107772.001 SH Construction Case Booklet

4. Enforcement – Enforcement of Adjudicator’s Decisions – Declarations Sought – Stay of proceedings Ealing Care Alliance Ltd v London Borough of Ealing 8 The Claimant service provider Ealing Care Alliance Ltd (“ECA”) had contracted to provide care home services for the Defendant, London Borough of Ealing (“Ealing”). This PFI framework agreement provided for market testing of the cost of the services with a clause for mandatory adjudication where the parties did not agree the content of the market testing proposal. ECA referred a dispute regarding benchmarking to adjudication. The adjudicator found that the benchmarking exercise was validly undertaken and either party was entitled to require the services to be market tested. ECA started the market testing procedure but Ealing served a notice of dissatisfaction informing ECA that it intended to challenge the adjudicator’s decision and ask for market testing to be suspended. ECA continued with market testing and Ealing insisted that any invitations to tender stipulated that ECA’s right to market testing was the subject of a legal challenge by Ealing. ECA objected to this on the grounds that it would deter bidders and commenced proceedings seeking a declaration that the adjudicator’s decision was enforced and that ECA was entitled to proceed to market testing without any requirement to insert Ealing’s stipulations. Ealing did not commence proceedings to challenge the adjudicator’s decision. Ealing submitted that (1) There should be a stay for adjudication because the dispute before the court was about the market testing proposal which had to be adjudicated before proceedings could be taken. (2) The declaration sought by ECA should not be granted because it avoided the underlying dispute between the parties of whether the adjudicator’s decision was correct. The Court held: 1. It was not appropriate to order a stay. The dispute between the parties was not caught by the mandatory adjudication provisions. The effect of the stay would be to waste time and costs. Ealing’s delays in making its stay application and acting on its notice of dissatisfaction counted against it. 2. There was a difference between Ealing serving a notice of dissatisfaction and pursuing a legal challenge. The stipulation in any invitations to tender that market testing was subject to Ealing’s legal challenge was sufficient to deter bidders and may be misleading. The effect of such stipulations was for Ealing to frustrate ECA from having the benefit of the adjudicator’s decision. Granting the declaration sought by ECA would have the useful effect of allowing ECA to continue market testing and give effect to the adjudicator’s decision.

Comment This helpful judgment confirms the “pay now, argue later” doctrine which is in the spirit of the Act and clarifies the question posed in our previous analysis of the TCC judgement. Although an employer may in many instances be able to recover an overpayment by way of adjustment at the following interim payment stage it is not always practicable to do so. As a result, it may be that an adjudicator can order repayment of any excess payed as a result of a revaluation at adjudication to establish the correct valuation of the work. However, this right can only be exercised after the employer has paid the notified sum as required by s111 of the Act. The Act intends to promote cash flow, and this should allow for prompt payment followed by any financial adjustments. 3. Enforcement—Enforcement of adjudicator’s decision – Milestone payments Birmingham City Council v Amey Highways Ltd 7 The Claimant (“BCC”) and the Defendant (“Amey”) were parties to a 2010 Private Finance Initiative contract for the rehabilitation and maintenance of the road network in Birmingham for 25 years. The parties had been engaged in a dispute arising from Amey’s performance of the contract since 2015. Under the contract, the amount to be paid to Amey increased when milestones were certified. BCC referred the dispute to adjudication and the adjudicator set aside the certification of milestones 6–9. Amey successfully challenged the adjudicator’s decision in the High Court but the Court of Appeal reinstated the decision. BCC claimed that it followed from the setting aside of the milestone certificates that Amey had been overpaid by circa £55million. Amey refused to repay arguing that an analysis was necessary to determine when it could have achieved the milestones had it complied with its contractual obligations. The dispute regarding repayment was referred to adjudication and the adjudicator decided that the analysis was irrelevant and BCC was entitled to repayment of £55million. BCC sought summary judgment to enforce the adjudicator’s decision in addition to supplementary claims. The Court granted summary judgment on the repayment claim and reserved judgment on the supplementary claims. There was no dispute of fact in respect of the repayment claim. Under the contract, only certification gave the right to be paid and retain the money. Once the certification had been set aside, Amey had no right to be paid or to retain the money. The money had to be repaid to BCC pending valid certification in the future. There was good reason to enforce the adjudicator’s decision. In any event the money had been wrongly paid and there was no lawful justification for Amey to retain it. Any wrongly paid sums could be recovered by one party from another under the Contract. The application was granted.


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