In Battersea Project Phase 2 Development Co Ltd v QFS Scaffolding Ltd [2024] EWHC 591, the TCC looked again at the interplay between an adjudication notice and a “conclusive evidence” provision relating to a final payment notice (FPN) issued under a JCT contract.

Background

Battersea engaged QFS under a JCT Design and Build Subcontract Agreement 2011 edition with bespoke amendments for an asbestos scaffolding package.

The relevant clauses of the Sub-Contract were as follows:

• Clause 1.8.1 provided that a FPN was conclusive of the various matters listed in that clause, unless clause 1.8.2 was engaged.
• Clause 1.8.2 provided that if adjudication, arbitration, or other proceedings were commenced within the time periods noted in the clause, the FPN would not be conclusive pending the conclusion of those proceedings; and upon such conclusion, the effect of the FPN would be subject to the terms of any decision, award or judgement in or settlement of such proceedings.

On 19 December 2022, QFS gave notice of its intention to refer to adjudication the true value of the Final Sub-Contract Sum (“Adjudication 11”). Due to a number of other ongoing adjudications between the parties, it was agreed that QFS would not serve its Referral before 13 January 2023. However, QFS failed to serve the Referral on this date.

Battersea argued that the agreement for the Referral to be served no earlier than 13 January 2023 was a suspensory waiver. In light of this, Battersea gave notice that its waiver would end on 3 February 2023. QFS failed to serve the Referral by 3 February 2023.

In May 2023, QFS served a further Notice of Adjudication, in materially identical terms to its December Notice. The Adjudicator’s Decision awarding QFS c.£3.1 million was eventually published in September 2023.

Battersea objected and contended that no effective adjudication could be pursued once 13 January 2023 or, in the alternative, 3 February 2023 had passed given no unforeseeable reason for those dates being missed had been relied on by QFS. Thus, Battersea argued that QFS had abandoned Adjudication 11, and subsequently sought a declaration by way of a Part 8 claim that a FPN which it had issued on 22 December 2022 should stand as conclusive evidence of the (lesser) sum due.

QFS then brought a Part 7 claim to enforce the Decision. The parties agreed that the two actions should be heard together.

What did the Court Decide?

The judge held that in order to render Adjudication 11 effective, QFS should have issued its Referral on 13 January 2023 or, as a result of a forbearance or waiver, by 3 February 2023 at the latest. Therefore, the Notice was bound to fail because QFS had not served its Referral by the agreed date.

However, the court found that on a proper construction of clause 1.8.2, “conclusion” meant either a decision, award or judgment or a settlement. Therefore, a “conclusion” did not include the ending of an adjudication which had become a nullity.

Moreover, the expression “such proceedings” was found to be broad enough to encompass adjudication proceedings relating to the same dispute as the subject matter of the initial notice.

The court therefore decided that the adjudication proceedings commenced on 19 December 2022 were only concluded when the Adjudicator reached his Decision in September 2023 – unless, before then, QFS had already abandoned the proceedings.

As to that question of abandonment, the judge determined that although QFS erroneously thought it did not need to serve the referral in February 2023, its position throughout the subsequent exchanges in correspondence was clear that it was trying to settle Adjudication 11. It was not because it intended to abandon the adjudication proceedings.

The Decision was therefore enforceable, and the Part 8 Claim was dismissed and summary judgment given in the Part 7 proceedings.

Conclusion

The “conclusive evidence” provisions of clause 1.8 of the JCT contract can be tricky to negotiate, even in their unamended form. This case confirms what is meant by “conclusion” of proceedings, finding that “conclusion” does not include an adjudication that has become a nullity. If proceedings are commenced in timely fashion, the conclusive evidence clause will bite only where it can be shown that a party has subsequently abandoned those proceedings before their conclusion.

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This article contains information of general interest about current legal issues, but does not provide legal advice. It is prepared for the general information of our clients and other interested parties. This article should not be relied upon in any specific situation without appropriate legal advice. If you require legal advice on any of the issues raised in this article, please contact one of our specialist construction lawyers.

© Hawkswell Kilvington Limited 2024

 

For more information contact:

David Spires | Partner 

Author:

Meredith Peart | Paralegal