“20. The adjudicator shall decide the matters in dispute. He may take into account any other matters which the parties to the dispute agree should be within the scope of the adjudication or which are matters under the contract which he considers are necessarily connected with the dispute. In particular, he may- (a) open up, revise and review any decision taken or any certificate given by any person referred to in the contract unless the contract states that the decision or certificate is final and conclusive, (b) decide that any of the parties to the dispute is liable to make a payment under the contract (whether in sterling or some other currency) and, subject to section 111(9) of the Act, when that payment is due and the final date for payment, (c) having regard to any term of the contract relating to the payment of interest decide the circumstances in which, and the rates at which, and the periods for which simple or compound rates of interest shall be paid.”
“Pursuant to clauses 4.9.4 and 4.10.2 of the Building Contract, this Pay Less Notice gives written notification of the Employer’s intention to pay less than the sum stated as being otherwise due from the Employer. The Employer considers that the sum that is due on the date this notice is given is£0.00 . The basis on which the sum is calculated is as follows: 1. the sum which, absent point 2 below, would have been due from the Employer at31 March 2017 is£1,407,748.00 plus VAT (the “Sum”). The basis on which the Sum is calculated is set out in the Payment Certificate 22 dated13 April 2017 ; and 2. subject to paragraph 2, the Employer is entitled to withhold from the sum which would otherwise be due on that date liquidated damages of£2,506,857.00 (the “Liquidated Damages”). The Liquidated Damages have been calculated on the following basis: 2.1 Liquidated damages11th October 2016 –24th March 2017 @£107,000.00 per week or proportion for any part thereof (total:£2,506,857.00 ).”
“we may require payment of liquidated damages and/ or withhold or deduct liquidated damages”
“The basis on which this sum is calculated is set out in the Payment Certificate 22 dated13th April 2017 .”
“(27) On the use of the word “specify”
“… There can be no possible objection in principle to a notice referring to a detailed calculation set out in another, clearly defined document. That is how these things are commonly done.”
“If reference back to earlier documents is permissible, why not two? If two, why not five?”
“1. Speak or treat of a matter etc in detail; give details or particulars. 3. Mention or name (a thing, that) explicitly; state categorically or particularly. Also, include in an architect’s, engineer’s etc specification.”
“On this approach, if there is no stay, the court will be able to exercise all its ordinary powers to decide the issues of fact and law which may be brought before it and to give effect to the rights and obligations of the parties in the usual way. It will have all the powers which it needs to determine the extent to which, if at all, either party was in breach of the contract and to determine what sums, if any are due to be paid by one party to the other whether by way of set-off or in addition to those sums which have been certified by the architect. It will not be necessary for it to exercise the powers which the parties have conferred upon the architect in order to provide the machinery for working out their contract. Nor will it be necessary for it to exercise the power which clause 41.4 confers on the arbitrator to revise certificates. This is because the court does not need to make use of the machinery under the contract to provide the parties with the appropriate remedies. The ordinary powers of the court in regard to the examination of the facts and the awarding of sums found due to or by either party are all that is required. There would be no risk of any injustice to the contractor.”
“It does not, however, follow from the fact that a certificate is a condition precedent that the absence of a certificate is a bar to the right to payment. This is because the decision of the engineer in relation to certification is not conclusive of the rights of the parties, unless they have clearly so provided. If the engineer’s decision is not binding, it can be reviewed by an arbitrator (if there is any arbitration clause which permits such a review) or by the court. If the arbitrator or the court decides that the engineer ought to have issued a certificate which he refused to issue, or to have included a larger sum in a certificate which he did issue, they can, and ordinarily will, hold that the contractor is entitled to payment as if such certificate had been issued and award or give judgment for the appropriate sum.”
“In my opinion, the absence of a timeous notice of intention to withhold payment does not relieve the party making the claim of the ordinary burden of showing that he is entitled under the contract to receive the payment he claims. It remains incumbent on the claimant to demonstrate, if the point is disputed, that the sum claimed is contractually due.”
“9. The time period during which matters can be checked before the final certificate is to be issued is much longer than that for interim certificates. That is as one would expect. In this case it is essentially three months. In practice therefore a final certificate is more likely to be accurate than an interim certificate. But nothing actually turns on this for it is common ground that section 111(1) applies to both interim and final certificates. 10. It was the debate about a final certificate which brought out the true nature of the provision. Suppose a final certificate included items not done or charged for twice and the time for serving a withholding notice has passed. An obvious concern would arise if the provision had the effect of not only requiring the client to pay for such items, but was conclusive. The section would override the contractual term specifically saying certificates are not conclusive. But the section does not say that failure to serve a withholding notice creates an irrebuttable presumption that the sum is in the final analysis properly payable. It merely says the paying party “may not withhold payment…of a sum due”
“14. Sheriff Taylor’s analysis, once articulated, is obviously right. And it has a series of advantages… (b) It provides a fair solution, preserving the builder’s cash flow but not preventing the client who has not issued a withholding notice from raising the disputed items in adjudication or even legal proceedings. (c) It requires the client who is going to withhold to be specific in his notice about how much he is withholding and why, thus limiting the amount of withholding to specific points. And these must be raised early. (d) It does not preclude the client who has paid from subsequently showing he has overpaid. If he has overpaid on an interim certificate the matter can be put right in subsequent certificates. Otherwise he can raise the matter by way of adjudication or if necessary arbitration or legal proceedings.” (b) It provides a fair solution, preserving the builder’s cash flow but not preventing the client who has not issued a withholding notice from raising the disputed items in adjudication or even legal proceedings. (c) It requires the client who is going to withhold to be specific in his notice about how much he is withholding and why, thus limiting the amount of withholding to specific points. And these must be raised early. (d) It does not preclude the client who has paid from subsequently showing he has overpaid. If he has overpaid on an interim certificate the matter can be put right in subsequent certificates. Otherwise he can raise the matter by way of adjudication or if necessary arbitration or legal proceedings.”
“There is, as Jacob LJ demonstrates, nothing irrevocable about the section 111 process. It is designed simply to ensure that once a certificate is issued, payment follows unless proper notice of withholding is given. It has no legal effect, even presumptively, on the true incidence of liability.”
“I agree also with His Honour Judge LLoyd’s conclusion that if the employer fails to serve any notices in time it must be taken to be agreeing the value stated in the application, right or wrong. In my judgement, therefore, in that situation the first adjudicator must be in principle taken to have decided the question of the value of the work carried out by the contractor for the purposes of the interim application in question.”
“This means that the employer cannot bring a second adjudication to determine the value of the work at the valuation date of the interim application in question. But it does not mean any more. There is nothing to prevent the employer challenging the value of the work on the next application, even if he is contending for a figure that is lower than the (unchallenged) amount stated in the previous application. If this was not made clear by my judgment, then it should have been and it is certainly made clear by the decision of the Court of Appeal in Rupert Morgan Building Services (LLC) Ltd v Jervis[2004] 1 WLR 1867 , in particular the passage from paragraph 14 that is set out in paragraph 30 below. My judgment in ISG v Seevic was not intended to go behind that.”
“69. I do not need to decide whether or not that passage is correct in relation to interim valuations and interim payments. In almost all construction contracts special contractual provisions apply to interim payments. Mistakes can usually be put right at a later stage, although that was not possible in the Galliford Try case because the contract prevented negative valuations. 70. The important point for present purposes is that the quoted passage (whether right or wrong in relation to interim valuations) does not apply to final accounts. Edwards-Stuart J said so in the Galliford Try case at para 25, where he emphasised the “fundamental difference” between payment obligations which arise on an interim application and those that arise on termination. 71. In the present case we are concerned with a final account following termination of the construction contract. Clause 8.12.5 of the contract conditions requires an assessment of the amount which is “properly due in respect of the account”
“Section 108 of the Act entitles the parties to refer any dispute to adjudication at any time. That would include a dispute regarding the proper valuation of the works. However, where a particular interim payment has been fixed by the default notice mechanism under the contract, as in this case, there is no contractual basis on which to revise that payment by reference to a proper valuation of the works and therefore there is no relevant dispute that can be referred to adjudication.”