| Date | 28 July 2004 |
|
|
| Judgment | M J Gleeson Group plc v Devonshire Green Holding Ltd, TCC 19 March 2004 |
|
|
| The Issue | The effect of subsequent valuations and withholding notices upon the enforcement of an adjudicator's decision. |
|
|
| Implication |
A withholding notice may not be raised to defeat a sum ordered to be paid by an adjudicator. Under JCT 98 With Contractor's Design, the contractor's application will become the amount due for interim payment unless the employer has issued notices of payment or withholding. |
printIn March of this year the case of M J Gleeson Group v Devonshire Green Holding examined the payment provisions of the JCT 98 Standard Form of Contract With Contractor's Design in the context of an adjudicator's decision that the employer should pay the contractor the amount of its interim application for payment. Gleeson had entered into that form of JCT contract for the design and construction of some 480 private residential apartments with retail and leisure accommodation at a site in Sheffield. The contract price was £34 million. A dispute arose as to the amount payable against interim application 31 and this was referred to adjudication. Pausing there, it is important to note that the JCT With Contractor's Design form differs quite significantly to the other JCT main contract forms in the manner in which it deals with interim payments. Clause 30.3.2 requires the contractor to make an application for interim payment accompanied by appropriate details. Clause 30.3.3 provides that not later than five days after the receipt of the contractor's application for payment, the employer shall give a written notice to the contractor specifying the amount of payment proposed to be made and the basis upon which that amount is calculated. The employer is then obliged to pay the amount proposed no later than the final date for payment unless it has given a withholding notice to the contractor under clause 30.3.4 within the time limit prescribed by the contract. Clause 30.3.5 is then a key provision. It says "Where the employer does not give any written notice pursuant to clause 30.3.3 and/or to clause 30.3.4, the employer shall pay the contractor the amount stated in the application for interim payment". Returning to the present case, Devonshire had not given a notice specifying the amount to be paid or a withholding notice in relation to application 31. Accordingly, on a clear reading of the contract, Devonshire became obliged to pay Gleeson the amount stated in the contractor's application, namely the sum of £9.4 million. This is what the adjudicator held. Devonshire refused to pay and the matter came before Judge Gilliland in the Technology and Construction Court for enforcement of the adjudicator's decision. Devonshire resisted enforcement on the basis of two issues. Firstly, Devonshire argued, during the course of the adjudication and prior to the adjudicator issuing his decision, the employer's agent had issued a "valuation certificate" in respect of application 33. That showed an amount due under the contract of some £8.8 million less than the amount applied for in application 31 which the adjudicator had directed to be paid. As an aside, it is remarkable how contract administrators often fail to read the contract. The payment provisions at clause 30.3 do not involve the employer's agent, let alone mention a "valuation certificate". Secondly, Devonshire noted, two days after the adjudicator's decision the employer's agent had given to Gleeson a notice requiring Gleeson to pay liquidated and ascertained damages in respect of a failure to meet sectional completion dates. The total amount of liquidated damages claimed was some £2.8 million. The amount of liquidated damages together with the alleged excessive valuation of £8.8 million exceeded the amount of the adjudicator's award. Devonshire argued that this was a good reason for not enforcing the adjudicator's award or for deferring enforcement until these matters were resolved. Judge Gilliland was quite unimpressed by Devonshire's arguments. Clause 39A provides that the adjudicator's decision is to be binding on the parties until the dispute or difference is finally determined by arbitration, litigation or agreement. In his judgment, the giving by the employer of a notice concerning a subsequent interim application did not affect the question of what amount was properly payable under the earlier application. The mechanism of clause 30.3 of the contract was nothing more than the setting out of the respective views of the employer and the contractor. Under that clause, the employer's view will prevail if he gives the appropriate notice. If he fails to give the appropriate notice, the contractor's view will prevail. Accordingly, whatever the position was in relation to application 33, that did not affect Gleeson's clear entitlement under the contract to be paid the amount applied for under application 31 as confirmed by the adjudicator's decision. So far as the question of liquidated and ascertained damages was concerned, at the time when the dispute arose as to the amount payable under application 31, Devonshire had not served any withholding notice even though the delay it was complaining about had occurred almost a year earlier. Judge Gilliland concluded therefore that Devonshire could not now rely on liquidated damages as a defence to the present action to enforce the adjudicator's award. That would amount to applying a set-off against the amount ordered to be paid by the adjudicator. Judge Gilliland recognised that one needed clear language to oust the common law right of set-off. He was satisfied that Clause 39.A.7 of the contract provided that clear language in that it required the parties to comply with the decision of the adjudicator. Moreover, Judge Gilliland was clear that the decision of an adjudicator could not be defeated by raising a later withholding notice. That would be entirely inconsistent with the statutory purpose of adjudication. In conclusion, Gleeson were given judgment for the full amount of the adjudicator's decision.
CJ-0430
|
|||
|
© Brewer Consulting |
|||
 |
|||