Harding v Paice and Springall [01.12.15]

Court of Appeal holds that further adjudications in construction disputes are not prohibited where a previous adjudication has not decided on certain matters; in addition an employer can still challenge a final account notice where a valid pay less notice has not been issued.

Implications

This decision is welcome as it confirms that undetermined matters may still be adjudicated in the future. It also produces a sensible outcome with regard to challenging final account notices.

In clarifying the meaning of the word “decision”, in paragraph 9 of Part I of the Scheme for Construction Contracts, Lord Justice Jackson was persuaded by the Defendant employers’ argument that it meant “a decision in relation to the dispute now being referred to adjudication.” Essentially, if the adjudicator had not been asked to assess the merits of the valuation, for example, then that point was still open to adjudication in future.

Parties to adjudication must therefore be aware that where a matter has been adjudicated there may still be aspects that have not been determined which are open for future challenge.

The Court of Appeal also indicated that there is a different payment challenge regime for final accounts. This takes into account the inability to simply put mistakes “right at a later stage” as one can with interim certificates. Even where an invalid pay less notice had been issued, it was still open to the employer to adjudicate on the merits of the final valuation certificate. This essentially amends the effect of having to pay the notified sum pursuant to s.111 Housing Grants, Construction and Regeneration Act 1996 where final accounts are concerned.

Background

The Claimant contractor appealed against a decision of the Technology and Construction Court (TCC) refusing an injunction preventing a fourth adjudication by the employers to determine the final value of the contract.

The parties had initially entered into a building contract in March 2013 under the JCT Intermediate Form 2011. Problems arose on the project for various reasons. The contract was terminated and the contractor sought to adjudicate on the final account totalling £397,912, which by this time was the third adjudication.

The adjudicator held the employers must pay the final account valuation but did not state he had agreed the value; merely that the employers must pay. The employers eventually paid and sought a fourth adjudication challenging the actual value of the final account.

Decision

Jackson LJ reaffirmed the decision of Mr Justice Edwards-Stuart in the TCC, holding as follows:

  • Whether a subsequent dispute was substantially the same as an earlier one was a question of fact and degree.
  • Ultimately, it was what the third adjudicator had decided rather than the dispute which had been referred which determined how much remained available for consideration by a subsequent adjudicator. Indeed, the adjudicator expressly declined to decide the merits of the contractor’s valuation as a “correct valuation of the works”.
  • The word “decision” in paragraph 9(2) of Part I of the Scheme meant a decision in relation to the dispute now being referred to adjudication:

“Parliament cannot have intended that if a claimant refers twenty disputes or issues to adjudication but the adjudicator only decides one of those disputes or issues, future adjudication about the other matters is prohibited.”

  •  It was open to the employers to challenge the valuation of the final account even where they had failed to issue a valid pay less notice.