Adam Architecture Ltd v Halsbury Homes Ltd

Citation: [2017] EWCA Civ 1735

Justin Mort QC acted for the successful appellant in this appeal against the decision of Edwards-Stuart J.

Halsbury Homes Ltd (“Halsbury”) is a property developer, Adam Architecture Ltd (“Adam”) an architectural practice. The two businesses had worked together on a number of development projects. Halsbury retained Adam to provide designs in relation to the construction of 200 homes in Norfolk.  The appointment incorporated RIBA conditions.

As one would expect the RIBA conditions provide for interim payments, payment notices and pay less notices.  The RIBA conditions also provide that the client can terminate on reasonable notice, and they provide for the architect to submit a termination account.

It is not particularly clear from the text of the RIBA conditions whether it is intended that the contractual requirement to serve payment notices and/or pay less notices attaches to any payment obligation besides an interim payment.

A dispute arose between the parties, and Halsbury brought the appointment to an end.  Adam therefore submitted its account in respect of the work done to that point.  Halsbury did not issue a pay less notice against that account, or against an earlier (more modest) interim application for payment.  Nor did Halsbury pay the fees claimed, but made complaint about Adam’s performance.

Adam referred its claim for fees to adjudication.

The principal issue in the adjudication was whether Halsbury was required to serve a pay less notice against a termination account.  Halsbury’s argument at that stage was that the Court of Appeal’s decision in Harding v Paice indicated that interim payments were different to final payments, and that on that basis no pay less notice was required for the purposes of the termination account.  The adjudicator rejected that argument, and held that in the absence of a pay less notice, Halsbury was bound to pay the sum applied for, albeit it could nonetheless contest the correctness of the account (that is to say: on another occasion).

Having lost on this point before the adjudicator, Halsbury referred its argument to the TCC for determination in part 8 proceedings, ie: whether, on the basis of the analysis in Harding v Paice, the requirement for a pay less notice does not apply to a termination account.  For its part Adam commenced its own proceedings in the TCC for enforcement of the adjudicator’s decision.

Shortly before the hearing at first instance the learned judge suggested an additional possible analysis for consideration by the parties: that the contract had been repudiated by Halsbury.   That was not an argument that Halsbury had included within its part 8 claim.  Its reasons for not doing so were not explained, but presumably might include (a) the fact that that would be potentially a somewhat involved issue in the context of a part 8 claim, and (b) Halsbury would not necessarily want to concede that it had repudiated the appointment, far less urge such a case on the court.

At first instance the parties concentrated primarily upon (1) the correct reading of the RIBA conditions, and (2) whether the material application was an application for a payment on account.  The judge at first instance held that there was no contractual requirement for a pay less notice against a termination account, but that in any event the contract had been repudiated by Halsbury so that Halsbury had in effect discharged itself from the obligation to serve a pay less notice.

Adam appealed, raising a number of points.

One of the grounds of appeal was that the judge should not have embarked upon an inquiry into whether the contract was repudiated in a part 8 hearing that was also the summary judgment hearing to enforce the adjudicator’s decision.  See Hutton Construction Ltd v Wilson Properties (London) Ltd.  The Court of Appeal was unsympathetic to that line of argument.

The appeal nonetheless succeeded on the basis that (1) irrespective of the terms of the RIBA appointment, the Housing Grants Construction and Regeneration Act 1996 as amended attaches to final payments as to interim payments, and (2) whether or not the appointment had been repudiated by Halsbury, there had been no acceptance.  Adam had simply submitted its claim for payment of its fees, ie a contractual entitlement.

Judgment

Comment

The finding that section 111 attaches to final payments is unremarkable.  Clearly Harding v Paice is if anything authority for just that proposition rather than the reverse.  However the Court of Appeal did have to consider various comments in the House of Lords decision in Melville Dundas which appeared to support Halsbury’s position: comments made in conflict with the concession made by counsel for the employer in that case (Sir Robert Akenhead), that section 111 applied to final and interim payments alike.

The Court of Appeal in Adam also heard argument on Balfour Beatty v Moodus (a case relied upon by Halsbury), in which Coulson J as he then was considered the scope of section 111 albeit in a different context: whether section 111 attaches to all parties to a construction contract, or only to the party paying for work.

That specific point does surely require consideration by the Court of Appeal, but this was not the occasion.

It is a feature of this area of the law, namely payment notices and adjudication, that because the obligations are (in theory) of temporary effect only, only a minute number of cases have any appeal potential.  As a result there is now a backlog of possible heresies which show no sign of being resolved any time soon.

Counsel

Justin Mort QC

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