BUSINESS AND PROPERTY COURTS IN LIVERPOOL
TECHNOLOGY AND CONSTRUCTION COURT (KBD)
Liverpool L2 2BX |
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B e f o r e :
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BELLWAY HOMES LIMITED |
Claimant |
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-and- |
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SURGO CONSTRUCTION LIMITED |
Defendant |
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for the Claimant
Ms Brenna Conroy (instructed by Hay & Kilner LLP)
for the Defendant
Hearing date: 22nd November 2023
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Crown Copyright ©
District Judge Baldwin:
Introduction – Claimant's application to enforce an adjudication decision
Robert Lockhart (9th June 2023 with exhibit)
Michael Smyth (16th August 2023 and 2 x 9th October 2023 with exhibits)
Martyn Cole (9th October 2023 with exhibit).
The application is opposed by the Defendant, which relies upon the witness statement and exhibit of Jan Rzedzian dated 29th September 2023.
(i) multiple disputes were referred without consent and subsequently determined by the Adjudicator when no jurisdiction to do so existed;
(ii) alternatively, if there was jurisdiction to determine the dispute, that jurisdiction was then exceeded by the Adjudicator in going on to determine a true value payment due to the Claimant, having already decided that the payment application ("PA") was invalid in the context of the "smash & grab" aspect of the adjudication.
Background and relevant extracts from the adjudication process
" NATURE AND BRIEF DESCRIPTION OF THE DISPUTE
5. The Referring Party submitted its Application for Payment for December 2022 on 22 December 2022 at 16:59 ("the Application "), which specified the sum due at the payment due date and the basis on which that sum was calculated, in the amount of £152,225.23.
6. The Responding Party failed to issue either a payment notice or a payless notice and the Referring Party's primary position is that the Application became the notified sum which the Responding Party failed to pay on or before the final date for payment.
7. Further or in the alternative, the Referring Party is entitled to an amount due up to end December 2022, calculated on a substantive basis, in such sum as the Adjudicator shall decide.
8. The Responding Party failed to pay the amount due to the Referring Party in respect of the Application by the Final Date for Payment or at all.
NATURE OF THE REDRESS WHICH IS SOUGHT
9. The Referring Party seeks the following redress:
(1) a decision that, in respect of the Application, £152,225.23 is the sum due to the Referring Party on the Due Date or, alternatively, such sum as the Adjudicator shall decide;…"
" PARTICULARS OF THE DISPUTE
15. The instant dispute concerns the Referring Party's entitlement to payment in respect of the Application.
…
28. … the Sub-Contract permitted or required the Referring Party (the
payee) to do as it did and issue the Application to notify the Responding Party (the payer) of the sum that the payee considered would become due on the payment due date in respect of the payment, and the basis on which that sum was calculated. The Responding Party failed to issue a payment notice and, as a result, the Application became the 'notified sum'
…
True Value
33. Further or in the alternative, and should payment not be awarded on the basis of the default payment provisions, then the Adjudicator is requested to ascertain the true value of the Application.
…
36. The Application is a written application for payment, in sufficient detail to show the value of all work properly performed in accordance with the Sub-Contract with variations and all other sums or amounts which became payable under the Sub-Contract during or in respect of the period from commencement of the Sub-Contract Works to 31 December 2022, summarised below:"
"29. The issue within this dispute is the amount of Roundel's entitlement to payment for its sub-contract works.
30. The parties argue this issue under the following two headings:
1) Default Payment - "Smash & Grab" – being the amount determined by the validity of the correspondence and notices, in compliance with statute and the Conditions,
and "in the alternative"
2) "True Value" – being my determination of the correct valuation of Roundel's Sub-Contract Works.
31. The matters that I address whilst resolving this issue are:
● Is Roundel's Application validly compliant with statute and the conditions?
● If so, then has Surgo issued a valid Pay Less Notice against the Application?
● If Roundel's Application is valid and Surgo has not issued a valid Pay Less Notice, then what amount of payment is Roundel's "smash & grab" default entitlement?and
● If the default "smash & grab" part of the claim is not successful, then what amount of payment is Roundel entitled to as a "true value" of the Sub-Contract Works?"
"51. Validity of Application
Roundel's Application cannot be considered as an Application in relation to the 22 December 2022, or any other payment due date. It comprises no more than a number of accountancy summaries that do not seem to correlate with each other. It was not and cannot readily be demonstrated to be an Application stating the sum that the Contractor
considers would become due to it. Certainly it is not in substance, form and intent an Application, and it is not free from contradiction and ambiguity.
52. It follows that Roundel's Application does not meet the tests, under the Act, of being valid for the purposes of facilitating a default "smash and grab" payment…
54. Conclusion on "Smash & Grab" Entitlement
It is for the foregoing reasons that I reject Roundel's claim that it is entitled to payment of the amount of its Application dated 22 December 2022 as being the Notified Sum."
"55. Consequently, I now turn to the parties' entitlements arising under a "true value" valuation.
"True Value" entitlement
56. Roundel's further claim is that, "in the alternative" Surgo is entitled to an amount calculated on a "substantive basis" (i.e., a "true value" Adjudication), and continues to rely upon its Application to Surgo dated 22 December 2022, and accompanying attachments."
"60. …
Having considered the parties contrasting submissions, my conclusion is that this Application is an ordinary application for payment, and there is nothing to indicate that it is a Final Account.
61. Roundel's invoices prior to issuing its Application date 22 December 2022
Prior to December 2022, Roundel applied for payment on a basis of issuing invoices for each kitchen, as and when each installation was completed. This seems to be the method of application and payment that both parties wanted, but, as I conclude within paragraph 12, Roundel had already entered into a contract requiring regular Valuation Periods, as clause 9 of the Conditions.
62. Roundel's Application, dated 22 December 2022, is as averred by Surgo, just a summary of previously invoiced sums, and did not add anything new. However, this is the first Application that complied with the clause 9 of the Conditions and valued the whole of the works that were carried out up to that date."
"90. Conclusion on "True Value" Entitlement
Accordingly, I include the amount of £ 146,118.82 within the Summary of the Amount of my Award."
"96. …
The facts that are relevant to the calculation of interest on the amount of my Award are:
Amount of my Award £ 146,118.82 Date of Application for Payment 22 December 2022 Final Date for Payment (calculated as being 60 days thereafter) (cl. 9.4 & 9.7) 20 February 2023
"The DECISION
I have considered all submissions and accordingly:
I DECIDE that:
1) In respect of Roundel Manufacturing Limited's Application, dated 22 December 2022, £ 148,431.70 is the sum due to the Referring party,
2) Surgo Construction Limited shall pay Roundel Manufacturing Limited the sum due of £ 148,431.70 (One Hundred and Forty Eight Thousand, Four Hundred and Thirty One Pounds & Seventy Pence) forthwith. Thereafter, further interest accrues against Surgo Construction Limited at the rate of £ 33.03 per day. VAT is to be levied in accordance with the requirements of HM Revenue & Customs;…"
One Dispute or Multiple Disputes?
(a) The Claimant
"38. …
(iv) What a dispute in any given case is will be a question of fact… Courts should not adopt an over legalistic analysis of what the dispute between the parties is, bearing in mind that almost every construction contract is a commercial transaction and parties cannot broadly have contemplated that every issue between the parties would necessarily have to attract a separate reference to adjudication.
…
(vii) Whether there are one or more disputes again involves a consideration of the facts. It may well be that, if there is a clear link between two or more arguably separate claims or assertions, that may well point to there being one dispute. A useful if not invariable rule of thumb is that, if disputed claim no. 1 cannot be decided without deciding claim no. 2, that establishes such a clear link and points to there only being one dispute."
"…the word 'dispute' is not to be given a restrictive or particular meaning for the purposes of adjudication… the word 'dispute' [is] an ordinary English word, which should be given its ordinary English meaning…
… a wide interpretation should be given to the word 'dispute' so that the Adjudicator's jurisdiction [is] preserved wherever possible... a court should approach the question of what comprised the dispute 'with robust common sense', which takes into account the nature of the dispute and the manner in which it has been presented to the Adjudicator."
and at 7.123:
"It would appear therefore that a party refers a single dispute to adjudication if it can be demonstrated that his claim, which may be made up of several different elements, can be fairly described as a single, disputed claim for a sum due (or some other relief, like an extension of time) under the contract… In practical terms, it is thought likely that a notice to refer will usually fall foul of the stipulation that it must contain a reference to only one dispute only where, as in Grovedeck, there is a attempt to refer disputes arising under more than one contract in a single notice of adjudication, or where, as in Bothma, the notice of adjudication refers to a number of disputes which, on analysis, are independent of one another."
(b) The Defendant
"97 …The employer has very little time to carry out a complex valuation. The contract in the present case allowed a period of 18 days for the preparation of a Pay Less Notice. Under the Scheme, the period is only ten days. Such a rushed process cannot sensibly lead to a definitive valuation of the work at any particular date. The mechanism is simply intended to generate a provisional figure for immediate payment. The adjudication provisions stand behind the notice provisions, in order to facilitate a more detailed valuation of the work at that date, if such is required…"
(c) Discussion
"Taking into account the nature of the dispute and the manner in which it was presented to the Adjudicator, can it fairly be described as a single, disputed claim for a sum due or a referral of a number of disputes which, on analysis, are independent of one another?"
(i) The wording of the notice of adjudication clearly characterised the dispute as a failure to pay any sum due to the Claimant by the final date for payment, whether by means of a notified sum or by way of a substantive amount due up to the end of December 2022[2];
(ii) To characterise these as separate disputes would be to adopt too legalistic an approach to the exclusion of a task which was readily performed by the Adjudicator on the facts presented to him and within the timescale afforded by the Scheme. I cannot accept that any dilemma would be faced as to the extent to which the issues raised ought to be countered and no such difficulties appear to have been encountered in fact;
(iii) There is no real reliance by the Defendant upon a factual matrix which would allow a clear conclusion of true independence in fact. On the contrary, the distinction drawn by the Defendant is, in my view, a legalistic one, namely characterising a statutory regime for determining the sum due as a notified sum differently from a true value approach, based upon the singular regulated nature and outcome of the statutory regime;
(iv) The underlying facts, insofar as they assist, only amount to an alleged failure on the part of the Defendant to pay R any sum due by December 2022 for 14 more kitchens than originally contracted for [81-2]. Beyond that, factually, I agree with Mr Kaplan, the character of this matter is that there are two routes advanced to the same goal of determining a sum owed;
(v) Whilst the smash & grab claim can clearly be decided without deciding the true value claim, I am far from persuaded that this sort of "sum due pursuant to one payment application" dispute is the sort of thing envisaged as an arguably separate claim by Akenhead J at para. 38(vii) of Witney. There is certainly no obvious parallel or close comparison to be drawn with the "extension of time" and "true sum" issues considered in Witney in the context of the Bothma v Mayhaven case, referred to at para. 37 of Witney and in Coulson at para. 7.123. Indeed, the "complete subservience" issue[3] raised by Ms Conroy tends, if anything, to support a view that the true value issue could not be decided, sensibly, without deciding the notified sum issue, which analysis, in turn, can then, without too much difficulty, be characterised as establishing a clear link between the two;
(vi) In this Court's experience it is not unique to disputes between these parties for such issues to be combined within one adjudication referral, as alternative outcomes;
(vii) Overall, the dispute can fairly and much more straightforwardly be described as a single, disputed claim for a sum due.
Exceeding the jurisdiction found to exist
(a) The Claimant
"Further or in the alternative, the Referring Party is entitled to an amount due up to end December 2022, calculated on a substantive basis, in such sum as the Adjudicator shall decide."
Thus, he submits, the Adjudicator was given a range of options, including the true value of the works at a given point in the interim payment cycle, namely at the end of December 2022.
(b) The Defendant
"85. The Notice of Intention to Refer did not confer jurisdiction on the Adjudicator to consider alternative claims that did not affect the sums that might be due to Stellite in liquidated damages. Even allowing
for some latitude, the words "or such other amount that the Adjudicator deems appropriate" cannot be stretched to encompass a claim for un-liquidated damages (or, logically, any other amount brought in any claim for money under the Contract). Those words simply allowed for the awarding of a lesser sum than Stellite had claimed if, for example, Vascroft established an entitlement to an extension of time under the Contract. Thus it did not confer jurisdiction on the Adjudicator to determine what was a reasonable time for completion, which could only
be relevant to a claim for un-liquidated damages. This is reflected in and consistent with the fact that at no stage thereafter did the parties make any submissions by reference to a claim for un-liquidated damages (or a reasonable time for completion outside the context of a claim for liquidated damages)."
(c) Discussion
(i) an Application for payment for December 2022 had been submitted on 22nd December (para. 5);
(ii) the Application became the notified sum (para. 6);
(iii) the Claimant was alternatively entitled to an amount due up to the end December 2022 calculated on a substantive basis in such an amount as the Adjudicator was to decide (para. 7);
(iv) no amount had been paid in respect of the Application by the Final Date for Payment or at all (para. 8).
(i) should payment not be awarded on the default payment basis, to ascertain the true value of the Application (para. 33);
(ii) the written application was in sufficient detail to show the value of all work properly performed to 31 December 2022 (para. 36).
Conclusion
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Note 1 see points 7 and 8 at paragraph 9 above [Back] Note 2 see para. 9 above [Back] Note 3 see para. 28 above [Back] Note 4 see para. 16 above [Back] Note 5 see para. 17 above [Back] Note 6 see para. 9 above [Back] Note 7 see para. 10 above [Back] Note 8 see para. 11 above [Back]