Shimizu Europe Limited -v- LBJ Fabrications Limited
Case reference:
[2003] EWHC 1229 (TCC)
Thursday, 29 May 2003
Key terms: Adjudicator's decision - natural justice - letter of intent - DOM/1 TeCSA Rules - Payment "without set-off" - Withholding Notice - Future Right to Set-off - VAT invoice
Shimizu as main contractor for work at plot 10, Edmund Halley Road, Oxford Science Park, engaged LBJ as sub-contractors for the design, supply and installation of the louvers and cladding. A contract was recorded in a letter of intent dated 14 February 2002, which stated that the contract would be in the form of the DOM/1 together with various non-standard amendments.
LBJ made an application for an interim payment which became the subject of an adjudication. The parties agreed to adjudicate in accordance with the TeCSA Adjudication Rules 1999 version 1.3. The Adjudicator's decision was dated 20th February 2003 in which he valued LBJ's work and decided that Shimizu should pay the sum of £47,718.39 plus VAT as appropriate "with out set-off… Payment to be made not later than 28 days after LBJ had delivered a VAT invoice as required by amended clause 21.2.4".
Shimizu reserved their position during the adjudication and refused to pay. They sought a declaration in which they challenged the Adjudicator's jurisdiction and also challenged the decision on the basis of breaches of natural justice.
Once a decision had been issued, LBJ sent an invoice to Shimizu. Shimizu then served a withholding notice in relation to sums due in respect of that invoice.
Shimizu argued that by virtue of clause 21.2.4 a payment did not become due to the sub-contractor until Shimizu had submitted an invoice. The final date for payment was 28 days after submission of that invoice. The Adjudicator decided that an amount was due, but the final date for payment was 28 days after receipt of the invoice. Shimizu argued that they were therefore able to serve a withholding notice not later than 5 days before that final date for payment. Shimizu also argued that the Adjudicator based his decision on the wrong contract.
HHJ Kirkham held that the TeCSA Rules provided that the Adjudicator could determine his own jurisdiction. He was therefore able to determine the basis of the contract from which the dispute arose. His decision was made within jurisdiction. He was able to determine the amount payable as at the date of his decision. However, he could not take into account set-off that might arise in the future. It was therefore possible for Shimizu to issue a withholding notice in respect of set-offs which arose after the date of the Adjudicator's decision, but before the final date for payment. Therefore Shimizu's withholding notice was effective and Shimizu were not obliged to pay the Adjudicator's decision. She accepted that it was a harsh position, but the Act did not prohibit this approach, there is simply an application of the sub-contract agreed between the parties.
LBJ made an application for an interim payment which became the subject of an adjudication. The parties agreed to adjudicate in accordance with the TeCSA Adjudication Rules 1999 version 1.3. The Adjudicator's decision was dated 20th February 2003 in which he valued LBJ's work and decided that Shimizu should pay the sum of £47,718.39 plus VAT as appropriate "with out set-off… Payment to be made not later than 28 days after LBJ had delivered a VAT invoice as required by amended clause 21.2.4".
Shimizu reserved their position during the adjudication and refused to pay. They sought a declaration in which they challenged the Adjudicator's jurisdiction and also challenged the decision on the basis of breaches of natural justice.
Once a decision had been issued, LBJ sent an invoice to Shimizu. Shimizu then served a withholding notice in relation to sums due in respect of that invoice.
Shimizu argued that by virtue of clause 21.2.4 a payment did not become due to the sub-contractor until Shimizu had submitted an invoice. The final date for payment was 28 days after submission of that invoice. The Adjudicator decided that an amount was due, but the final date for payment was 28 days after receipt of the invoice. Shimizu argued that they were therefore able to serve a withholding notice not later than 5 days before that final date for payment. Shimizu also argued that the Adjudicator based his decision on the wrong contract.
HHJ Kirkham held that the TeCSA Rules provided that the Adjudicator could determine his own jurisdiction. He was therefore able to determine the basis of the contract from which the dispute arose. His decision was made within jurisdiction. He was able to determine the amount payable as at the date of his decision. However, he could not take into account set-off that might arise in the future. It was therefore possible for Shimizu to issue a withholding notice in respect of set-offs which arose after the date of the Adjudicator's decision, but before the final date for payment. Therefore Shimizu's withholding notice was effective and Shimizu were not obliged to pay the Adjudicator's decision. She accepted that it was a harsh position, but the Act did not prohibit this approach, there is simply an application of the sub-contract agreed between the parties.