The ‘2011” payment regime continues to cause problems

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Mr Justice Coulson in Hutton Construction Ltd v Wilson Properties (London) Ltd (2017) EWHC 517 (TCC) provided some pretty clear guidance over use of the Part 8 procedure in the English courts and the very limited circumstances to resist an incorrect adjudication decision. He also took a swipe at the JCT payment provisions, revised to meet the changes introduced in 2011.

Facts

Wilson Properties (London) Ltd (WPL) engaged Hutton Construction Ltd (HC) to convert Danbury Palace in Chelmsford into apartments. The contract, dated 12 November 2014, was a JCT Standard Building Contract, Without Quantities, 2011 Edition.

On 17 August 2016 HC served application for payment number 24. On 23 August 2016 WPL issued a ‘pay less notice’, arguing that it was a valid interim certificate or a timeous pay less notice, one or the other. HC disputed the validity of the pay less notice and in October 2016 commenced adjudication.

On 15 November 2016, the adjudicator found in favour of HC awarding them the sum of £491,944.73, mainly on the basis WPL had failed to serve a valid pay less notice. WPL considered that to be just plain wrong and not pay the sum awarded by the adjudicator. HC issued enforcement proceedings in December 2016.

Through its solicitors WPL indicated that it would resist enforcement but without declaring why. WPL did not serve a defence, however, on 3 February 2017 provided a witness statement from its solicitors that referenced payment application number 22 and 23. This ‘evidence’ raised issues of fact and tried to set out a history but did not state why the adjudicator was wrong and failed to identify what declarations were sought by WPL.

On 16 February 2017 WPL issued Part 8 Claim Form but again failed to seek any specific declarations. Instead, it asked the court to decide the same issue that was before the adjudicator namely: whether the adjudicator was correct to reach the decision he did about WPL’s notice of 23 August 2016.

Decision

Mr Justice Coulson noted that the WPL’s stance was increasingly common amongst parties discontented with an adjudicator’s decision. It raised fundamental points of principle and practice concerning the enforcement of adjudication decision. However, the Judge set out conditions that must be satisfied by a defendant who seeks to resist enforcement proceedings and suggested that the following approach should be adopted:

  • The parties can choose a “broadly consensual approach”, and agree that the court will deal with a “short and self-contained point” (such as one related to the proper timing of an application for payment, payment notice or pay less notice), without oral evidence.
  • Where the parties are unable to agree how the court should deal with the enforcement proceeding (like in the present case), the defendant must issue a Part 8 application setting out the declaration it seeks or indicate in detail what it seeks by way of final declaration.

In considering the conditions that needed to be met by a defendant seeking to resist enforcement by way of Part 8 application, Coulson J asserted that (i) there must be a short self-contained issue which arose in the adjudication that the defendant continues to contest, (ii) the issue must require no oral evidence or any other elaboration beyond that which is capable of being provided in the time allowed for an enforcement hearing (a couple of hours) and (iii) the issue must be one which, on a summary judgment application, it would be unconscionable for the court to ignore.

The judge concluded that it could not be right to let the defendant “shoehorn into” the limited time available at the enforcement hearing the entirety of an adjudication dispute. This kind of approach “would mean that” an “adjudicator would simply become the first part of a two-stage process”. That would run contrary to the principles outlined in the Macob and Bouygues decisions which upheld adjudicator’s decisions save in very limited circumstances.

WPL was not assisted by the judge’s observation that the JCT payment mechanism (whilst there to reflect legislation) was convoluted and desperately difficult to operate.

HC was entitled to summary judgment for the £491,944.73 awarded by the adjudicator.

Practical implications

  • Rigorous conditions need to be satisfied in order for a defendant to be successful in resisting enforcement proceedings via a Part 8 application.
  • The court clearly warns parties against the mis-use of Part 8 and reminds them that such a procedure is not to be used to “shoehorn” the entirety of the adjudication dispute into an enforcement hearing.
  • The court will not allow a re-run of the issues in the adjudication even if they concern a short point of law.
  • The judge was probably right about the ‘new’ (2011) payment regime which has been a recipe for dispute for years now.

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