M Davenport Builders Limited v Mr Colin Greer, Mrs Julia Greer
The case concerned a final account dispute between M Davenport Builders Limited (“Davenport”) and Mr Colin Greer and Mrs Julia Greer (the “Greers”). The adjudication and payment provisions of the Scheme for Construction Contracts (the “Scheme”) and the Housing Grants, Construction and Regeneration Act 1996 (the “Act”) applied.
Davenport made a final account payment application for £106,160.84. The Greers did not submit a Payment Notice or a Pay Less Notice. Davenport issued a Payee’s Default Notice. The Greers failed to pay and Davenport commenced adjudication proceedings (“Adjudication One”). In Adjudication One, Davenport was awarded the full amount claimed in its final account application plus interest. The Greers commenced a new adjudication (“Adjudication Two”) disputing the valuation of the final account. Davenport commenced enforcement proceedings for the award made in Adjudication One. The Greers sought to rely on the award made in Adjudication Two. The key question was whether the Greers could rely on the decision in Adjudication Two, without paying the amount in Adjudication One.
The Judge referred to the case of Harding v Paice  1 WLR 4068, where Paice had failed to submit a valid Payment Notice or Pay Less Notice and failed to pay the award ordered against it in the following adjudication. Harding commenced enforcement proceedings. Paice commenced a “true value” adjudication before the enforcement proceedings hearing. Despite the fact Paice had not paid the amount awarded in the initial adjudication before proceeding with the “true value” adjudication, Paice was not prevented from relying on the “true value” adjudication award in the enforcement proceedings. However, before the enforcement proceedings decision was made and before the Adjudicator gave its decision in the “true value” adjudication, Paice had paid the sums ordered in the initial adjudication.
Mr Justice Stuart-Smith concluded that before the Greers were able to rely on the decision made in Adjudication Two, they were obliged to discharge their immediate payment obligation from Adjudication One. The Judge noted:
“In my judgment, it should now be taken as established that an employer who is subject to an immediate obligation to discharge the order of an Adjudicator based upon the failure of the employer to serve either a Payment Notice or a Pay Less Notice must discharge that immediate obligation before he will be entitled to rely upon a subsequent decision in a true value adjudication.”
Mr Justice Stuart-Smith held that the Greers had not discharged their immediate payment obligation. Therefore, the Greers were not entitled to rely on the decision made in Adjudication Two. The Greers were ordered to pay Davenport £106,160.84 plus interest and the costs of the enforcement proceedings. Additionally, the Judge considered the difference between final applications and interim applications and whether the difference was of any significance when providing his judgment. The Judge considered that there was nothing in the provisions of the Act or the Scheme which suggested that different policy considerations should apply.
The Judge noted that the Court will not always restrain the progress of a “true value” adjudication commenced before the employer has discharged its immediate payment obligation. However, he considered that it was not necessary for him to decide under what circumstances this might occur.
Despite the suggestion that there may be circumstances when payment by an employer is not a precondition to relying on a following true value adjudication, in the interests of time and money, it would be prudent for employers to pay contractors prior to commencing any “true value” adjudication.