shall continue to occur at the same intervals as set out above and dates for submission of applications, valuations, Payment Notices, Pay Less Notices and Final Date for Payment shall occur at the same time from the Due Date as for every month as set out above.
For the avoidance of doubt if applications are not received from the Sub-Contractor 7 days prior to the Valuation Date then the Sub-Contractor shall not be entitled to any payment, whether or not a payment notice is served by the Sub-Contractor until the procedure set out above is repeated in relation to the next Valuation Date.”
Reverting to clause 9 of the Sub-Contract, there were detailed provisions as to the content of the Payment Notice and the Payless Notice at clauses 9.5–9.7. It is unnecessary to set those out because no part of the appeal turns on them.
Other relevant parts of JBH's standard sub-contract terms include:
(a) Clause 20.3, which provided that “the decision of the adjudicator should be binding until it is found to be finally determined by legal proceedings or by agreement”.
(b) Clause 23.1, which dealt with illegality and waiver. That provided that:
“23.1. No waiver by J & B Hopkins of any breach of the Sub-Contract by the Sub-Contractor shall be a waiver of any subsequent breach of the same or of any other provision of the Sub-Contract. No failure by J & B Hopkins to exercise any right or remedy arising under the Sub-Contract or at law shall be a waiver of its right to exercise such rights arising subsequently.”
(c) Appendix 5, paragraph (5)(b), which set out “the normal Working Hours for the site” indicated that, on Sunday, the site was “closed”. That was confirmed in the pre-order meeting minutes (also a contract document), dated 19 September 2019, at paragraph 9.11.
The Factual Background
The works did not go smoothly and there were disputes between the parties. On Monday 15 March 2021, AVB sent JBH its interim application number 13, setting a value for the works carried out in the gross sum of £520,890 and net amount claimed of £106,619.10.
On Monday 22 March 2022, AVB sent JBH its interim application number 14. The application itself was dated the previous day, 21 March 2021, which was a Sunday. Application 14 showed a gross value of the works of £601,000 and a net amount due in the sum of £211,773.60.
On 1 April 2021, JBH responded to interim application 14. The first paragraph of their email read:
“Please see attached our initial summary of your application number 14 dated 21/3/21 and issued 22/3/21. We note that you have issued two applications for the period, the first being application 13, dated and issued 15/3/21 are we to assume number 14 supersedes the aforementioned application 13?”
The email of 1 April then went on to detail the areas of dispute raised by application 14. It concluded:
“A full and formal sub-contract payment or payless notice should be issued in due course and in accordance with the dates set out within appendix 6 of the Sub-contract.”
The valuation attached to the email indicated that JBH considered, as at the date of interim application 14, that no further sums were due to AVB, who on JBH's case had been overpaid.
On 16 April 2021, JBH sent AVB a “sub-contractors payment certification”. Despite that title, the covering email described it as payment notice 14 and it is clear that the document was intended to be a Payment Notice under clause 9.5. It related specifically to application 14. The covering email said that “comments made within the attached email dated 1 April 2021 [paragraphs 12 and 13 above] remain and as such have been reflected within the formal payment notice”. This certificate indicated that, on JBH's valuation, AVB had been overpaid in the sum of £68,946.25. There were subsequent discussions and correspondence between the parties between April and November 2021 concerning AVB's claim based on application 14, but they did not lead to a resolution of the dispute.
Throughout this period, JBH apparently treated application 14 as having been validly made: the dispute was on the detail. On 12 October 2021, a dispute having arisen in respect of application 14, AVB's consultants wrote indicating that, if the sum due was not paid, they would commence adjudication. In their reply dated 19 October 2021, JBH's...
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