December 2018 newsletter kp

WWW.UKADJUDICATORS.CO.UK
DECEMBER 2018 NEWSLETTER
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EDITORS’ COMMENTS
It was good to be able to meet with our
panellists on the 7th
and 8th
November in
Bristol. As the Adjudication Society annual
conference moves around the country, we
intend to arrange other dinners to fall on the
evening before each conference. The 2019
conference details are yet to be finalised but
the venue is very likely to be in London.
I had the pleasure of attending the Dispute
Resolution Board Foundation conference in
Geneva with an evening dinner being held
aboard the paddle ship ‘The Vevey’. This
setting allowed delegates to network and
discuss areas of possible mutual collaboration
in connection with dispute board
adjudication. This will be a growth area in the
years ahead; given the FIDIC changes to a
standing DAAB our panellists will be well
placed to participate in these.
I presented a paper at the Society of
Construction Law (Africa) 3rd International
Construction Law Conference in Johannesburg
on the 21st
November 2018. The topic was
Adjudicator Nominating Bodies and possible
regulation required for the South African
market when statutory adjudication is
introduced. A comparative analysis was
undertaken of the English and Malaysian
systems as examples of minimally and highly
regulated system. These were contrasted with
the South African system, which is
contractually based but has had court
support.
The opportunity to discuss the various forms
of international adjudication and the desire
from other countries to avail of its benefits
indicates that this form of dispute resolution
continues to grow globally.
We are planning a series of events across the
country in 2019 to publicise the services of
our nominating body if you would like to take
part as a speaker or can host us in your offices
please do let me know.
We have taken a table at the SCL annual lunch
in London on the 15th
February 2019; please
see emails about opportunities to join us.
In closing, we would like to take this
opportunity to wish you all a very Merry
Christmas and a prosperous New Year.
Sean Gibbs is a director with Hanscomb
lntercontinental and is available to serve as an
arbitrator, adjudicator, mediator, quantum
expert and dispute board member.
sean.gibbs@hanscombintercontinental.co.uk

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Kirsty Potts, Barrister (Non-Practising), is a
Lecturer in Property and Construction Law at
the University of the West of England.
Kirsty.potts@uwe.ac.uk
UK ADJUDICATORS’ TABLE AT THE
SCL LONDON ANNUAL LUNCH
UK Adjudicators have taken a table at the SCL
Annual London Lunch which is taking place on
the 15th
February 2019 at 12pm at the
Grosvenor House, Park Lane, London.
Places are available on the table to our
panellists.
Please confirm your interest to Sean Gibbs:
sean.gibbs@hanscombintercontinental.co.uk
GET IT RIGHT OR TRY AGAIN LATER:
THE NEW REGIME FOR INTERIM
PAYMENTS
S&T (UK) Limited v Grove
Developments Limited [2018]
EWCA Civ 2448
4Pump Court reported on the important
decision of Coulson J (as he was then) at first
instance in Grove Developments Ltd v S&T
(UK) Ltd [2018] EWHC 123 (TCC) in their
February edition of their Newsletter. The
hotly anticipated decision of the Court of
Appeal in the appeal against that decision has
today been handed down. In a judgment
given by Sir Rupert Jackson, the Court of
Appeal has upheld the first instance decision
of Coulson J.
At first instance Coulson J had overturned the
line of authorities flowing from ISG v Seevic,
holding that an employer is entitled to run a

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second adjudication to determine the ‘true’
value of an interim application for payment,
even if the employer’s payment notice and
payless notice were invalid. The Court of
Appeal has dismissed the appeal against that
decision, and upheld Coulson J’s decision. The
reasoning given by Sir Rupert Jackson, in one
of his final decisions before retirement from
the bench, is highly significant for the
construction industry.
Anthony Speaight QC and Matthew Thorne
represented the contractor.
Background
By a JCT Design & Build Contract 2011, Grove
engaged S&T to design and build a new
Premier Inn Hotel at Heathrow Terminal 4.
The parties fell into dispute about the sum
payable as an interim payment and about the
deduction of liquidated damages. Three issues
arose for consideration by the Court of
Appeal:
(1) What does the statutory and contractual
obligation to “specify” the basis of calculation
in a Pay Less Notice require? In particular, is it
satisfied by incorporating a separate and
unappended document by reference?
(2) Can an employer commence an
adjudication seeking a decision as to the ‘true’
value of an interim application if its Payment
or Pay Less Notice was invalid?
(3) What are the timing requirements for the
notification provisions before an employer is
entitled to levy liquidated damages under the
JCT form?
Issue 1: How should the basis of calculation be
“specified”?
The first issue before the Court was whether
Grove’s Pay Less Notice complied with the
requirement of the contract that payment
notices “specify the basis of calculation” of
the sum stated to be due.
Grove’s Payment Notice was out of time and
invalid. Consequently Grove relied on its Pay
Less Notice. This specified the sum stated to
be due, but did not expressly set out the basis
of calculation. Instead, it purported to
incorporate by reference the calculation
detailed in its earlier (invalid) Payment Notice.
S&T argued that this did not comply with the
1996 Act and the contract: the notice must
expressly set out the basis of calculation on
the face of that notice.
The Court of Appeal upheld the first instance
decision that the Pay Less Notice was valid,
stating that there is “no bright line rule”. Sir
Rupert Jackson held that:
“It is neither tenable to say that reference to
other documents is always permissible nor to
say that such reference is never permissible.
As King LJ pointed out during Mr Speaight’s

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submissions, it is a question of fact and degree
in each case whether the purported Pay Less
Notice achieved the requisite degree of
specificity.”
On the facts of the case, the calculations were
understood, and there was no rule precluding
incorporation by reference such as contained
in the Pay Less Notice.
This decision may reflect a softening of the
sometimes high hurdle for formal compliance
with notice provisions reflected in recent
decisions. Nevertheless, the test of “fact and
degree” adopted by the Court could lead to
uncertainty for parties as to whether the
contractually required information was
properly incorporated by reference. This may
increase the number of factual disputes about
whether the relevant Notice was valid.
Despite this decision, parties would be well-
advised to set out clearly the basis of
calculation in their Notices to avoid any
ambiguity.
Issue 2: The ‘true’ value of the sum due
The consequences of the Judgment on Issue 2
will be significant for the construction
industry. Prior to the first instance decision in
this case, it was well-established that, in
respect of the JCT D&B 2011 (and similar
forms), the sum to be paid by the employer
was the sum “stated as due” in the relevant
Notice; and, if the employer failed to issue a
valid Payment Notice or Payless Notice, it
would be bound to pay the sum stated in the
contractor’s interim application for payment
(see, for example, ISG v Seevic [2014] EWHC
4007, Galliford Try v Estura [2015] EWHC 412,
Kilker v Purton [2016] EWHC 2616 and
Kersfield v Bray [2017] EWHC 15).
The Court of Appeal has upheld the first
instance overturning of that position, holding
that an employer is entitled to commence an
adjudication to determine the ‘true’ value of
the interim account, even if it failed to issue a
valid Payment Notice or Payless Notice – but
only once the ‘notified sum’ has been paid.
Following a lengthy review of the authorities,
the Court of Appeal made the following
important findings:
(1) At common law, a building contract is an
entire contract. The contractor has no
entitlement to interim payments, save as
provided by the contractual terms or by
statute.
(2) The employer’s immediate obligation is to
pay the ‘notified sum’. If it fails to do so, this
can be enforced by adjudication, litigation, or
arbitration.
(3) However, the sums payable are not
conclusive as to the correct valuation of work
done. That therefore remains a justiciable
issue between the parties, if it is disputed. The
wide powers of the Court (and, in

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consequence, of the adjudicator) permit
opening up and revising the sums shown as
due (as held in Beaufort v Gilbert Ash [1999] 1
AC 266).
(4) The payment mechanism is simply
intended to generate a provisional figure for
immediate payment. The adjudication
provisions then facilitate a more detailed
valuation of the work at that date, if required.
(5) The mechanism by which any
overpayment is recovered is not, contrary to
Coulson J’s first instance judgment, by way of
implied term or restitution. It is simply a
dispositive remedy flowing from the
adjudicator’s re-evaluation.
Despite this, the Court concluded that, in
order to avoid undermining the legislation,
the ‘value’ adjudication could not be
commenced until payment of the notified
sum had been made. This was because the Act
creates a “hierarchy of obligations” by which
“the adjudication provisions are subordinate
to the payment provisions in section 111…The
Act cannot sensibly be construed as permitting
the adjudication regime to trump the prompt
payment regime. Therefore, both the Act and
the contract must be construed as prohibiting
the employer from embarking upon an
adjudication to obtain a re-valuation of the
work before he has complied with his
immediate payment obligation.” This clear
requirement that the notified sum be paid
first is a significant gloss on Coulson J’s
decision.
The practical consequences of this decision
will now have to be worked out through
adjudications and in the Courts, and some
questions remain. In particular:
 It remains to be seen whether the
ability to commence a ‘true value’
adjudication is limited to the JCT
form, or whether the principle will
operate more broadly. Since the Act
provides only for the payment of a
notified sum, it is assumed that
everything will continue to depend on
the contractual wording used in any
given case.
 On what basis can ‘true value’
adjudications be prevented until
payment of the notified sum has been
made? Is an adjudicator without
jurisdiction until payment has been
made (which on one reading is
implied in the Court of Appeal’s
judgment)? Can injunctions be
obtained to prevent the continuation
of such adjudications until the
notified sum is paid? It is unclear how
this rule will be applied in practice.

6 | P a g e
 Will this decision reduce the so-called
‘smash and grab’ adjudications, as
was widely suggested following
Coulson J’s first instance decision? Or
– due to the Court of Appeal’s
requirement for payment first - will it
simply result in more adjudications
(initially on the basis of notices,
followed by second adjudications on
value)?
Issue 3: Timing of notices for Liquidated
Damages
The final issue examined by the Court of
Appeal is unconnected to the payment
regime, but raises an important point about
notices relating to liquidated damages.
By clause 2.29 of the JCT form, an employer is
required to take three steps before it can
deduct liquidated damages:
(1) First, the issue of a non-completion notice
(notice 1).
(2) Secondly, the employer must have notified
the contractor that it “may require payment
of, or may withhold or deduct, liquidated
damages” (notice 2 - the Warning Notice).
(3) Finally, the employer must give notice that
it “requires” the contractor to pay liquidated
damages or “will” withhold or deduct
liquidated damages (notice 3 – the Deduction
Notice).
Grove sent the Warning Notice and Deduction
Notice in the correct sequence, but in such
quick succession that the former had not
reached S&T’s inbox before the latter was
sent.
S&T contended that the Deduction Notice was
invalid, because: (a) it had not received the
Warning Notice before the Deduction Notice
was sent, or (b) it had not been given time to
read or digest the Warning Notice first. Thus,
to use the contractual language, it had not
been ‘notified’ by the Warning Notice before
Grove ‘gave notice’ in the Deduction Notice.
The Court of Appeal rejected that argument,
holding that
(1) The words “notified” and “give notice”
both require the sending and receipt of a
notice, so if both notices are received in the
correct sequence that is sufficient to satisfy
the requirements of the clause.
(2) No specific time period is required for a
party to consider the Warning Notice before
the Deduction Notice is received. Whilst the
Court acknowledged that this robs the clause
of any real purpose, it held that it is
impossible to identify any specific period of
time which should elapse between serving the
two notices, and a requirement for a
‘reasonable’ lapse of time is unworkable and

7 | P a g e
does not satisfy the requirements for an
implied term.
This is a notable determination because it
makes the Warning Notice a mere procedural
hurdle. As the Court of Appeal acknowledged,
the procedure provides “no obvious benefit to
anyone, if the employer warns the contractor
of what he may do just seven or eight seconds
before he actually does it”. Nevertheless,
“However surprising it may seem to a judge,
clause 2.29 of the contract requires no more
than the giving of notices in a specified
sequence. Judges should not generally impose
their notions of commercial common sense
upon the parties to business disputes.
Provided that a scintilla of time elapses after
giving notice 2 and before giving notice 3, that
is sufficient.”
To the extent that parties wish to give some
teeth to the Warning Notice, they may wish to
consider a bespoke amendment to the
standard form.
Lynne McCafferty QC
LMcCaffertyQC@4pumpcourt.com
Editors: George Woods & Matthew Thorne
GWoods@4pumpcourt.com
MThorne@4pumpcourt.com
Anthony Speaight QC
aspeaight@4pumpcourt.com
ANNUAL REPORT OF THE
CHAIRPERSON OF THE MINISTERIAL
PANEL OF ADJUDICATORS
(IRELAND)
The Construction Contracts Act 2013 came
into force for certain construction contracts
entered into after 25 July 2016 in accordance
with the 'Construction Contracts Act, 2013
(Appointed Day) Order 2016' (Statutory
Instrument No 165 of 2016).
Dr Nael G Bunni, Chairperson of the
Ministerial Panel of Adjudicators’ second
Annual Report on the implementation of the
Construction Contracts Act 2013 covers the
period from the 26 July 2017 to 25 July 2018.
During the period his report covers, 11
applications were received by the
Construction Contracts Adjudication Service
of the Department of Business, Enterprise and
Innovation for the appointment of an
adjudicator.

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An Adjudicator from the Ministerial-
appointed Panel of Adjudicators was
appointed in 9 out of the 11 applications
received. In the other two cases an
Adjudicator was not appointed as the
applications did not comply either with the
legislation and/or the ‘Code of Practice
Governing the Conduct of Adjudications’.
One of these cases concerned an amount in
dispute stated to be €32 Million, the highest
amount in dispute that has been referred for
the appointment of an Adjudicator under
section 6(4) of the Act to date.
The Rules of the Superior Courts were
broadened to incorporate a provision for
enforcement by the High Court of Adjudicator
decisions - 'Rules of the Superior Courts
(Construction Contracts Act 2013) 2016'
(Statutory Instrument No. 450 of 2016).
The 'Code of Practice Governing the Conduct
of Adjudications' requests that certain data be
provided to the Construction Contracts
Adjudication Service relevant to and within 21
days of the completion of each adjudication
for the purpose of compiling anonymised
statistical data on the Act.
During the period of his report, the
Construction Contracts Adjudication Service
received seven Adjudicator Statistical Data
returns. The principal site locations of the
payment disputes concerned are listed in
Table 1 and the primary professional
qualifications of the adjudicators involved are
at Table 2:
Table 1 - Principal site locations of payment
disputes
Dublin 4
Limerick 1
Cork 1
Not disclosed 1
Table 2 - Primary Professional Qualification of
Adjudicator
Quantity Surveyor 3
Barrister 2
Solicitor 1
Engineer 1
Nael Bunni concluded that: ‘despite this slow
start for the usage of the Act, the real value of
this legislation, having regard to the
protections afforded therein to
subcontractors, will likely become more
apparent in the event of a future slowing
down of activity in the sector, where payment
vulnerability may once again feature as an
area of concern to subcontractors. They may
in turn, increasingly seek to rely upon it to
vindicate their rights to payment under
applicable contracts and in the event of non-
compliance on the part of main contractors, to
access adjudication as a speedy dispute
resolution mechanism’.
https://dbei.gov.ie/en/Publications/Publicatio
n-files/Second-Annual-Report-of-the-

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implementation-of-the-Construction-
Contracts-Act-2013.pdf
Thomas Johnson is a director in the global
construction claims consultancy Hanscomb
Intercontinental.
CREATING A RESPONSIBLE
PAYMENT CULTURE: A CALL FOR
EVIDENCE ON TACKLING LATE
PAYMENT
The Department for Business, Energy &
Industrial Strategy sought views and
experiences on the impact of unfair payment
practices, and proposals for measures to
create a more responsible payment culture.
The consultation closed on the 29th
November
2018 and there is no indication how quickly
the findings will be released. Given the work
likely to be needed dealing with the Brexit
issues, it is very likely that any findings may
not be implemented for a considerable time.
CONSTRUCTION (RETENTION
DEPOSIT SCHEMES) BILL 2017-19
The second reading debate of the
Construction (Retention Deposit Schemes) Bill
introduced by Mr Peter Aldous MP has been
postponed numerous times, with the next
revised date being given as 25 January 2019.
Those following its progress will be starting to
see the pattern of postponement, possibly
pushing out the Bill from ever being
implemented, with Brexit issues taking
priority in Parliament during 2019 & 2020.
Construction minister Richard Harrington gave
a speech to the Construction News Summit on
20 November 2019 in which he indicated that
the government would make an
announcement on changes to the law in
relation to retentions “very soon.” What this
will look like is not clear, although
commentators have welcomed this positive
message.
The Bill’s progression through Parliament can
be followed via the following link:
https://services.parliament.uk/bills/2017-
19/constructionretentiondepositschemes.html

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ENGLAND AND WALES HIGH
COURT (TECHNOLOGY AND
CONSTRUCTION COURT) DECISIONS
October
 Ealing Care Alliance Ltd v London
Borough of Ealing [2018] EWHC 2630
(TCC) (11 October 2018)
November
 Bombardier Transportation UK Ltd v
Hitachi Rail Europe Ltd & Ors (Rev 2)
[2018] EWHC 2926 (TCC) (02
November 2018)
 Clancy Docwra Ltd v EON Energy
Solutions Ltd [2018] EWHC 3124 (TCC)
(16 November 2018)
 Synergy Gas Services Ltd v Northern
Gas Heating Ltd [2018] EWHC 3060
(TCC) (15 November 2018)
DRBF CONFERENCES 2019
DRBF 19th Annual International Conference:
Berlin, Germany May 22 - 24, 2019
http://www.drb.org/events/calendar/
DRBF Northwest Regional Conference:
Seattle, Washington, USA June 06 - 07, 2019
http://www.drb.org/events/calendar/
SOCIETY OF CONSTRUCTION LAW
(UK)
Cardiff 5 December 2018
(1) Key recent professional liability cases; (2)
Trends (including post Grenfell liability issues
and the Carillion liquidation); and (3) Practical
guidance
5.30 for 6.00pm at Blake Morgan, One Central
Square, Cardiff CF10 1FS
Speakers are from Atkin Chambers

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FIDIC CONFERENCES 2018
Contractor & Claims Workshops: 3 December
Main Conference: 4 & 5 December 2018
Modified Contracts & Dispute Resolution
Workshops: 6 December 2018
Novotel London West, London, UK
https://law.knect365.com/fidic-international-
contract-users/
FIDIC CONFERENCES 2019
The FIDIC International Infrastructure
conference takes place from 8 to 10
September 2019 in Mexico City.
http://fidic2019.org/en
FIDIC LATIN AMERICA CONTRACT USERS'
CONFERENCE
October 2019; City TBC
https://law.knect365.com/fidic-latam-
contracts/
SCL INTERNATIONAL CONFERENCE
2020
The Society of Construction Law 9th
International Conference is being held from 4
to 6 November, 2020, in Auckland, New
Zealand. Further details can be found at :
http://www.constructionlaw2020.com/scl20

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SMASH AND GRAB IS DEAD – LONG
LIVE SMASH AND GRAB!
The latest in adjudication law is all about
timing…
Last week the Court of Appeal, one of the
highest courts in the land, confirmed the
recent decision of the Technology and
Construction Court in the ‘Grove’ case. In the
case of a successful ‘smash and grab’
adjudication, the employer is able to submit a
further adjudication for ‘true valuation’. This
changes the position previously thought to be
correct following the dispute in ISG
Construction v Seevic College in 2014.
A smash and what?
A ‘smash and grab’ adjudication. We’re not
quite sure where the name came from; it’s a
bit of a misnomer. The term was coined after
the last round of changes to the Construction
Act. Essentially, where the Employer hadn’t
responded in time to an application for
payment, the amount could be claimed in
adjudication by default. It was thought the
employer couldn’t then claim a corrected
valuation until after the project completed,
under the single dispute in adjudication rule.
The process for payment (as you probably
know) is quite procedural. Briefly, the
Contractor submits a payment application and
the Employer submits a payment certificate
(the ‘notified sum’). Sounds simple enough,
but as is usually the way with law, if you get
the procedure wrong, you risk losing out. But,
if the Employer doesn’t bother to submit a
payment certificate then the Contractor’s
payment application becomes the notified
sum by default.
So it’s not so much ‘smash and grab
adjudication’ as ‘get what you are due after
the Employer had a chance to object but
didn’t bother adjudication.’ The terminology
conjures up terms of robberies and men in
striped shirts. But the payer has had plenty of
time to respond to an application for
payment, so it shouldn’t be a surprise that the
amount applied for becomes due, even if the
amount is wrong.
So what’s changed?
In the latest case, the courts ruled that rather
than the £14m claimed, a more appropriate
calculation should be made and a ‘true
valuation’ adjudication should be allowed.
The Employer assessed the amount to be
closer to £1.4m – quite different from the
Contractor’s payment application.
What’s changed is that the court has now
confirmed that in law, the Employer should be
entitled to make an adjudication for a ‘true
valuation’. The courts have been quite explicit
about the timings throughout the whole
process, which is where some disagreements

13 | P a g e
still lie. Timing of claim submissions and
timings of adjudications are all critical to the
process.
Could ‘smash and grab’ survive?
The court has noted that ‘each case will turn
on its own facts’. Future cases may not be
decided in the same way, depending on the
various factors involved. Timing, it seems, is
everything. There are many different factors
affecting an outcome. A different case in
different circumstances might have a different
result.
What now?
The main difference now is that the likelihood
of success in such cases is now less certain.
Previously if the Employer had failed to keep
up with the process it was almost taken as
read that a ‘smash and grab’ adjudication
would be a success. Now, that position is less
clear.
Employers (as well as Contractors) need to be
mindful of the timescales for notices and
payments. And Contractors may need to be
aware that their payment claims might not
succeed, even if they’ve met the correct times
and dates and the Employer has not.
The key here might well be the contract.
Careful amendment of the contract might
help avoid such disputes. However, as
previously stated, the real key is to read and
understand the contract. Take careful note of
the timings for notices and payments- then
stick to them.
Bill Bordill, is a director with Decipher Group
and is available to serve as an adjudicator.
bill.bordill@decipher-group.com
http://www.decipher-group.com
Please note that this is a newsletter
and does not provide legal advice.
Whilst every care has been taken in
the preparation of this document,
we cannot accept any liability for
any loss or damage, whether
caused by negligence or otherwise,
to any person using this document.
Independent legal advice should be
taken from a regulated lawyer.

December 2018 newsletter kp

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December 2018 newsletter kp