UK Adjudicators November 2020 Newsletter

WWW.UKADJUDICATORS.CO.UK
NOVEMBER 2020 NEWSLETTER
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EDITORS COMMENTS
The UK is now in a second lockdown and the
likely impact on the construction industry and
society moving forward is not known. Like
most other organisations we place safety of
others in society before our own needs and
wants and we have adjusted our first major
planned conference for 2021.
The annual Edinburgh Adjudication and
Arbitration conference will therefore be
taking place as a virtual event during the week
ending 5th
March 2021. As in previous years
this will precede the Edinburgh University Pre
Vis Moot.
Two cases that show that adjudication is
useful to a Party in liquidation and that in
such circumstances the courts will enforce an
adjudicator’s decision (Balfour Beatty Civil
Engineering Ltd & Anor v Astec Projects Ltd
[2020] EWHC 796 (TCC) and Styles and Wood
v GECIF Trustees Unreported 4 September
2020) should lead to more parties and in
particular their liquidators and administrators
referring disputes to adjudication.
At the Adjudication Society Virtual Conference
Janey Milligan provided an update on the
annual adjudication report and also feedback
from the main Adjudicator Nominating Bodies
indicating that there is a current trend of the
number of disputes increasing though it is not
possible from Janey’s information to reach a
conclusion if this is as a result of COVID-19,
economic pressure, ability of liquidators to
refer matters to adjudication or a very
probable combination of all of these.
We have a range of articles on adjudication
from across the globe and further Canadian
recognition of the benefits of adjudication to
resolve payment disputes in construction.
Alberta has seen the benefits of legislating for
adjudication and prompt payment in the
construction industry and is currently passing
legislation through its Parliament which is
likely to be up and running in 2021.
Sean Gibbs LLB(Hons) LLM MICE FCIOB FRICS
FCIARB, is a director with Hanscomb
Intercontinental and is available to serve as an
arbitrator, adjudicator, mediator, quantum
expert and dispute board member.
sean.gibbs@hanscombintercontinental.co.uk

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RECOVERY OF PARTY COSTS IN
ADJUDICATION
The position regarding the award of party
costs in adjudication proceedings is one which
has been revised, bit by bit, over the years.
The high water mark was Bridgeway v Tolenti
in 2000, which permitted clauses that would
oblige a referring party to make payment of
all of the adjudicator and responding party’s
costs regardless of outcome.
Yuanda v WW Gearii
in 2010 sought to put an
end to such practices (in England and Wales at
least), treating practical or commercial
restrictions on the ability to adjudicate at any
time as seriously as contractual restrictions.
The Local Democracy Economic Development
and Construction Act 2009 (“the LDEDCA”)
took aim at the same targets and introduced,
from 2011, an express prohibition on any
clauses which removed the discretion of
adjudicator to apportion their fees as they
saw fit. Whilst parties were free to agree that
an adjudicator could award party costs in the
proceedings, such an agreement would have
to be recorded in writing and be made after
the service of a notice of adjudication.
For a while, the issue of adjudicators awarding
party costs was no longer a consideration.
Things seemingly changed with new
regulations introduced in 2013 which
amended The Late Payment of Commercial
Debts (Interest) Act 1998 (“the Late Payment
Act”).
Statutory Interest
The Late Payment Act introduced a statutory
right to claim interest on late payments where
there was no adequate contractual remedy
for interest due on late payments.
Over the years, the provisions of the Late
Payment Act have been updated and
amended by various sets of regulations. In
2002, for example, Section 5A was added to
the Act which provided for a fixed sum to be
added to the time related interest due, on a
sliding scale from £40 for debts of less than
£1,000 to £100 for debts of over £10,000.
It’s probably fair to say that this additional
compensation was relatively uncontroversial.
Claims in adjudication which added these
modest lump sums to statutory interest were
often granted by adjudicators.
This additional lump sum started to demand
rather more attention after the introduction
of the Late Payment of Commercial Debts
Regulations 2013 (“the 2013 Regulations”) in
which Section 5A of the Late Payment Act was
amended, as follows:
“(2) After subsection (2) insert—
(2A) If the reasonable costs of the supplier in
recovering the debt are not met by the fixed

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sum, the supplier shall also be entitled to a
sum equivalent to the difference between the
fixed sum and those costs.”
On the face of it, the door was now opened
for claiming party costs in adjudication, albeit
only in the limited circumstances where the
statutory late payment provisions applied.
The View of the Courts
It wasn’t long before the courts were asked to
consider this apparent exception to the
general rule that party costs were not
recoverable without the agreement of both
parties, post-notice of adjudication.
The decision in Lulu v Mulalleyiii
gave some
encouragement, finding that an adjudicator’s
decision which included party costs in this
way was enforceable. The challenge in that
case appears to have been very narrowly
argued though. Rather than attacking the
award as being contrary to the requirements
of the Construction Act,iv
it was argued that
the adjudicator lacked jurisdiction to reach
such a decision. The interest was awarded in
respect of a counterclaim raised by the
responding party within the proceedings. It
was unsuccessfully argued that the award of
those costs was beyond the scope of the
dispute which had been referred.
It was held that the decision in Allied v
Paradigmv
was relevant and a responding
party could “raise any defence to the claim
when it’s referred to adjudication”. Any
counterclaim could be considered so long as it
was consequential upon or connected to the
referred dispute.
In Lulu, it was decided that the costs of
running the adjudication were ancillary or
connected to the dispute described by the
notice of adjudication and the adjudicator
therefore had the jurisdiction to consider
them. The adjudicator’s decision was
enforced.
Shortly afterwards, however, the judgment in
Enviroflow v Redhillvi
brought a swift end to
claims of this type within adjudication.
Here, the Court weighed up two competing
statutory provisions. On the one hand, section
5A of the Late Payment Act said that if the
fixed lump of £40 to £100 added to the
interest was not sufficient to cover the party’s
reasonable costs of pursuing the debt, then an
amount equal to those costs should be added
to the interest instead.
On the other hand, section 108(A) of the
Construction Act said that any provision of a
contract which sought to allow an adjudicator
to allocate party costs would be ineffective
unless made in writing after the service of the
notice of adjudication.
It was held that the requirement of section 5A
of the Late Payment Act was to be implied
into a commercial contract where there was

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no contractual mechanism for dealing with
late payments. However, once implied it
would immediately be rendered ineffective by
section 108(A) of the Construction Act. The
Construction Act prevented the implication of
a right to claim debt recovery costs within
adjudication.
This point is now settled and attempts to
claim party costs via the Late Payment Act are
likely to be given short shrift. However, whilst
that may be the case, is this a desirable
outcome? Is there a way of reconciling the
two apparently contradictory statutory
provisions? Does Enviroflow limit access to
adjudication for those most in need of the
process and who is being protected by the
Enviroflow prohibition on claiming party
costs? Given the recent advent of the Low
Value Dispute adjudication schemes, is it not
perhaps time to consider whether the full set
of rights granted by the Late Payment Act
should be extended to the construction
industry.
Implementing EU Directives and the 2013
Regulations
The Late Payment Act’s 2013 Regulations
were introduced in order to implement an EU
Directive.vii
Directives do not have automatic
legal effect within the EU Member States.
Instead, they set minimum standards which
each member is then required to incorporate
into their own national law.
Article 2 of the Directive stated that:
“This Directive shall apply to all payments
made as remuneration for commercial
transactions”
“Member States may exclude debts that are
subject to insolvency proceedings instituted
against the debtor, including proceedings
aimed at debt restructuring”
The scope of the Directive was clear. It was to
apply to all commercial transactions. Whilst
exclusions could be made in cases of
insolvency, there was nothing which
permitted specific industries to be exempt.
“1. Member States shall ensure that, where
interest for late payment becomes payable in
commercial transactions in accordance with
Article 3 or 4, the creditor is entitled to obtain
from the debtor, as a minimum, a fixed sum of
EUR 40.
2. Member States shall ensure that the fixed
sum referred to in paragraph 1 is payable
without the necessity of a reminder and as
compensation for the creditor’s own recovery
costs.
3. The creditor shall, in addition to the fixed
sum referred to in paragraph 1, be entitled to
obtain reasonable compensation from the

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debtor for any recovery costs exceeding that
fixed sum and incurred due to the debtor’s
late payment. This could include expenses
incurred, inter alia, in instructing a lawyer or
employing a debt collection agency”
[emphasis added]
The small lump sum, already provided for by
the Late Payment Act’s 2002 Regulations, is
referred to. In addition, there is the
entitlement to claim the costs of recovering a
late payment. Not only that, but the scope of
those costs expressly included appointing a
lawyer or a debt collection agency.
The Directive therefore required that a
statutory mechanism be introduced whereby
a claimant relying on late payment regulations
was entitled to claim its debt recovery costs
(which could include legal fees). All
commercial transactions were to be covered
by these new rules. No exceptions could be
made for any specific classes of contract. The
2013 Regulations were the method by which
those mandatory requirements would be
incorporated into English and Welsh law.
The EU Commission monitors the proposed
implementation of directives into local law,
ensuring compliance with the relevant
requirements. In this case, there was nothing
to suggest that the 2013 Regulations weren’t
going to successfully implement the Directive.
The barrier to implementation of all of the
requirements arises not from the 2013
Regulations, but from the existing
Construction Act.
Did Parliament intend that the 2013
Regulations (or that part which relates to the
recovery of costs) should not apply to
construction contracts and the adjudication
process? It seems unlikely, since any attempt
to limit the scope of the 2013 Regulations
would surely have seen the EU Commission
reject the proposed regulations.
It is obviously a little late now for us to ask or
expect the EU Commission to ride to the
Directive’s rescue and insist that Parliament
adjusts local law to fully implement its
requirements.
Balancing Acts
Notwithstanding the decision in Enviroflow,
can we perhaps pick a way through the
competing legislation to allow a party relying
on the Late Payment Act to recover costs in
adjudication, whilst still maintaining the
Construction Act’s section 108(A) prohibition
on awarding party costs without an express
post notice of adjudication agreement?
Section 1(1) of the Late Payment Act states:
“It is an implied term in a contract to which
this Act applies that any qualifying debt
created by the contract carries simple interest
subject to and in accordance with this Part.”

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The entitlement to claim the recovery costs of
pursuing a debt arises under section 5A(2A) of
the Late Payment Act. Section 5A(3) then
states that:
“The obligation to pay a sum under this
section in respect of a qualifying debt shall be
treated as part of the term implied by section
1(1) in the contract creating the debt.”
Section 1(1) provides for an implied term
which allows interest to be claimed. Section
5A(3) then says that the costs of recovering
the debt are also granted under section 1(1).
So, what is being awarded here? Is it a party’s
costs of fighting an adjudication to recover a
late payment? Or is it interest which includes
an amount equal to the party’s costs? If we
view it as the latter, then we find a solution to
the problem.
It is not controversial that an adjudicator is
entitled to award interest as a part of their
decisions. Section 20(c) of the Scheme says
that the adjudicator may “having regard to
any term of the contract relating to the
payment of interest decide the circumstances
in which, and the rates at which, and the
periods for which simple or compound rates of
interest shall be paid”.
If we say that we are awarding a lump sum as
interest which happens to equal the party
incurred costs of conducting the adjudication,
do we manage to avoid the prohibition at
section 108(A) of the Construction Act? After
all, the adjudicator would, strictly speaking,
not be awarding costs themselves, but an
amount of interest to the same value.
In that way, do we obey the apparently
competing requirements of two different
Acts? We don’t create an exception to the
Directive which was never intended and we
also ensure that all commercial transactions
attract the rights stated within the Directive.
At the same time, we don’t open the
floodgates to contract clauses which seek to
deter adjudication by giving adjudicators a
general ability to award party costs. The
award of party costs as interest is limited to
circumstances where the Late Payment Act
applies and a separate agreement after the
service of the notice of adjudication is still
required in other circumstances.
Conclusions
If we consider that there is a way, albeit in
limited circumstances, whereby adjudicators
could award party costs, we should perhaps
also consider whether or not they should.
If a party, when negotiating its contracts,
decides that it does not want to be at risk of
paying the other party’s costs for any future
adjudication proceedings, then the solution is
simple. It includes an express provision in its
contracts for interest in the case that it is late
in making payments due.

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Even without pre-agreed interest rates, a
paying party can avoid the risk of paying the
other party’s costs by complying with the
Construction Act and issuing payment and/or
pay less notices in a timely manner.
That is all that is required: obey good practice
in drafting a commercial contract and don’t
allow the Late Payment Act to step in and fill
in the gaps, and then also obey good practice
when it comes to certifying payments.
Put that way, we can see who it is that
benefits from the position as it stands post
Enviroflow. The beneficiaries are those parties
who employ others to carry out construction
works without including express provisions for
interest on late payment and without issuing
either timely payment or pay less notices. Are
these the parties we want to protect? Are
these the parties we are prepared to make an
exception to the Late Payment Act for?
There appears to be a consensus that the
adjudication process has become more
complex and expensive than originally
intended, with those at the lower end of the
market being priced out of using it as an
effective means of dispute resolution.
The Low Value Dispute adjudication schemes
recently introduced are an attempt to address
the problem. However, the limit on the length
of submissions and evidence (which, at one
lever arch file, can still be substantial) and a
limit on the amount which an adjudicator can
charge seems scant consolation for a small
subcontractor who has made an application
for payment, received no payment or pay less
notice and is then faced with a contractor
who simply refuses to pay. In circumstances
such as those, shouldn’t our sympathy be with
the injured party? Shouldn’t we refocus our
view of the competing legislation, remind
ourselves why it was introduced and ensure it
works to the benefit of those most in need of
the intended protections?
Adjudication was introduced to maintain
cashflow within the construction industry.
The Late Payment Act was intended to give a
remedy to those being denied sums which
were indisputably due.
The LDEDCA amendments to the Construction
Act were instigated to strengthen the payee’s
position by making sums applied for become
due automatically if the payer ignored them.
Finally, the Directive and 2013 Regulations
expressly set out to ensure that a party to a
commercial transaction would be entitled to
recoup the costs of recovering a late debt.
All that legislation points one way, but the
current interpretation has removed the
intended benefit to those denied their money
in the industry; an industry that was so bad at
maintaining cashflow it required additional

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statutory rules to be imposed on it via the
Construction Act.
I would argue that we should consider who
this legislation was all intended to protect.
Where we find that those most in need of this
protection have fallen through the gaps, we
should plug the gaps and give them back the
rights which Parliament and the EU
considered they should have.
i
Bridgeway Construction Ltd v Tolent Construction
Ltd (2000) CILL 1662
ii1
Yuanda (UK) Co Ltd v WW Gear Construction Ltd
[2010] EWHC 720
iii1
Lulu Construction Ltd v Mulalley & Co Ltd.
[2016] EWHC 1852
iv
Housing Grants, Construction and Regeneration
Act 1996
v
Allied P&L Ltd v Paradigm Housing Group Ltd
[2009] EWHC 2890
vi
Enviroflow Management Ltd v Redhill Works
(Nottingham) Ltd (2017) [unreported]
vii1
EU Directive 2011/7/EU
Tony Clough – Director - Base Quantum Ltd.
Base Studios, Aldwych House, London, WC2B
4HN
T: +44 207 043 0993 / M: +44 7854 489591
tony.clough@base-quantum.co.uk
ADVERSE INFERENCES AND
ADJUDICATION – VICTORIA
The recent Victorian Court of Appeal decision
in 1155 Nepean Highway Pty Ltd v Promax
Buildings Pty Ltd [2020] VSCA 253 examines
the inferences that an adjudicator can draw
from the absence of supporting material
provided by the respondent to a payment
claim.
In 5MF58, we covered the Trial Division
proceedings. On appeal, the applicant (1155
Nepean Hwy) argued that the trial judge had
erroneously approved the approach of the
adjudicator. At issue – the ability to draw
adverse inferences from the applicant's failure
to adduce contradictory material in the
adjudication, even though the statutory
prohibition in the Building and Construction
Industry Security of Payment Act 2002 (Vic)
(SOP Act) prevented the applicant from
lodging an adjudication response.
The Court agreed. "The applicant's silence in
the adjudication could not be taken as
indicating anything at all about the strength of
its case" in the circumstances. Here, the fact
that the applicant had not provided a
payment schedule meant that section 21(2A)

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of the SOP Act prevented the applicant from
lodging an adjudication response. Also, the
adjudicator had not sought further
submissions or material under section 22(5).
Relevantly, however, the Court went on to
distinguish between an adverse inference
based on the absence of an adjudication
response and the applicant's earlier failure to
serve a payment schedule.
To the latter, the Court reasoned that:
"…an inference drawn, not from the absence
of an adjudication response but from the
applicant’s failure to provide a payment
schedule, is in a different position… A
recipient of a payment claim may be taken to
know of the critical significance of a payment
schedule to the operation of the Act in
general and to the making of an adjudication
determination in particular. … As a matter of
common sense, a recipient of a payment
claim who does not respond to it might
rationally be thought to have no basis upon
which to contest it."
On that basis, the Court held that it was
"permissible for an adjudicator to infer, based
on the failure of a recipient of a payment
claim to provide a payment schedule, that the
recipient was not in a position to contest the
claim".
In the end, the Court declined to find that the
adjudicator drew the inference identified by
the applicant.
The applicant also argued that the contract
drawings constituted part of the "construction
contract" which was required to be
considered by the adjudicator pursuant to
section 23(2)(b) of the SOP Act, so that a
failure to have regard to them rendered the
determination void under section 23(2B).
Although not forming a separate ground of
appeal, the Court considered this argument
and made observations regarding what
constitutes "the provisions of the construction
contract from which the application arose" for
the purposes of section 23(2)(b). The Court
observed:
"…two interpretations are open. On the
broader view, all the contents of documents
having force as part of the contract or
arrangement constituting the construction
contract make up the provisions of that
contract. On a narrower reading, the
provisions of a construction contract are to be
found only in the contract executed by the
parties, and not in other documents
incorporated by reference in that document."
Ultimately the Court concluded that the text
of section 23(2)(b) supports the narrower
approach, noting (among other things) that
the use of the expression "the provisions of
the construction contract", rather than "the

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construction contract" in
section 23(2)(b) suggests that the section
"contemplates something other than the
whole of the construction contract as broadly
defined". In reaching this conclusion, the
Court also adopted a practical approach
consistent with the expeditious conduct of
adjudications. The Court determined that
section 23(2)(b) sets a basal level of
contractual material that an adjudicator must
always consider, while empowering the
adjudicator to demand further submissions,
including the provision of documents, where
the adjudicator considers that the parties
have not provided all "relevant
documentation".
PARTNER , BRISBANE, SYDNEY
T +61 7 3292 7025 | +61 2 9353 4130
scapelli@claytonutz.com
SOP REMINDER: PURCHASE
ORDERS AND THE RISK OF
MULTIPLE CONSTRUCTION
CONTRACTS
The recent NSW Supreme Court decision in
Acciona Infrastructure Australia Pty Ltd v
Holcim (Australia) Pty Ltd [2020] NSWSC 1330,
highlights the issue of purchase orders
resulting in multiple construction contracts –
rather than one construction contract.
The plaintiff (Acciona) entered into an
Agreement with the defendant (Holcim) for
the supply of concrete. On 28 May 2020,
Holcim served a payment claim on Acciona for
concrete allegedly supplied. On 12 June 2020,
Acciona responded with a nil payment
schedule. Holcim submitted an adjudication
application for the claim, and an adjudication
determination was made in favour of Holcim
for $2.9 million. Acciona challenged the
adjudication determination.
Acciona argued that the adjudicator lacked
jurisdiction because there was neither a valid
payment claim nor a valid adjudication
application because the payment claim
contained claims for work done under two or
more contracts. Section 13(5) of the Building

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and Construction Industry Security of
Payment Act 1999 (NSW) (SOP Act) specifies
that a claimant can only serve one payment
claim in any particular month for any work
done or goods and services supplied in that
month. Justice Hammerschlag referred to the
judgment of Trinco (NSW) Pty Ltd v Alpha A
Group Pty Ltd [2018] NSWSC where the Court
held that a single progress claim cannot
validly claim for work done under more than
one contract. Relevantly, under clause 2(c) of
the Agreement, the issue of a purchase order
resulted in a separate contract coming into
existence between the parties. Applying
Trinco, Justice Hammerschlag concluded that
the payment claim straddled numerous
purchase orders and therefore did not
constitute a valid payment claim because
each purchase order was a separate contract.
As a result, the adjudicator had no jurisdiction
because the payment claim was invalid as per
section 13(5) and was therefore ineffective to
engage the operation of the SOP Act.
Justice Hammerschlag also rejected a
procedural fairness argument advanced by
Acciona that turned on its facts.
This case highlights the importance of reading
the provisions of the SOP Act within the
context of the agreement between the
parties. In this case, the fact that each
purchase order resulted in the creation of a
new contract meant that Holcim needed to
prepare a separate payment claim and
adjudication application for each purchase
order in order for the payment claim to be
valid and for the adjudicator to have
jurisdiction in relation to the dispute.
Frazer Moss
Clayton Utz
PARTNER , BRISBANE
T +61 7 3292 7204
fmoss@claytonutz.com

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JRT DEVELOPMENTS LTD V TW
DIXON (DEVELOPMENTS) LTD:
WHEN ENFORCEMENT IS
`MANIFESTLY UNJUST'
In the recent case of JRT Developments Ltd
(JRT) v TW Dixon (Developments) Ltd (TWD)
[2020] the TCC has shown that parties seeking
to enforce "smash and grab" adjudication
awards will not be able to do so in
circumstances where it would be manifestly
unfair.
Background
Of interest and significance in this case is the
fact that the parties in dispute are related. JRT
is owned and controlled by Mr Jonathan
Woodcock, the nephew of the sole
shareholders and directors of TWD, Mr and
Mrs Dixon. Mr and Mrs Dixon set up TWD,
with Mr Woodcock's assistance, solely for the
purposes of developing 14 new homes on
farmland near Market Drayton in Shropshire.
They are elderly and have no prior
involvement in the construction industry.
JRT and TWD entered into a JCT Minor Works
Contract with Design 2011 Edition ("the JCT
Contract") and a socalled `Commercial
Agreement' ("the Commercial Agreement"),
both dated 22 June 2016, for the design and
construction of the new homes.
The Commercial Agreement confirmed that
JRT was to manage the project and provided
that:
"The development will be constructed on a
cost plus basis covered through funding of
means (sic) of the Communities and Housing
Association. The associated costs and
overheads of TW Dixon will be covered by JRT
Developments".
"The Properties will be delivered at cost plus
the business overheads of JRT. Agreement of
profit share...is to be split against a 50:50
ratio of gross profit minus the plot value and
the associated build and sale costs"
Clearly, the relationship between the parties
was unusual; the dealings between them
were very informal so as to be more like that
of joint venture partners than that of
employer and contractor in an arm's length
construction contract. Mr Woodcock even
arranged the funding for the project (a loan
from the Homes and Communities Agency
(HCA)).
Throughout the duration of the project JRT
made no direct requests for payment from
TWD; rather JRT liaised direct with HCA as
funder, who made regular payments to TWD
based on periodic valuations of the work. JRT
issued invoices to TWA for amounts approved

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by HCA, which were then paid using the
funding provided.
The dispute
The relationship between the parties
gradually deteriorated due to cost overruns
and delays, as well as alleged actions on the
part of JRT. The JCT Contract was eventually
terminated by JRT on 13 June 2019. The
parties then engaged in informal dialogue as
regards the resolution of outstanding
payments, said to be in the sum of
952,578.97. This dialogue continued until JRT
issued a Disputed Payment Notice under the
terms of the JCT Contract, on 19 September
2019. It is evident that TWD failed to
understand the significance of the Disputed
Payment Notice and did not serve a pay less
notice as required.
On 14 November 2019, the first day on which
it was able to do so, JRT referred the dispute
to Adjudication. The adjudicator decided in
favour of JRT, concluding that the Disputed
Payment Notice was valid and that TWD must
pay as a result of having failed to serve a pay
less notice. JRT issued proceedings and sought
summary judgment to enforce the decision.
TWD subsequently brought a claim under Part
7 seeking a stay of enforcement on basis of
`special circumstances', being:
a) The probable inability of JRT to repay the
judgment sum at the end of the substantive
trial - Wimbledon Construction Company 200
Ltd v Vago [2005]1; and
b) the risk of manifest injustice if no stay was
granted, as a result of TWD's inability to pay
and all the circumstances of the case -
Hillview Industrial Development (UK) Ltd v
Botes Building Ltd [2006]2) and Galliford Try
Building Ltd v Estura [2015]3
The TCC
Inability to repay the judgment sum
Wimbledon Construction v Vago
To meet the test set out in the Wimbledon
case, TWD needed to show:
1. The probable inability of JRT to repay the
judgment sum at the end of the trial in TWD's
claim.
2. That JRT's financial position was not the
same or similar to its financial position at the
time the JCT Contract was entered into (22
June 2016).
3. That JRT's financial position was not due
either wholly or in significant part due to
TWD's failure to pay the sums awarded in the
adjudication.
HHJ Watson found that, whilst JRT was not
technically insolvent, it was "highly probable"
that JRT would be unable to repay the
judgment sum, thus satisfying the first limb of
the Wimbledon test. She also concluded that,

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having reviewed JRT's changing financial
position during the relevant period, and
taking onto account factors such as JRT's
significant loans, the management of its
finances, arrangements with creditors and
lack of profit, the financial position of JRT was
indeed substantially worse than when the JCT
Contract was entered into. As such, JRT posed
a significantly higher financial risk than it did
in 2016, thus satisfying the second limb of the
test. Finally, HHJ Watson found that JRT's
financial position was not caused either
wholly or in significant part by TWD's failure
to pay the sums awarded by the adjudicator.
TWD therefore successfully demonstrated all
three limbs of the Wimbledon test.
Manifest Injustice
The principle of staying adjudication
enforcement in situations of manifest
injustice was first established in the case of
Galliford Try Building Ltd v Estura Ltd. Estura
had failed to serve a pay less notice, leading
to an award in Galliford Try's favour. Estura
would have been unable to pay the award in
full pending a final valuation of the works,
hence the court deeming this unfair and
granting a partial stay in execution.
In the similar circumstances of the current
case, the TCC found that TWD would not be
able to pay any part of the judgment sum
without rendering itself immediately insolvent
and being forced into liquidation. HHJ Watson
noted:
The highly unusual project funding
arrangements, whereby the relationship
between the parties was not that of employer
and contractor at arm's length.
During the entire three-year course of the
contract, JRT limited its claims for payment to
the sums recovered from HCA. The payment
terms of the JCT Contract were ignored by
both parties. It was only after termination
that JRT sought to rely on the contractual
payment provisions, clearly intending to
trigger a referral to adjudication and an award
of the full sum claimed. HHJ Watson
commented: "these circumstances appear to
me to be relevant to the fairness of enforcing
the judgment sum."
Whilst the true valuation of any sums due to
JRT was an issue for trial, it was likely that at
least substantial elements of JRT's claim for
payment were not properly due to it at the
time it issued the Disputed Payment Notice.
Accordingly, HHJ Watson concluded that it
would be manifestly unjust to TWD if the
judgment was not stayed. TWD would be
forced to pay a potentially overinflated sum,
as a result of which it would be forced into
liquidation and thus unable to pursue its claim
for a declaration that the Disputed Payment
Notice was not a valid payment notice. The

15 | P a g e
TCC therefore granted a stay of enforcement
pending trial.
Comment
Whilst the general rule remains that an
adjudication award will be enforced, it is clear
that the TCC will make an exception in rare
cases where manifest injustice can be shown.
It is interesting to see that manifest injustice
does not always need to relate to inability to
pay; in this case the TCC clearly took into
account the unusual relationship between the
parties, their conduct throughout the
duration of the contract and the unfairness of
depriving TWD of the opportunity to obtain a
final assessment of the true account. It is
evident that the Court will give short shrift to
parties seeking to take advantage of the
adjudication process in situations where to do
so is clearly unfair.
In the current economic climate, where the
industry is unfortunately likely to see
increased insolvencies, the case serves as
another useful reminder of the limitations of
"smash and grab" adjudication.
James Vernon – Partner T: 020 7469 0424
E: j.vernon@beale-law.com
STATUTORY ADJUDICATION FOR
ALBERTA, CANADA
The proposed legislation was tabled in the
Alberta Legislature October 21, 2020. It will be
debated during the fall 2020 legislative
session.
If the legislation passes, Service Alberta will
work with industry experts to develop
regulations. Service Alberta intends to bring
the new rules into force during July 2021.
The new rules will not apply to contracts
drafted and signed under the existing rules.
They will only apply after the legislation is
proclaimed (currently targeting July 2021).
The new rules will not apply to contracts with
the Government of Alberta, which will
continue to be governed by the Public Works
Act. However, the Government of Alberta will
continue to hold itself to the standards of
prompt payment that are proposed in the
new legislation.
Bill 37: The Builders’ Lien (Prompt Payment)
Amendment Act, 2020 would introduce
timelines and rules for payments and liens in
all construction industry sectors, ensuring
contractors and subcontractors are paid on
time.
Previously, Alberta had no rules for payment
timelines in the construction industry, which

16 | P a g e
meant these timelines were vague if not
addressed in a contract. If passed, these
changes will set a clear timeline of 28 days for
payments to be received, giving construction
industry professionals the confidence they
need to operate successfully.
The construction industry is a multi-billion
dollar sector of Alberta’s economy that
creates thousands of jobs for Albertans.
Amendments to the act would help ensure
contractors and subcontractors get paid on
time, strengthen Alberta’s economic recovery
and protect jobs.
Key changes
If passed, amendments will:
• set a 28-day timeline for owners,
contractors and subcontractors to pay
invoices
• prohibit ‘pay-when-paid’ clauses in
construction contracts
• ‘pay-when-paid’ clauses allow
contractors to withhold payment
from their subcontractors until the
contractor is paid, unfairly placing the
risk of non-payment onto
subcontractors
• extend timelines for registering liens:
• construction industry: from 45 days to
60 days
• concrete industry: from 45 days to 90
days
• increase the minimum amount owed
that can be subject to a lien from
$300 to $700
• allow dispute resolution through
adjudication, which is faster and less
costly than going to court
• introduce new rules allowing
holdback money on large, multi-year
projects to be released without risk at
pre-set times
• improve subcontractors’ access to
payment information
• rename the Builders’ Lien Act to the
Prompt Payment and Construction
Lien Act

17 | P a g e
WHAT SUM HAS BEEN NOTIFIED
FOR PAYMENT?
As I sit down to write this piece on sunny but
a cold(ish) autumn morning, prior to a round
of golf (better known as a good old fashioned
hack in my case!) this afternoon, I hope
everybody who reads this piece is coping OK
in these prolonged challenging times and is
keeping themselves and their family, friends,
colleagues and associates safe. If we all look
out for one another then I feel sure we will all
again be able to share in one another’s
pleasurable company in the not too distant
future.
The last 6 months have certainly been the
busiest period I have ever personally
encountered in terms of adjudication
proceedings. The references to adjudication
have been coming to me thick and fast since
March, both as advocate and adjudicator,
with little time to come up for air.
One of the things which has surprised me the
most, recently, is the number of proceedings
in which the responding party has elected not
to serve a response. Prior to the last 6
months it was very rare indeed for me to be
involved in an adjudication where the
responding party has not served a response,
and I think the fact that I have seen this
happening so often recently is definitely a sign
of the times in which we currently find
ourselves. It appears to me that many parties
are not actually disputing that sums are due
for payment, but are merely buying
themselves some additional time in which to
make payment by way of ‘forcing’ the payee
to first go through the adjudication process
before making the payment due. I suspect
this may in part be due to the restrictions
placed on creditors by the Corporate
Insolvency and Governance Act 2020, but that
is a topic for another day.
In this piece, I have considered the view
(which is not necessarily my own) that given
the draconian consequences of failing to
comply with the notice provisions of the Act,
parties seeking payment should be held to a
standard of strict compliance, and so-called
“technical” defences to payment claims
should be permitted. Against that
background, I go to discuss one particular
“technical” defence which, while not
necessarily meritorious, could cause real
problems for a “smash and grab” claimant.
Technical Defences to Payment
Before moving on to discuss two particular
potential arguments which may be used as a
defence to a payment claim where the payer
has failed to serve either of the notices
(payment notice or pay less notice) required
by the amended Construction Act, I quote
Coulson J (as he was then) in Caledonian
Modular Ltd v Mar City Developments Ltd

18 | P a g e
[2015] EWHC 1855 (TCC) in which he said [at
para 36}
“One of the more baleful effects of the
amendments to the 1996 Act has been a large
increase in the number of cases before
adjudicators (and thus before the TCC), in
which the claimant contractor argues that the
employer failed to serve its notices on time,
and that therefore there was an automatic
right to payment in full of the sum claimed”
[my emphasis added]
and [at para 37]
“In the UK (unlike other jurisdictions with
mandatory construction adjudication, such as
Malaysia) the employer's failure to serve a
payless notice within a short period
challenging the payee's notice can have
draconian consequences. A failure to serve a
notice in time will usually mean a full liability
to pay. That is what the run of recent TCC
cases on this topic, including ISG v Seevic
College [2014] EWHC 4007 (TCC) and Galliford
Try Building Ltd v Estura Ltd [2015] EWHC 412
(TCC), are all about. But it seems to me that, if
contractors want the benefit of these
provisions, they are obliged, in return, to set
out their interim payment claims with proper
clarity. If the employer is to be put at risk that
a failure to serve a payless notice at the
appropriate time during the payment period
will render him liable in full for the amount
claimed, he must be given reasonable notice
that the payment period has been triggered in
the first place” [my emphasis added]
It seems to me that what Lord Justice Coulson
(as he is now) appeared to be saying in
Caledonian Modular is that he viewed the
consequences of failing to serve the notice(s)
required the amended Construction Act as
baleful and draconian therefore, in essence, if
a party wishes to rely upon any such failure in
order to advance a right to payment then it
must, itself, come before the tribunal with
‘clean hands’. In other words, if a party
wishes to rely strictly upon the requirements
of the amended Construction Act, and a
failure to comply with those requirements, in
order to advance a right to payment then it
must, itself, also have complied strictly with
any requirements of the amended
Construction Act.
A particular technical defence: ambiguity in
the notified sum
All of this sets the scene for the particular
potential defence to payment which I discuss
further in this piece.
One of the ‘features’ of applications for
payment which I see on a regular basis (in
those applications submitted by main
contractors, sub-contractors and sub-sub-
contractors alike), both when acting as
advocate and sitting as adjudicator, is the
practice of arriving at the ‘sum due’ by way of

19 | P a g e
a calculation which takes the cumulative value
of the works undertaken to date and then
deducts the cumulative value of the works
included/claimed in the previous application
for payment.
There is, of course, no issue with this method
of calculation if the payer has paid the
cumulative value of the works
for payment. However, what if the payer has
not paid the cumulative value of the works
for payment, but has instead actually paid a
lesser sum (for example, the payer has only
paid the cumulative value of the works
included/claimed in the application for
payment prior to the previous application)?
This will lead to the application for payment
being ‘understated’ and there being an
‘underclaim’ and subsequent ‘underpayment’
because the method of calculation assumes
that the value of the works included and
claimed in the previous application for
payment has been paid by the payer.
This is, of course, unlikely to be problematic
where the payer issues the requisite notice(s)
(payment notice and/or pay less notice) in
response to the application for payment.
However, what if the payer fails to issue any
notice at all in response to the application for
payment and the payee wishes to rely upon
its application for payment as a ‘default
notice’? Is the payee entitled only to payment
of the sum stated as due in the application for
payment (which, as aforesaid, has been
calculated by deducting the sum claimed in
the previous application rather than the sum
paid to date), which would, in effect, be an
underpayment? Or is the payee entitled to
have the sum claimed/stated as due in the
application for payment adjusted to account
for the sum which has actually been paid to
date, and which would then, in effect, reflect
the actual payment position?
This is a situation which I have encountered
numerous times, both as an advocate and as
an adjudicator. The correct answer is,
probably, that it depends (isn’t it always
thus??!!).
However, let us for a minute take a fairly
typical example of a contract (such as a JCT
contract) which generally reflects the
requirements of the amended Construction
Act. As most of us will by now be well aware,
following a spate of ‘smash and grab’
adjudications since the floodgates were
opened by Edwards-Stuart J in ISG
Construction Ltd v Seevic College [2014]
EWHC 4007 (TCC), save for limited
circumstances (some of which I discussed in
the Adjudication Society Spring 2019
newsletter), where the payer fails to issue any
notice at all in response to an application for
payment then the sum stated as due in the
application for payment becomes the notified
sum and the payer is obliged to pay that sum

20 | P a g e
on or before the final date for payment (all as
per sections 110A, 110B and 111 of the
amended Construction Act).
The question which then arises is - what is the
sum stated as due and thus the notified sum?
This then leads to more questions – does the
sum stated as due in the application for
payment (which, remember, in the
circumstances described above has been
calculated by deducting the sum claimed in
the previous application rather than the sum
paid to date and which, in effect, results in an
‘underclaim’) become the notified sum which
the payer is obliged to pay? Is the sum stated
as due in the application for payment actually
the cumulative sum stated therein, with the
notified sum which the payer is obliged to pay
is then being calculated by deducting the sum
paid to date (instead of deducting the
previous application)? Would the notified
sum being something other than the sum
stated as due in the application for payment
not be contrary to Sections 110A, 110B and
111 of the amended Construction Act, which
expressly provide that the sum stated as due
becomes the notified sum which the payer is
obliged to pay if it has not issued a pay less
notice? Is the adjudicator empowered under
paragraph 20 of Part I of the amended
Scheme to ‘correct’ the application for
payment by deducting the sum paid to date
(rather than deducting the previous
application), so to arrive at a different sum
due/notified sum?
I have seen many arguments run in the
circumstances described above. Whilst for
the purposes of this piece I won’t discuss
what were those arguments, what I will
discuss briefly are two arguments which I
haven’t yet seen advanced as a defence by a
payer (I will not divulge whether or not they
are arguments that I have run as advocate
(successfully or otherwise)!).
The arguments are thus –
i) The amended Construction Act (at
sections 110A, 110B and 111) envisages the
notified sum being the sum stated as due in
the relevant notice (be that a payment notice,
or a payee notice in default (such as an
application for payment)). The amended
Construction Act (at section 111) requires the
payer to pay the notified sum if it has not
issued a pay less notice; nothing more,
nothing less. Accordingly, in the
circumstances described above the only sum
which the payer is obliged to pay is the sum
(which has become the notified sum, and
which has not been adjusted by a pay less
notice). There is no mechanism by which that
sum can now be adjusted (whether by way of
deducting the sum paid to date instead of the
previous application, or otherwise) to be
something other than that sum; and

21 | P a g e
ii) In Systems Pipework Ltd v Rotary
Building Services Ltd [2017] EWHC 3235 (TCC)
Coulson J (as he was then) said [at para 31]
“…..it is plain to all that the 2 September 2016
documents did not identify, for example, what
the defendant said had already been paid, or
what the defendant said had been deducted
and/or was now payable by way of retention.
As Mr Sareen put it at paragraph 13 of his
skeleton argument, if the 2 September
documents had notified the amount due, it
would have been quite unnecessary for the
claimant to have to do any calculation at all”;
[my emphasis added]
and [at para 33]
“Neither would the reasonable recipient have
regarded the documents as a notification of
the sum due: for it to be that, the minimum
that was required was the actual
identification of the sum due…..”; [my
emphasis added]
and [at para 35]
“All of this simply goes to confirm the basic
principle that, if X is supposed to be notifying
Y that a sum is due, under a clause that
provides for a deemed agreement that binds
the parties unequivocally, then it is a
prerequisite of the arrangement that the sum
due and the clause are clearly set out in the
relevant notice. It is not good enough to say
that the recipient could have worked it out for
themselves”. [my emphasis added]
Accordingly, in the circumstances described
above the only sum which the payer is obliged
to pay is the sum stated as due in the
application for payment (which has become
the notified sum). There is no mechanism by
which that sum can be adjusted (whether by
way of deducting the sum paid to date instead
of the previous application, or otherwise) to
something other than that sum and, indeed,
any such adjustment would be contrary to the
principles adopted in Systems Pipework.
Let us then assume, for present purposes,
that an adjudicator agrees that the sum which
the payer is obliged to pay in the
circumstances described above is the sum
because it is that sum which has become the
notified sum. Can the adjudicator adjust the
sum stated as due in the application for
payment to account for the sum paid to date;
thereby correcting what would otherwise
have been, in effect, an underpayment? If the
adjudication proceedings were being
conducted pursuant to Part I of the amended
Scheme, could the adjudicator utilise the

22 | P a g e
powers given by paragraph 20 thereof to
make such an adjustment if, in order to
properly do justice, the adjustment was
necessary? If the adjudicator decided that
(s)he did have the power to make such an
adjustment pursuant to that paragraph,
would (s)he not be offending the principles
adopted in Systems Pipework? Should a
distinction now be drawn between the
powers of the adjudicator to make such an
adjustment in a ‘true value’ adjudication (in
which, I would suggest, it is not uncommon
for the actual sum paid to date to be used
when calculating the sum due for payment,
regardless of what is stated in the application
for payment) on the one hand, and the
powers of the adjudicator to make such an
adjustment (or not, as the case may be) in a
‘smash and grab’ adjudication on the other?
To add a further twist to the plot, what about
what O’Farrell J had to say in Kersfield
Developments (Bridge Road) Ltd v Bray and
Slaughter Ltd [2017] EWHC 15 (TCC) [at para
94]?:
“I reject Mr Mort's submission that section
111(8) and the scheme empower an
adjudicator to open up and revise a payment
notice or pay less notice. A payment or pay
less notice is not a decision taken or a
certificate given by any person referred to in
the contract. The notice sets out the sum that
the employer considers is due and payable to
the contractor in response to the contractor's
application”. [emphasis added]
Does O’Farrell J’s judgement in Kersfield
Developments apply equally to a default
payment notice, in that a default payment
notice is not a decision taken or a certificate
given by any person referred to in the
contract, therefore an adjudicator is not
empowered by paragraph 20 of Part I of the
Scheme to open up and revise it? Would the
foregoing not better align with the intention
of sections 110A, 110B and 111 of the
amended Construction Act and Coulson J’s (as
he was then) judgement in Systems
Pipework?
I have my own views on what the answers to
the questions posed above should be, but in
the current circumstances perhaps we may
see the courts grapple with these questions in
the not too distant future; therefore, I shall
keep my powder dry for the time being and
leave you to form your own views.
Alternatively, you may well discover my views
should you come before me when I am sitting
as adjudicator!
Dean Sayers is a Director with Sayers
Commercial Ltd, and is available to sit as an
adjudicator and arbitrator
dean@sayerscommercial.co.uk

23 | P a g e
TCC COURT JUDGEMENTS
September
• Daewoo Shipbuilding And Marine
Engineering Company Ltd v Songa
Offshore Equinox Ltd & Anor [2020]
EWHC 2353 (TCC) (01 September
2020)
• Dr Jones Yeovil Ltd v The Stepping
Stone Group Ltd [2020] EWHC 2308
(TCC) (04 September 2020)
• Energy Works (Hull) Ltd v MW High
Tech Projects UK Ltd & Ors [2020]
2020)
• Essex County Council v UBB Waste
(Essex) Ltd (No. 3) [2020] EWHC 2387
• John Doyle Construction Ltd v Erith
Contractors Ltd (Rev 1) [2020] EWHC
2451 (TCC) (14 September 2020)
• The Leicester Bakery (Holdings) Ltd v
Ridge And Partners LLP (Rev 1) [2020]
2020)
• Municpio De Mariana & Ors v BHP
Group Plc & Anor [2020] EWHC 2471
• Premier Engineering (Lincoln) Ltd v
MW High Tech Projects UK Ltd [2020]
2020)
• Pullman Foods Ltd v The Welsh
Ministers & Anor [2020] EWHC 2521
October
• BDW Trading Ltd v Lantoom
Ltd [2020] EWHC 2744 (TCC) (16
October 2020)
• Blue Manchester Ltd v North West
Ground Rents Ltd [2020] EWHC 2777
(TCC) (20 October 2020)

24 | P a g e
FORTHCOMING LECTURES
03/11/2020 Online 5.30pm
“The joint First Prize Winners of the Hudson
Prize
Competition will present their award winning
papers”
Speakers: Anson Cheung and Serena Lee
19/11/2020 Online 5.00pm
“Case Law | Adjudication update”
(excluding Bresco and Doyle v Erith)
Speaker: Steven Walker QC
23/11/2020 Online 5.00pm
“Construction Hearings: some practical
issues”
Speakers: Nicola Dunleavy and Andrew Miller
QC
30/11/2020 Online 5.00pm
“2020 Irish Conference Keynote Lecture”
Speaker: Anneliese Day QC
01/12/2020 Online 4.30pm
“Pre-trial Process and Construction Disputes”
Speakers: Karen Killoran, Alan Brady BL
and Leon Major
01/12/2020 Online 6.30pm
“Britain's greatest building project - Hadrian's
Wall”
Speaker: Sir Rupert Jackson
02/12/2020 Online 4.30pm
“Third Party Funding in Construction Law”
Speakers: Matthew Denney and Darren
Lehane S.C

25 | P a g e
3/12/2020 Online 5.00pm
“Deep Technology & Construction Law
Disputes”
Speakers: Mark Beer and Bruno Herbots
4/12/2020 Online 5.00pm
“Adjudication 2020
Speakers: Graeme Sampson, James
O’Donoghue
and Damien Keogh
9/12/2020 Online 5.00pm
“Enforcement after Bresco”
Speaker: Riaz Hussain QC
https://www.scl.org.uk/events
SCL INTERNATIONAL CONFERENCE
2021
The Society of Construction Law 9th
International Conference has been postponed
till November 2021.
The Right Honourable Lord Justice Coulson
will be a keynote speaker at the Conference.
http://www.constructionlaw2021.com/scl21

26 | P a g e
i
Bridgeway Construction Ltd v Tolent Construction
Ltd (2000) CILL 1662
ii
Yuanda (UK) Co Ltd v WW Gear Construction Ltd
[2010] EWHC 720
iii
Lulu Construction Ltd v Mulalley & Co Ltd. [2016]
EWHC 1852
iv
Housing Grants, Construction and Regeneration
Act 1996
v
Allied P&L Ltd v Paradigm Housing Group Ltd
[2009] EWHC 2890
vi
Enviroflow Management Ltd v Redhill Works
(Nottingham) Ltd (2017) [unreported]
vii
EU Directive 2011/7/EU

UK Adjudicators November 2020 Newsletter

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UK Adjudicators November 2020 Newsletter