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Difficult second albums: how adjudications can bind subsequent overlapping ones - Bellway Homes Ltd v Surgo Construction Ltd [2024] EWHC 10 (TCC)
Smash and grab adjudications are a perpetual thorn in employers’ sides. A claim will pop up that a pay less notice has been missed and significant sums are now owed. Employers then need to cobble together procedural arguments to resist the claim.
That’s hard enough as it is. But what if the contractor could also simultaneously adjudicate on an alternative ground that not only are they procedurally owed monies, but that also they have a substantive claim to the sums sought. This is often known as a ‘true value’ adjudication.
In this case, the court considered the validity of running such an adjudication. Can a party refer a dispute to an adjudicator on both a ‘true value’ and ‘smash and grab’ basis?
Background
Roundel Manufacturing Limited (“Roundel”) brought an adjudication for the sums in a purported payment application of around £150,000 to which Surgo did not issue a pay less notice or make any payment. The adjudication was referred on the basis of:
a smash and grab claim owing to the lack of a pay less notice; and
in the alternative on a true value basis, i.e., it had carried out the work to the sums claimed.
The adjudicator decided that the smash and grab failed as the payment application was not valid under the contract. However, he awarded Roundel the full sums owed on the true value argument. The lack of a payment application did not diminish the fact the works were instructed, carried out and completed.
Roundel then assigned its interest to Bellway Homes Limited who then brought enforcement proceedings.
In these enforcement proceedings, Surgo argued that the adjudicator lacked jurisdiction as 2 separate disputes had been referred. In the alternative, the adjudicator exceeded his jurisdiction. Surgo argued it was not permissible for the adjudicator to allow the true value argument having already decided the payment application was invalid.
What did the court say?
The court determined that there was a single dispute referred and so the adjudicator had jurisdiction. In reaching this position the court considered the following:
It cautioned against using a ‘legalistic approach’ to this issue and preferred a common-sense approach that considered the facts.
The dispute clearly concerned the amount due under the contract, albeit argued for in two different ways.
The ‘rule of thumb’ was whether each issue could be decided independently of the other? For example, payment disputes versus extensions of time claims. Clearly this case did not fall into this category.
Having held there was jurisdiction, the court held Surgo’s case on exceeding jurisdiction ‘did not stand up to scrutiny’. Bellway had clearly put forward two alternative arguments and the adjudicator considered both arguments, arriving at his decision at the alternative route.
Why does it matter?
Remember that the court will take a broad and common-sense approach to defining a dispute, but also that framing your dispute well and tightly in your notice and referral will help to protect your claim from jurisdictional challenges.
If there is a smash and grab claim, then consider whether a true value claim will likely be argued at the same time albeit recognising that this will probably apply in limited circumstances. This should be a comfort to employers, but they should also be alive to this risk.
As with all disputes make sure you keep your documentation up to date. Adjudications are, by their nature, a speedy mechanism to resolve disputes. Being able to pull together key pieces of information quickly to help support your position on any true value argument will place you in a strong position.
If a contractor purports a smash and grab entitlement and a substantive basis for a claim, think about settling. You might end up with a reduced claim and saving yourself a lot of legal and adjudication fees.
David Owens, Partner
Ewan Anthony, Trainee Solicitor
Michael Comba, Associate
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