The contractor made an application for an interim payment in respect of works done under a construction contract. The employer having issued a payment notice stating that no sum was payable, the contractor commenced adjudication proceedings to determine whether the sum applied for was “the notified sum” for the purposes of section 111 of the Housing Grants, Construction and Regeneration Act 1996 and therefore immediately payable by the employer. The adjudicator determined, inter alia, that the employer’s payment notice was invalid and awarded the contractor the sum applied for. In between the adjudicator’s award and its enforcement, the employer launched two adjudications of its own concerning: (i) its entitlement to offset costs it had incurred in rectifying defects and snags in the since completed works; and (ii) the contractor’s entitlement to an extension of time. In both proceedings the adjudicator found in the employer’s favour. The employer commenced a Part 7 claim for summary judgment of the defects adjudication. The contractor, relying on Court of Appeal authority to the effect that section 111 of the 1996 Act obliged the employer to pay the notified sum before embarking on an adjudication to obtain a revaluation of the work, commenced a Part 8 claim for a declaration that both the employer’s adjudications had been made without jurisdiction.
On the employer’s and contractor’s claims—
Held, claims allowed in part. There was no rationale for a construction of the Housing Grants, Construction and Regeneration Act 1996 which had the effect of prohibiting any adjudication while the notified sum remained unpaid, even where the subject matter of the adjudication had no relation to that sum. The only prohibition on commencing an adjudication was where the dispute referred was a true value adjudication in respect of the same payment cycle as the notified sum adjudication, where the true value adjudication was one concerned with the re-valuation of work for which payment had become due on a previous payment application. A payer who had a claim for losses which could have been the subject of a pay less notice served in respect of the notified sum in question could not commence a true value adjudication in respect of such a claim until it had paid the relevant notified sum, but if the claim was in respect of defects or delay occurring after the pay less notice date there was no principled reason for prohibiting the payer from commencing an adjudication in respect of such matters. In the present case, although the employer was entitled to summary judgment for the majority of the defects adjudication, there were elements of both the defects and extension of time adjudications that the adjudicator had not had jurisdiction to determine (paras 36, 39–40, 52, 56).
Jonathan Acton Davis KC (instructed by Clarke Willmott LLP, Manchester) for the employer.
Charlie Thompson (instructed by Hill Dickinson LLP, Manchester) for the contractor.