In Galliford Try v Estura, Galliford Try (GT) submitted IA60 which was badged as an "indicative final account". It sought a final contract sum of £12.6m with a balance due of £3.9m. This was £5m more than the original contract sum.
Estura did not serve a Payment or Pay Less Notice but disputed the amount due. GT referred the dispute to adjudication and Estura argued that a sum of £147k was due. In the absence of any Payment or Pay Less Notices, the adjudicator ordered Estura to pay the full £3.9m claimed.
This follows the reasoning in ISG v Seevic where a paying party who does not serve a Payment or Payment Less Notice is deemed to have accepted the contractor's valuation of the works.
Estura commenced a counter-adjudication seeking a proper valuation of the works carried out by GT. Again, following ISG v Seevic, the adjudicator resigned due to lack of jurisdiction as this was substantially the same dispute as had previously been adjudicated.
GT then sought to enforce the first adjudicator's decision. Estura was unable to resist the summary judgment application but successfully persuaded the judge to order a partial stay of execution by arguing "manifest injustice" on the basis that:
- IA60 was the last interim application prior to agreeing a final account;
- As IA60 sought payment for what was virtually GT's final account, there was no incentive on GT to submit a formal final account application;
- If GT did not submit a final account application, then there could be no valuation of the final account;
- Consequently, Estura would be deprived of the opportunity of valuing the works (and should a dispute arise over that value, referring that dispute to adjudication); and
- Estura lacked the funding to pay the adjudicator's award or to litigate the dispute.
Estura relied on part of the judgment in Hillview Industrial Developments v Botes Building where the judge stated that the purpose of the Construction Act was to "enable justice to be done between the parties to a dispute. It was not intended to cause injustice…" and that a stay of enforcement can be granted where there was a risk of "manifest injustice".
Comment
Readers should note that the summary judgment was still granted in favour of GT and that it remains in the Court's discretion to lift the stay of enforcement in the event that further evidence, e.g. relating to Estura's financial position, comes to light. It should also be noted that the judge granted the stay of execution based on the "unusual circumstances" and the "exceptional" fact of the case, and that such stays will be granted only in "rare cases".
It will be interesting to see whether parties attempt to adopt the "manifest injustice" argument as a defence in adjudication proceedings or whether adjudicators will leave such an argument for the Courts to decide.
In summary, the judgment again reiterates the importance of payers serving valid and effective Payment and Pay Less Notices if they wish to challenge contractor's applications for payment. If they don't, their only option is to seek to redress the situation at the next valuation or have the dispute over payment finally determined by litigation or arbitration.
