4 December 2015

How final is the final account? Harding –v- Paice: Court of Appeal

This was a saga of adjudication followed by cross adjudication, injunction and further adjudication. The parties had fallen out big style to the degree that they couldn’t even decide between themselves who had terminated the building contract.

On the third adjudication, it was decided for them by the adjudicator that the contractor (Harding) had terminated but as Paice, the employer, hadn’t sent out a payless notice for the final application on termination the full amount was payable.

Now we all know now that a lack of a payless notice is the death knell for any defence to pay the sum claimed in the application and that cross adjudications by employers to get the works revalued for that application are going to get short thrift. As Edwards Stewart had said in his previous judgements this year (ISG –v- Seevic), on interim applications, no notice means no challenge and the employer can only challenge the overpayment by correcting the value of the works through the next application (Galliford Try – v- Estura).

BUT this wasn’t an interim application, it was a post termination final reckoning and that means the employer doesn’t get a chance to correct the over valuation in a following application. Edwards Stuart in both Galliford –v- Try and Harding –v- Paice made clear that in his view there was a “fundamental difference” between interim and final applications.

The Court of Appeal agreed. Paice could proceed to have the works valued and the lack of payless notice was not to be a bar to a final and proper determination of the amounts due between the parties.

Lord Justice Jackson said

“In my view the employer’s failure to serve a Pay Less notice (as held by the previous adjudicator) had limited consequences. It meant that the employer had to pay the full amount shown on the contractor’s account and argue about the figures later. The employer duly paid that sum, as ordered by the previous adjudicator. The employer is now entitled to proceed to adjudication in order to determine the correct value of the contractor’s claims and the employer’s counter-claims. Therefore the judge’s decision was correct”

He also clarified what parts of a previous dispute can be re adjudicated. The Act says that an adjudicator cannot determine a dispute that is “the same or substantially the same as one which has previously been referred… and a decision has been taken”. This can be difficult for adjudicators as often in an adjudication every last kitchen sink gets thrown at the poor guy and then the next adjudicator has to unpick all of that to see if the dispute in front of him has been decided before.

Jackson has lent a helping hand. In his view the emphasis was on the adjudicator reaching a decision, not on the number of disputes or issues that had been referred to him.

“It is quite clear from the authorities that one does not look at the dispute or disputes referred to the first adjudicator in isolation. One must also look at what the first adjudicator actually decided. Ultimately it is what the first adjudicator decided, which determines how much or how little remains available for consideration by the second adjudicator.”

In simple terms, one looks at the decision to see what it has decided, all the rest of the bun fight is still yet to be finally determined.

All in all a good clear judgement even if it didn’t clear up some of the worrying obiter in ISG and Galliford that a lack of payless means that the employer is deemed to have agreed the value of the works but I think we all believe that what he actually meant was the employer is deemed to accept that the application sum is the notified sum which is an entirely different beast.

Harding (t/a MJ Harding Contractors) v Paice and another [2015] EWCA Civ 1231

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Lucinda Baker, Partner
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