Executive Summary

A party is entitled to refer to adjudication a dispute in respect of the true value of the final account, even where a previous adjudicator has determined that a contractor is due to be paid the amount stated in its final account application by reason of the employer's failure to serve a payment notice or pay less notice. This does not amount to referring 'the same or substantially the same' dispute to adjudication.

The Facts

Kilker Projects Limited ("Kilker") employed Rob Purton ("Richwood") to carry out specialist joinery works at the Dorchester Hotel, Park Lane.

During the works, a dispute was referred to adjudication in which the adjudicator held that Kilker had failed to serve a valid payment notice or pay less notice in respect of Richwood's final account application. Accordingly, Kilker was ordered to pay Richwood £147,223.

Kilker commenced a second adjudication seeking a declaration of the true value of final account for the works and repayment of any sums found to have been overpaid to Richwood. The adjudicator decided the true value of the account, which led to Richwood being ordered to 're-pay' to Kilker £55,676 plus VAT.

Kilker commenced enforcement proceedings and, in defence, Richwood argued that the second adjudicator did not have jurisdiction to decide the dispute on the basis the first adjudicator had already decided the dispute as to value and payment of the final account.

The Decision

Richwood placed particular emphasis on the judgment of ISG Construction Ltd v Seevic College [2014] EWHC 4007 (TCC) in which Edwards-Stuart J held:

"... in the absence of any notices the amount stated in the contractor's application…is deemed to be the value of those works so that the employer must pay the sum applied for.

... if the employer fails to serve any notices in time it must be taken to be agreeing the value stated in the application, right or wrong. In my judgment, therefore, in that situation the first adjudicator must be in principle taken to have decided the question of the value of the work carried out by the contractor for the purposes of the interim application in question."

O'Farrell J was referred to the judgment of Galliford Try Building Ltd v Estura Ltd [2015] EWHC 412 (TCC) in which Edwards-Stuart J clarified his statements in ISG v Seevic. Here it was held that:

"…[an] employer cannot bring a second adjudication to determine the value of the work at the valuation date of the interim application in question. But it does not mean any more. There is nothing to prevent the employer challenging the value of the work on the next application, even if he is contending for a figure that is lower than the (unchallenged) amount stated in the previous application. If this was not made clear by my judgment, then it should have been, and it is certainly made clear by the decision of the Court of Appeal in Rupert Morgan Building Services (LLC) Ltd v Jervis [2003] EWCA Civ 1563."

O'Farrell J also considered Matthew Harding t/a MJ Harding Contractors v Paice [2015] EWCA Civ.1231 in which the Court of Appeal determined that the employer could refer to adjudication the question of the true valuation of a final account following termination, despite an earlier adjudication ordering payment of the contractor's application for final payment in full on the basis of a failure to serve a valid pay less notice.

In reliance on these judgments, O'Farrell decided that the 1996 Construction Act and the Scheme for Construction Contracts (as amended) are concerned only with cash flow. They "…establish a regime for determining stage or periodic payments throughout a relevant construction contract. They do not affect the ultimate value of the contract sum…". A party is entitled to have the "…ultimate value of the contract sum…" determined, including in adjudication and litigation. Accordingly, the second adjudicator's decision was upheld.