An adjudicator recently awarded a joinery subcontractor payment in full of its final account application, as the main contractor had failed to serve a valid payment notice or pay less notice. However, in a second adjudication, the main contractor obtained a declaration as to the true value of the final account and an order for repayment of the amount overpaid. The joinery subcontractor resisted enforcement, saying that the dispute as to the value and payment of the final account was decided in the first adjudication and could not be re-adjudicated, so that the decision in the second adjudication was a nullity.
Subject to the contract terms, where, under the Construction Act provisions, there is a "notified sum" in respect of an interim payment, usually there is no contractual basis for re-opening the contractor's entitlement to that payment. Any errors can be corrected in subsequent interim or final valuations and an adjudication decision as to the notified sum payable rules out a challenge to the interim payment on valuation grounds in a subsequent adjudication.
However, in rejecting the subcontractor's challenge, the court said that the Construction Act and scheme are concerned only with cash flow and not the contract sum.(1) Where the notified sum determined in adjudication concerns a final payment (and unless the contract says that it is conclusive as to the amount due), the notified sum must be paid; but either party can have the ultimate value determined in a subsequent adjudication, litigation or other form of dispute resolution. The contract need not set out any specific mechanism for that final accounting exercise; payment of any final sum due to either party is based on enforcement of the contractual bargain.
For further information on this topic please contact Chris Fellowes at Mayer Brown International LLP by telephone (+44 20 3130 3000) or email ([email protected]). The Mayer Brown International LLP website can be accessed at www.mayerbrown.com.
(1) Kilker Projects Ltd v Purton (t/a Richwood Interiors)  EWHC 2616.