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Court rejects “same or substantially the same” jurisdictional argument

The ingenuity of the arguments parties raise in adjudication and adjudication enforcement never ceases to amaze me. However, sometimes they are simple and straightforward. As an example, take the judgment in Universal Piling & Construction Ltd v VG Clements Ltd.

Universal applied for declaratory relief to determine whether the second adjudicator had jurisdiction to deal with the dispute referred to him. Sensibly, the parties agreed that those adjudication proceedings should be stayed, pending the outcome of that Part 8 application. Given the outcome of the hearing (which was in November last year), I suspect the adjudicator has now reached a decision (but I’m giving the answer away).

Universal Piling & Construction Ltd v VG Clements Ltd

Universal was engaged as a sub-contractor by VG Clements to carry out certain civil engineering and re-signalling works on the railway system between Victoria and Ramsgate.

After the works were complete, a dispute arose over Universal’s September 2015 application for payment, which Universal referred to adjudication. Mr Silver was appointed and, in July 2016, he concluded that VG Clements had failed to serve a valid payment or pay less notice, which meant the sum applied for was the sum due to Universal. Ultimately, this decision was enforced through a settlement agreement.

Universal did not make any more applications for payment.

In July 2016, VG Clements issued the defects certificate, which confirmed that there were no defects in Universal’s works. Thereafter, VG Clements issued a payment and a pay less notice, valuing the works up to August 2016 at just over £1.1 million, releasing the retention and showing a negative valuation (the “August application”). This precipitated another referral to adjudication (the second adjudication), in which Mr Jenson was appointed. Interestingly, VG Clements was the referring party this time. It sought an assessment of the:

“…proper sum due under the subcontract by reference to the August Application.”

Universal clearly had issues with what VG Clements had done, and issued Part 8 proceedings, applying for declaratory relief that:

  • Mr Jenson lacked jurisdiction because the same dispute had already been referred to adjudication and an adjudicator’s decision had been obtained.
  • Alternatively, such further order as the court may deem appropriate to enforce Mr Silver’s decision.

The jurisdictional argument was further divided:

  • There was no contractual basis for VG Clements to issue “an assessment and/or payment application” in the absence of an application from Universal.
  • The same or substantially the same dispute had already been decided by Mr Silver.

As I said at the start, the parties very sensibly agreed to stay the second adjudication pending the court’s decision.

Payment under the parties’ sub-contract

The judgment doesn’t tell us which NEC3 contract the parties had incorporated into their sub-contract, just that it was the “short form”, but I’m not sure it matters as clause 50 is the same in both “short forms”:

  • Clause 50.1 requires the sub-contractor to assess the amount due and to apply for payment. There is an assessment day each month until the month after the defect certificate has been issued.
  • Clause 50.2 deals with how the applications for payment are calculated.
  • Clause 50.3 defines the amount due to the sub-contractor:

    “The amount due is the price of the work done to date plus other amounts to be paid to the subcontractor… less amounts to be paid by or retained from the subcontractor .”

  • Clause 50.4 entitles the contractor to assess what is due to the contractor and issue a pay less notice.

Clause 50 is a “code for payment”

O’Farrell J looked in detail at clause 50. She said that when read with the obligation in clause 10.1 (the sub-contract’s good faith clause), clause 50.1 imposed on the sub-contractor an obligation to apply for payment by each assessment day. Universal had called this a “complete code and scheme under which payments may be claimed”,  and O’Farrell J accepted the “code” point.

However, she was less willing to be drawn on whether there was a contractual basis on which VG Clements could issue an assessment and/or payment application under the terms of the contract, stating instead that this was a matter for the adjudicator, Mr Jenson.

I thought it was interesting that O’Farrell J did not decide this point. I say this because from Universal’s alternative declaration (see above), it appears to me that she could have dealt with it. I acknowledge that it is not entirely clear, but it would have been useful to have obtained a judge’s views on whether VG Clements was entitled to:

  • Issue its own assessment following Universal’s failure to do so under clause 50.1 (and the contractual basis for it).
  • Damages for Universal’s failure to make as assessment, the measure of which is the value of the overpayment that VG Clements is precluded from recovering by reference to a proper assessment.

I’ve had similar arguments run before me a few times in adjudications, but I haven’t had to deal with them as yet.

Same or substantially same dispute

At first glance, it is difficult to see how a dispute over a sub-contractor’s interim application issued in 2015 could be said to be the same dispute as one arising out of the contractor’s assessment issued following the defects certificate in 2016. Universal sought to explain this by arguing that the first adjudicator’s decision was final and binding on the parties:

“…unless and until the matter is referred to the tribunal specified in the contract.”

As that had not been done, there was nothing to refer to a second adjudicator. VG Clements simply highlighted the differences between the two.

Before deciding the point, O’Farrell J set out the factors listed by Akenhead J in his judgment in Carillion Construction Ltd v Stephen Andrew Smith. In light of those factors, it is unsurprising that she concluded that the second dispute was a different dispute to that in the first adjudication.

I liked the fact that she did this. In my view, these factors are a useful reminder to anyone involved in adjudication who is pondering the question as to whether something is or is not the same dispute. They should be referred to more often by parties and their representatives.

I said her judgment on this point was unsurprising, and it was. The dispute referred in the second adjudication is quite clearly a different dispute to that referred in the first adjudication:

  • Mr Silver decided that payment was due for the September 2015 valuation because no payment notice and/or pay less notice had been served.
  • Mr Jenson was being asked to determine the proper valuation for the works carried out up to 19 August 2016, that is, to value the works on the merits.

Not only was the nature of the claims different (the first was a smash and grab and the second a valuation on the merits), but they concerned different applications that were around a year apart.

I also thought it was interesting that the judgment refers to Kilker Projects Ltd v Purton (which I discussed at the timeand Harding v Paice and Springhall (which I also looked at), but does not mention the Court of Appeal’s judgment in Brown and another v Complete Buildings Solutions Ltd. Perhaps it is because that case was concerned with “the new notice and only the new notice” (as Lord Simon put it), rather than a valuation exercise.

MCMS Ltd Jonathan Cope

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