Heelis LLP, summarises four court
Adjudication Case Law Update 2023: Part 3
decisions relating to the enforcement
of adjudicators' Awards under the
In the third edition of our 2023 Court
Housing Grants, Construction and
Decision Summaries, Kenneth Salmon
Regeneration Act 1996.
MCIArb, consultant solicitor at Slater
In Part 3 Enforcement of award – advisory award - Interaction with Part 8 claim: Sleaford Building Services Ltd v Isoplus Piping Systems Ltd [2023] EWHC 969 (TCC)
Mr Alexander Nissen KC (28 April 2023)
Jurisdiction – Failure to exhaust by not expressly considering line of defence: AGB Scotland v Darren McDermott [2023] CSOH 31, 17 May 2023, Lord Sandison
Natural Justice – Failure to answer the right question; Challenge to enforcement of award arising from validity of final account statement – Broad Justice at high speed:
Atalian Servant AMK Ltd v B W (Electrical Contractors) Ltd [2023] CSIH 18 Lord
President Carloway, Lords Woolman and Pentland (18 April 2023)
Payment application – Validity – ‘days’ not ‘clear days’ : Elements Europe Ltd v FK Buildings Ltd [2023] EWHC 726 (TCC) Mr Justice Constable
judgment 30 March 2023
Legislation
1
The “ Act ” means the Housing Grants, Construction and Regeneration Act 1996, as amended by the Local Democracy, Economic Development and Construction Act 2009 Pt 8. The ‘new’ provisions apply to contracts entered into on or after 1 October 2011. The Act applies to England and Wales, Scotland and Northern Ireland. The main regulations are contained in the Scheme for Construction Contracts (England & Wales) Regulations 1998 (the ‘Principal Regulations’). 1 They have been amended by the Scheme for Construction Contracts (England & Wales) (Amendment) (England) Regulations 2011 2 (the ‘new Regulations’). The new Regulations apply only to contracts for construction operations in England entered
into on or after 1 October 2011. For earlier contracts, the Principal Regulations apply.
Northern Ireland has its own scheme: the Scheme for Construction Contracts in
Northern Ireland 1999 as amended by the Scheme for Construction Contracts in
Northern Ireland (Amendment) Regulations (Northern Ireland) 2012. The Northern
Ireland Scheme is broadly similar to that in force in England and Wales.
There are separate regulations for contracts for work in Scotland applicable to
contracts made on or after 1 November 2011. 3 The new Regulations apply only to
contracts for work in Scotland entered into on or after this date. For earlier contracts,
the Scheme for Construction Contracts (Scotland) Regulations 1998 4 applies. There
are new separate regulations for Wales, applicable to contracts for construction
operations in Wales entered into on or after 1 October 2011. 5
1 Scheme for Construction Contracts (England & Wales) Regulations 1998 (SI 1998/649).
2 Scheme for Construction Contracts (England & Wales) (Amendment) (England) Regulations 2011 (SI 2011/2333).
3 Scheme for Construction Contracts (Scotland) Amendment Regulations 2011 (SI 2011/371).
4 Scheme for Construction Contracts (Scotland) Regulations 1998 (SI 1998/687) (S.34).
5 Scheme for Construction Contracts (England and Wales) Regulations 1998 (Amendment) (Wales) Regulations 2011 (SI
2011/1715) (W.194).
A reference to “the Scheme” is to the Principal Regulations for England and Wales, or the Scheme for Scotland, Wales, or Northern Ireland, as the context requires.
Summary
Enforcement of award – advisory award - Interaction with Part 8 claim Sleaford Building Services Ltd v Isoplus Piping Systems Ltd [2023] EWHC 969 (TCC)
Mr Alexander Nissen KC (28 April 2023)
The proper approach when dealing with a Part 7 claim for enforcement of an
adjudication decision and Part 8 claim for a final determination of any short self-
contained issues was for the two sets of proceedings to be heard together, the Part 7 application first. Usually, judgment should be given on the Part 7 claim, and then – to the extent possible – the court would endeavour to sort out the Part 8 claim and see what effect, if any, that had on the enforcement.
The three-stage test in Hutton was to be applied when looking at the suitability of
the Part 8 proceedings to be determined at the same time as the Part 7 claim.
Here the court had also to address a question as to whether there was any distinction properly to be made between that part of the adjudicator’s decision which was specifically framed as ‘advice’ on the one hand and the ‘decision’ on the other. The court c oncluded the adjudicator regarded the ‘advice’ as non -binding but without deciding whether that was right or wrong. In the event, the court found
that there were a substantial number of sub-issues requiring proper
particularisation, argument, and evidence that were not suitable for summary
determination.
Jurisdiction – Failure to exhaust by not expressly considering line of defence
AGB Scotland v Darren McDermott [2023] CSOH 31, 17 May 2023, Lord Sandison
Where the adjudicator did not consider a line of defence, the decision may (though
not necessarily would) be unenforceable for failure to exhaust jurisdiction. It was not
necessary for the adjudicator to have expressly referred in his decision to every issue
considered if it was plain on reading the decision that he must have considered the
particular line of defence in question.
Natural Justice – Failure to answer the right question; Challenge to enforcement of award arising from validity of final account statement – Broad Justice at high speed
Atalian Servant AMK Ltd v B W (Electrical Contractors) Ltd [2023] CSIH 18 Lord
President Carloway, Lords Woolman and Pentland (18 April, 2023) A contract provided that a final account statement (FAS) was ‘final and binding’ on the payee unless the parties agreed to modify it or the payee commenced
adjudication or court proceedings within 20 working days. Adjudication (and court)
proceedings were commenced within that time. The adjudicator resigned and a
second adjudication notice was served. The appellate court found that the
adjudication proceedings did not come to an end on the resignation of the first
adjudicator, and BWE had followed the correct procedure in serving a new notice.
The essential question in both adjudications was: what sum was properly due? The first notice meant BWE had “ their foot firmly in the door, as permitted by clause 33.4, by virtue of both the adjudication and the timeous, and still pending, litigation.” The challenge on that ground failed, the court agreeing with the dictum of Lord Briggs in Bresco : “pay now, argue later.”
The court also found there was no procedural unfairness. The adjudicator gave due notice to the parties of his line of thinking on what was termed ‘beck and call’ and the number of man hours worked and invited comment. AMK responded in detail
and repeatedly on these matters. The Lord President noted the adjudicator took on “a nigh impossible task” having to consider an enormous volume of written materials in such a short time such that the decision was bound to involve “broad justice at high speed” . This was no frolic of the adjudicator’s own and the natural justice challenge failed.
Payment application – Validity – ‘days’ not ‘clear days’ Elements Europe Ltd v FK Buildings Ltd [2023] EWHC 726 (TCC) Mr Justice Constable
judgment 30 March 2023
This was another case where the successful party in adjudication (Elements) sought to enforce the adjudicator’s award in its favour and the losing party (FK) brought Part 8 proceedings to decide a short point of construction which, if upheld, would
mean the award was wrongly made. The point at issue was the construction of a
payment provision in a JCT standard form (not previously the subject of judicial
consideration). Although the parties settled their dispute after a full hearing,
judgment was given by agreement as it dealt with a point of some importance
concerning the date and time of the making of payment applications. On this point,
the court held that the requirement in clause 4.6.3.1 to make a payment application “ so as to be received not later than 4 days prior to the Interim Valuation Date for the relevant payment …" did not mean 4 ‘clear days’ before that date, but 4 days before the date, meaning it could be done on the fourth day before that date. The
payment application in question was sent in the evening outside site working hours
but received by at least one recipient on the evening of the fourth day and had
therefore been validly made. The law did not deal in parts of a day.
It is also noteworthy that Elements argued that Coulson J in Hutton Construction
Limited v Wilson had set a higher test than that in the TCC Guide i.e. that the adjudicator’s decision must be ‘obviously wrong’ or one to be taken ‘on any view’
before the question would be suitable for Part 8. The court disagreed. The test was
that set out in Hutton and A&V Building Solutions and the TCC Guide. Applying that
test, the question was suitable for summary determination as there was no factual
dispute and no argument based on waiver.
Court decision summaries in full
Click on the options below to read a full summary and analysis. Enforcement of award – advisory award - Interaction with Part 8 claim Sleaford Building Services Ltd v Isoplus Piping Systems Ltd [2023] EWHC 969 (TCC)
Mr Alexander Nissen KC (28 April 2023)
Sleaford commenced an adjudication in which it sought various findings that its
subcontractor, IPS, was not entitled to any further milestone payments by reason of its failure to comply with various ‘prerequisites’ (or preconditions) to payment for a true valuation of the subcontract works and ‘advice’ that IPS had been negligent in its pipelaying, and that the payment prerequisites had not been complied with. It
concluded that IPS had been overpaid and sought repayment.
IPS denied it had been negligent, contended that the prerequisites were not
conditions precedent to payment, or that the payment terms failed to comply with
section 110 (1A) of the Act so that the Scheme applied, and claimed it was entitled to
a final milestone payment.
It was accepted that the adjudicator could make an award of money in favour of
either party.
The adjudicator found that clause 21.4 of the subcontract did require production of
certified copies of the sub-subcontracts entered into by IPS, with evidence of the sub- subcontractors’ insurances as pre-conditions of payment, within a stipulated time of 7 days. She ‘confirmed’ t hat IPS had installed a compliant installation that was in accordance with the subcontract and that milestones 1-17 should be certified as accepted . She ‘advised’ (as per the relief claimed) that (i) there was no proof that IPS had been negligent in supplying incorrect and unsuitable fittings and (ii)
she was unable to determine whether or not there had been compliance with all
pre-requisites. She valued the works in the sum of £838,400 and found that Sleaford
should make payment to IPS in the sum of £323,502 and directed payment to be
made accordingly.
Sleaford declined to pay and issued Part 8 proceedings in London for declarations
as to the meaning of clause 21.4 and that, in consequence, no further payment was
due, and the award should not be enforced. IPS issued Part 7 proceedings to enforce
the award in Manchester.
IPS’s position was that the adjudicator's decision in its favour should be enforced pursuant to its Part 7 claim unless Sleaford succeeded at the concurrent hearing on
the substance of its Part 8 declarations. As to that, it said Sleaford could not succeed
at the concurrent hearing as its claims were unsuitable for summary determination
by Part 8 because the complaints of non-compliance with clause 21.4 had not been
properly particularised, and its defence to any breach depended on the resolution
of factual issues, including waiver. Sleaford accepted that the decision was valid
and unless it succeeded on its Part 8 claim, it was enforceable. It said its Part 8 claim
involved a short point of construction, and there was no need for evidence as it was ‘ incontrovertible that the sub-subcontracts had not been provided to it within 7 days and no evidence of insurance provided. Payment of (3) previous milestones could
not amount to waiver. It also pointed out that the fact that the milestones were for
lump sums stated in the subcontract meant IPS could not demonstrate the sums
included for sub-subcontractors, so nothing was due.
The proper approach to combined Part 7 and Part 8 claims
As a matter of procedure, the court said that as the Part 8 claim had already been
issued in London, the Part 7 proceedings for enforcement should also have been
issued there to avoid the waste of court administrative resources in transferring the
same, as required by the TCC Guide and case law.
The proper approach to these two sets of proceedings was identified in A&V Building
Solutions Ltd v J&B Hopkins Ltd. 6
" The proper approach to parallel proceedings was outlined by O'Farrell J in Structure
Consulting Limited v Maroush Food Production Limited [2017] EWHC 962 (TCC). The
judge should usually give judgment on the claim based on the adjudicator's decision and then – to the extent possible – endeavour to sort out the Part 8 proceedings. The same point was made in Hutton Construction Limited v Wilson
Properties (London) Ltd [2017] EWHC 517 (TCC); [2017] BLR 344, where the judge said
that the Part 8 claim should be dealt with after the enforcement unless the point
raised was straightforward and self-contained, and the parties were agreed that it
could be dealt with at the enforcement application without adding to the time estimate.”
The court also took the view that as regards the question ‘ Is there any defence to the Part claim? ’ the three -stage test in Hutton was not applicable in this instance. It only arose in the context of the suitability of the Part 8 proceedings.
6 [2023] EWCA Civ 54 by Coulson J at [38].
At this point, the court felt it convenient to address the question of whether there was any distinction properly to be made between the ‘ advice ’ of the adjudicator on the one hand and the ‘ decision ’ on the other. The adjudicator referred to the potential distinction in the relief claimed by Sleaford, drawing it to the attention of
the parties and inviting comment on it. She ultimately construed the request that
she "advise" the parties literally and distinctly from those matters upon which she
was called to decide, as was clear from her approach and comment that "any such
advice may not be enforceable" and later, when she contrasted her decision from
her advice. She clearly did decide that clause 21.4 contained pre-requisites to
payment. Pending trial, that element of her decision was binding. However, viewed objectively, she did not intend her ‘advice’ to be binding. In practical terms, this turned out to be a distinction without a difference because it was common ground
that she either advised or decided that she was unable to reach any conclusion
whether or not all pre-requisites to payment had, in fact, been met. However, what
was abundantly clear was that she did not consider that that inability was such as
to shut out IPS from its entitlement to payment. She clearly decided that payment
was to be made. Accordingly, the award was to be enforced and summary
judgment granted to IPS unless any final determination in the Part 8 claim impacted
upon it.
Part 8
For the reasons summarised below, the court found that the issues arising in the
Part 8 proceedings were unsuitable for summary determination.
The question of construction of clause 21.4 involved the prior question: whether it
was ever capable of being operated in the case of milestone payments where there
was no mechanism for determining what sum related to the work of sub-
subcontractors. It was thus likely that evidence of content and value of work would
be needed.
If the condition was operable, the next question was whether the condition’s precedents were satisfied. There were multiple sub-elements. There was the
question of timing. It was in dispute whether the requirement of clause 21.4 that the
sub-subcontracts be provided within 7 days was part of the condition precedent;
that would be a matter of pleading and argument. What would happen if
compliance was one day late? Did that mean no payment was due for any work at
all?
The various elements required properly particularised claims and responses.
Then there was the question as to whether IPS had actually complied with the
conditions. Some of the material before the court suggested that professional
indemnity insurances were not required from at least two sub-subcontractors who
had no design responsibility.
The allegations made in the adjudication were not all the same as those advanced
before the court. A properly particularised claim was required.
The question of compatibility between the subcontract and sub-subcontracts
would, if pursued, require factual analysis.
The question of waiver was very likely to involve evidence of previous payments and
practice. It did not follow that previously decided cases in which it was said payment
was equivocal would apply. IPS contended those cases could be distinguished as
being based on payment notices and payment practice, whereas here IPS relied on
the fact of payment on previous occasions as unilateral waiver. Only once any
breaches had been identified would it be possible to determine whether there was
a waiver.
Valuation evidence would be required because, at present, there was no basis upon
which the court could determine what part of any milestone payment related to the
work of a given sub-subcontractor in respect of which a breach of clause 21.4 had been proven. This was also fatal to Sleaford’s contention that IPS was not entitle d to summary judgment because it could not show what monies were due under clause
21.4 of the subcontract. IPS was seeking judgment on the sum awarded by the
adjudicator not due under clause 21.4. The burden of showing for the purposes of a
final determination what, if any, sums belonged to sub-subcontractors did not fall
on IPS but on Sleaford and required evidence.
The issues were by no means short and self-contained and were not suitable for
final determination under Part 8 at this stage. There would be summary judgment
for IPS.
There was an issue about the ambit of s 110(1A) (on which there was little authority)
and the exception at (1C) (on which there was no authority). IPS said that if the terms
of clause 21.4 amounted to conditions precedent to payment, the terms were
inoperable and / or did not comply with the Act, and the default provisions of the
Scheme would apply. The court said that questions were for another day and not
for the Part 8 proceedings.
The Part 8 proceedings were dismissed so as to enable Sleaford to start fresh
proceedings based on the issues it now might choose to pursue.
Comment: Whilst the case decides nothing new, it is yet another example of an
unsuccessful attempt to pre-empt enforcement of a valid award by asking for the
final determination of a central underlying legal issue (in this case, the construction
of a payment provision). That the attempt failed for a plethora of reasons is a
reminder that the use of Part 8 is subject to restrictions and is only suitable for short,
self-contained points requiring no evidence, as previous case law and the TCC
Guide underline. One unusual feature was that the remedy sought in the adjudication included a request that the adjudicator “advises” the parties on two issues namely whether the subcontractor had been negligent in the way it had installed certain fittings and also whether the payment ‘prerequisites’ had been complied with. The ad judicator did as requested and gave ‘advice’ on th ose issues. The court took a pragmatic view and decided that the ‘ a dvice’ was binding until there was a final determination, p erhaps encouraged by the fact that the ‘advice’ did not impact the core findings as to valuation and payment or the validity of the
decision. The referring party had drafted its own notice and referral and some of
the language used was informal. The court might have found the matter more troublesome had the core issues been the subject of the ‘advice’ .
Jurisdiction – Failure to exhaust by not expressly considering line of defence AGB Scotland v Darren McDermott [2023] CSOH 31, 17 May 2023, Lord Sandison
The parties entered into a SBCC Standard Building Contract with Quantities for the carrying out of alterations and an extension at Mr McDermott’s home. AGB applied to the quantity surveyor for an interim payment of £367.8k (IPA). Upon being notified
that the quantity surveyor was no longer instructed by Mr McDermott, AGB then
resubmitted the IPA to the contract administrator (CRGP) who issued a pay less
notice stating nothing was due.
The IPA referred and, AGB said, enclosed a copy of an earlier letter and its appendix
which set out the basis on which the interim payment was calculated. AGB
commenced adjudication proceedings in which the adjudicator had to decide
several issues including whether the appendix was sent with the IPA. He found for
AGB and awarded them the sum claimed. In proceedings to enforce the decision,
Mr McDermott contended that the adjudicator had failed to exhaust his jurisdiction
by failing to consider and make a finding on the defence that the appendix had not
formed part of the IPA, with the result that there was no proper specification given
of the sums claimed in the IPA. The adjudicator had noted in the decision that Mr
McDermott had argued that AGB had not provided a basis for the calculation of the
sum claimed but had not noted the specific ground was the absence of the
appendix.
After reviewing the law as to the principles on which the court would approach an
application to enforce an award, the court noted an adjudicator could not rely on a
general assertion that s/he had considered all submissions and documents. There
must be some effort to address the lines of defence advanced and to explain the
basis upon which they were accepted or rejected, failing which the decision would
be unenforceable.
Mr McDermott contended that the only questions the adjudicator had directly
addressed were (a) whether an earlier document could be incorporated by
reference in an IPA and (b) whether the letter and appendix in question provided
sufficient detail. AGB said it was clear from the terms of the decision that the
question had been adequately addressed. They also argued that the decision
should be enforced unless there was a failure to exhaust jurisdiction in a material
respect and the court should intervene only in the plainest of cases.
The court quoted a number of paragraphs from the decision, which could only be
read as deciding that the letter and appendix had been included in the IPA (at least
in the earlier application to the quantity surveyor). Whether that could be criticised
as an ill-founded conclusion in law or fact was of no consequence. The appendix
itself was already in the hands of Mr McDermott’s agents and was both referenced in the IPA and contained adequate specification. Decree granted in favour of AGB.
Comment The court ’s approach mirrors the English authorities, which is to say that for policy reasons frequently restated, the court will be slow to refuse enforcement. It is
common, if not universal, for adjudicators to say they have read and considered
and taken account of all notices, submissions and documents placed before them.
Such statements are unobjectionable, but the adjudicator must go further and
attempt to show they have addressed all lines of defence and explain why they
have accepted or rejected them.
Natural Justice – Failure to answer the right question; Challenge to enforcement of award arising from validity of final account statement – Broad Justice at high speed
Atalian Servant AMK Ltd v B W (Electrical Contractors) Ltd [2023] CSIH 18 Lord
President Carloway, Lords Woolman and Pentland (18 April 2023)
The Reclaimers AMK raised an action asking the Inner House to set aside the order of the commercial judge granting judgment on an adjudicator’s award in favour of the Respondents BWE 7 .
AMK had engaged BWE as sub-subcontractor to provide what was essentially
labour only for part of its electrical subcontract work at Lords Cricket Ground.
The sub-subcontract provided for BWE to submit its final account and for AMK to then provide a Final Account Statement (FAS), which was to become ‘final and
7 Atalian Servant AMK Ltd v B W (Electrical Contractors) Ltd [2023] ScotCS CSOH 14 Lord Sandison (16 February 2023) [see Cases Part
2 of 2023].
binding ’ unless BWE commenced adjudication or court proceedings within 20 working days. There was a massive difference in value between BWE’s final account (showing £1.9m due to them) and the FAS value - i.e. £2.384m gross versus £306k.
BWE commenced adjudication and court proceedings within 20 days of the FAS. The
first adjudicator resigned because the dispute was "absolutely incapable of proper
resolution in the timescales set by the Construction Act" in light of the overwhelming amount of material sent to him – the referral alone was accompanied by 26,000 pages of material. BWE served a further notice in respect of the same dispute,
essentially asking the second adjudicator to determine the sum properly due on the
final account. Mr Tony Bingham was appointed. Following the Referral, Response,
Reply, Rejoinder, and further submissions, Mr Bingham concluded that a sum of £1.4m was due to BWE (‘Award’) . At a fairly late stage, he had said that the nature and extent of the multiple variations changed the complexion of the sub-
subcontract into a beck-and-call arrangement, though not a new contract. He
indicated his line of thinking saying he proposed to look at the number of hours
worked and to select an appropriate contract rate and invited comments. The
parties did respond and address him on this in detail.
In the commercial court, BWE sought enforcement of the Award, and AMK opposed
and claimed that the Award was invalid on the grounds that Mr Bingham had not answered the question referred to him, namely “ What was the sum due?”, but had embarked on a frolic of his own in breach of the rules of natural justice in assessing
a fair price based on what he regarded as a new contract. Further, he had decided
that the FAS was contractually invalid without this issue having been raised by either
party. Separately, Mr Bingham had failed to address, and thus failed to exhaust, his
jurisdiction in relation to various lines of defence advanced by AMK, including several
items of cross-claim.
In the court below, the commercial judge had found:
(a) The question put to the adjudicator could scarcely have been wider: what
sum (if any) was due from AMK to BWE? The Award was a genuine attempt to
answer that question.
(b) As to the issue of the validity of the FAS, the adjudicator was clearly entitled
under paragraphs 13 and 20 of the Scheme (for Scotland) to raise it with the
parties. Once he had done so, there was extensive correspondence about it in which every opportunity was offered and taken for each party’s position to be amply elucidated. In accepting BWE ’s position, he had obviously rejected AMK’s position. (c) Residual complaints were similarly dismissed, each party having ample
opportunity to advance its case.
On AMK’s action to finally determine the validity of the FAS , the judge held that it would undermine the valid decision of the adjudicator to allow AMK, in effect, to set
off their FAS claims against the Award.
Before the Inner House, AMK contended that the adjudication was out of time and the FAS, therefore, final and binding. The first adjudication notice was not a ‘ foot in the door ’ allowing the second notice to be in time. The adjudicator had not answered the question posed but had devised his own questions and answers. He had failed to allow them a fair opportunity to address him on his proposed method of valuation. He had treated the sub-subcontract as ‘ beck and call ’ and not valued the works as required under the sub-subcontract. Indeed because of the weight of
material, they had not had enough time to address the new evaluation. He had not
addressed their various defences. All in breach of the rules of natural justice.
BWE argued the first adjudication was commenced in time, and upon the
resignation of the adjudicator they had followed the correct procedure by serving
a new notice. All that was required was that proceedings be commenced within 20
days, and this was done. The adjudicator had answered the right question, and the
parties had been given and had taken every opportunity to deal with the matters
he had raised.
The decision
Clause 33.4 provided that the FAS was final and binding on BWE, unless the parties
agreed to modify it or BWE commenced an adjudication or court proceedings within
20 working days. Adjudication proceedings were commenced within that time and
the FAS was therefore no longer final and binding. The adjudication proceedings did
not come to an end on the resignation of the first adjudicator. BWE followed the
correct procedure in serving a new notice. The two notices were very similar. The essential question was the same: what sum was properly due? “ The resignation of the first adjudicator did not terminate BWE's right to challenge the FAS. BWE have their foot firmly in the door, as permitted by clause 33.4, by virtue of both the adjudication and the timeous, and still pending, litigation. ” The challenge on that ground failed. The court agreed with the dictum of Lord Briggs in Bresco : 8 “pay now, argue later.”
The court also agreed with the principle of fairness as adopted by Lord Malcolm in
J&A Construction from the English case of Absolute Rentals 9 . The court found no
unfairness here. The adjudicator gave due notice to the parties of his line of thinking
8 Bresco Electrical Services v Michael J Lonsdale (Electrical) [2020] Bus LR 1140 at paragraph 12.
9 J & A Construction (Scotland) v Windex [2013] CSOH 170, Lord Malcolm adopted (at para [7]) a passage from Absolute Rentals v Gencor Enterprises, unreported, 16 July 2000.
on ‘beck and call’ and the number of man hours worked and invited comment. AMK responded in detail, repeatedly setting out their case as to why the variations had
to be valued under the sub-subcontract and that the number of man-hours worked
was irrelevant and unreliable.
The Lord President noted the adjudicator took on “ a nigh impossible task ” having to consider an enormous volume of written materials. He said it was redolent of what
was described by Turner J in Re Fundao Dam Disaster 10 as amounting to "a fractal
pattern of progressively complex and ever-finer recursive detail of sharply declining
significance," adding that it would have required a super-human effort to carry out
a precise valuation exercise before the adjudication deadline. The decision was bound to involve “broad justice at high speed” . The court concluded that the Award was “an exemplary piece of work” , the adjudicator having cut down the issue to one of assessing roughly what he considered to be payable and doing so in accordance
with the sub-subcontract. He selected a contractual rate and applied it to the hours
worked. This was no frolic of his own and the natural justice challenge failed.
The court found no need to address the discrete question of whether the court could
have considered, as a parallel question on enforcement, whether the FAS was
binding on the adjudicator and reserved it to a future occasion.
Payment application – Validity – ‘days’ not ‘clear days’ Elements Europe Ltd v FK Buildings Ltd [2023] EWHC 726 (TCC) Mr Justice Constable
judgment 30 March 2023
The claimant (Elements) sought summary judgment pursuant to an adjudicato r’ s decision awarding them over £3.9m plus interest and fees. That dispute was only
10 [2020] EWHC 2471 (at para 11).
part of a wider dispute between the parties. The respondent FK did not dispute the
validity of the decision. Instead, they made an application under Part 8 CPR asking
the court to rule on two short points, which if upheld, meant the decision was wrong
in law and should not therefore, in conscience, be enforced.
After a full hearing and following receipt of a draft judgment, the parties settled the
wider dispute and the court made a consent order dealing with the entire dispute.
It was not asked to and did not enter summary judgment. The two points the court
had been asked to decide on the Part 8 application arose from an important
payment provision of a JCT standard form of contract in common use, on which (so
far as counsel were aware) there was no previous authority and, in its discretion and
with the agreement of the parties, the court elected to give judgment recording its
decision on those points.
FK as main contractor engaged Elements as sub-contractor under a Sub-Contract
in writing incorporating the JCT Standard Building Sub-Contract Conditions SBCSub/C 2016 Edition with bespoke amendments ( ‘ the Sub-Contract ’ ) to carry out remediation works to 312 bi-split apartment modules as part of the design and
construction of three buildings to comprise a 156 residential apartment scheme at
Uptown Riverside, Springfield Lane, Salford.
The material terms
Clause 4.6 (page 68.30) of the Sub-Contract Conditions provided:
"4.6.1. During the period up to the due date for the final payment fixed under Clause 4.22.1 … the monthly due dates for interim payments shall in each case be the date 12 days after the relevant Interim Valuation Date …" 4.6.3. Where Clause 4.6.2 does not apply, the Subcontractor may make a payment application in respect of an interim payment to the Contractor either:
4.6.3.1. so as to be received not later than 4 days prior to the Interim Valuation Date for the relevant payment …"
Sub-Contract Particulars Item 10 provided that:
"The first Interim Valuation Date is 25 th June 2021 and thereafter the same date every fortnight [sic] for a period of two months, following which the date shall be the same in each month or the nearest business day in that month."
Clause 4.7.1. provided that:
"Subject to Clause 4.7.4 the final date for payment of any payment shall be 21 days after the due date as fixed in accordance with Clause 4.6.1 …"
The Specification provided:
"The site will be open for the Sub-Contractor to carry out the Sub-Contract Works from 7.30 a.m. to 6.00 p.m. Monday to Friday except on any dates stated in item 2.2. On Saturdays, the site will be open from 8.00 am to 1.00 pm"
Elements issued its Payment Application No. 16 by email on 21 October 2022, timed
at 22.07 hours. It was sent on behalf of Elements by Base Quantum, who had been
retained to prepare interim applications for payment, to a Mr Corns of FK and copied
to four other FK employees. The email attached a link to a 17-page PDF valuation
which stated that there was an amount due to Elements of £3,950,190.53. There was
no dispute that the email and its attached payment application was received into
the various recipients' email inboxes on the same date it was sent, between 22.07
and 22.08 hours.
In the adjudication, Elements adduced evidence of ‘usual’ and site-specific practice that the hours worked by quantity surveying and administrative staff were not confined to site or business hours but that they worked ‘ late hours ’ . On 21 October 2022, at least some of the individual recipients of the email serving application 16
saw that the email had landed and opened the email and its attachments, and all
understood that a payment application had been served. This evidence had been served in response to FK’s position in the adjudication that site-specific and usual site practice was relevant to the question of whether the recipients could
reasonably have been expected to have read the email. By the time of the court
hearing, counsel for FK had abandoned that argument as irrelevant and contended
the question of receipt was to be decided by the proper construction of the terms
of the Sub-Contract.
In the adjudication FK had disputed Elements ’ entitlement to payment for five reasons, all of which the adjudicator rejected. Two of those reasons were the subject
of the present Part 8 application.
The contentions
FK contended that the application was submitted late and was therefore
contractually invalid. Further, that in order to rely on the absence of a pay less notice
to found its right to payment, Elements had to show that its payment application
was valid since otherwise it would not constitute a payment notice entitling them to
payment.
To found that proposition, FK relied on the correct construction of clause 4.6.3.1 of the
Sub-Contract as meaning that application 16:
(1) needed to be received on or before the end of site working hours on 20 th October 2022; alternatively
(2) needed to be received on or before the end of site working hours on 21 st October 2022
placing emphasis on the word ‘ receive d’ in clause 4.6.3.1, which was to be contrasted with the word ‘give’ in clause 4.7.1 .
In relation to its first argument, FK submitted that the effect of clause 4.6.3.1 was to
require the application to be received no later than 4 days before the valuation date,
and receipt on 20 October was less 4 days or at least between 3 and 4 days. Elements countered that this was tantamount to saying ‘ days ’ meant ‘ c lear’ days and the clause used no such language. Further, ‘ day ’ in English law was always treated as a full day, and fractions of a day were to be ignored. FK’s alternative argument was that the clause should be construed such that the payment application needed to be received on or before the end of site working hours on whichever was the correct day (following the first argument) because that best met the reasonable commercial expectations of the parties. Elements ’ response to this was to point out that the Sub-Contract imposed no restriction on
the time of day in which a Payment Application might be made and received. They
relied again on the 'fractions of a day' principle as equally applicable to defeat the
second argument. The reference in the Specification to site opening times was
irrelevant and drew attention to the fact that the provision, when read in full, related
to the time during which the sub-contractor was entitled to carry out its work.
Indeed, the absence of any cross-reference between 4.6.3.1 and this part of the
Specification supported the argument that the parties had not intended it to be
determinative of the times permitted for service of a payment application. FK's
construction would lead to uncertainty: what was to define the hours within which a
payment notice could be validly served? On the other hand, Elements' construction
of the contract meant simply that, in the case of a Payment Application made by
email, it was received when it arrived in the inbox of the intended recipient, which was to be determined as a matter of fact – as to which they relied on the accepted evidence of actual timed receipt. Finally, as to commercial expectation, Elements
again relied on its uncontroverted evidence that at least two previous payment
applications that had been sent in the late evening had been accepted as properly
submitted.
Is Part 8 appropriate?
Elements argued that Part 8 was not appropriate as the questions did not fall within
the exception set out in Hutton Construction Limited v Wilson 11 . They also contended that Coulson J in Hutton had set a higher test: that the adjudicator’s decision must be ‘obviously wrong’ o r one to be taken ‘on any view ’ . The court did not agree that Coulson J intended to set a higher standard than the TCC Guide. Applying Hutton
and A&V Building Solutions 12 and the TCC Guide, the court was satisfied that the
point of construction before it was a short and straightforward one capable of
determination by the court. It would have taken a different view had the evidence
relied upon by Elements been disputed and/or had the issue of waiver or estoppel
been raised based upon the factual evidence of site practice.
The proper construction of clause 4.6.3.1
Days or clear days? There was an important distinction between 4 ‘days’ and 4 ‘ clear days’. If something had to be done 4 c lear days before a certain date, then it must be done at the latest on the fifth day before that date. If it was to be done 4 days
before the date, then it could be done on the fourth day prior to that date. The
language used was clear and the words of clause 4.6.3.1 could not be construed as meaning ‘clear’ days.
FK placed significantly more emphasis on their second argument, that receipt timed
at 22.08 was not received on or before the end of site working hours and was
11 Hutton Construction Limited v Wilson Properties (London) Ltd [2017] EWHC 517 (TCC).
12 Court of Appeal in A&V Building Solutions Ltd v J&B Hopkins Ltd [2023] 2023 EWCA Civ 54.
therefore late. The court had regard to a long line of established authority that the
courts do not deal in fractions of a day 13 .
Applying the established principles to the present case, and unless the Sub-
Contract provided otherwise, a payment application required to be made so as to
be received by FK no later than 21 st October 2022 could be made so as to be received at any time on 21 st October 2022, up to 23.59.59, “ because the law does not count in fractions of a day ” . The Sub-C ontract could have but did not provide for ‘clear’ days or for an application to be received within certain hours. The Specification provision as to the hours the site was open for work could not be read as importing a restriction on the time by which an application had to be received. “Put simply, the site opening times within the Specification have nothing to do with the proper construction of the word 'days' within the payment and notice provisions required for compliance with the HCGRA”.
Payment Application No 16 was made so as to be received on 21 st October 2022,
which was not later than 4 days prior to the Interim Valuation date, and was
therefore validly made. There was no error by the adjudicator in this respect, and
the award should be enforced and the Part 8 Claim dismissed.
About the author: Kenneth Salmon MCIArb is a qualified solicitor in England, Wales
and Eire. He is a Ciarb qualified and CMC accredited Mediator and Chair of
Education at Ciarb North West Branch. Kenneth is a construction specialist
currently working as a consultant to Slater Heelis Limited. He has extensive
experience of all forms of dispute resolution including arbitration, adjudication,
expert determination and mediation He is the author of Cases on the Enforcement
of Construction Adjudication Awards (2012) and the series Cases (on adjudication
13 Lester v Garland (1808) 15 Ves 248; Boxxe v Secretary of State for Justice [2023] EWHC 533 (TCC).
enforcement) published in Ciarb’s journal Arbitration: The International Journal of Arbitration, Mediation and Dispute Management 1999-2017.
Read more about our work in adjudication.
If you want to develop your knowledge and skills in construction adjudication, look
at our training courses.
Find out more about how to apply to Ciarb's Adjudication Panel.
Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16 Page 17 Page 18 Page 19 Page 20 Page 21 Page 22 Page 23 Page 24 Page 25Made with FlippingBook - PDF hosting