Another Wembley case: cherry picking for adjudication and satellite litigation

United Kingdom

The latest Wembley stadium case between Multiplex (M) and its concrete works sub-contractor, PC Harrington (PCH) shows how satellite litigation can arise when a party adjudicates a cherry picked part of an interim application.

PCH applied for a net sum of over £13m. M certified that just under £11m was payable but by PCH to M (valuing PCH’s works at £2.3m but deducting £13m). M started an adjudication in respect of the costs it incurred resolving an alleged defect in PCH’s work accounting for £2m of the £13m deducted.

PCH asked the court to rule that the adjudicator could only decide whether PCH was liable and if so for what, but not to direct payment of any sum by PCH to M because account had to be taken of the amount certified. That amount was £2.3m due from M to PCH because as a matter of interpretation of the contract, M could only certify a sum payable to PCH (and not a sum payable to M). PCH said that M might withhold from that sum but it could not produce a sum payable to M. The position might have been different had M adjudicated several claims worth more than £ 2.3m in that it could recover the excess; but that was not what M sought to do.
Both parties seemed to accept that the payment regime under their contract complied with the Construction Act but sought to use the Act to support their competing interpretations.

The court held that under the contract M could include deductions for, say, defective work (which might normally be the subject of a withholding notice) and could certify a negative sum. PCH could not take the credit items in its favour without the debit items which formed an intrinsic part of the calculation.

It was common ground that it would be within the scope of the adjudication for PCH to raise any claims to payment that it may have in order to defeat M’s monetary claim; although if PCH sought, itself, to recover a monetary sum from M it would have to initiate an adjudication of its own.
This case highlights a benefit to the party that is normally the payer of a contractual payment regime that allows it to certify a negative sum and the problems that can arise from (as the parties accepted) “not felicitously drafted” payment provisions.

Reference: P C Harrington Contractors Limited v Multiplex Constructions (UK) Limited [2007] EWHC 2833 (TCC) Click here for a link to the judgment: