BHL applied for summary enforcement of a “smash and grab” adjudication decision for just over £700k in relation to Interim Payment Application 23. ESG sought to rely on an earlier “true valuation” adjudication in relation to Application 22. 

Bexheat had originally employed Essex as a sub-contractor to complete the construction of a residential and extra care facility. The contract sum was for £1,035,000 subject to adjustment. The construction works reached practical completion by 30 September 2021. However, disputes emerged concerning Bexheat’s entitlement to payment in respect of variations and the costs of prolongation.  On 18 August 2021, Bexheat commenced Adjudication 1, seeking a net payment of £678,885.78 based on payment application 22 (“Application 22”) for gross £1,832,071.87. Essex had issued a Pay Less Notice on 13 August 2021 valuing works at £1,170,729.19 giving rise to a net sum due to Bexheat of £4,908.44. The adjudicator decided that the true value of the Application 22 was £1,319,830.61, therefore, Bexheat was entitled to £141,646.35 plus VAT. In addition, the adjudicator determined Bexheat was entitled to interest and that Essex would be required to pay 65% of the adjudicator’s fees. Essex accepted this decision and paid the sums due to Bexheat in full.

Adjudication 2 was commenced on 17 August 2021 based on Bexheat’s payment application for £2,010,121.74 seeking a net repayment of £706,029.62 plus VAT based on a payment application (“Application 23”). Essex argued that it had served a valid Pay Less Notice on 13 October 2021 in response to Application 23, and therefore Bexheat was not entitled to further relief. However, the adjudicator disagreed with the Essex’s submissions and found that Essex’s pay less notice was late and that Bexheat was entitled to the sum applied for as a consequence. The Adjudicator awarded Bexheat £706,029.62 plus VAT, as well as contractual interest, statutory compensation of £100 and liability for the adjudicator’s fees and expenses. Essex failed to make payment on any count in respect of Adjudication 2.

Essex’s non-payment in respect of Adjudication 2 led Bexheat to bring the proceedings for the summary judgment application to enforce the decision. Bexheat argued that the Court ought to grant relief in respect of the enforcing the payment due from Adjudication 2 on the basis it had been a separate adjudication and they were rightfully entitled to sum granted. 

Essex’s counsel submitted that the decision in Adjudication 1 was a binding decision determining the true value of Bexheat’s entitlement to payment, which would in effect render the balance due to Bexheat nil on the basis that Mr Silver would have been obliged to determine Application 23’s value in line with the decision made in Adjudication 1. 

On the basis of Adjudication 2 having commenced first, Essex considered the parties to be bound only to the first decision, with Essex’s defence composed of several areas; the impact of Adjudication 1, potential to Set-off, joinder of disputes, severance of the compensation awarded in Adjudication 1 and the potential to stay. It was therefore for the court to determine; (i) whether the true value of Application 23 had in fact been determined in Adjudication 1, in the negative meaning that Mr Silver had lacked jurisdiction to determine the payment due under application 23, (ii) whether Essex was entitled to set-off against the Second Adjudication amounts due from Bexheat to Essex (iii) whether Essex had entitlement  to the true value of the application payment (iv) whether Mr Silver had jurisdiction to award the £100 statutory compensation, and (v) whether enforcement ought to be stayed.

(i)    The impact of the First Adjudication Award:

The judge compared the adjudication matters, noting that Adjudication 1 had concerned Bexheat’s entitlement to payment in respect of Application 22. Conversely, Adjudication 2 determined whether Essex had served a valid Pay Less Notice in respect of Application 23, which was the only basis on which Essex would not be liable to pay the notified sum in Application 23. Noting that while the items detailed within each payment application had been similar items, Application 23 had concerned work over a different time-period to Application 22; therefore, Bexheat was entitled to a different sum under Application 23, and if Essex wanted to avoid paying that sum in full, it had to serve a valid payment or payless notice. The judge determined the disputes within each adjudication to have been different and therefore separately determinable.

(ii)    Set-off:

Essex’s counsel submitted that the contract provided for set-off by virtue of clause 30.2. They argued that an existing sum due from Bexheat totalling £163,345.10 contra charges ought to be set off against the sum awarded in Adjudication 2. However, citing clause 30.1 which specified that parties were required to comply with adjudicators’ decisions immediately upon delivery of decisions unless otherwise agreed, this argument was rejected. Noting that the contra charges did not arise out of either adjudication proceeding, the judge found that Essex’s purported set-off was not permissible. 

(iii)    Joinder of disputes:

Essex further submitted that Mr Silver was incorrect in refusing to allow the joinder of the ‘true value’ of Application 23 with the notified sum of Adjudication 2. Counsel for Essex purported that clause 30.3 entitled Essex to elect the same adjudicator to determine the notified sum and true value. However, the difficulty in this argument concerned the necessity for all parties to consent to a multi-issue adjudication as per the Scheme for Construction Contracts. Reconciling this inconsistency with the Scheme as well as the contract itself, which did not compel the adjudicator to determine multiple issues, the judge found against this argument.

(iv)    Severance:

The final quantum related issue Essex raised was Bexheat was not entitled to claim compensation as this issue had been dealt with in Adjudication 1. Due to the low value of the matter the judge swiftly determined that Essex failed to raise the challenge to Mr Silver’s jurisdiction to award such compensation, and therefore the right challenge the jurisdiction is waived.

(v)    Stay of proceedings:

Essex further argued that an enforcement (in its favour) ought to be stayed on the basis that a return of the sum from Bexheat would not be able to pay due to financial difficulties. In the alternative, it argued that a judgment against Essex ought to be stayed as Essex would suffer a manifest injustice. However, the judge found on the facts that Bexheat was not demonstrably insolvent, and that any financial difficulties would in fact have been the fault of Essex’s non-payment of sums due. Determining Essex’s own financial position to be immaterial, the judge refused Essex’s request for a stay of execution. 

Given the judges’ determination that the payment applications had in fact been different, the judge found that the later adjudication did not trespass on an earlier decision and that therefore, Bexheat had been entitled to adjudicate. Considering each of the arguments Essex put forward, the judge found against each of them in turn, granting Bexheat the relief sought for the entitlement to the sums awarded at adjudication. 

The key lesson to learn may be to avoid complexity of such disputes by clearly setting out dispute clauses within the contract. The case also provides yet another example of the courts general unwillingness to intervene with adjudicators decisions.