Ringway Infrastructure Services Limited v Vauxhall Motors Limited

United Kingdom

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

For full judgment, please click here

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