UK: Construction Case Law Update - Top 5 Adjudication Cases Of 2018 (Video)

Last Updated: 27 March 2019
Article by Iain Drummond and Nathaniel Buckingham

This two-part webinar series explores the top construction court cases from 2018, to provide an understanding of the key developments in construction law and adjudication practice and how these might affect your construction projects and disputes in 2019.

Read or watch the second in the series below: the top five adjuducation cases of 2018.

1. S&T (UK) Limited v Grove Developments [2018] EWCA Civ 2448

Grove employed S&T to design and build a new hotel at Heathrow Airport under a JCT Design and Build Contract. In response to an interim payment application by S&T, Grove issued a payment notice which had clearly set out the basis of the valuation, however it was issued late. Grove then issued a pay-less notice which, although issued on time, did not provide the detailed calculation of the basis of the valuation. S&T disputed that it was a valid pay-less notice because they said it did not set out the basis for the sum due, a requirement for a pay-less notice. The dispute was referred to adjudication, where the adjudicator decided that it was not a valid pay-less notice as the calculation detail was insufficient. The case was then referred to the TCC, which found that Grove had complied with the requirement to specify the basis of the calculation, therefore the pay-less notice was valid.

The Court also held that, upon payment, Grove was entitled to pursue a further adjudication to determine the 'true value' of the works. This was an important development in 'smash and grab' adjudications as it meant that even in the absence of a valid payment or pay-less notice, a payer can raise a counter-adjudication on the true value of an interim payment application. S&T appealed.

The Court of Appeal upheld the decision of the TCC and dismissed the appeal by S&T, finding that Grove was entitled to bring a counter-adjudication on the 'true value' of the work. However, the Court of Appeal stressed that payment of the 'smash and grab' adjudication award must be made before a dispute on the true value of the application can be adjudicated on.

While this appeal decision has confirmed that a payer can raise a 'true value' adjudication for an interim application even in the absence of a payment or pay-less notice, it does not make it any less important for payers to ensure that payment notices and pay-less notices are served correctly and on time, as payment must still be made of the (often inflated) sum sought by the payee. Therefore, whilst the threat and consequences of a 'smash and grab' claim have been diminished, they remain a useful tool for payees to recover swift payment and a strong incentive for payers to ensure that they administer payment processes properly.

2. Vinci Construction (UK) Limited v Beumer Group UK [2018] EWHC 1874 (TCC)

Beumer employed Vinci to carry out the design, manufacture and supply of Gatwick Airport's baggage handling system. The parties' disputes regarding extension of time were referred to adjudication seven times and, in the seventh, the adjudicator found in favour of Vinci and awarded £9,671,500 of liquidated damages as a result of the delay by Beumer. After payment was not made, Vinci commenced enforcement proceedings and applied for summary judgement. Beumer challenged the enforcement, arguing that the adjudicator did not keep the requirements of natural justice in mind when writing his decision, arguing that the adjudicator:

  1. included findings that were not consistent with findings from the previous adjudications;
  2. did not give adequate reasons; and
  3. failed to order Vinci to disclose material from a previous adjudication between Vinci and another party which Beumer wished to use to aid their position.

The Court rejected Beumer's challenge. On the first point, the Court found that the adjudicator's decision was not inconsistent with previous findings because earlier adjudications had only dealt with the monetary value of certain compensation events, and not Beumer's claims for extensions of time in respect of those compensation events. On the second argument, the Court held that there was "no difficulty in discerning the adjudicator's reasoning". Finally, the Court held that the adjudicator could not have been expected to order disclosure when he was not requested to do so and nothing was put before him that would have required him to make such an order. The Court reiterated that an adjudicator's decision does not need to be the standard of a typical court judgement, but rather needs to be sufficiently clear so as the reasoning can be understood, regardless of whether the reasoning is right or wrong. The Court therefore found no breach of natural justice in this case.

This decision demonstrates the Court's ongoing commitment to upholding adjudication decisions by summary judgement to maintain the efficacy of the adjudication process. It also highlights that a breach of natural justice argument will not be viewed lightly by the Courts and will be scrutinised closely.

3. Equitix ESI CHP (Wrexham) Ltd v Bester Generacion UK Ltd [2018] EWHC 177 (TCC)

Equitix engaged Bester to design and build the Wrexham Biomass Fired Energy Generating Plant. In a dispute referred to adjudication, the adjudicator decided that the termination of Bester's contract by Equitix was valid, and ordered payment by Bester of around £9.8 million. Equitix raised an action to enforce this second decision against Bester.

Bester resisted enforcement on the ground that, amongst other things, the adjudicator did not have jurisdiction to decide the dispute because the contract included works which were an "excluded operation" under s105 of the 1996 Act.

The TCC rejected this argument. The Court looked closely at the 1996 Act, in particular s104(5), which makes it clear that it is only the part of the agreement which relates to construction operations that will benefit from the right to refer a dispute to adjudication. In this case, it was held that the works undertaken which were "excluded operations" were simply preparatory works. These therefore fell under s105(1)(e) of the 1996 Act, which provides that operations which are preparatory to construction operations are covered under the overall definition of construction operations. It was held that "it would make a nonsense of the Act if every preparatory/ancillary operation not expressly identified in s105(1) became an excluded operation".

The question of whether an adjudicator has jurisdiction or not cannot be answered based on a construction contract as a whole - it is the particular part of the contract in dispute that has been referred to adjudication that is relevant and the list of excluded operations will be interpreted narrowly.

4. Gosvenor London Ltd v Aygun Aluminium UK Ltd [2018] EWHC 227 (TCC)

Aygun appointed Gosvenor to install cladding for a new hotel in Southampton. The works were delayed and the matter was referred to adjudication. The adjudicator found in favour of Gosvenor and awarded them £553,958.47. Aygun resisted enforcement of the adjudicator's decision, claiming that the sum awarded to Gosvenor was based on fraudulent invoices. The TCC had to determine: (1) whether Gosvenor was entitled to enforce the adjudicator's decision; and (2) whether Aygun was entitled to a "stay of execution", which prevents an adjudicator's decision being enforced for a period of time (usually based on the financial position of the winning party).

For the first issue, the Court applied the principles set out in SG South Ltd v King's Head Cirencester LLP and another, and held that Aygun could have relied upon the fraud issues raised as a defence during the adjudication. As such, Aygun could not then use fraud to resist enforcement, and Gosvenor was entitled to enforce the decision.

However, for the second issue, the Court granted Aygun a stay of execution. There were questionable disparities between Gosvenor's 2016 and 2017 accounts, which Gosvenor provided no evidence to rebut in the hearing. The Court found that it was necessary to look into the fraud allegations further, and decided therefore not to enforce the adjudicator's decision until that had been undertaken.

The Court stressed that this new ground will apply to very few cases and will be "extremely rare"; however, it will likely add a new avenue for parties seeking to avoid enforcement of an adjudicator's decision. The decision also highlights the TCC's willingness to grant a stay of execution if there is a risk that a party will not be able to recover an adjudication sum.

5. BN Rendering v Everwarm Ltd [2018] CSOH 45

Everwarm entered into a subcontract with BN Rendering for the installation of external wall insulation in Kirkcaldy. When a dispute was referred to adjudication, the adjudicator found that BN Rendering was due £141,598.20 plus VAT from Everwarm. BN Rendering then sought to enforce this award in the Court of Session.

Everwarm argued that the Court of Session did not have jurisdiction to enforce the award as the contract gave the English courts exclusive jurisdiction to resolve all disputes arising from the subcontract, and so BN Rendering could not rely on the defender's domicile in Scotland. ; and the clause did not identify which disputes arising out of the subcontract were subject to the exclusive jurisdiction of the English courts.

The Court of Session held it did not have jurisdiction to enforce the adjudicator's award, and this must be done in the English courts. A signature was not required to demonstrate that the parties provided real consent to the exclusive jurisdiction clause – it was sufficient that the parties' contract expressly referred to the terms and conditions. It was also held that there was no ambiguity in the exclusive jurisdiction clause, and that the reference to "exclusive" jurisdiction could not be construed in such a way that the English courts would have jurisdiction only in respect of certain disputes. The action was therefore dismissed.

The key lesson to take from this case is that, when seeking to enforce an adjudicator's award, it is vital to ensure that it is clear which court or courts have jurisdiction, before raising an action. Further, given that a signature was not required for the exclusive jurisdiction clause to be effective, parties intending to include such a clause must clearly demonstrate that the jurisdiction clause was agreed, based on the construction of the contract.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions