Lidl Great Britain Ltd v Closed Circuit Cooling Ltd (t/a 3CL)
Citation: [2023] EWHC 3051 (TCC)
Abstract
In S&T (UK) Ltd v Grove [2018] EWCA Civ 2448 (‘Grove’), the CA concluded that where a paying party is not entitled to commence a ‘true value’ adjudication (‘TVA’) prior to payment of a notified sum. This case provides useful guidance on the scope of that prohibition.
Background
3CL commenced an adjudication (the ‘Notified Sum Adjudication’) seeking payment of a notified sum following an interim payment application (‘AFP19’). The decision in that adjudication was enforced by the TCC in the previous case of Lidl Great Britain Ltd v Closed Circuit Cooling Ltd (t/a 3CL) [2023] EWHC 2243 (TCC). In the interim, and prior to the enforcement, Lidl commenced further adjudications in response:
- Defects: Lidl costs of defects to be paid as a debt or offsetting against sums owed to 3CL (the ‘Defects Adjudication’).
- Extensions of time: a declaration that 3CL was not entitled to any EOT (the ‘EOT Adjudication’).
3CL raised jurisdictional challenges in the Defects and EOT Adjudications. It argued that, applying the Grove principle, those adjudications lacked jurisdiction due to Lidl having not paid the AFP19 notified sum beforehand. 3CL maintained this position following the decisions and Lidl commenced Part 7 proceedings to enforce payment of sums awarded in the Defects Adjudication. 3CL commenced Part 8 proceedings by way of defence, in which it sought a declaration that the EOT and Defects Adjudication decisions were unenforceable alternatively unenforceable to the extent that Lidl had been granted ‘true value’ relief.
Decision
In determining the scope of the Grove prohibition, HHJ Davies did not consider that there was any basis for a blanket prohibition on all adjudications commenced in the absence of payment of the notified sum: [36]. The issue was whether the prohibition applied only to a TVA in which a party sought to revalue the works in the same payment cycle as the notified sum, or applied more widely to employer cross claims such as for liquidated damages and defects.
The Decision
In deciding this point, the Judge considered the payment provisions of the HGCRA. There is an obligation by way of S.111(1) to pay the notified sum on or before the final date for payment. This is the sum considered to be due as stated in the payer’s payment notice or a payee’s notice, both of which normally focus on the valuation of the work at the time. However, this obligation is subject to s.111(3), which entitles the payer to issue a “pay less notice”. Unlike payment notices, pay less notices also tend to include deductions for other matters outside of the mere value of ‘the works’ such as defective work or liquidated damages.
Given that the HGCRA payment provisions enable a paying party to pay what it considers due by reference to deductions for alleged defective work or delay, the Judge agreed with 3CL’s submission that the meaning of a TVA for the purposes of the Grove prohibition was not just concerned with the valuation of the actual work in the same payment round, but has a wider meaning to include potential cross claims for alleged defects and delay that could have been advanced in a pay less notice in the relevant payment cycle:
“…whilst a payer may well wish to bring a [TVA] in relation to all such matters (i.e. valuation, defects and delay claims), it may also wish to bring a [TVA] in relation to matters only of valuation, or only of defects claims, or only of delay claims. Often it will wish to do so in relation to defects claims or delay claims because it has omitted to serve an effective payless notice and, thus, will want to bring a [TVA] in relation to such matters. In my judgment it must follow that such claims are covered by the Grove principle insofar as they are matters which could have been the subject of a payless notice served in respect of the particular notified sum in question. If, however, they are claims which could not have been the subject of such a payless notice, then it is difficult to see the justification for applying the Grove principle to them.”
Conclusion
The Judge held that the Defects Adjudication had been, in part, commenced without jurisdiction, as it amounted to an effective true value of certain items in respect of which deductions had been made in the pay less notice served in response to AFP19.
Further, the Judge found the same for part of the EOT Adjudication, which he determined amounted to an effective true value adjudication in respect of liquidated damages which Lidl had sought to deduct in the pay less notice served in response to AFP19. Thus, to the extent of the cross-over in period between the liquidated damages deducted in Lidl’s pay less notice in response to AFP19, the EOT Adjudication was commenced without jurisdiction.
Representation
Jonathan Acton Davis KC from Atkin Chambers (instructed by Clarke Willmott LLP) acted for Lidl. Charlie Thompson (instructed by Hill Dickinson LLP) for 3CL.
A copy of the judgment is available here.
