RMC Building & Civil Engineering Ltd v UK Construction Ltd (Rev 1)

Where a construction contract provides an adequate payment mechanism, the payment provisions of the contract govern the payment dates. If the payer fails to serve a compliant payment or pay less notice within the statutory or contractual period, the notified sum becomes payable, subject to any effective agreement, waiver or estoppel. Without prejudice negotiations aimed at resolving a payment dispute are inadmissible as evidence of admissions against interest. A party seeking to resist enforcement of an adjudicator’s decision must provide credible evidence of severe financial hardship or a real risk that an overpayment cannot be recovered. A stay is exceptional and will not ordinarily be granted merely because the adjudicated sum may exceed the true final entitlement.

RMC, a groundworks subcontractor, applied for summary judgment to enforce an adjudicator’s decision requiring UK Construction Ltd to pay £216,129, together with costs, expenses and interest. The dispute arose from RMC’s interim payment application, in respect of which UKC had served no pay less notice.

UKC challenged the adjudicator’s jurisdiction, contended that the application had been withdrawn or superseded during without prejudice negotiations, argued that the adjudicator had exceeded a cap in the Scheme for Construction Contracts, and alleged that RMC’s departure from site had been an accepted repudiatory breach. UKC also sought an adjournment or stay of enforcement pending a Part 8 claim concerning the true value of the account.

1. Jurisdiction. UKC had produced no evidence that the alleged Letter of Appointment had been sent to RMC. Its provision for TecSA to nominate the adjudicator therefore did not form part of the contract. The adjudicator was properly appointed.
2. Without prejudice communications. The exchanges between the parties were negotiations intended to resolve a continuing payment dispute. They fell within the without prejudice rule, and admissions against interest made during them could not be relied upon. The court applied the approach in Unilever v Proctor & Gamble [2000] 1 WLR 2436, as cited in Sang Krok Suh v Mace (UK) [2016] EWCA Civ 4.
3. Payment entitlement. The contractual provision for payment 30 days from month-end valuation supplied an adequate payment mechanism. Sections 110A and 110B of the Housing Grants, Construction and Regeneration Act 1996 therefore applied. RMC was entitled to issue its payment application, and UKC’s pay less notice had to be served within the applicable period under section 111(7) and paragraph 10 of Part II of the Scheme for Construction Contracts. No such notice was served. The sum stated in the application consequently became payable.
4. Withdrawal and dispute. The court adopted the approach in VGC Construction Ltd v Jackson Civil Engineering Ltd [2008] EWHC 2082 (TCC): a disputed claim may cease to be a dispute through agreement or an unequivocal withdrawal, and estoppel or waiver may arise if the responding party relies detrimentally on a clear representation. On the evidence, there was no binding withdrawal and no detrimental reliance. The adjudicator’s finding that the application had not been withdrawn was within his jurisdiction.
5. Scheme cap. UKC failed to prove the contract price or entire sum payable. Its challenge under paragraph 2(4) of Part II of the Scheme therefore failed.
6. Repudiation and stay. UKC had not accepted any repudiatory breach by RMC. Summary judgment was granted. Following Galliford Try Building Ltd v Estura Ltd [2015] BLR 321, a stay is appropriate only in rare cases. UKC provided no credible evidence of severe financial hardship or of a real risk that RMC could not repay any overpayment. Enforcement was not stayed.