In Bellway Homes Limited v Surgo Construction Ltd [2024] EWHC 269 the Technology and Construction Court (TCC) was asked to determine issues arising in relation to the appointment of a panel adjudicator; and his decision entitling the employer to repayment of sums overpaid on a previous interim payment cycle.

Background

Bellway Homes Limited (“Bellway”) engaged Surgo Construction Ltd (“Surgo”) under an amended JCT Intermediate Building Contract with Contractor’s Design, 2016 Edition dated 9 October 2019 (the “Contract”).

In February 2023, the contract administrator issued payment certificate 36 (“Certificate 36”) in a negative sum of c.£3.4million. Surgo did not repay that sum, and, to the contrary, claimed it was itself owed a further £1.42m.

Bellway referred its claim to adjudication on a notified sum basis and an alternative true value basis to Mr Jonathan Cope, one of 3 panel adjudicators named in the Contract (the “Adjudicator”). Surgo challenged aspects of the adjudication provisions in the Contract, and the Adjudicator later resigned.

On 13 March 2023, Bellway commenced a further adjudication. On that occasion the referral was stated to be made under The Scheme for Construction Contracts (England and Wales) Regulations 1998 (the “Scheme”) but Bellway again selected the Adjudicator from the Contract panel. Notwithstanding objections by Surgo, the Adjudicator accepted jurisdiction on that basis and proceeded to make a true valuation decision (the “Decision”) that Surgo must repay Bellway sums overpaid within the earlier interim payment cycle.

Surgo had by that time issued a Part 8 claim challenging Bellway’s entitlement to be paid sums by Surgo on an interim basis pursuant to a true value determination; and confirming that to the extent there had been overpayment to Surgo during the course of the works, Bellway was not entitled to be repaid until the issuing of the final certificate, subject to a final reconciliation in accordance with Clause 4.21 of the Contract.

For its part, Bellway brought a Part 7 claim seeking to enforce the Decision, in response to which Surgo rehearsed its earlier jurisdictional arguments.

What did the Court Decide?

The judge determined that the bespoke adjudication clause was not in contravention of the Housing Grants, Construction and Regeneration Act 1996 (“HGCRA”). As long as the objective of securing appointment and referral within 7 days of the notice was achieved it did not matter if a period in excess of 7 days was not expressly prohibited.

Further, the contractual requirement for the Adjudicator to be picked from Bellway’s panel did not contravene the HGCRA. There was no basis to suggest that by the mere fact of being on Bellway’s panel the Adjudicator was not “ostensibly impartial”.

As to the substantive award that had been made by the Adjudicator, the judge held that the payment mechanism within the contract (as amended) envisaged that a negative amount might be due to the contractor in an interim payment cycle. Further, the words “at any time” included in clause 4.9, meant the employer was not limited to recovering an overpayment at the final account stage only. Surgo’s Part 8 Claim was therefore dismissed.

Conclusion

The decision confirms that bespoke adjudication clauses can be acceptable to the court and are not necessarily contrary to the HGCRA; and that where an objective is achieved there is no need for the clause in question to explicitly require it. It further illustrates the court’s robust approach to addressing suggestions of adjudicator impartiality.

Bespoke amendments to interim payment provisions might also prove acceptable, and contractors should take careful note of clauses entitling their employer to recoup overpayments without waiting for the final account stage.

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David Spires 

Partner

E-mail: DSpires@hklegal.co.uk

 

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.

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