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JCT payment changes and summary judgment

A few weeks ago I read with interest Peter Brogden’s blog on some of the key changes included in the JCT’s 2016 suite of contracts. Of particular interest were his comments on payment, where he identified three main changes, including how a “common valuation date” will operate across the supply chain. This obviously depends on every party using the appropriate JCT standard form contract or sub-contract, and not amending the payment clauses. I sincerely hope that parties are sensible and adopt the unamended versions of the new JCT contracts, but the pessimist in me anticipates that the temptation to amend will be too great.

Peter also noted another much smaller change, tucked away in clause 4.11.7 (at least in the SBC), namely that any unpaid amount and its simple interest “shall be recoverable as a debt”. Under the previous edition of the SBC it was only the final payment and interest that could be recovered as a debt, and not unpaid amounts arising from interim payments. As Peter noted:

“This opens up summary judgment as a faster means to get cash-flow moving on an ongoing project.”

It was that bit of his post that really got me thinking.

Summary judgment rather than adjudication?

I looked at the idea of summary judgment (under CPR 24) as an alternative to adjudication when the judgment in Volkerlaser Ltd v Nottingham City Council came out. At the time, I said that I was a little surprised to see an unpaid contractor issue proceedings (under CPR 7) in circumstances where the employer had not served a payment or pay less notice. I was less surprised to see Edwards-Stuart J conclude that the summary judgment application should fail, although it may well be a case that turned on its own unique set of facts.

At the time, I gave a number of reasons why I was surprised at the contractor’s approach, namely:

  • The hurdles a party has to overcome to succeed on summary judgment.
  • The court’s approach to enforcing adjudicators’ decisions.

Summary judgment test

The test that is applied in summary judgment applications is set out in CPR 24.2, which provides that the court may give summary judgment on a claim or a particular issue if:

  • The party has no real prospect of succeeding on or defending the claim (CPR 24.2(a)).
  • There is no other compelling reason why the case or issue should be disposed of at a trial (CPR 24.2(b)).

As I understand it, the key is for the court to determine whether the case, as pleaded, has a real prospect of success. When looking at what is meant by “real”, the court will look for more than an arguable case, more than something that has a “fanciful chance of winning”.

Given the way case law relating to payment disputes has developed over the last couple of years, one may think that the lack of a pay less notice means there is no defence to a payment claim, that it is a “slam dunk” or a “smash and grab in adjudication speak. However, it is difficult to know how a court will react if, for example, the employer raises issues concerning the validity of a default payment notice, or even issues of delay or defects in its defence. Will those be enough to defeat the requirements of CPR 24.2 or is the wording in the JCT clause (that the amount is recoverable as a debt) sufficient of its own?

Court’s approach to enforcement

If you look at how the courts approach adjudication enforcement, provided the adjudicator had jurisdiction to decide the dispute (and didn’t breach the rules of natural justice), it doesn’t matter if the adjudicator made a mistake. This gives adjudicators considerable leeway when it comes to making decisions.

On the other hand, I know we are starting to see parties apply for declaratory relief under CPR 8 in defence of adjudication enforcement proceedings, asking the court to make final and binding determinations on the meaning of contract provisions and the like.  Would the Part 8 option be a more sensible course of action?

Other reasons against court proceedings

Another, slightly unrelated thought, relates to where a party might issue proceedings to enforce this debt.

Those of you lucky enough to have access to the TCC in the Rolls Building or in the District Registries are used to using the TCC’s adjudication enforcement procedure, with the speed and consistency of decisions that it brings.

If parties start issuing proceedings to recover debts under the contract, are they going to start using the Money Claim Online (MCOL) procedure or will they simply issue in the appropriate County Court? (Remember, the TCC in the High Court will only accept claims over £250,000.) How long will this process take and would a 28-day adjudication actually prove to be quicker and, potentially, cheaper (even if each party has to bear its own costs)?

Conclusion

I’m not sure if Peter is suggesting that we will see parties preferring to issue proceedings and applying for summary judgment as a way of getting paid, rather than referring the non-payment dispute to adjudication, but it is a thought. However, as I said when I wrote about Volkerlaser, personally, I would prefer to take my chances via the adjudicator route.

MCMS Ltd Jonathan Cope

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