Justin Mendelle, head of construction at Sharpe Pritchard, looks at a recent case which highlights the importance that employers ensure payment applications considered to be wrongly valued, are corrected as soon as possible.
Background
Harding as the claimant building contractor, entered into a building contract with the defendant developers Paice, to construct two residential houses. The contract was an amended form of the JCT Intermediate Form of Building Contract 2011.
Disputes arose between the parties, eventually resulting in Harding serving a notice of termination of its employment, and as required under the contract, it submitted its account to Paice which set out the value of the work. Paice failed to issue a pay less notice and following an adjudication commenced by Harding, it was decided that Harding was entitled to payment of around £340,000.
Paice launched a subsequent adjudication seeking a decision on whether the value of the contract works was correct. Harding applied for an injunction in order to prevent Paice from proceeding with this on the grounds that i) the value of the contract works had already been determined in the earlier adjudication; and ii) the adjudicator had already issued his decision on the dispute being referred to.
Decision
The judge rejected Harding’s submission that Paice was attempting to launch an adjudication relating to a dispute that had already been adjudicated on. This was because in the first adjudication, the primary issue had been whether or not, in the absence of a pay less notice, Harding was entitled to payment of the sum claimed. The secondary issue had been the determination of the proper value of the account, but since the adjudicator had accepted Harding’s primary case and had specifically pointed out that he was not deciding upon the correctness of the sum claimed, the proper value of the works remained undecided. Therefore it remained open to challenge.
The judge further rejected Harding’s argument that the value of the contract works had been properly decided, and stated that the absence of a pay less notice did not have the effect of converting the relevant sum into that which was properly due in respect of the account. In other words, the obligation was to pay what was due, but Paice were entitled to have the value of the works determined, whether by adjudication or litigation.
For more information on construction law, please contact Justin Mendelle on 020 7061 5948 or email jmendelle@sharpepritchard.co.uk.
This article is for general awareness only and does not constitute legal or professional advice. The law may have changed since this page was first published.
