Alex Delin is a construction partner at Irwin Mitchell Solicitors
The Technology and Construction Court (TCC) has released a decision, Bell Building Ltd v TClarke Contracting Ltd [2024] EWHC 1929 TCC, concerning the supply and installation of sub and superstructure works (subcontract works). The works were carried out by Bell Build for TClarke Contracting under an amended JCT Design & Build subcontract 2016 at a data centre at Greenwich Point, London, for a sum of just over £20m.
“It will be worth keeping an eye on any appeal should TClarke so decide”
Bell issued payment application 18 on 20 April 2023 in the gross sum of nearly £21m for carrying out the subcontract works, seeking payment of £1,058,248.92, with a final date for payment of 19 June 2023.
TClarke sought to rely on a pay-less notice issued on 6 June 2023 to pay just over £700,000, of which Bell questioned the validity and so commenced a so-called ‘smash and grab’ adjudication, seeking £1,443,981.51 plus VAT.
During the course of the adjudication, the adjudicator queried why Bell was seeking £1,443,981.51 plus VAT when Bell applied for less than that, at £1,058,248.92, under payment application 18. Bell explained payment application 18 reflected the increase in value of the completed subcontract works since the last application, without taking into account the sums previously due as interim payments and/or sums paid by TClarke. Whereas Bell’s claim in the adjudication was based on its contractual entitlement to the value of the completed work, less sums previously due as interim payments, sums paid to date and the retention.
Therefore, Bell’s claim for £1,443,981.51 plus VAT in the adjudication was the result of deducting TClarke’s payments at the date of the referral from Bell’s gross valuation under payment application 18, less the retention. While a ‘smash and grab’, Bell’s claim also included the common proviso that the adjudicator could grant “such other relief as is necessary, just and equitable to resolve the dispute”.
TClarke resists
TClarke took issue with this in the adjudication, presumably because it appeared odd that Bell was seeking £1,443,981.51 plus VAT, having only applied for £1,058,248.92, and seeking to have the adjudicator resign. TClarke contended that the adjudicator had no jurisdiction to take into account calculations based on the amount paid under a subsequent payment application 19. The adjudicator accepted this argument and directed, “following this logic…the outstanding amount remaining to be paid is in the sum of…£2,129,672.69”. Therefore, as a result of the jurisdiction challenge which the adjudicator accepted, Bell was awarded more than claimed in the adjudication.
At first, TClarke sought a Part 8 declaration that the pay-less notice was valid but did so under Part 8 proceedings (instead of Part 7), which is suitable for disputes over the law, not facts, only. Because of live disputes over whether TClarke issued a valid pay-less notice and whether the subcontract had varied the procedure for assessment of interim payments, the TCC held in April 2024 that witness evidence would almost certainly be required and therefore a Part 8 declaration was unsuitable, following on from decisions such as Breakshore Ltd v Red Key Concepts Ltd [2022] 5 WLUK 677. Bell seized the opportunity and issued enforcement proceedings in May 2024.
TClarke resisted enforcement on the basis of a lack of jurisdiction and/or a breach of natural justice. In particular, TClarke argued Bell had referred a ‘smash and grab’ adjudication where the sum payable was due because of an invalid pay-less notice, not because of any accurate valuation by TClarke, and indeed that was the dispute the adjudicator understood to be referred, yet awarded more than the sum claimed.
However, applying the test laid down in Cantillon Ltd v Urvasco Ltd [2008] EWHC 282 (TCC) and considering judgments including Roe Brickwork Ltd v Wates Construction Ltd [2013] EWHC 3417 TCC, the TCC enforced the decision. It held that the adjudicator did not breach the rules of natural justice by carrying out a valuation exercise, given the adjudicator corrected the arithmetic only, nor lacked jurisdiction because it was TClarke that invited the adjudicator to ignore payments made under payment application 19.
It will be worth keeping an eye on any appeal should TClarke so decide, especially whether or not the adjudicator was held to have gone on a frolic of his own. In the meantime, the case illustrates a useful reminder of assessing the possible outcomes of a jurisdiction argument before being made.
