107772.001 SH Construction Case Booklet

3. Enforcement – true value decision as a defence or set-off before payment M Davenport Builders v Greer 11 The Claimant applied to enforce an adjudication decision by Mr Sutcliffe dated 24 October 2018 awarding them £106,160.84 plus interest on a claim based on their final account. The Defendants put up then abandoned a raft of unmeritorious defences. Having accepted that Mr Sutcliffe’s award was valid and enforceable, they wished to rely by way of set-off or counterclaim upon the existence of a “true value” adjudication by another adjudicator, Mr Sliwinski. The central issue was whether the Defendant was obliged to pay the Sutcliffe award before commencing the Sliwinski adjudication. The contract between the parties was for construction works to a building in Stockport to which the relevant provisions of the Scheme applied. The case concerned an application for a payment of a final payment. The defendants having failed to give a payment or pay less notice, the claimant issued a payee’s notice in default pursuant to Section 110B of the Act. That adjusted the final date for payment but once again the Defendants failed to issue a Pay Less Notice. Nor did they pay the sum demanded either when due or thereafter. The Sliwinski adjudication was commenced 6 days after Mr Sutcliffe’s decision. He concluded that the gross value of the final account was £867,557.54 excluding VAT and that no sum was payable by the Claimant to the Defendants. What the Claimant did in the Sutcliffe adjudication was to take the ‘short route’ to a right to immediate payment of the sum claimed. It did not require the adjudicator to undertake a valuation exercise. 12 The Court said it was now established by the Court of Appeal in Harding and, more recently in Grove, 13 that where a party to an initial adjudication had successfully taken the short route to immediate payment, the fact of the initial decision did not necessarily preclude a further adjudication requiring the later adjudicator to undertake the valuation exercise that was not undertaken by the first adjudicator. The second adjudication (a “true value” adjudication) was not necessarily precluded by the first adjudication because the dispute in the true value adjudicationwas not the same or substantially the same dispute as the contractual issue resolved by the first adjudication: see Harding; and Grove at [95]. It was common ground (and the Court would accept) that a party required to make immediate payment because of an adjudication decision based upon the short or contractual route would be entitled to commence and rely upon the results of a true value adjudication if and when he had made the immediate payment required by the first adjudication. The question in the present case was whether he was entitled to commence and/ or rely upon a true value adjudication (such as the Sliwinski adjudication in the present case) without having first made the immediate payment. Resolution of that question required consideration of the Act, the Scheme, questions of policy, and the authority of Harding and Grove.

The starting point was s. 111(1) of the 1996 Act, which Jackson LJ characterised in Grove as creating an “immediate” payment obligation to promote cashflow and which it was since established applied equally to interim and final payments. 14 Further nothing theCourt could identify in the Act or the Scheme stated or implied that different policy considerations should apply to final applications rather than interim applications. Harding demanded closer attention as a case involving an application for payment of a final account the chronology of which lent some support to the defendant’s position that it was entitled to start the Sliwinski adjudication before paying the sum ordered by the Sutcliffe award. However having considered the Scope and Effect of [the adjudicator’s] decision in the third adjudication and in each passage of his judgment in Harding Jackson LJ included reference to the payer having paid the sums due under the first adjudication or to the payee being entitled to retain monies that had been paid to him; and he did so in terms suggesting that the payment had been made before (or the monies being retained until) the payer proceeded to a true value adjudication. The unresolved area of latent ambiguity in the decision of the Court of Appeal in Harding , was this:    Did the right to bring the fourth true value adjudication detract from Paice’s obligation to comply with the third adjudicator’s decision in the meantime by paying the sum ordered by the third adjudication? The decision of the Judge below and the Court of Appeal was that Paice should not be restrained from bringing the true value adjudication and that decision was given after Paice had in fact paid the sums ordered by the third adjudication. However, the decision of the Court of Appeal implied that it was not an essential prerequisite to relying upon a later true value adjudication decision that the earlier immediate obligation should be discharged before launching the later true value adjudication. Paice did not pay its immediate obligation under the third adjudication before launching the fourth, and they were not precluded from proceeding with or relying upon the fourth adjudication for that reason. This suggests that the critical time will be the time when the Court is deciding whether to enforce the immediate obligation. Pausing for air at that stage, it seemed to the Court consistent with the policy underlying the adjudication regime that a defendant who had discharged his immediate obligation should generally be entitled to rely upon a subsequent true value adjudication and that a defendant who had not done so should not be entitled to do so. Adopting a phrase from [141] of the judgment of Coulson J in Grove at first instance “the second adjudication cannot act as some sort of Trojan horse to avoid paying the sum stated as due”.


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