I find myself regularly posting on this blog about TCC
judgments which uphold decisions in construction adjudications. The case of Caledonian Modular Limited v Mar City Developments Limited is
therefore something of a rarity!
The payment provisions in the relevant contract were
governed by the Scheme. On 30 January an
application for payment (number 15) was issued.
The sum due was just over £1.5m.
A pay less notice was served by the employer on 5 February and there was
no challenge to its validity.
An area of ongoing dispute between the parties was the
valuation of a series of connected variations.
Email correspondence continued between the parties and on 13 February
the contractor sent an email with an updated account. On 19 March the contractor raised a series of
invoices on the basis of the updated account provided on 13 February and
interim application number 15. On 26
March, in order to protect its position while clarification was sought as to
what the invoices relates to and why they had been issued, the employer served
a pay less notice.
The email of 13 February did not state that it was a fresh
application for payment. None of the
invoices of 19 March stated that they represented a default notice under the
Scheme. Notwithstanding this, the
contractor commenced an adjudication based on the documents representing just
that. The adjudicator decided in favour
of the contractor and that no pay less notice was served in time, meaning the
total claimed (again c£1.5m) was due.
In its judgment the TCC had little hesitation in setting
aside the adjudicator’s decision, which did not appear to involve any detailed
scrutiny of whether the documents in question represented a valid application
for payment and valid default notice. It
appeared to have been accepted at face value that this is what the documents
represented.
To the TCC, the absence of any clarity as to what the
documents of 13 February and 19 March were intended to represent was
fatal. They did not say on their face
that they were, respectively, an application for payment and a default notice (the
judge noted that they were inconsistent in form and content to all previous equivalent
payment documents). Underlying
negotiations (which the documents appeared to have been produced in connection
with, rather than in connection with a fresh application under the contract)
was another. Third it was premature and
so could not stand as a valid fresh application. To allow it to stand would be inconsistent
with the provisions in the Scheme and would allow contractors to issue repeated
applications for payment every few days (without clearly stating that this is
what the document represents and in ignorance of the payment provisions which
bind the parties) in the hope that if the employer took its eye off the ball
for just one that the contractor would then secure an undeserved windfall.
It appears the view taken was of the contractor seeking to
construct a self-serving argument as to what the email of 13 February and
subsequent invoice represented after the event and on the facts the decision is
perhaps an easy one for the TCC to have arrived at. The case does serve as a warning to
contractors and those representing contractors that if an application for
payment under a construction contract is being made it must be sufficiently
clear on its face that this is what it is and, for an early application to be
considered valid there must be clear evidence that the parties had agreed to
depart from the contractual mechanism for payment.
The case also illustrates that in unusual cases where the
basis of a challenge to an adjudicator’s decision is straightforward and can be
disposed of swiftly in favour of the paying party, the court can resolve that
without first requiring payment of the sum the adjudicator decides is due.
By Nitej Davda
Nitej is a partner in the construction team at Cripps. To find out more about Nitej please click
here.
