Adjudicating the value of a final account – how binding is a “default” adjudication

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Kilker Projects Limited v Purton (T/A Richwood Interiors) (2016) CILL, O’Farrell QC

Facts

This is the second case concerning Kilker Projects’ sub-contract with Mr Purton t/a Richwood Interiors to carry out specialist joinery works at the Dorchester Hotel.  The works were finished and Purton submitted a final account but Kilker produced neither a Payer’s Payment Notice nor a subsequent Notice to Pay Less.  Accordingly Purton obtained an adjudication that the final account sum demanded be paid because (Section 111, Construction Act) the Payer was bound by the Payee’s Notice and was not entitled to withhold against it.

Subsequently Kilker Projects paid the amount Decided, but started a second adjudication asking a new adjudicator to determine the value of the Final Account and to order a repayment.  The second adjudicator duly valued the works at £745,000 and ordered a repayment of £55,000 which Purton refused to pay.

TCC Held:

  1. At the interim stage, an employer must pay and cannot bring a second adjudication to value the work in question. He can challenge the overall valuation at the next payment application stage even if that produces a lower figure in due course (Galliford Try v Estura).
  2. At the Final Account stage there is no further opportunity to re-open the valuation process and therefore (Harding v Paice) the adjudicated figure can be valued in a second adjudication. This was a policy decision to prevent the injustice of denying the Payer a remedy.
  3. Applying the previous cases, and in the absence of express words in the contract to say that the contractor’s Final Account would be conclusive as to the final sum due under the contract, Kilker was entitled to its second adjudication.

Comment                       

  1. We suggest that it makes sense to call adjudication decisions made in the absence of payer’s notices etc “default adjudications”.

Although this a well-reasoned and logical case, we should bear in mind that even if the Payer was not entitled to have the valuation determined in the second adjudication, he would still be able to litigate the matter to Court since adjudication decisions are only temporarily binding.

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