Payment—validity of successive payment notices and pay less notice—whether adjudication

on successive payment notices amounted to the same dispute

See Jonjohnson Construction Ltd v Eagle Building Services Ltd23

Eagle employed Jonjohnson (JJC) to provide steelwork for the foundations of the Westonbirt
Arboretum Treetops Walkways under a contract that did not contain either payment or
adjudication provisions complying with the Act. These matters were therefore governed by the
Scheme.

The works were completed and in March 2016, JJC applied for the sums it claimed were then due.
Eagle responded by email in these terms:

“Don’t agree with your application. Phase 2 had to be redone due to your steel not to drawing. Our
costs for breaking out and re-concrete phase 2 was in excess of £20k. Take the

£20k from the £38k for phase 1 leaves £18,843…”

In April 2016, JJC submitted a further payment notice evidently intended to act as
default notice under section 110B(2) of the Act (the April notice).

No payment was made and JJC referred the matter to adjudication before Ms Janey Milligan
(Adjudication no. 1). JJC sought to limit the scope of the dispute and therefore the adjudicator’s
jurisdiction to the sole question: whether Eagle was obliged to pay the sums set out in the April
notice.

That position was accepted by Eagle and the adjudicator.

Ms Milligan decided that since the March 2016 application was an effective “claim by the payee” for
the purposes of paragraph 12 of the Scheme, JJC had no right to submit a default payment notice
in April. Section 110B(4) of the Act provided that an unpaid party could not issue a second
payment notice where the contract provided or allowed the payee to submit an application for
payment, and such an application had already been made.

There followed a second adjudication, which was aborted. JJC then began adjudication no. 3 in which
Mr Judkins was appointed adjudicator. The dispute referred now was based on the premise that JJC’s
March payment application was an effective payment notice in which case in the absence of a payment
or pay less notice from Eagle, the sums set out in the March payment application became the sums
due and payable. The three issues for Mr Judkins were:

1) Whether the decision of Ms Milligan (that the April notice was not a valid payment
notice) was binding on him. He decided it was and even if it was not binding on him, he would have
arrived at the same decision as she had.

2) Whether the earlier March payment notice was a valid payment notice, which he decided it was.

3) Whether Eagle’s email in response was a valid pay less notice which he decided it was not.

Eagle did not pay the resulting award and JJC commenced enforcement proceedings. Eagle
advanced several ‘ingenious’ arguments which Jefford J dismissed in short order, holding
that

a) JJC had sufficiently raised the issue whether the March 2016 claim was “a claim by the payee” in
adjudication no. 3.

b) The dispute referred in Adjudication no. 3 was not the same as that referred in Adjudication
no.1 – the former having been based on the April notice and the latter on the March notice.

c) This was not a “Henderson v. Henderson impermissible bite of the cherry”. There was no abuse of
process. In adjudication, unlike litigation, only one dispute could be referred at the same time.
Adjudication no. 1 was commenced on a limited basis and concerned only the April notice.
Adjudication no. 3 concerned the March notice and was not an attempt to re-litigate the same
dispute.

The judge also considered that Mr Judkins was right to conclude that he was bound by Ms
Milligan’s decision and finding that the March notice was an effective notice under section.110B(4)
and noted, with apparent approval, that he agreed with finding.

The judge also dismissed Eagle’s argument for JJC to succeed it had to rely on the
decisions in both adjudications no. 1 and no. 3. The position was simple: it was an application to
enforce the decision and the sum of money found due in adjudication no. 3.

Comment

What is uncertain from the case reports so far available and in the absence of a transcript of the
judgment, is why Mr Judkins evidently decided the JJC email was not an effective pay less notice.
There is at least a respectable argument that it was responsive to the payment notice
and would convey the necessary intention to act as such a notice to a reasonable recipient (see
Surrey and Sussex Healthcare24). Whilst peculiar to its facts, the decision illustrates again the
complexities of the payment provisions of the Act and the differences of view that can arise in
applying them to any given factual situation.

 

This article was originally written and published on the internet by Slater Heelis on 07/06/18.

 

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.

 

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