Set off – failure to consider defence – Validity of payment notice – severance: Downs Road Developments LLP v Laxmanbhai Construction (UK) Ltd [2021] EWHC 2441 (TCC) 7 September 2021 (HHJ Eyre QC) The claimant Employer engaged the defendant Contractor to build 79 residential units in London on a JCT DB 2011 with amendments for a contract sum of £27.39m. The Employer served a “holding” notice relied on as a valid Payment Notice for £0.97p (i.e. a nominal £1 less 3% retention) within the requisite period (Payment Notice 34). It later served a detailed Payment Notice (34a) outside the requisite period. This process had been employed in previous payment applications 31-33. The Contractor’s interim payment 34 had been for a net sum of £1,888,660.70 whereas Payment Notice 34a was for the net sum of £657,218.50 which was duly paid. Instead of commencing a ‘smash and grab’ adjudication the Contractor referred the dispute over the (true) value of interim payment application 34 to adjudication. Its stated reason for doing so was to settle the manner in which future payment applications were to be dealt with and to avoid a further adjudication by the Employer for a true value if it succeeded on its smash and grab. In the adjudication the Employer relied on its Payment Notice 34. It also raised counterclaim for a defective capping beam said to result in a loss of future rental value of £149, 692. The adjudicator valued interim payment application No 34 at £103,826.98 after deducting £10,000 for the Contractor’s admitted failure to provide a warranty.
He decided the issue over the capping beam was not part of the dispute i.e. not part of the valuation of the payment application as referred to him and he had no jurisdiction to deal with it. The Employer applied under Part 8 CPR for declaration that the adjudicator’s decision was unenforceable because of his failure to address the defence based on the defective capping beam. It also sought a declaration that the Contractor was not entitled to suspend works because the Employer had failed to pay the amount said to be due under the Decision. In its Acknowledgement of Service the Contractor sought declarations that Payment Notices 34 and 34a were invalid and that the Decision was valid and enforceable.
The Issues
At the hearing, the Employer conceded that Payment Notice 34a was out of time and invalid. However they argued that Payment Notice 34 was valid: it provided an agenda for adjudication and thereby satisfied the requirements of section 110A (2)(a) of the HGCRA and clause 4.10.1 of the Contract. The Employer said the Decision itself was not binding as to the conclusion that £103,826.98 was due because the adjudicator had failed to consider its capping beam cross-claim. However, said the Employer, the Decision involved decisions on two separate issues: (1) that of the sum due in respect of Interim Application 34 and (2) the extent of the set-off available to the Employer. Although the adjudicator's conclusion as to the latter of those issues was not enforceable, the Decision was binding as to the former.
Made with FlippingBook - Online Brochure Maker