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A clear case of different disputes, as confirmed by the Court of Appeal

Most of the judgments that Matt and I comment on in this blog come from the TCC but, occasionally, the Court of Appeal graces us with an adjudication related judgment. It is one such judgment that I want to talk about this week: Mr & Mrs Brown v Complete Building Solutions Ltd. The judgment is quite concise, so I will endeavour to do the same (famous last words!).

Mr and Mrs Brown v CBS

The Browns employed CBS to build them a house. By the time the architect issued the final certificate in October 2013, CBS said that the sum of around £115,000 was still outstanding. So far, so normal. This outstanding sum was not paid, and so CBS commenced an adjudication (the first adjudication).

It appears that it was common ground that the architect’s final certificate was invalid, and CBS relied on its letter of 20 December 2013 alleging that it was a payee’s (or default) payment notice. CBS alleged that the Browns had not issued a pay less notice, and it referred to clause 4.8.4 of the JCT Minor Works Contract, 2011 Edition, which states:

“If the final certificate is not issued in accordance with clause 4.8.1.

1. the Contractor may give a payment notice to the Employer with a copy to the Architect/Contract Administrator stating what the Contractor considers to be the amount of the final payment due to him under this Contract and the basis on which the sum has been calculated and, subject to any notice under clause 4.8.4.3, the final payment shall be the final amount.

3. If the Employer intends to pay less than the sum specified in the Contractor’s payment notice, he shall not later than 5 days before the final date for payment give the Contractor notice of that intention… and the payment to be made on or before the final date for payment shall not be less than the amount stated as due in the Employer’s notice.”

The first adjudicator, Mr Calcroft, found that CBS’s payee’s payment notice was invalid. Therefore, no payment was due to CBS. Undeterred, in April 2014 CBS issued a further notice under clause 4.8.4 claiming the same sum of £115,000. For some odd reason, the Browns once again decided not to serve a pay less notice and, when the Browns did not pay, CBS started a second adjudication. This time a different adjudicator, Mr Hough, was appointed. The Browns contended that he did not have jurisdiction as the dispute referred to him was the same dispute as had been decided by Mr Calcroft. The Browns relied on paragraph 9(2) of Part I of the Scheme for Construction Contracts 1998, which provides that an adjudicator must resign where the dispute is:

“…is the same or substantially the same as one which has previously been referred to adjudication and a decision has been taken in that adjudication.”

Mr Hough did not agree with the Browns, and proceeded to reach a decision where he found that CBS was entitled to the sum claimed as a result of the Browns’ failure to serve a pay less notice.

When the Browns did not pay the sum Mr Hough awarded, CBS applied to the TCC in Manchester to enforce the decision. HHJ Raynor QC agreed with Mr Hough’s conclusion that he had jurisdiction, and duly enforced the decision. Not satisfied by the findings of Mr Hough and HHJ Raynor QC, the Browns decided to appeal the judgment.

Court of Appeal

The Court of Appeal referred to Jackson LJ’s comments on paragraph 9(2) in Harding v Paice and Springall:

“It is quite clear from the authorities that one does not look at the dispute or dispute referred to the first adjudicator in isolation. One must look at what the first adjudicator actually decided. Ultimately it is what the first adjudicator decided which determines how much or how little remains for consideration by the second adjudicator.”

The Court of Appeal agreed with both Mr Hough and HHJ Raynor QC that the two disputes were not the same. While the same sum was being claimed in the two adjudications, Mr Calcroft had decided that CBS’s December 2013 letter did not constitute a valid payee’s payment notice, and CBS was not seeking a redetermination of this matter in the second adjudication. The second adjudication concerned the April 2014 payee’s payment notice, so it was clearly a different dispute.

My thoughts

I looked at paragraph 9(2) in my blog on Harding v Paice. I said then that I thought it likely that Harding’s legal team wouldn’t have rated their chances of succeeding with the “same dispute” point as being particularly high, as the adjudicator had quite clearly not decided the merits of the sum due. I suspect the Browns’ legal team might have felt a similar sense of trepidation with their argument, and perhaps they should have taken heed of the views of Mr Hough and HHJ Raynor QC before embarking on what must have been an expensive appeal process.

Mr Calcroft had clearly not decided the effectiveness of the April 2014 notice, and therefore how could it have been the same dispute? It was not as if Mr Calcroft had decided the merits of the previous valuation, and that CBS had attempted to have a “second bite of the cherry”. Also, think about what the consequences would have been. The Browns could have simply refused to pay the sum due, and CBS would have had no redress to adjudication.

However, while not wishing any further disputes on these parties, it will be really interesting to see what happens if (or when) the Browns decide to refer the merits of the valuation to adjudication. Are they deemed to have agreed the value of the final account (as in the case du jour, ISG v Seevic), or can an adjudicator decide the merits of the valuation in another adjudication? In my blog on Harding v Paice, I concluded that in cases of final accounts (rather than termination accounts), the position remains unclear. Perhaps the next instalment of this case will shed some light on this question, but perhaps both parties have had their fill of disputes.

MCMS Ltd Jonathan Cope

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