J G WALKER GROUNDWORKS LTD V PRIORY HOMES (EAST) LTD [2013] EWHC 3723 (TCC)

Judgment date: 6th December 2013

(1) It is the Notice of Intention to Refer a Dispute to Adjudication (“Notice of Adjudication”), as opposed to the Referral Notice, that defines the scope of the referral (paragraph 1 of Part I of the Scheme for Construction Contracts). Therefore, in a case in which the Notice of Adjudication mentions alleged agreed variations to the works, the Adjudicator acts within his jurisdiction when he takes into account the value of the additional work carried out by the Claimant even if the Referral Notice claims sums due under “the Contract”, defined as the original contract without the variations. (2) Where a Notice of Adjudication stated that the dispute concerned the sum due from one party to the other and whether a party was entitled to withhold monies pursuant to a Pay Less Notice, the Adjudicator had jurisdiction to determine whether the payment application relied upon by the claimant was the final account or an interim valuation. (3) In this case, since the Court concluded that the challenges to the Adjudicator’s jurisdiction were without merit, the Defendant was required to explain why it should not pay the costs of the application on an indemnity basis.

Technology and Construction Court, Mr. Justice Edwards-Stuart

Background

In January 2013 Priory Homes (East) Ltd ("Priory Homes") engaged J G Walker Groundworks Ltd ("JGW") to construct roads, sewers and groundworks for a project to build eight new bungalows at 37 Lampits Hill, Corringham. The initial agreed price for the works was £137,898.15. JGW alleged that variations and additions to the works were agreed verbally between the parties and the total value of the works carried out, according to JGW, was elevated to £158,219.97. JGW made applications for payment amounting in total to this sum.

Priory Homes paid £112,003.91, refusing to pay anything further. In September 2013 JGW referred the dispute about the non-payment of the balance to adjudication. In October 2013 the Adjudicator awarded JGW the sum claimed, namely £38,832.51, plus interest. He also directed that JGW should pay his fees and expenses of £8,260 plus VAT. JGW then issued court proceedings and applied for summary judgment to enforce the decision.

At the hearing Priory Homes raised two challenges said to be in relation the jurisdiction of the Adjudicator.

The first point was that the definition of contract contained in the referral notice was very precise. It referred to the original contract and did not include what was due under what was called the "varied Contract". Priory Homes relied on the fact that the Adjudicator referred to "the Contract" at many places in his Decision, never to the contract as varied. Accordingly, it was submitted that, the Adjudicator only had jurisdiction to determine what was due under "the Contract", which meant that he had to ignore any variations (whether agreed or not).

The second point argued by Priory Homes was that the question referred to the Adjudicator was about the value of the JGW’s final account, and not about what was due under an interim valuation.

Issues

The Court had to decide the following issues:-

• Had the Adjudicator acted within his jurisdiction when determining the sum due under the varied contract?
• Did the Adjudicator have jurisdiction to determine whether JGW’s application for payment was an interim application or final application?

Decision

The Court held:

• That in accordance with paragraph 1 of Part I of the Scheme for Construction Contracts, whilst there may be scope, in case of ambiguity, for reading the Notice of Adjudication in the light of the Referral Notice, it is the Notice of Adjudication, not the Referral Notice, that defines the scope of the referral. Since the Notice of Adjudication expressly mentioned the variations to the works, the Adjudicator had acted within his jurisdiction.
• That the dispute referred to adjudication was what sum was due from Priory Homes to JGW and Priory Homes was entitled to withhold monies pursuant to a Pay Less Notice dated 26 July 2013. This implicitly embraced the question of whether the application relied upon by JGW was a final account or an interim valuation. The Adjudicator therefore had jurisdiction to decide this question and had decided that it was the latter.
• That JGW was therefore entitled to summary judgment.
• That since Priory Homes’ challenge to adjudicator’s jurisdiction was without merit, it should explain why it should not pay the costs of the application on an indemnity basis.

For the full judgment please click here