Keywords: Housing Grants Construction and Regeneration Act 1996, dispute, payment, jurisdiction.

In LPL Electrical Services Ltd v Kershaw Mechanical Services Ltd the issue in enforcement proceedings was whether the adjudicator had acted outside his jurisdiction in ordering payment of amounts applied for by LPL in an Application 8.

LPL was a sub-subcontractor to Kershaw. Clause 6.1 of the contract provided that the amount due to LPL under interim certificates was the value of work pursuant to the contract plus variations plus additional costs and materials and fluctuations. Clause 6.3 provided that the amounts ascertained under Clause 6.1 shall be due and payable not later than 60 days after specified valuation dates, less certain things which included payments previously due. The applications were not therefore cumulative. Clause 6.3 provided for deductions for “payments previously due” not “payments previously made”.

Clause 6.4 allowed Kershaw to give notice of the amount actually due if the amount ascertained by Kershaw differed from the amount of the application. The notice had to be given 30 days prior to the date for payment under Clause 6.3. It was common ground that if effective notice was given then payment was not due at that time.

LPL issued Application No 7, which was a final account, which gave the value of works completed and the gross valuation as £345,000. Previous applications had been made and paid in the sum of £272,364.15, making an application for the balance of £48,903. Kershaw issued an effective notice under Clause 6.3, requiring full costs breakdowns and substantiation, so no payment was made on Application No 7. LPL submitted Application No 8 which included further details, adjusted slightly the value of work completed to £346,217.17 and after allowing for the previous application left a balance of £171.98 claimed under Application No 8. Kershaw did not issue notice in time. The Adjudicator decided that Kershaw was required to pay LPL’s Application No 8 in full which after deduction for retention he decided was £70,162.27.

Kershaw argued in the enforcement proceedings that the reference to adjudication was for Application No 8 only and this was only for £171. Kershaw argued that the Adjudicator did not have the jurisdiction to make the decision he did.

His Honour Judge Havery QC examined the Notice of Adjudication in which LPL sought payment of £70,162.17 for work carried out in accordance with interim application. It was held that what was being sought was the payment of the sum of some £70,000 and not simply restricted to Application No 8. Accordingly the Adjudicator had jurisdiction to decide as he did.

It appears that the decision turn on the finding that once an effective notice had been given for Application No 7 the sum of some £70,000 was no longer due, and therefore on the particular words of the contract did become due under Application No 8 in the absence of a further effective notice. The decision emphasizes the importance of giving timely notices and of careful drafting of Notices of Adjudication.