A losing party to an adjudication decision is often left
scrabbling around searching for reasons why the decision
shouldn't be enforced and why the losing party shouldn't
have to make payment. Well, no matter how ingenious the arguments,
the chances are that the court will enforce the adjudicator's
In the recent case of Seabreeze v Toposu the court
concluded that an arrangement, where Seabreeze agreed to pay
subcontractors directly, constituted a 'construction
contract' for the purposes of the Security of Payment
Act, therefore, the adjudicator's decision could be
enforced against Seabreeze.
Seabreeze was developing land for residential purposes
and entered into a contract with a builder. In this case the
builder was Castle. As part of the contract
Castle agreed to only retain subcontractors with the prior
consent of Seabreeze. Where this had been done, Seabreeze
agreed to pay the subcontractors direct.
Castle approached a number of subcontractors (with the
approval of Seabreeze) and asked them to quote for certain works.
One of those subcontractors was Toposu. Toposu
was asked to quote for the supply and installation of steel and
aluminium on the project. Toposu quoted for the work and
was instructed to start fabricating straight away.
Castle advised Toposu that as it was the 'project
manager' on the project so Toposu would have to submit its
invoices to Castle but would be paid directly by
Seabreeze. It was clear from the evidence that this
happened in some cases and not in others. In any event, all the
subcontractors' on the project understood that
Seabreeze was paying them direct.
In one particular instance, Toposu made a payment claim
to Castle and Castle created a payment schedule
in a form that was addressed by Seabreeze to
Toposu. The payment schedule approved the whole of the
claimed amount. The superintended considered and approved the
payment schedule. Seabreeze then paid the claimed amount
direct to Toposu but sought to deduct retention.
The deduction for retention was said to reflect the contract
made between Seabreeze and Castle. It did not,
however, reflect the terms of the subcontract made between
Castle and Toposu – the subcontract that
Seabreeze agreed to make payment against. Toposu
sent for the adjudicator.
The adjudicator concluded that there was a 'construction
contract' between Seabreeze and Toposu and
that Toposu should be paid its full claim (i.e. without
any withholding for retention). Seabreeze disagreed and sought to
restrain enforcement of the adjudicator's determination stating
that there was no 'construction contract' in place between
Seabreeze and Toposu.
The court considered a number of previous decisions on the topic
and concluded that the evidence demonstrated an
'arrangement' under which Toposu undertook to perform
construction work on the project for the benefit of
In addition, the evidence demonstrated that Toposu
undertook work on the agreed basis, Seabreeze undertook to
pay for it and Seabreeze was liable to pay Toposu
directly for the work done. The court found that the
adjudicator's decision could be enforced against
If you are a principal and you agree to an 'arrangement'
where you pay subcontractors direct, you may be caught by the
Security of Payment Act and no matter how many different
reasons you wish to throw at the winner as to why the
adjudicator's decision should not be enforced, you will
Many retail leases include a covenant to trade, requiring the tenant to open the premises for trade during certain hours.
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