This blog post may be of interest to our clients involved in construction adjudications in England and Wales. Under s108(1) of the Housing Grants, Construction and Regeneration Act 1996 (E&W) (Act) a party to a construction contract has the right to refer a dispute to adjudication. As reference to ‘dispute’ is in the singular, each matter referred consists of one dispute unless the parties otherwise agree. However, a dispute can contain multiple sub-issues, for example, a dispute concerning several variations.

An issue sometimes arises where a Referring Party makes a claim by arguing that (1) a valid payment or payless notice was not issued and therefore the claimed amount is payable by default, and/or (2) the true value of the works represents the amount claimed. A claim advanced in this way can cause problems for an adjudicator as it may be argued that two disputes have been referred (i.e., a dispute about whether a default payment arises and a separate dispute about the true value of the works). Support for the contention that two disputes have been referred is found in S&T (UK) Limited v Grove Developments Limited [2018] EWCA Civ 2448 (TCC), which states that:

92 … the interim application, the Payment Notice and the Pay Less Notice are three documents one of which, in every case, will trigger the operation of section 111. That section generates an obligation to pay the notified sum before the final date for payment. But section 111 is not the philosopher’s stone. It does not transmute the sum notified by one or other of those three documents into a true valuation of the work done … Subsequently, the adjudication provisions of the Act or (if correctly drafted) of the contract come into play. Either party can challenge the correctness of the notified sum by adjudication.

Further:

95 … The payment bargain dictates what must be paid immediately. The valuation bargain sets out the process for reviewing and adjusting the payments which have been made.

Recently, the Technology and Construction Court has brought a degree of clarity to this issue. In Bellway Homes Limited v Surgo Construction Limited [2024] EWHC 10 (TCC), the Referring Party advanced its claim on the grounds that the Responding Party had not issued a payment or payless notice and in the alternative that payment was due on foot of the true value of the works calculated on a substantive basis. The adjudicator decided that a default payment did not arise as the application for payment did not meet the requirements of the Act and proceeded to direct payment on a true value basis. In deciding whether one or two disputes were referred, Baldwin J considered the starting point for discussion was the following extract from Coulson on Construction Adjudication:

7.123 Taking into account the nature of the dispute and the manner in which it was presented to the Adjudicator, can it fairly be described as a single, disputed claim for a sum due or a referral of a number of disputes which, on analysis, are independent of one another?

Baldwin J concluded that a single dispute was referred for the following reasons:

  • The Notice of Adjudication characterised the dispute as a failure to pay a sum due by the final date for payment, whether by means of the notified sum or by way of the substantive amount due.
  • To characterise these as separate disputes would be to adopt too legalistic an approach to the exclusion of a task which was readily performed by the adjudicator on the facts presented to him and within the timescale afforded.
  • There was no real reliance by the Responding Party upon a factual matrix, which would allow a clear conclusion of true independence in fact.
  • There were two routes advanced by the Referring Party to the same goal of determining a sum owed.
  • In the court’s experience it is not unique to disputes between these parties for such issues to be combined within one adjudication referral, as alternative outcomes.
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Photo of Paul Hughes Paul Hughes

Paul Hughes is a senior associate in A&L Goodbody’s Construction & Engineering group. Paul has extensive experience in construction disputes and acts for employers, contractors and sub-contractors across multiple sectors, including, civil engineering, residential, commercial, educational, refurbishment, repair and maintenance and energy. Paul…

Paul Hughes is a senior associate in A&L Goodbody’s Construction & Engineering group. Paul has extensive experience in construction disputes and acts for employers, contractors and sub-contractors across multiple sectors, including, civil engineering, residential, commercial, educational, refurbishment, repair and maintenance and energy. Paul has expertise in disputes concerning extensions of time, loss and expense, defects, variations, payments, final accounts, true valuations, termination and asbestos. Paul has experience of dealing with disputes arising under the standard forms of contract, including, JCT, NEC, FIDIC, PWC & RIAI and ancillary agreements. Paul holds a PhD (Law) and is a solicitor in both Ireland and England and Wales. He is also a Fellow of the Royal Institution of Chartered Surveyors (FRICS), the Society of Chartered Surveyors Ireland (FSCSI), the Chartered Institution of Civil Engineering Surveyors (FCInstCES) and the Chartered Institution of Arbitrators (FCIArb).