The contractual route to recovery The court had found on the facts that ICI had repudiated the contract. It was well-established that, if a contract came to an end through repudiation, the parties’ existing rights and obligations under that contract remained in existence. Accordingly, if ICI had an accrued right to recover overpayments under the contract, before the contract came to an end, that right remained notwithstanding a wrongful repudiation. This was an NEC3 contract. There were two payment components being Defined Cost, and the Fee, each to be assessed by the Project Manager at each assessment date. The resulting amount due comprised the Price for Works Done to Date, plus other amounts to be paid to the Contractor, less amounts to be paid by or retained from the Contractor. The court did not consider that such an interim assessment could be said to be a definitive or final valuation of the works for all purposes at that point. The contract made clear that “The Project Manager corrects any wrongly assessed amount due in a later payment certificate.” That later payment certificate could, potentially, be an interim assessment or the Final Assessment, as the Project Manager could at either stage correct any “wrongly assessed amount” If there was any doubt, clause 56 of the contract resolved it by providing: “The issue of any payment certificate or the payment of any amount by the Employer to the Contractor does not constitute or imply or be evidence of the Project Manager’s, the Supervisor’s or the Employer’s approval or acceptance of any design, work, Plant and Materials forming part of the works or relieve the Contractor of any of his obligations under this contract.” MMT relied on ISG Construction Ltd v Seevic College 11 where the contractor sought an adjudicator’s decision in relation to its payment application, in respect of which the employer had not served valid payless notices. The decision, in Adjudication No.1, was in the contractor’s favour in the sum of £1.097m. Some four days before the decision in that adjudication, the employer started Adjudication No.2, in relation to the actual value of the contractor’s works the subject of the application. The employer succeeded in that adjudication in that the adjudicator decided that the value of the works was only £315k, disallowing approximately £1m claimed as loss and expense. Edwards-Stuart J declared that there was no jurisdiction to conduct Adjudication No.2, even though in Adjudication No.1 the adjudicator had stated “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.” This was because, as he put it in [25] “as between contractor and employer, in the absence of any notices the amount stated in the contractor’s application as the value of the works executed is deemed to be the value of those works so that the employer must pay the sum applied for.” He considered that the question of the valuation of the works in Application No.13 had been decided in Adjudication No.1. Permission to appeal was granted in that
case by the Court of Appeal, but the appeal did not take place as the matter was compromised. ISG did not support MMT’s pleaded assertion that the amount of the interim application was “deemed to be the value of those works”. It was decided before the Court of Appeal judgment in MJ Harding Contractors v Paice and Springall 12 where the Court of Appeal found ISG difficult to reconcile with the ratio in Harding. A similar approach to defining the dispute was adopted by a differently constituted Court of Appeal in Brown v Complete Building Solutions Ltd. 13 The Court of Appeal held that the terms, scope and extent of the dispute previously referred, and the earlier decision, had to be analysed. The dispute that was referred for resolution in the earlier adjudication could not be considered in isolation. The latter adjudication dealt with a different dispute and the adjudicator had jurisdiction. In the judgment of the court, the ratio of the Court of Appeal authorities cast real doubt on whether ISG would be decided in the same way now. That led to similar doubts as to whether the reasoning was correct. In any event, upon analysis, the judgment in ISG was concerned with timing not substantive underlying rights. In Galliford Try Building Ltd v Estura Ltd 14 the judge himself had explained his view of what ISG had decided. “[18] I held that if an employer fails to serve the relevant notices under this form of contract it must be deemed to have agreed the valuation stated in the relevant interim application, right or wrong. Accordingly, the adjudicator must be taken to have decided the question of the value of the work carried out by the contractor for the purposes of the interim application in question. [19] However, I made it clear that this agreement as to the amount stated in a particular interim application (and hence as to the value of the work on the relevant valuation date) could not constitute any agreement as to the value of the work at some other date (see paragraph 31). [20] This means that the employer cannot bring a second adjudication to determine the value of the work at the valuation date of the interim application in question. But it does not mean any more. There is nothing to prevent the employer challenging the value of the work on the next application, even if he is contending for a figure that is lower than the (unchallenged) amount stated in the previous application.” Even if the first sentence of [20] remained correct, (and it was decided on 27 February 2015, before the Court of Appeal judgment in Harding on 01 December 2015) this meant that the value of the work remained something that could be challenged. In other words, the value of the works executed is not definitely determined by the figure in the interim assessment (or an adjudicator’s decision on that interim assessment). Nor could it sensibly be argued otherwise, given the nature of adjudication.
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