In ISG Construction v Seevic College, ISG issued interim Application No. 11. Seevic failed to serve a Pay Less Notice but didn't pay ISG. ISG therefore referred the non-payment to adjudication.
Shortly before the adjudicator's decision was due (and presumably knowing what the outcome was going to be) Seevic commenced its own adjudication seeking a valuation of ISG's works under the contract. The same adjudicator was appointed on both adjudications.
In the first adjudication, the adjudicator decided that in the absence of a Pay Less Notice, the full amount of ISG's interim application was due; in the second adjudication, the adjudicator decided that the actual "value" of the works was significantly less than the amount applied for.
Seevic did not comply with the first adjudicator's decision so ISG commenced enforcement proceedings and argued that the adjudicator in the second adjudication lacked jurisdiction.
The Court held that by failing to issue a Pay Less Notice, Seevic had "agreed" the value of ISG's works in sum applied for. It was therefore not open to Seevic to seek to have the value of the works decided in the second adjudication as that dispute had already been decided. To allow otherwise would "undermine" the statutory payment regime.
Of course, it would remain open to an employer to seek to correct the position in a subsequent interim payment certificate, though there may still be significant cash flow issues if the employer has to pay the previous certificate in full. This is a matter of timing and whether the employer can issue a correcting interim payment certificate before the contractor can enforce an adjudicator’s decision on a previous interim application.
This decision should be contrasted with the decision in Harding Contractors v Paice where similar circumstances arose but where Harding (the contractor) issued its application for payment after its employment under the building contract had been terminated.
Harding commenced adjudication proceedings. The adjudicator decided that as Paice had not served a Pay Less Notice the sum applied for was automatically due. The adjudicator therefore did not consider the actual merits of Harding’s application for payment.
Paice then commenced its own adjudication proceedings seeking a decision on the final sum due to Harding under the contract. Harding commenced enforcement proceedings and sought an injunction preventing Paice from continuing its adjudication on the basis that the dispute had already been decided.
The Court rejected the injunction application and said that the dispute was not the “same or substantially the same” as the one already decided. The distinction appears to be that Harding’s adjudication concerned an “interim” application for payment whereas Paice’s adjudication concerned the final account post-termination.
Again, the key message for all parties to a construction contract is to ensure that the statutory payment regime is complied with.
