HT-2024-LDS-000009 - [2024] EWHC 2188 (TCC)

Fecha: 21-Ago-2024

The Law

The Law

13.

The well-established legal principles applicable to adjudication enforcement were set out by O’Farrell J in Bexheat Ltd v Essex Services Group Ltd [2022] EWHC 936 (TCC) at [A/9/35-39];

(1)

Where a valid application for payment has been made, an employer who does not issue a valid payment notice or pay less notice must pay the ‘notified sum’ in accordance with section 111 of the Act;

(2)

Failure to pay the notified sum entitles the contractor to seek payment of the sum by obtaining an adjudication award;

(3)

Unless otherwise directed by the adjudicator, the parties are required to comply with the decision immediately;

(4)

The courts take a robust approach to enforcement, regardless of errors of procedure, fact or law, unless in excess of jurisdiction or breach of natural justice;

(5)

When a party is required to pay a ‘notified sum’, that party may embark upon a true valuation of the work done, but only after it has complied with the immediate payment obligation under section 11 of the Act.

14.

A number of other cases were referred to concerning the challenging of the enforcement of an adjudicator’s decision based on jurisdiction:

(1)

S&T (UK) Ltd v Grove Developments Ltd [2018] EWCA Civ 2448 - where a party is required to pay a notified sum but fails to do so, it may not commence a true value adjudication.

(2)

Broseley London Limited v Prime Asset Management Limited [2020] EWHC 944 (TCC) - the principle set out in Grove prevents a paying party from commencing a true value adjudication without first paying the amount awarded in a previous adjudication decision.

(3)

Sudlows Limited v Global Switch Estates 1 Limited [2023] EWCA Civ 813 – to decide whether an adjudicator lacks jurisdiction as to a dispute previously referred, the adjudicator should give a robust and common sense answer, looking to see what the earlier adjudication actually decided and considering the need for flexibility to prevent a party re-adjudicating a claim.

(4)

Lidl Great Britain v Closed Circuit Cooling Limited [2023] EWHC 3051 (TCC) - whilst there is no blanket principle on commencing a true value adjudication before satisfying an award made in respect of an interim payment application, the Grove principle does prevent a paying party from commencing a true value adjudication on matters which were subject to a decision on the same payment cycle “insofar as they are matters which could have been the subject of the pay less notice served in respect of the particular notified sum in question”.

15.

Whilst Mr Fearon argues that the comments of Sir Rupert Jackson in the Grove case are obiter and should not be accepted without considering the other authorities and the particular factual matrix in this case, it does not seem to me that Counsel do in fact disagree on the law. The Defendant is arguing its case on a factual basis, that the second adjudication conducted by Mr Lord did not relate to the same payment cycle because it related to the September 2023 interim payment application and was for the valuation of the works. The first adjudication made a decision on the Claimant’s December 2023 interim payment application. It was argued that the adjudication therefore was not in respect of the same matters upon which Mr Latham gave his decision in the first adjudication and the court should exercise its discretion to set off.

16.

The principles in respect of the set off were stated by Joanna Smith J inFK Construction Limited v ISG Retail Limited [2023] EWHC 1042 (TCC) as follows at [20]:

“The general position is that adjudicators’ decisions which direct the payment of money by one party to another are to be enforced summarily and expeditiously ... No set off or withholding against payment of that amount should generally be permitted…
“There are, however, at least three limited exceptions to this general position:
(i)
a first, “relatively rare”, exception will be where there is a specified contractual right to set off…
(ii)
a second exception may arise where it follows logically from an adjudicator’s decision that the adjudicator is permitting a set off to be made against the sum otherwise decided to be payable…
(iii)
a third exception may arise in an appropriate case, at the discretion of the court, where there are two valid and enforceable adjudication decisions involving the same parties whose effect is that monies are owed by each party to the other…”

17.

The judge also quoted Akenhead J’s decision in HS Works Ltd v Enterprise Managed Services Ltd [2009] EWHC 729 (TCC) at paragraph 40 setting out the steps which needed to be considered before the court should permit a set-off:

“(a)
First, it is necessary to determine at the time when the court is considering the issue whether both decisions are valid; if not or if it cannot be determined whether each is valid, it is unnecessary to consider the next steps.
(b)
If both are valid, it is then necessary to consider if, both are capable of being enforced or given effect to; if one or other is not so capable, the question of set off does not arise.
(c)
If it is clear that both are so capable, the court should enforce or give effect to them both, provided that separate proceedings have been brought by each party to enforce each decision. The court has no reason to favour one side or the other if each has a valid and enforceable decision in its favour.
(d)
How each decision is enforced is a matter for the court. It may be wholly inappropriate to permit a set off of a second ﬁnancial decision as such in circumstances where the First Decision was predicated upon a basis that there could be no set off”.