Adjudication
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KEYWORDS: |
Housing Grants Construction and Regeneration Act 1996, Adjudication, payment, set-off, Mr Justice Christopher Clarke. |
In P C Harrington Contractors Limited v Multiplex Constructions (UK) Limited [2007] EWHC 2833 (TCC) Mr Justice Christopher Clarke decided a short but interesting point on the mechanism for interim payment.
PCH was a subcontractor to Multiplex the main contractor for the design and construction of the New Wembley National Stadium.
In April 2007 PCH submitted an application for payment for £13,437,726.30 taking into account previous payments and claiming that 100% of the work had been done, claiming for variations and other claim items and deducting certain amounts for "Abatement" and "MPX contra charges".
Multiplex issued an interim certificate together with appendices giving detailed grounds for deducting and/or withholding. The certificate stated a net payment after deduction of retention of £2,301,608.45. The further deduction and/or withholding stated in the certificate was £13,048,219.16 so that no payment was made by Multiplex to PCH.
The £13,048,219.16 deducted was made up of claims by Multiplex for both incomplete and defective work, including a claim for £1,658,665 for alleged but disputed defects in the concrete floors poured by PCH. Multiplex claimed that PCH had failed to achieve the specified floor tolerance, flatness and finish and that Multiplex had to get other contractors to finish off the work. Subsequently Multiplex increased the valuation of the claim from £1,658,665 to £2,070,110.50 and requested that PCH accept liability and pay the sum, which PCH declined to do.
Multiplex commenced adjudication seeking an order for payment of £2,070,110.50.
PCH argued before Mr Justice Christopher Clarke that in any adjudication Multiplex wwas bound to recognise that £2,301,608.45 was due to PCH. It would not be able to claim any monetary sum in respect of the floors since the sum claimed of £2,070,110.50 was less than the sum due for payment by Multiplex to PCH of £2,301,608.45. PCH argued that Multiplex could ask the adjudicator to decide whether PCH was liable to Multiplex for the work to the floors but no monetary award could be made.
PCH argued that the position might be different if Multiplex had initiated an adjudication covering several claims which together exceeded £ 2,301,608.45. It could then seek to recover the excess, but that was not what Multiplex sought to do.
Clause 21.9 of the contract described the Interim Payment Certificate in terms of the amount due and the amounts to be deducted under Clause 21.10. That clause was headed "Sums Due to Contractor" and provided for the Contractor to deduct from the Payment Certificate sums which the subcontractor was required to pay to the Contractor.
It was common ground that Clause 21 was not well drafted. Mr Justice Christopher Clarke took a purposive approach to the interpretation of Clause 21.
He held that Clause 21 was a scheme for the making of interim payments and not a means of establishing the ultimate position of the parties - it related to cash flow - referring to Jacob LJ. in Rupert Morgan Building Services (LLC) Ltd v David Jervis and Harriet Jervis [2003] EWCA Civ 1563.
He held that Clause 21 required the Contractor to make a series of calculations. He had to first determine the positive amount of what he considered to be due, disregarding any items of set off, counterclaim, abatement or withholding. That amount might also include amounts that the Contractor proposed to withhold subject to the requisite notice, for instance the value of work not carried out by the subcontractor but included in the calculation so that the Contractor's claims were not overstated.
Accordingly in the instant case the sum of £ 2,301,608.45 was the aggregate of the positive amounts in Multiplex's calculations and in that sense amounts due to the Sub-Contractor pursuant to Clause 21.9. It was held that the £2,301,608.45 figure did not represent what Multiplex certified to be a sum that PCH was entitled to receive. On the contrary the contract and the certificate made clear that Multiplex did not accept that PCH was entitled to anything.
As to the adjudication, it was held that PCH could raise any claims to payment if they were capable of adjudication within the relevant time limit, in order to defeat Multiplex's monetary claim. If however it sought to recover a monetary sum from Multiplex it would have to initiate an adjudication of its own. What PCH could not do was to claim that Multiplex had certified or accepted that £2,301,608.45 was now due and payable to PCH.