Lidl Great Britain Limited v Closed Circuit Cooling Limited t/a 3CL

The Grove principle prevents a payer from commencing a true-value adjudication before paying a notified sum where the adjudication concerns matters that could have been raised in a payment or payless notice for that notified sum. It does not prohibit every adjudication while the notified sum remains unpaid. The relevant distinction is substantive and objective. Claims concerning defects or delay arising after the relevant payment cycle may ordinarily be adjudicated. A subsequent adjudication cannot be characterised by the payer’s intention to obtain a deduction or set-off if, objectively, it does not seek to revalue matters that could have been raised in the earlier payment cycle.

The parties were engaged in a series of adjudications concerning refrigeration works. In an earlier adjudication, 3CL obtained an award of the notified sum arising from its payment application AFP19. Lidl paid that award only after referring two further disputes to adjudication.

Adjudication no 2 concerned Lidl’s recovery of the cost of post-completion snagging and defect rectification. Adjudication no 3 concerned 3CL’s entitlement to extensions of time. Lidl sought summary judgment enforcing adjudication no 2. 3CL sought declarations that adjudications nos 2 and 3 were unenforceable under the Grove principle. The central issue was the scope of that principle and its application to the two referrals.

1. The court rejected the proposed prohibition on commencing any adjudication before payment of an unpaid notified sum. The right to adjudicate construction disputes is valuable and should not be restricted without clear statutory or principled justification.

2. The Grove principle applies to a true-value adjudication concerning matters which could have been the subject of a payment notice or payless notice in respect of the particular notified sum. It may cover valuation, defects, delay claims or similar deductions, whether considered together or separately.

3. The dividing line is substantive and objective. Matters arising after the relevant payment or payless notice date, and which could not have been included in that notice, are not caught. The payer’s intention to create a future set-off or deduction is irrelevant if the adjudication does not objectively seek to revalue matters within the earlier payment cycle.

4. Adjudication no 2 principally concerned post-completion defects and snagging works arising after the AFP19 payment cycle. It was therefore outside the principle, subject to an arguable overlap with deductions made in PAY-7. The court severed the affected sum and granted Lidl summary judgment for £496,946.02, together with proportionate interest and the adjudicator’s costs.

5. Adjudication no 3 was within the principle to the extent that it sought a determination that 3CL had no entitlement to an extension of time between 18 June 2022 and 29 September 2022. That issue substantially revalued the same delay issue used to justify deductions in PAY-7. The adjudicator lacked jurisdiction for that period, but retained jurisdiction for the periods 25 May to 18 June 2022 and 29 September to 26 October 2022.

Not an appeal. The judgment determined parallel Part 7 enforcement and Part 8 jurisdiction proceedings at first instance.