In the first case, Working Environment v Greencoat, Greencoat, the main contractor appointed Working Environment (WE) as its mechanical sub-contractor under JCT2005 SBCSub/A (rev 2).
The payment provisions required WE to issue Applications for Payment on the penultimate Friday of each month, with Greencoat to issue a Payment Certificate 7 days later. The Final Date of Payment was 45 days after WE issued a VAT invoice.
On 24 November 2011, WE issued Application for Payment No. 10 seeking £488,000. On 2 December 2011 Greencoat issued a Payment Certificate indicating a new sum due of £16,000.
It was agreed the Final Date of Payment was 14 January 2012.
On 14 December 2011 WE served a Notice of Adjudication alleging: (i) undervaluation of variations; and (ii) overvaluation of Greencoat’s abatement and proposed withholding. WE sought declarations and orders in relation to payment.
Greencoat argued that a dispute had not crystallised and that the adjudicator had no jurisdiction as the adjudication had been started before the Final Date of Payment.
The Referral Notice was served on 21 December 2011.
On 5 January 2012 Greencoat issued and served a Withholding Notice – which it was entitled to do under the contract.
In his decision dated 29 February 2012, the adjudicator found that:
- A dispute had crystallised by 14 December 2011 when the Notice of Adjudication was served
- The dispute arose on 2 December 2011 by Greencoat certifying a lesser sum that was applied for by WE
- The Withholding Notice dated 5 January 2012 was valid
- The sum payable to WE as at 14 January 2012 was £230,000
WE sought to enforce the adjudicator’s decision and was successful.
Comment: This case dispels the commonly held view that a “dispute” cannot crystallise (and therefore cannot be adjudicated) until after the Final Date of Payment. Indeed, the Court commented that there was some practical advantage in commencing adjudication before the Final Date of Payment so that the dispute can be resolved at or around the time payment should be made. This did not prevent the paying party from serving a Withholding Notice, which the adjudicator considered as part of Greencoat’s submission.
Author: James Coppinger, Head of Construction and Engineering.
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