Matthew Harding v Paice and Springhall [2015] EWCA Civ 1231

This was an appeal of Harding v Paice which was first heard by the Technology and Construction Court in November 2014. 

The contractor, Harding, entered into a contract (a JCT IFC 0211 form) with Mr Paice and Mrs Springhall for certain construction works.  For various reasons, Harding terminated the contract and then issued a post termination final account valuation as required by the contract. It is relevant that the contract between the parties in this case provided that the employer was to pay the ‘amount properly due in respect of the account’.  As an aside, this wording is contrary to the requirement of the 2009 Act, which requires the payer to pay the amount in the payment notice, but this issue was not addressed by the courts. 

The employer failed to issue a pay less notice, Harding commenced an adjudication for the full amount applied and was awarded the full amount. The employer then commenced a second adjudication seeking a valuation of the works that were the subject of the valuation.  Harding made an application to the court for an injunction on the basis that the second adjudicator had no jurisdiction because unless a valid pay less notice had been served, then the amount applied for was due and could not ever be undone. Harding also argued that as a matter of fact the scope of the first adjudication included an assessment of the merits of the application, but the adjudicator decided that he did not need to address that point because of the failure to issue a pay less notice.

The court of first instance disagreed, holding that the adjudicator’s decision that the amount applied for was to be paid did not mean that the paying party was precluded for all time from commencing further proceedings to determine the value of the works.  It also confirmed that where the adjudicator does not make a decision on an issue or issues, in this case the true value of the amount applied for, it is open for either party to raise those issues in a second adjudication.  It seems to have been a relevant consideration to the court that application in question related to the final account, not an interim application although it is questionable whether this distinction between types of payment is appropriate – the 2009 Act highlights no such distinction. 

The contractor appealed.  The Court of Appeal rejected the appeal, upholding the first instance decision of Edwards-Stuart-J in which he decided that, in relation to final account following termination, a failure to serve payment or pay less notice will not ordinarily preclude an employer from subsequently challenging the true value of the payment through adjudication or court proceedings. This, it seems, is different to the position with interim payments.  Last week Coulson J held that “if there is a valid payment notice from the contractor, and no employer's payment notice and/or payless notice, then the employer is liable to the contractor for the amount notified and the employer is not entitled to start a second adjudication to deal with the interim valuation itself.” (Severfield (UK) v Duro Felguera UK).  The Court described its decision as being consistent with previous authority decided prior to the 2009 Act coming into force.  The Court’s reliance on pre-2009 Act cases is odd because the payment regime was completely re-written, so it is questionable whether any of the cases relating to the old Act should apply.  It is unclear whether the Court of Appeal decision may be applied to final account applications that do not flow from termination.  One would have thought the two are distinguishable, but the Court’s decision does not provide guidance on that point.

The Court also gave helpful guidance, albeit consistent with previous authority, on the meaning of paragraph 9(2) of the Scheme, which precludes an adjudicator from presiding over the substantially the same dispute has one that has already been decided.