BEXHEAT LIMITED v ESSEX SERVICES GROUP LIMITED

A payer who fails to serve a valid payment or pay less notice must pay the notified sum by the final date for payment. It cannot commence or rely upon a true-value adjudication until it has discharged that immediate obligation.

An earlier adjudication bars a later adjudication only where the referred or decided disputes are the same or substantially the same. A contractual right of set-off cannot defeat the statutory requirement for immediate compliance with an adjudicator’s payment direction, save within limited exceptions. A jurisdictional objection must be reserved appropriately and clearly; an objection omitted while other specific objections are pursued is ordinarily waived.

BHL sought summary judgment enforcing an adjudicator’s direction that ESG pay £706,029.62, VAT, interest, statutory compensation and fees. ESG had failed to serve a valid pay less notice against Interim Application 23.

ESG relied on an earlier adjudication valuing Interim Application 22, contractual clauses permitting set-off and joinder of disputes, and an objection to statutory compensation. Alternatively, it sought a stay because of BHL’s alleged inability to repay or risk of dissipation.

The principal questions were whether the second adjudicator had revisited a previously decided dispute, whether the contractual set-off and joinder provisions could defeat immediate payment, whether the compensation award was severable, and whether enforcement should be stayed.

1. Summary judgment was granted and the stay refused. The second adjudication decision was valid and enforceable. BHL was entitled to £724,827.88, plus interest and costs.

2. The first and second adjudications concerned neither the same nor substantially the same disputes. The first determined the true value of Interim Application 22 for the period ending 31 July 2021. The second determined entitlement to the notified sum under Interim Application 23 for a later valuation period following ESG’s failure to serve a valid pay less notice. The second adjudicator did not trespass upon the first decision.

3. Any argument that the first decision displaced the second adjudicator’s power was jurisdictional in substance. ESG had raised a different, specific jurisdictional objection but had not reserved the objection now advanced. Applying Bresco Electrical Services Ltd v Michael J Lonsdale (Electrical) Ltd [2019] EWCA Civ 27, it had waived that ground.

4. Section 111 of the Housing Grants, Construction and Regeneration Act 1996 imposed an immediate obligation to pay the notified sum. If ESG wished to rely on the first valuation against Interim Application 23, it should have done so in a timeous pay less notice. Until payment, ESG could neither commence nor rely upon a true-value adjudication.

5. Clause 30.2 could not confer an unqualified right to set off contra charges against the adjudicator’s express payment direction. It had to be construed subject to the Scheme’s requirement for immediate compliance and the limited exceptions identified in Thameside Construction Co Ltd v Stevens [2013] EWHC 2071. Otherwise, it was unenforceable. None of those exceptions applied.

6. Clause 30.3 could not permit ESG unilaterally to combine the notified-sum and true-value disputes. Paragraphs 8 and 20 of the Scheme required all parties’ consent. In any event, section 111 prevented ESG from pursuing the true-value dispute before paying the notified sum.

7. The £100 statutory-compensation award was discrete and capable in principle of severance. ESG nevertheless waived its jurisdictional objection by failing to raise it before the adjudicator.

8. BHL was a going concern. Its financial position was substantially the same as when the contract was made, and any adverse movement was attributable to ESG’s non-payment. There was no evidence of intended dissipation or other exceptional circumstance justifying a stay.

• High Court: Enforced the second adjudication decision by summary judgment and refused a stay of execution.
• Second adjudication: The adjudicator decided that ESG had not served a valid pay less notice and directed payment of the notified sum, interest, compensation and fees.
• First adjudication: A different adjudicator determined the true value of Interim Application 22. ESG paid that award.