M Davenport Builders Ltd v Greer & Anor

An employer required to make an immediate payment under the Housing Grants, Construction and Regeneration Act 1996 after failing to serve a Payment Notice or Pay Less Notice must pay before relying on a later true-value adjudication. The rule applies to both interim and final applications. A later adjudication may determine the true value and any resulting adjustment, but it cannot postpone the immediate payment obligation. The guidance in S&T(UK) Ltd v Grove Developments Ltd [2018] EWCA Civ 2448 was treated as authoritative despite being obiter. Harding v Paice [2015] EWCA Civ 1231 did not establish a contrary rule.

The claimant sought summary judgment to enforce an adjudicator’s award of £106,160.84 plus interest on a final account under a construction contract. The defendants accepted that the award was valid and enforceable, but sought to rely on a subsequent true-value adjudication by way of set-off or counterclaim.

The defendants had not paid the first adjudicator’s award before commencing the later adjudication. The central issue was whether they could commence and, in particular, rely on the later true-value decision without first discharging the immediate payment obligation.

Summary judgment was granted for the claimant to enforce the first adjudicator’s decision, together with interest. The defendants could not rely on the later true-value adjudication.

1. The payment and adjudication provisions of the Housing Grants, Construction and Regeneration Act 1996 pursue related but distinct purposes. Failure to serve a Payment Notice or Pay Less Notice may create a short route to immediate payment without requiring a valuation of the works. That does not prevent a later true-value adjudication.
2. The immediate payment obligation has priority. An employer subject to an adjudicator’s order arising from that short route must discharge the order before relying on a subsequent true-value adjudication by way of defence, set-off or counterclaim. The adjudication regime cannot be used to postpone the prompt-payment obligation.
3. The Court of Appeal’s reasoning in S&T(UK) Ltd v Grove Developments Ltd [2018] EWCA Civ 2448, including the distinction between the payment bargain and the valuation bargain, was technically obiter but had been fully argued and was intended to provide authoritative guidance. The judge agreed with it and felt obliged to follow it. The approach in the first-instance decision, [2018] EWHC 123 (TCC), was also clear and supported the same conclusion.
4. There was no material policy distinction between interim and final applications. Cashflow remained relevant after completion, and the insolvency provisions did not justify a different approach. The principle in Adam Architecture v Halsbury Homes Ltd [2017] EWCA Civ 1735 supported equal treatment.
5. The judgment did not decide whether, or in what circumstances, a court should restrain a true-value adjudication commenced before payment. Harding v Paice [2015] EWCA Civ 1231 showed that commencement or progress would not invariably be restrained. The issue did not affect the present enforcement application. The VAT issue was therefore not decided. The defendants were ordered to pay the claimant’s costs.