ISG Retail Limited v FK Construction Limited

Where an adjudicator’s temporarily binding decision is later shown to be wrong by a final court determination, the temporary effect of the decision yields retrospectively to the final judgment. Sums paid pursuant to the adjudication may therefore be recovered, together with appropriate consequential relief. The repayment claim is not defeated merely because the later proceedings did not directly seek to reverse the adjudicator’s decision, or because other disputes or adjudications exist between the parties. A draft judgment should be reopened only within the proper correction jurisdiction. It must not become an additional opportunity to remedy evidential gaps or advance arguments that could have been raised at the original hearing.

The claimant sought repayment of £1,751,063.70 paid pursuant to an adjudicator’s decision requiring payment of a notified sum under the Housing Grants Construction and Regeneration Act 1996. The adjudicator had treated a late application for payment as a valid default payee’s notice under section 110B(4).

In earlier Part 8 proceedings concerning a different application, the court held that a late application was not submitted in accordance with the contract and could not qualify under section 110B(4). The claimant contended that this final determination undermined the basis of the earlier adjudication and entitled it to repayment. The defendant relied on other adjudications, alleged true-value issues and further arguments raised after circulation of the draft judgment.

1. Repayment of adjudication overpayment. Applying the principle in Aspect Contracts (Asbestos) Ltd v Higgins Construction Plc [2015] 1 W.L.R. 2961, where a dispute referred to an adjudicator is subsequently finally determined by the court or an arbitral tribunal on a different basis, sums paid pursuant to the adjudicator’s incorrect decision must be repaid to the extent of the overpayment. The adjudicator’s temporarily binding decision ceases retrospectively to bind once the final determination establishes that more was paid than was substantively due (paras [16]–[19]).
2. The repayment remedy was available even though the claimant’s earlier Part 8 proceedings did not directly seek to reverse the adjudicator’s decision. That distinction made no material difference because the court’s determination undermined the premise on which the adjudicator had proceeded (para [17]).
3. The defendant’s reliance on estoppel failed. The adjudicator had rejected the claimant’s estoppel arguments, and repayment remained justified because the statutory construction underlying the decision had subsequently been shown to be wrong. Other disputes between the parties could not be opened up to avoid repayment. A separate adjudicator’s conditional provision concerning sums that were “not paid” did not apply because the relevant sums had in fact been paid (paras [20]–[23]).
4. The court entered summary judgment and declarations requiring repayment of £1,751,063.70. Relief concerning the later adjudication became unnecessary because repayment rendered enforcement of that decision otiose (paras [24]–[25]).
5. Reconsideration of draft judgment. Following Gosvenor London Ltd v Aygun Aluminium UK Ltd [2018] EWHC 227 (TCC); [2018] Bus L.R. 1439, a draft judgment should not be reopened to permit a second round of litigation, cure omissions in evidence or introduce arguments that could have been advanced at the hearing. Further points arising on receipt of the draft judgment are ordinarily matters for the Court of Appeal, not grounds for reopening the judgment (paras [28]–[32]).

First-instance proceedings. The judgment records earlier adjudications, enforcement proceedings before Joanna Smith J, and earlier Part 8 proceedings before the same judge, but no appeal from the present decision.