ISG Construction Ltd v Seevic College

Under a construction contract providing interim payments through a defined notice regime, the contractor’s entitlement during the project arises only through the contractual interim-application and final-payment machinery. If the employer serves neither a payment notice nor a pay less notice, the amount stated in the interim application becomes payable, as between the parties and absent fraud, irrespective of the work’s true value. The employer cannot circumvent that regime by seeking a later adjudication on the same valuation or by demanding a valuation at an arbitrary date. An adjudicator lacks jurisdiction to redetermine a question already decided. Where the contract provides for final resolution by litigation, the court may determine the parties’ rights and grant declaratory relief.

ISG applied for summary judgment to enforce a first adjudicator’s decision requiring Seevic College to pay the sum claimed in an interim application. Seevic had served neither a payment notice nor a pay less notice. It later obtained a second adjudication valuing the works at a lower figure and directing repayment.

The application raised whether the value of the works had already been determined by the first adjudication, whether the second adjudication concerned the same dispute, and whether Seevic had any contractual right to a true valuation at the relevant date. The court also considered the effect of the Housing Grants, Construction and Regeneration Act 1996 and the contract’s adjudication provisions.

Disposition. Summary judgment was granted for ISG. The first adjudicator’s decision was enforceable, and the second adjudicator’s decision was declared invalid for want of jurisdiction.

1. Payment regime. The JCT Design and Build Contract 2011 provided defined machinery for interim applications, payment notices and pay less notices. During the project, payment could arise only through that machinery, or at the end through the final statement. There was no freestanding entitlement to payment based on the value of work at an arbitrary date.
2. Effect of missing notices. Following Watkin Jones & Son Ltd v Lidl UK GmbH [2002] EWHC 183 (TCC), the court held that, where the employer serves none of the required notices, the amount stated in the interim application must be treated as the agreed value for that application, whether right or wrong. The employer cannot later reopen that valuation through a separate adjudication.
3. Second adjudication. The second notice and referral sought the valuation of the works forming the subject of Application No 13. That question had already been decided in principle by the first adjudication. The difference between the contractual valuation period ending on 11 May 2014 and the date stated in the second notice did not alter the substance of the reference. The second adjudicator therefore lacked jurisdiction.
4. Alternative basis. The employer had no contractual right to obtain a valuation at a date other than a specified valuation date, still less a financial award or repayment based on it. The court could finally determine the parties’ rights because the contract provided for litigation rather than arbitration. The judge declined to depart from the principle in Hayter v Nelson [1990] 2 Lloyd’s Rep 265 merely because the dispute arose in adjudication.
5. Practical consequences and guidance. Allowing a later true-value adjudication would undermine the statutory and contractual notice regime. The rule on successive adjudications explained in Interserve v Cleveland Bridge [2006] EWHC 741 (QB) reinforced the need to comply with each decision. The judge also approved the guidance in CJP Builders Ltd v William Verry Ltd [2008] BLR 545 that an adjudicator may use an unless-order procedure, provided each party has a reasonable and broadly comparable opportunity to be heard. ISG was entitled to its costs on the standard basis.