Source: http://www.practical-completion.co.uk/adjudication/
Timestamp: 2017-01-18 05:47:00
Document Index: 232881044

Matched Legal Cases: ['art 36', 'art 36', 'art 36', 'art 36', 'art 36', 'art 36', 'art 36', 'art 36', 'EWCA ', 'EWCA ', 'UKSC ']

Mills & Reeve: Practical Completion: Adjudication Mills & Reeve: Practical Completion
The information on this blog is not intended to be legal advice. You should not rely on it and we don't accept liability in connection with it. Please read our full disclaimer and let us know if you would like us to advise on any legal issue. Specific advice should be sought for specific problems. Adjudication
Payment Notices and Pay Less Notices – calculating time this Christmas
When calculating time under the Construction Act this Christmas, be aware that in relation to Payment Notices (including Default Notices) and Pay Less Notices the following days do not count:
Weekends do count unless they are excluded for another reason – for instance this year Christmas Day falls on a Sunday.
New Year’s Day does count
The days that do not count vary from year to year
These rules also apply to withholding notices and to adjudication proceedings.
For more information on payment and pay less notices, click here.
Posted by Alison Garrett on 14/12/2016 at 03:45 PM | Permalink
Wes Futures Ltd v Allen Wilson Construction Limited [2016] EWHC 2863 (TCC) was one of those occasions where the parties to a dispute were agreed that they had reached agreement, but disagreed as to what that agreement encompassed. To paraphrase someone who we may soon consider a beacon of liberal American foreign policy, there were agreed agreeds and unagreed agreeds.
In short, the Technology and Construction Court (“TCC”) was asked to determine whether an offer made by a Claimant was (1) a valid Part 36 Offer; and (2) whether the Defendant’s acceptance of it made it liable to meet the Claimant’s costs of their adjudication proceedings. The parties agreed they had settled, just not exactly what they had settled.
The primary issue surrounded whether the Claimant’s letter, which purported to be a Part 36 Offer, did in fact meet the criteria. Counterintuitively, the Claimant argued that it did not, and that ostensible deficiencies in its drafting meant that it should be interpreted more broadly (to the advantage of the Claimant). The upshot of it not being a Part 36, said that Claimant, was that its costs of the two adjudications (against the Defendant) would be recoverable from the Defendant. The Defendant disagreed, arguing that this was in fact a valid Part 36 Offer, and that it should only suffer the attendant consequences, i.e. being liable for the Claimant’s costs of the TCC proceedings.
The TCC determined that the Claimant’s letter was, in fact, a Part 36 Offer (and both parties had treated it as such at the times of offer and acceptance). There were deficiencies in its drafting but these were not sufficient to make the offer invalid as a Part 36. As a consequence, the ‘only’ costs which the Defendant was liable to pay the Claimant as a result of its acceptance, were those of the TCC proceedings. Its acceptance did not make it liable to pay the Claimant’s costs of the previous adjudications. The TCC then went further and said, even if it was not in fact a Part 36 Offer, the wording of the letter meant that it encompassed Court proceedings only. The TCC further clarified that there were two wider principles in operation (1) being that costs in adjudications were not recoverable in accordance with the Housing Grants (Construction and Regeneration) Act 1996, and that (2) costs of proceedings would not normally include the costs of separate stand –alone ADR proceedings (i.e. adjudication).
The decision serves as a reminder that a party’s costs of adjudication will be borne by it alone, and that caution should be exercised when issuing Part 36 Offers if there is an intention, or expectation, to recover other costs incurred during the dispute resolution process.
Follow the links below for more articles on:
Posted by David Phillips on 22/11/2016 at 10:45 AM | Permalink
Final account valuation can be the subject of a second adjudication
Section 111 of the Housing Grants, Construction and Regeneration Act 1996 (as amended) (“HGCRA”) provides that where a payer fails to issue a payment notice the sum applied for by the payee becomes the ‘notified sum’. If the payer then subsequently fails to issue a pay less notice then the ‘notified sum’ applied for becomes the sum due. The oft-cited cases of ISG Construction Ltd v Seevic College [2014] EWHC 4007 (TCC) and Galliford Try Building Ltd v Estura Ltd [2015] EWHC 412 (TCC) confirmed that where a payer fails to serve a pay less notice they are deemed to have agreed the value of the application, meaning that the valuation of that application cannot be dealt with in a subsequent adjudication. In the case of Harding (t/a/ M J Harding Contractors) v Paice and another [2015] EWCA Civ 1231, which was a case dealing with the valuation of an account on termination, it was confirmed by the Court of Appeal that the principle developed in ISG and Galliford only applied to interim applications.
Given that Harding was a case concerning the valuation of an account on termination, the question remained as to what the position would be in respect of normal final account valuations and whether or not the principle developed in ISG and Galliford applied to these or not. This question has now been answered by Ms Finola O’Farrell QC (sitting as a deputy High Court judge) in the case of Kilker Projects Ltd v Purton (t/a Richwood Interiors) [2016] EWHC 2616 (TCC). Considering the above cases she held that the payer could refer the valuation of the final account to a second adjudication. The first adjudicator that dealt with the dispute between the parties decided that, as the payer had not issued a pay less notice, the notified sum (which was the sum that had been applied for) became due. He did not look into whether what was applied for represented the true value of the account. Accordingly, the second adjudicator had jurisdiction to determine the value of the final account and his decision could be enforced. In respect of the HGCRA and the Scheme for Construction Contracts (England and Wales) Regulations 1998, she pointed out that these were concerned with cash flow and that 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”. As such, a party is entitled to have the ultimate value of the contract sum determined.
This decision confirms what many believed the position to be.
adjudication, click here; or
payment and pay less notices, click here.
Posted by Matt Bromilow on 07/11/2016 at 12:46 PM | Permalink
Do you need to think about public procurement when settling a commercial dispute?
The ECJ has just handed down a preliminary ruling on request of the Danish Supreme Court in Finn Frogne A/S v Rigspolitiet ved Center for Beredskabskommunikation Case C-549/14.
In short, this is a surprising decision and one which may cause difficulty for contracting authorities and disputes lawyers. The inference from this decision seems to be that, unless the terms of a settlement, agreed between a contracting authority and a supplier who are embroiled in a commercial dispute over a public contract fall within the remit of:
(1) Regulation 72 “modification of contracts during their term”; or (2) Regulation 32 “use of the negotiated procedure without prior publication”,
then it is possible for the terms of that settlement to itself constitute an illegal modification to a public contract which should have been advertised and procured under the procurement rules (with possible consequences of ineffectiveness of the settlement and damages to the aggrieved third party supplier).
The Centre for Emergency Communication of the National Police in Denmark (CFB) awarded a contract to Terma for the supply and maintenance of a communications system for all emergency response services worth around €70m. A dispute arose between the parties relating to delivery times. The parties agreed a settlement of that dispute which involved reducing the scope of the contract to:
the supply of a radio communications system for regional police worth under €5m;
the sale of two central server farms to CFB worth under €7m (Terma had purchased the latter for the purpose of leasing the servers to CFB under the original contract).
The parties waived all other rights from the original contract as part of the settlement. CFB published a VEAT notice in respect of the settlement and Frogne (who had not been involved in the original procurement exercise at all) brought a challenge to the settlement on the basis that it constituted a material amendment to the original contract and should have been competed under the procurement rules.
The Danish Supreme Court then referred a question to the European Court of Justice (ECJ) for interpretation of the procurement rules, asking whether the procurement rules must be interpreted as meaning that, following the award of a public contract, a material amendment cannot be made to it without a new tendering procedure being initiated, even in the case where the amendment is objectively a type of settlement agreement where both parties agree to mutual waivers designed to bring an end to a dispute with an uncertain outcome, which arose from the difficulties encountered in the performance of that contract.
an amendment of a contract consisting in a reduction in its scope may result in the contract being brought within reach of a greater number of economic operators (particularly smaller economic operators who may not have otherwise qualified for the larger original contract);
it was irrelevant that the settlement agreement did not arise from the desire of the parties to renegotiate the essential terms of the contract, but instead out of objective difficulties with unpredictable consequences encountered in the performance of that contract. Contracting authorities can opt for a direct award of a contract, that is to say, negotiating the terms of the contract with a selected economic operator without prior publication of a contract notice, only in the circumstances expressly referred to in the procurement rules (in the UK these are contained in Regulation 32 “use of the negotiated procedure without prior publication”); and
contracting authorities may retain the possibility of making amendments to a contract after it has been awarded, on condition that this is provided for in the documents which governed the award procedure. By expressly providing for the option and setting the rules for the application of them in those procurement documents, the contracting authority ensures that all suppliers interested in participating in the procurement procedure have been made aware of that possibility from the outset and are therefore on an equal footing when formulating their respective tenders. The position would be different only if the contract documents provided for the possibility of adjusting certain conditions, even material ones, after the contract had been awarded and fixed the detailed rules for the application of that possibility. Comment
Our first thought on reading this case was to consider whether we should update dispute resolution clauses in public contracts to provide expressly for this kind of settlement, and thus try to ensure that any settlement is a "permitted modification" because it has been clearly precisely and unequivocally set out in the original contract. However we soon discounted this strategy as unfeasible: we don’t think a general term permitting modification as part of a settlement would be capable of ever being specific enough for the particular circumstances in which it was ultimately used.
This case also serves as a reminder that material changes to public contracts can relate to reducing the contract scope as well as increasing it.
This case was a reference for a preliminary ruling, which the Danish Supreme Court requested from the ECJ to aid the Danish Court’s interpretation of European derived law. Similarly in the UK, our courts must still refer to and use ECJ jurisprudence when deciding matters derived from European law, but once the UK has left the EU, the UK Courts may not still be bound and may decide not to follow the decision.
Finally, if you are wondering, “what is a VEAT?” you’ll find the answer here on our procurement portal.
Posted by Katherine Souter on 16/09/2016 at 01:20 PM | Permalink
Adjudication costs: is the back door open? As most practitioners know, the recovery of costs in construction adjudication is the exception rather than the rule. However, there has been an interesting recent summary judgment decision from the TCC (Tulu Construction Ltd v Mulalley & Co Ltd [2016] EWHC 1852 (TCC)) which enforced an adjudicator’s decision that had awarded £47,666.27 of “debt recovery costs” (there is no further detail as to what these costs are but it is assumed that it includes the legal fees in bringing the adjudication) as part of the award under the Late Payment of Commercial Debts (Interest) Act 1998. The judgment is brief with limited discussion on the legal arguments (with no discussion of the impact of s108A of the Housing Grants, Construction and Regeneration Act 1996 (as amended)), but we can anticipate it being used with some enthusiasm going forward by referring parties to argue (by mere citation of the case) to recover their costs of the adjudication. Whilst some may argue that you shouldn’t be able to recover these costs through the back door when the front door has been closed, time will tell whether the door is actually ajar. Posted by Patrick Wisheu on 11/08/2016 at 04:24 PM | Permalink
Courts get tougher on challenging adjudication enforcement This is a cautionary tale for anyone thinking about not complying with an adjudicator’s award and challenging enforcement proceedings. Unless there are really good reasons for not complying you could find yourself out of pocket for more than just the amount of the adjudicator’s fees.
In AMD Environmental Ltd v Cumberland Construction Company Ltd [2016] EWHC 285, the adjudicator’s award required Cumberland to pay £78,000 plus VAT plus the adjudicator’s fees. Cumberland did not pay. AMD issued enforcement proceedings. Cumberland resisted the proceedings. One of the arguments that they put forward was that the dispute had failed to crystallise at the time of the appointment of the adjudicator.
The court reiterated that this argument “is frequently advanced and almost as frequently rejected”. He also mentioned that the only case where he was aware that this argument had succeeded was where a claim was put forward after close of play on Maundy Thursday and the notice of adjudication was served on the following Tuesday (the day after Easter Monday).
In a robust conclusion he went on to state that “the adjudication decision should have been honoured some time ago” and the arguments in support of Cumberland’s position were “hopeless”.
As a general point (and warning) he went onto say that the TCC is concerned that too many adjudication decisions are not being complied with, and he went on to order Cumberland to pay indemnity costs in respect of the enforcement proceedings and interest at 6% on the adjudicator’s award. Ouch.
Posted by Alison Garrett on 07/03/2016 at 10:00 AM | Permalink
Interim until the end
Another case with an impact on the so called “smash and grab” adjudication has recently been heard in the TCC. This time it dealt with the position where a construction contract contained a schedule of dates for interim applications, but the works had become extended and so ran beyond the last date in the schedule.
The court held that beyond the final date in the schedule, the contractor had no contractual right to make applications and, as a result, the Employer could not be obliged to pay in relation to such an application.
The contract specified 23 application dates and this was sufficient agreement as to the payment mechanism to avoid needing to import the relevant provisions of the Scheme for Construction Contracts. The parties were negotiating around the extension to those dates, but never did reach an agreement, hence no further entitlement to apply on an interim basis existed. Accordingly, the contractor would have to wait until final assessment in order to be paid for all of the work that fell to be valued after application 23.
Whilst with slightly different contract terms and facts, the outcome of a similar case could well be different, given that many contracts of any size often do ‘overrun’, and the impacts of a lack of cashflow can be severe, contractors should ensure that the contract provides for interim applications to continue and ideally in a default manner.
(Grove Developments Ltd v Balfour Beatty Regional Construction Ltd [2016] EWHC 168 (TCC))
Posted by Paul Slinger on 29/02/2016 at 01:16 PM | Permalink
Harding v Paice If you are reading this construction law blog, no doubt you will be aware of the bank of three cases (namely, ISG Construction Ltd v Seevic College [2014] EWHC 4007 (TCC) Galliford Try Building Ltd v Estura Ltd [2015] EWHC and Matthew Harding t/a Harding Contractors v (1) Gary George Leslie Paice (2) Kim Springall [2014] EWHC 3824 (TCC) decided by Mr Justice Edwards-Stuart, which concerned the common scenario of the contractor’s payment application becoming the ‘notified sum’ under the Housing Grants, Construction and Regeneration Act 1996 (as amended) due to the failure of the employer to issue a payment certificate or a pay less notice.
One of the three cases, Harding v Paice and Springall, recently came before the Court of Appeal. Before we get into the substance of what the Court of Appeal decided, it is worth us first reminding ourselves of the facts of the case and what Mr Justice Edwards-Stuart decided at first instance.
In brief, Harding was contracted to construct and fit out two residential homes under a JCT Intermediate Form 2011. The parties fell out and the contract was terminated. Accordingly, Harding submitted his final account for payment following the termination of the contract and subsequently commenced an adjudication to recover the sum shown in his final account (the “Harding adjudication”), which was decided in his favour as a result of Paice and Springall failing to issue a payment certificate or effective pay less notice. The amount awarded was ultimately paid by Paice and Springall, however, prior to making that payment, Paice and Springall launched their own adjudication in order that the value of the works performed by Harding could be determined (the “Paice and Springall adjudication”). Harding sought injunctive and declaratory relief from the court to stop the Paice and Springall adjudication from proceeding. The basis of Harding’s claim was that all of the issues raised in the Paice and Springall adjudication had already been decided during the Harding adjudication.
First instance decision Mr Justice Edwards-Stuart dismissed Harding’s claims for injunctive and declaratory relief and concluded that, in respect of the Harding adjudication, although Paice and Springall were obliged to pay the sum shown on Harding’s final account because they had failed to serve an effective pay less notice, they should not be forever deprived from challenging the value stated in Harding’s final account. As such, the Paice and Springall adjudication could proceed.
The Court of Appeal upheld the first instance decision of Mr Justice Edwards-Stuart and dismissed Harding’s appeal. It concluded that as the adjudicator in the Harding adjudication had not decided on the merits of Harding’s final account and had instead awarded Harding the sum as stated in his final account due to the lack of pay less notice, Paice and Springall were entitled to have the value of the account determined.
Comment Following the Court of Appeal’s decision in Harding v Paice and Springall [2015] EWCA Civ 1231, it is now clear that, in respect of final account scenarios, the failure by the employer to issue a pay less notice is not fatal, as the employer is not deemed to accept the valuation contained within the contractor’s final account and can have the value of those works determined by a separate action (whether that be another adjudication or litigation). However, somewhat unfortunately, the Court of Appeal decided not to delve into the detail of Mr Justice Edwards-Stuart’s decision in ISG v Seevic where he decided, in respect of an interim payment application, that if an employer fails to serve a payment certificate or pay less notice then it must have agreed the valuation in the relevant interim application and, accordingly, an adjudicator dealing with a claim by a contractor for non-payment by the employer must be taken to have decided the value of the work in respect of the interim application in question. The Court of Appeal passed no comment on whether Mr Justice Edwards-Stuart decision was right in that case, merely acknowledging that in most cases special contractual provisions apply to interim payments which can normally be put right at a later stage.
As a result of the above, the position is respect of final count scenarios and interim application scenarios is different, with the approach to interim applications more advantageous to the contractor. No doubt the difference in approach towards interim applications and final accounts will come before the court again and when it does you’ll be among the first to hear.
Posted by Matt Bromilow on 01/02/2016 at 09:47 AM | Permalink
In the latest case involving interim applications and lack of payment notices, the Technology and Construction Court was tasked with ascertaining whether or not a communication from the contractor to the employer constituted a valid claim for payment by the contractor. The employer did not issue a pay less notice in response to the communication, so the question was an important one because it meant the difference between the employer having to hand over a substantial amount of money that it did not believe was payable. This is because legislation imposes a strict set of procedures in relation to interim payments under construction contracts.
The purported claim for payment by the contractor contained only a very modest update to its last application, with the addition of some equipment hire costs. That last application had been subject to an effective pay less notice from the contractor only a few days before the purported claim for payment was made. The calculations for the purported claim for payment were attached to an email which was rather opaque and was asking for the existing payment notice to be amended or updated.
The Court found that the communication was not a valid claim for payment. It did not state that it was an application for an interim payment and nor did subsequent correspondence, upon which the contractor also tried to rely, state that it was being provided as a default payment notice. Additionally, the employer had actually asked the contractor what the communication was supposed to be and the contractor’s response was inconsistent with the explanation it sought to advance at Court. The Court also considered it unlikely that even the contractor considered the communication as being a claim for payment at the point in time when it was made but was seeking to take advantage of subsequent events.
If the Contract describes what the application or payment notice should be called, then it should be called that it should align with any other contractual requirements too, otherwise the only effect it might ultimately have is to cause an unnecessary argument.
Caledonian Modular Ltd v Mar City Developments Ltd [2015] EWHC 185 (TCC)
Posted by Paul Slinger on 29/07/2015 at 10:47 AM | Permalink
Mills & Reeve success in Supreme Court in adjudication case
Nik Oldham, Alexandra Pike and Jacqui King of Mills & Reeve have successfully argued in the Supreme Court that its client, Aspect, a responding party to an adjudication, has 6 years from payment of an adjudicator's award to recover the sums paid. This means that, irrespective of limitation in the underlying claim, a paying party will have a mechanism to recover sums incorrectly awarded in adjudication. The new limitation period does not apply to the rest of the Referring Party's claim, so the Referring Party must ensure that it commences proceedings within the original limitation period if it wishes to claim additional sums. A full briefing on the case can be found here.
As a result of this judgment, parties to construction contracts may wish to amend the adjudication clause to state that an adjudication decision will be finally binding unless a claim is brought within a finiteperiod, say 28 days, after the adjudicator’s decision.
Aspect Contracts (Asbestos) Limited v Higgins Construction Plc [2015] UKSC 28
Posted by Alexandra Pike on 17/06/2015 at 03:26 PM | Permalink
New ACE Professional Services Agreement National Infrastructure Commission discussion paper on impact of population change on future infrastructure demand
Reflections on JCT 2016