It may be a little old (it was handed down in March 2014), but Ramsey J’s judgment in City Basements Ltd v Nordic Construction UK Ltd is a reminder that a payment dispute crystallises when payment is not made. The party claiming payment does not have to do more to ensure there is a dispute. As Ramsey J said:
“There is no need… in the case of an adjudication where it is a simple dispute about payment, for the parties to do anything else other than comply with the contractual provisions.”
City Basements v Nordic Construction
City Basements was engaged by Nordic to carry out piling and groundworks, and to construct a basement and the first floor of a car park (I guess the clue is in its name!).
Works progressed and, on 3 December 2013, City Basements applied for interim payment eight. This showed that works were complete and included the release of half of the retention (due to be released at practical completion). That payment became due on 17 December 2013, with the final date for payment on 10 January 2014. Payment and pay less notices should have been served if the amount applied for was not the sum that Nordic was going to pay.
In the event, although it did question whether practical completion had been achieved, Nordic did not do anything else and so, on 15 January 2014, City Basements referred the dispute to adjudication. The adjudicator found in its favour. Cue enforcement proceedings.
In the enforcement proceedings, one of the arguments that Nordic advanced related to whether there was a dispute or not. It said that a “dispute” was a precondition to referring something to an adjudicator and without a dispute, the adjudicator would lack jurisdiction. In advancing this argument, it relied on a clause in the sub-contract that was aimed at avoiding or resolving disputes or differences through the senior executives meeting for “good faith negotiations”. It said that because of this clause, it was “not easy to infer from inactivity in this case that there was a dispute”. Instead, there should have been a discussion before there was anything to refer to adjudication.
Unsurprisingly, Ramsey J gave short shrift to this argument. Not only did Nordic have a long time to take any points that it could take “legitimately under the contract” (from 3 December through to 10 January), but as soon as the final date for payment came and went, there was a “clear inference on an objective basis” that there was a dispute about whether Nordic would make payment. There was no need for the parties to do any more.
No dispute argument “is almost never successful”
In the words of Coulson J in St Austell Printing Company Ltd v Dawnus Construction Holdings Ltd (which Jonathan considered at the time), the crystallisation argument “is almost never successful”. However, that does not seem to prevent parties from running such arguments, not matter how stupid they may appear or sound on reflection. In this case, I particularly liked the way Ramsey J put it:
“Indeed it may seem strange that once the notice of adjudication was given, if there had been no dispute, that immediate payment was not made as would be expected in the absence of a dispute.”
In other words, if there was no dispute then why didn’t Nordic pay the amount claimed when the notice of adjudication was served?!?
I’ve joked in the past how my four year old daughter used to look at me in a bemused state when I explained to her that in my day job I had to listen to people argue about whether they were having an argument or not.