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Linking VAT invoices to payment clauses

The validity of payment clauses that link the final date for payment to the provisions of VAT invoices is now questionable.
In the Technology and Construction Court (TCC) judgment in Rochford Construction Ltd v Kilhan Construction Ltd Mrs Justice Cockerill concluded that the contract between the parties contained no adequate payment mechanism which pegged the due date with the final date for payment as required by the Construction Act.
This means that the clauses in contracts that seek to base the final date for payment solely on the provision of a VAT invoice are not compliant with the Construction Act.


Incorrect ANB 

Allegedly incorrect ANB not sufficient grounds to grant an injunction preventing continuation of the adjudication. Although this seems to fly in the face of common sense adjudication, unlike most other forms of dispute resolution, is purposefully quick and cheap to keep the project on track as far as possible. Speed is its very essence. Fraser J said, "There is simply no time within that duration to factor in applications to the court, with contested points on jurisdiction, without causing serious disruption and delay to the timetable set down by parliament for an adjudicator to reach a decision."
He concluded by saying, "Adjudication has to be allowed to continue, so far as possible, free from the interference of the court, and quibbles or challenges to an adjudicator’s jurisdiction should, in a conventional case, be taken upon enforcement." 
This case confirms that it is only in the most exceptional or unusual of circumstances that the court will grant an injunction to prevent the continuation of an ongoing adjudication.   

IBA v EMI and BICC [1980] 14 BLR 1 and Walter Lilly v Mackay [2012] EWHC 1773 (TCC)

Reasonable skill & care / Fitness for purpose

The case of Walter Lilly highlights the importance for both parties to carefully consider the matter of risk allocation before entering into contract. This is of particular importance with design and build contractors in which the contractor, if it is not careful, can find itself exposed not only to an obligation to exercise reasonable skill and care but also to the higher duty of fitness for purpose. In IBA v EMI the Court of Appeal judges stated, “We see no good reason…for not importing an obligation as to the reasonable fitness for purpose into these contracts or for importing a different obligation in relation to design from the obligation which plainly exists in relation to materials.” But this does not only apply to D&B contractors, it applies to consultants as well - architects or engineers. Care should be taken not to enter into a collateral warranty which includes a fitness for purpose obligation as it would automatically be increasing its potential liabilities which it would probably find is expressly excluded from its PI cover.    

M Davenport Builders Limited v Greer & Anor [2019] EWHC 318 (TCC)


The Claimant contractor sought to enforce an adjudicator’s decision for payment in the absence of a pay-less notice but the Employer, following the judgment in Grove, sought to 
rely upon a true value adjudication … without having first made the payment required by the first adjudication. 
Stuart-Smith J ruled that there was an obligation from the first adjudication that immediate payment had to be made before a second true value adjudication could be commenced. 
A Defendant cannot rely on a defence of set-off or counterclaim to avoid enforcement in the first adjudication. 

Lobo v Corich [2017] EWHC 1438 (TCC)

The bury-your-head-in-the-sand approach to defending a claim in adjudication 
This case concerns the service of documents. In brief, Corich, the contractor, “buried its head in the sand” and took no part in the adjudication, neither acknowledging receipt of any documents served on it or reserving its position in any way. Unsurprisingly, Corich lost the adjudication but worse was to follow as Lobo applied for summary judgement in the TCC to enforce the adjudicator’s decision and, of course, it was granted. The case ended up in the TCC. Corich’s defence that it was unaware of the adjudication proceedings because it had not received notices and therefore been subject to procedural unfairness or breach of natural justice, failed. In fact, Lobo had served the notices by several different methods. The judge said that Corich had only itself to blame for, “…protracted, pervasive, serious and inexplicable failure to behave with the prudence of a normally intelligent and educated businessman”.  

Remember The Ikarian Reefer [1993] 2 Lloyd’s Rep.68 ?

Sometimes the old ones are the best.

After 25 years some experts are still getting it wrong! In Ikarian there were a number of expert witnesses on each side yet the judge (Cresswell J) commented that several of them still managed to misunderstand what their responsibilities were. Since then and despite expert witness’ duties being embodied in CPR 35 the Ikarian Reefer has stood out as the unchallengeable pillars of wisdom.    
1. Expert evidence should be independent
2. An expert should provide independent assistance to the court
3. An expert should state the facts or assumptions upon which his/her opinion is based.
4. An expert should make it clear when a particular question falls outside his/her expertise.
5. If an expert’s opinion is not properly researched he/she should state so.
6. If an expert changes his/her mind it should be communicated to the court without delay 7. All photographs, plans, calculations or similar documents should be provided to the opposite party with exchange reports.
These are now known as the Creswell principles and alongside CPR 35 are relevant to all who practice as expert witness.

Grove Developments Limited -v- S&T (UK) Limited

Is this the end of smash & Grab?

The parties entered into a JCT contract for the design and build of a new hotel in London. S&T was a construction company that submitted an interim payment application in the sum of £14M and in response Grove issued a payment notice which despite being out-of-time satisfied the criteria for the basis of calculation. Grove subsequently issued a pay less notice within the permitted time but failed to attach the basis of calculation which it had hitherto attached to the payment notice. 
On a Part 8 application, Coulson J decided that Grove had complied with the requirement to “specify the basis of the calculation” and in that respect the pay less notice was compliant.
Grove also sought a declaration that in any event it was entitled to adjudicate on the true value of the interim application. Coulson J decided despite judgements in Grove and ISG and Galliford v Estura, that Grove was entitled to commence an adjudication to establish the true sum of the interim application. 


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Pye Associates (London)
+44(0)161 941 5783
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