‘Smash and grab’ adjudication enforced by the Technology and Construction Court

The Technology and Construction Court (TCC) has issued a reminder that there are very few scenarios where the courts will overturn a valid adjudicator’s decision.

The Facts

J Tomlinson Limited v Balfour Beatty Group Limited

The dispute referred for adjudication had related to an interim application for payment 30 (IA 30) issued by the claimant (the sub-contractor) which the adjudicator had decided had taken effect as a default payment notice.

The facts were as follows:

• J Tomlinson Limited (JTL) entered into a subcontract with Balfour Beatty Group Limited (BBGL) to provide design, labour and materials for electrical works at a site in Hull. The initial subcontract sum was around £435,000
• JTL served IA 30 by hand on BBGL on 12 September 2019 seeking a payment of some £1.246m
• BBGL did not issue any payment notice and/or any pay less notice in response to IA 30 and failed to pay the sums claimed by the final date for payment
• JTL commenced adjudication proceedings against BBGL
• The adjudicator awarded JTL the full sum of £1.246m.

BBGL failed to pay and JTL commenced enforcement proceedings.

Challenges raised in Enforcement Proceedings

BBGL raised two challenges to the validity of IA 30 in the enforcement proceedings. These were:

1. Under the terms of the subcontract, a valid interim application had to be both posted and emailed to BBGL
2. This was especially important where JTL relied upon its application as having become the ‘default’ notified sum, in the absence of any payment or pay less notice.

BBGL submitted that IA 30 was not valid because:

• It had not been posted with a copy sent by email and had not been validly served by JTL
• It had been served on BBGL on the wrong day.
  
  

Decision of the Court

The TCC granted summary judgment and enforced the adjudicator’s decision.

The court confirmed the principles that are set out in Hutton Construction Limited v Wilson Properties (London) Limited[1]. In the case the court confirmed that it adjudicators’ decisions will be enforced unless the adjudicator has exceeded his jurisdiction to decide the dispute or there has been a breach of the rules of natural justice.

The only exceptions are where:

• There is an admitted error, or
• There are issues regarding the timing or categorisation or description of a payment or pay less notice that would be unconscionable for the court to ignore.

BBGL did refer to either of the Hutton exceptions or try to explain why these should apply to the present case. BBGL’s arguments that were based on contractual interpretation did not provide a defence to enforcement of the adjudicator’s decision.

What can we learn?    

Paying parties should be careful to respond to payment applications and ensure that all necessary payment or pay less notices are given on time, otherwise sums may become due for payment by default.  This is especially important in the current climate, where due to COVID-19 lockdown restrictions more and more parties and their professional teams are working remotely and compliance with strict procedural requirements (e.g.) for service of physical copies of payment applications may not be possible.

This case is a reminder that failure to follow strict contractual requirements regarding service of notices will not necessarily render payment applications invalid. Paying parties therefore need to ensure they respond promptly to payment applications, even where the application may not have been made in strict accordance with relevant contractual terms.

The TCC has reinforced its policy of supporting that temporary finality of adjudicator’s decision (by which it is meant that a paying party must “pay now and argue later”). As the Judge explained “…the paying party, dissatisfied with an adjudicator’s decision, may embark upon a substantive resolution of the dispute…but is expected to comply with the adjudicator’s decision in the meanwhile…”

Written by Matthew Phipps and Hannah Plummer

 [1] [2017] EWHC 517 (TCC), [2018] 1 All E.R. (Comm) 524, [2017] 3 WLUK 419