Galliford Try Building Ltd v Estura Ltd

Citation: [2015] EWHC 412 (TCC), [2015] BLR 321, [2015] EWHC 412 (TCC), 159 Con LR 10

The court granted a partial stay on the execution of an adjudicator’s decision on the grounds that it would cause “manifest injustice” to the paying party, the Employer, if it were forced to pay in full, as a result of its own position of impecuniosity.

The Contractor (“Galliford”) had submitted to the Employer (“Estura”) an interim payment application described as an “Indicative Final Account and Valuation Summary” of approximately £4million, which Estura had refused to pay. However, despite valuing the works to be worth considerably less, Estura had failed to serve a payment or payless notice and an adjudicator proceeded to award Galliford the amount requested in full. In a subsequent adjudication started by Estura to determine the true value of the works, the adjudicator resigned for lack of jurisdiction on the basis that it was not possible to re-open the matter, relying on the authority of Watkin Jones& Son Ltd v Lidl UK GmbH [2002] EWHC 183 (TCC). This case has since been cited and followed in ISG v Seevic [2014] EWHC 4007 (TCC).

Estura then resisted Galliford’s application to enforce the adjudicator’s award arguing, amongst other things, that application of the principles in ISG v Seevic, in which it was held that an employer who fails to serve the relevant notices must be deemed to have agreed the valuation, right or wrong, and is thereby prevented from starting a second adjudication to have the true value of the works assessed, would cause manifest injustice in the case.

In the circumstances, there were several reasons why the error could not be corrected on the next application or on a final account: the contract did not provide for a negative valuation; the value of the interim certificate was almost as high as the final account would be; this was effectively the last interim application, preventing Estura from correcting the position in subsequent applications; there was now no incentive for Galliford to submit a final account, without which there could be no dispute to refer to adjudication; and Estura lacked the funds to pay the amount ordered by the adjudicator and to finance litigation to ensure a proper valuation of the final account.

Mr Justice Edwards-Stuart accepting the “manifest injustice” argument, decided that in the circumstances “an unusual combination of factors” gave rise to the risk of “irreparable prejudice” (applying Hillview v Botes [2006] EWHC 1365 (TCC)). In doing so, the court stressed the importance of sufficient and proper evidence being put before the court to substantiate a party’s claims over the state of its finances and emphasised the need for the facts to be exceptional. Enforcement of the judgment was stayed above the sum of £1.5 million, subject to certain conditions designed to ensure that Galliford retained the incentive to achieve practical completion and submit its final account.

Mr Justice Edwards-Stuart also clarified a point in relation to his earlier judgment in ISG v Seevic; where an employer has failed to submit a payment or payless notice he will not be taken to have agreed to the value of the works at any date other than the valuation date relevant to the particular payment certificate. He will not therefore be prevented from challenging the value of the works on the next application.

Link to Judgment

Counsel: Adrian Williamson QC appeared on behalf of the Defendant, Estura.

Counsel

Adrian Williamson QC

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