Bexheat Ltd v Essex Services Group Ltd

[2022] EWHC 936 (TCC)

BHL applied for summary enforcement of a “smash and grab” adjudication decision for just over £700k in relation to Interim Payment Application 23. ESG sought to rely on an earlier “true valuation” adjudication in relation to Application 22. 

Mrs Justice O’Farrell said that, if ESG wanted to do this, it could and should have raised this in a Pay Less Notice. Having failed to do so, the sum claimed in Interim Application 23 became the “notified sum” due for the purposes of section 111 of the HGCRA, and BHL was entitled to enforce the decision through summary judgment. ESG’s submission that the court should order a stay of execution pending determination of the “true value” of Interim Application 23, by adjudication or litigation, was contrary to the general rule that adjudicators’ decisions are intended to be enforced summarily and the successful party should not, as a rule, be kept out of its money. 

ESG resisted enforcement on two other grounds:

(i) ESG had a contractual entitlement to set off or make deductions against the adjudicator’s award; and

(ii) BHL had deprived ESG of its contractual right to elect to have the true value of the application payment in dispute determined at the same time by the same adjudicator as the notified sum dispute.

Under the Contract, clause 30 provided that: 

“30.2 The Sub-Contractor shall be entitled to set off or make deductions against an Adjudicator’s award in respect of any amounts which may at any time be due or have become due from the Sub-Subcontractor to the Sub-Contractor under the Sub-Subcontract or otherwise.

30.3 If the Sub-Contractor shall so elect the Adjudicator shall be entitled to adjudicate on more than one dispute at the same time and the parties agree that the Adjudicator shall so have jurisdiction and shall be entitled to set off one decision against another.”

The problem for ESG was that these sub-clauses were contrary to the provisions of the HGCRA and the Scheme. They were seen as attempts to get round the key principles underlying the adjudication process. 

The Scheme includes the following provisions:

“21 In the absence of any directions by the adjudicator relating to the time for performance of his decision, the parties shall be required to comply with any decision of the adjudicator immediately on delivery of the decision to the parties.

…

23(2) The decision of the adjudicator shall be binding on the parties, and they shall comply with it until the dispute is finally determined by legal proceedings, by arbitration (if the contract provides for arbitration or the parties otherwise agree to arbitration) or by agreement between the parties.”

In Ferson Contractors Ltd v Levolux AT Ltd [2003] EWCA Civ 11, the CA considered whether, pending final resolution by arbitration or litigation, an adjudicator’s decision should be enforced in derogation of contractual rights with which it may conflict. Mantell LJ said that: 

“The intended purpose of s.108 is plain … The contract must be construed so as to give effect to the intention of Parliament rather than to defeat it. If that cannot be achieved by way of construction, then the offending clause must be struck down.“

The general position is that adjudicators’ decisions which direct that one or other party is to pay money are to be honoured and that no set-off or withholding against payment of that amount should be permitted.

ESG also said that the adjudicator was wrong to refuse to allow joinder of the “true value” of Interim Application 23 with the “notified sum” issue in the second adjudication, in accordance with clause 30.3 of the Contract. Again, the Judge disagreed. Here, the clause, which gave ESG an unilateral right to refer more than one dispute to the adjudicator, was inconsistent with paragraphs 8 and 20 of the Scheme, which require the consent of all parties to a multiple dispute adjudication.

Both clauses were contrary to the principles underlying  statutory adjudication. The decision was accordingly enforced. 

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