Search

How can we help?

Icon

Adjudication decision cannot be used to resist prior adjudication

In M Davenport v Greer, one of the first cases to follow the court of Appeal’s decision in S&T v Grove, the TCC held that an employer could not use a “true value” adjudication decision as a defence or set off to enforcement proceedings for an earlier decision in favour of the contractor.

Background

M Davenport Builders (MDB) carried out building work for the Greers under a contract which contained no provisions for payment and so the payment terms of the Scheme for Construction Contracts were implied into the contract.  When MDB issued a final account for £106,160.84, the Greers did not pay but failed to issue a payment or pay less notice.

MDB commenced an adjudication for the unpaid sum (plus interest) and was successful.  The Greers did not pay the sum awarded to MDB and instead commenced a second adjudication (before a different adjudicator) as to the true value of the works.  The adjudicator decided in favour of the Greers that no money was payable to MDB.

MDB brought enforcement proceedings to the TCC in respect of the unpaid award in the first adjudication decision.  The Greers defended the proceedings on the basis that the decision in the second adjudication could be used as a set-off or counterclaim.

Decision

Stuart-Smith J held that the Greers could not rely on the decision in the second adjudication as a ground to avoid paying the sum awarded in the first adjudication.  He followed the reasoning of S&T v Grove  that the first “smash and grab” adjudication created an immediate obligation to make payment, which had to be done before commencing a second adjudication as to the value, and on that basis held that because the Greers had failed to discharge that obligation, they could not rely on the result of the second adjudication to resist enforcement of the first decision.

Although S&T v Grove related to interim applications, Stuart-Smith J found no significant reason to justify a difference in approach for a final application, on the basis that deprivation of cashflow could have serious effects for a contractor whether it occurred during or at the end of the works.

However, although the decision in S&T v Grove was clear that payment was required before a true value adjudication could be commenced, Stuart-Smith J did not determine any issue relating to the jurisdiction of the second adjudicator, on the basis that the question of jurisdiction for the second adjudication did not need to be determined given that he had held that the Greers could not rely on the decision in that adjudication.  Instead, citing Harding v Paice [2015] EWCA Civ 1231, he noted that in that case a party discharging its payment obligation from a first adjudication was not a prerequisite to that party commencing a second adjudication.

This element of the decision does not entirely follow S&T v Grove, which held that the payment obligation must be discharged before the second adjudication can be commenced.  Despite finding that there was no distinction between the interim and final payment contexts, by not applying Grove to the issue of jurisdiction of the second adjudication, Stuart-Smith J implicitly creates a distinction i.e. that Grove fetters the right to adjudicate in the case of interim payments, but not for final payments.

This is the first reported case to apply last year’s Court of Appeal decision in S&T v Grove. Critically, it confirms that S&T v Grove applies to true value adjudications after an initial “smash and grab” adjudication in the context of both interim and final payment applications.

Practical implications

This is the first reported case to apply last year’s Court of Appeal decision in S&T v Grove. Critically, it confirms that S&T v Grove applies to true value adjudications after an initial “smash and grab” adjudication in the context of both interim and final payment applications.

Whilst the principle makes sense, however, questions remain over whether it is commercially practical, particularly in light of the decision that the second adjudicator will not necessarily lack jurisdiction (which means that the second adjudication may be able to proceed, and be relied upon and enforced, but only once the payment awarded in the first adjudication has been made).  It is not obvious why an employer should be obliged to pay the sum from the first adjudication when they already have a further decision that that sum is not the true value and so is not due to be paid.  All that will happen in those circumstances is that the employer has to pay the sum awarded in the first adjudication and then commence enforcement proceedings to recover it on the basis of the second decision, instead of dealing with both decisions by means of set-off.

About this article

Disclaimer
This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full General Notices on our website.

About this article

Read, listen and watch our latest insights

art
  • 12 June 2024
  • Privacy and Data Protection

UK data protection: Important basics

Sometimes, data protection can seem like unhelpful red tape. At other times, it is critical to cultivating a trustworthy reputation.

art
  • 11 June 2024
  • Immigration

UK Immigration Roundup – May to June 2024

As the UK approaches the upcoming general election, immigration remains a focal issue in political discussions. The Conservative party’s recent proposal to cap visas for skilled migrant workers has alarmed various industries who are concerned that a limit to migration could harm vital sectors of the UK economy.

Pub
  • 06 June 2024
  • Employment

Talking Employment Law: What does the new Worker Protection Act 2023 mean for employers?

In this podcast, Lucy Densham Brown and Shauna Jones, members of the employment team, will review the new Worker Protection Act 2023 and provide some guidance on how employers should review their policies in preparation for October.

art
  • 03 June 2024
  • Commercial Real Estate

Sustainability and commercial property: green leases  

Climate change is considered by many the biggest threat we are facing today. With the UK said to have one of the oldest housing/building stocks, the focus on a building’s environmental performance and sustainability has never been more critical.

art
  • 03 June 2024
  • Employment

Using AI technologies in recruitment: is it fair and transparent?

In a rapidly evolving digital landscape, where artificial intelligence (AI) plays an increasingly pivotal role in HR and recruitment processes, ensuring responsible and ethical implementation is paramount.

Pub
  • 03 June 2024
  • Employment

Navigating the Labour Party’s New Deal for Working People: Legal implications and opportunities

Join Monica Atwal and Amanda Glover, for this in-person seminar on ‘Navigating the Labour Party’s New Deal for Working People: Legal Implications and Opportunities’ at our Reading office on Thursday, 20th June.