A dispute over payment was held to have
crystallized when, following an application for interim payment
under the contract by the contractor, no valid withholding notice
was issued by the employer. A common sense application of the
existing case law on “no dispute” arguments was
taken.
Mr Justice Akenhead – Queen’s Bench Division,
Technology and Construction Court
Background
Vauxhall employed Ringway to construct a new vehicle distribution
centre and various associated works under a contract incorporating
the JCT Standard Form of Contract With Contractor’s Design
(1998 Edition). Substantial delays occurred on the project
which, according to Ringway, resulted from factors for which they
were not responsible. Ringway submitted an application for
payment for over £1 million. Vauxhall did not serve a
withholding notice within five working days of receipt of the
application for payment, as stipulated in the contract, nor did it
pay the amount sought. Ringway referred the dispute over
payment to adjudication.
Vauxhall challenged the jurisdiction of the adjudicator from the
outset on the basis that the adjudicator had no jurisdiction
because no dispute had crystallised. In essence, it argued
that:
(i) The document entitled “Interim Application
No.11” dated 16 May 2007 was not an application for payment
within the meaning of the contract, therefore the five-day period
in which Vauxhall should issue its withholding notice in order to
withhold payment under the contract had not been triggered;
and
(ii) The parties had agreed that they would not adopt the
contractual procedure and would instead seek to negotiate the
ultimate entitlement to payment without resorting to the mechanism
for payment in the contract.
The adjudicator decided that Interim Application No.11 was indeed
an interim application for payment under the contract, that a
dispute had arisen and that he had jurisdiction to decide that
dispute, which he proceeded to do, finding in favour of
Ringway. Vauxhall refused to pay Ringway the monies awarded
and Ringway applied for summary judgment to enforce the
adjudicator’s decision.
Decision
Mr Justice Akenhead found that:
1) The document entitled Interim Application No.11 was indeed
an interim application for payment under the contract. The
fact that practical completion may have occurred prior to the issue
of that document did not preclude it from being an application for
interim payment.
2) If Vauxhall believed that the net sum was overstated, the
contractual machinery enabled it to give an appropriate notice
saying so, and not later than five days before the final date for
payment of an amount due, to give a written withholding notice
informing Ringway of its decision to withhold payment. It had
not issued either of these notices within the timescale
stipulated.
3) He was not satisfied that there was any express or implied
agreement between the parties in the exchange of correspondence
that took place after Interim Application No.11 was issued that
this was not to be treated as an application for interim payment,
but as an invitation to treat or to negotiate.
4) On that basis, a substantive dispute arising out of Interim
Application No.11 had crystallised and that was the dispute that
had been referred to and decided by the adjudicator.
The court awarded summary judgment in favour of Ringway.
See another article on this case:
Adjudication: when a dispute crystallizes
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