Henry Construction Projects Ltd v Alu-Fix (UK) Ltd

Factual and Procedural Background

The Plaintiff applied by way of summary judgment dated 14th March 2023 within Part 7 proceedings to enforce a "true value" adjudication decision ("TVA") dated 6th March 2023, wherein the adjudicator decided that the Defendant owed the Plaintiff £191,753.88 plus interest. The Defendant opposed the application on jurisdictional grounds, supported by expert evidence. The claim was transferred to Liverpool for hearing by a TCC District Judge.

The dispute arose under a JCT Standard Building Sub-Contract dated 14th June 2021, varied on 8th July 2021, for a boutique hotel development in Central London. The Plaintiff was the Contractor and the Defendant the Sub-Contractor.

Following a dispute, the Defendant terminated the sub-contract on 11th November 2022, triggering a payment mechanism requiring the Defendant to submit a payment application ("PA"). The Defendant submitted a PA on 15th November 2022 for £257,004.50 plus VAT, with payment due by 13th December 2022. The Defendant was not paid by that date and referred the matter to a "smash and grab" adjudication ("SGA") on 15th December 2022.

The Plaintiff submitted two pay less notices ("PLNs") on 25th November and 12th December 2022, disputing the PA. The Plaintiff commenced the TVA on 18th January 2023, asserting the Defendant was overpaid and owed money back. The SGA submissions were ongoing at that time.

The Defendant challenged the jurisdiction of the TVA adjudicator, contending that the Plaintiff had not paid a notified sum as required by section 111 of the Housing Grants, Construction and Regeneration Act 1996 (as amended) ("HGCRA96"), thus depriving the adjudicator of jurisdiction.

The first adjudicator in the SGA issued a decision on 27th January 2023, rejecting the Plaintiff's arguments and awarding the Defendant the sum claimed, payable by 3rd February 2023. The TVA adjudicator stayed the TVA pending payment, confirming he would resign if payment was not made. The Plaintiff paid in full on 2nd February 2023, after which the TVA proceeded to decision.

Legal Issues Presented

1. Whether the TVA adjudicator had jurisdiction to decide the dispute given the Plaintiff had not paid the notified sum before commencing the TVA.
2. Whether the commencement of a true value adjudication prior to payment of an immediate payment obligation under s.111 HGCRA96 is a jurisdictional defect rendering the adjudication null and void.
3. Whether a genuine dispute as to the validity of pay less notices affects the timing and existence of the immediate payment obligation and thus the jurisdiction to commence a TVA.
4. Whether the Plaintiff can rely on the TVA decision after payment of the immediate payment obligation following the SGA decision.

Arguments of the Parties

Plaintiff's Arguments

• The Plaintiff contended that the jurisdictional objection was novel and that the issue was not truly jurisdictional.
• At the time the TVA was commenced, there was an ongoing genuine dispute as to the validity of the PLN issued on 25th November 2022, meaning no immediate payment obligation had yet arisen.
• Accordingly, the embargo on commencing a TVA before payment of any immediate payment obligation should not apply in these circumstances.
• The immediate payment obligation only arose upon the adjudicator's ruling in the SGA, which invalidated the PLN, and the Plaintiff discharged this obligation within the timeframe ordered.
• The Plaintiff relied on case law suggesting that it is not an essential prerequisite to have paid the immediate obligation before launching a later true value adjudication, but that the critical time is when enforcement is sought.
• The Plaintiff argued that a finding of no jurisdiction would lead to absurd consequences, including retrospective removal of jurisdiction and undue curtailment of employers' rights.
• The Plaintiff submitted there was no risk of a "Trojan Horse" abuse since the sums due under the SGA were paid promptly.

Defendant's Arguments

• The Defendant argued that established authorities are clear that a TVA cannot be commenced while an immediate payment obligation remains unsatisfied.
• The Defendant relied on the AM Construction case as directly applicable, where the court found that an unpaid immediate payment obligation precluded commencement of a TVA.
• The Defendant emphasized the policy of prompt payment and cashflow protection, which would be undermined if TVAs could be commenced prematurely.
• The Defendant contended that the immediate payment obligation arose on 13th December 2022, the final date for payment determined by the SGA adjudicator, and thus existed prior to commencement of the TVA on 18th January 2023.
• The Defendant rejected any retrospective validation of the TVA and argued the Plaintiff bore the burden to pay before commencing the TVA or accept delay.
• Concerns were raised that a ruling for the Plaintiff might encourage spurious disputes aimed at delaying payment and prematurely launching TVAs, contrary to the statutory policy.
• The Defendant submitted that the Harding case was a stand-alone decision with limited application and should be treated cautiously.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Bexheat v Essex Services Group [2022] EWHC 936 (TCC)	Established principles on immediate payment obligation under s.111 HGCRA96 and enforcement of adjudicator decisions; robust approach to enforcement unless jurisdiction exceeded.	Cited extensively to confirm the immediate payment obligation must be discharged before commencing a true value adjudication and that failure to do so deprives adjudicator of jurisdiction.
Grove Developments Ltd v S&T (UK) Ltd [2018] EWCA Civ 2448	Clarified that an employer must pay the notified sum under s.111 before commencing a true value adjudication under s.108.	Applied to reject Plaintiff's argument that payment obligation could be deferred until after TVA commencement.
M Davenport Builders Ltd v Greer [2019] EWHC 318 (TCC)	Supported the policy that immediate payment obligations must be discharged before relying on a subsequent true value adjudication.	Followed to emphasize policy considerations and reinforce the sequence of payment obligation and adjudication.
AM Construction v The Darul Amaan Trust [2022] EWHC 1478 (TCC)	Confirmed that a true value adjudication cannot commence while an immediate payment obligation remains unpaid.	Relied upon by Defendant to support the jurisdictional objection and to reject Plaintiff's novel argument.
Harding (t/a MJ Harding Contractors) v Paice [2015] EWCA Civ 1231	Suggested that payment of immediate obligation before launching later true value adjudication may not be an essential prerequisite, focusing on enforcement stage.	Discussed by Plaintiff to argue the timing of payment obligation is critical and enforcement stage matters most; court found this was not decisive here.
Macob Civil Engineering Ltd v Morrison Construction Ltd (1999) 64 ConLR 1	Robust enforcement of adjudicator decisions unless jurisdiction exceeded or serious breach of natural justice.	Cited as part of the general principle favoring enforcement of adjudicator decisions.
Carillion Construction Ltd v Devonport Royal Dockyard Ltd [2005] EWHC 778 (TCC) and [2005] EWCA 1358	Reinforced robust enforcement of adjudicator decisions and jurisdictional limits.	Supported the court's robust approach but subject to jurisdictional compliance.
J & B Hopkins Ltd v Trant Engineering Ltd [2020] EWHC 1305 (TCC)	Affirmed principles of adjudication enforcement and jurisdiction.	Referenced in support of the enforcement framework.
Bresco Electrical Services Ltd (in liq) v Michael J Lonsdale (Electrical) Ltd [2020] UKSC 25	Confirmed limits on adjudicator jurisdiction and enforcement principles.	Used to underline the court's approach to jurisdictional challenges.

Court's Reasoning and Analysis

The Court focused on the critical question of when the immediate payment obligation arose under s.111 HGCRA96. The adjudicator in the SGA determined that the final date for payment was 13th December 2022, rejecting the Plaintiff's contention that the payment deadline was 3rd February 2023. This date was decisive in establishing the existence of an immediate payment obligation prior to commencement of the TVA on 18th January 2023.

The Court rejected the Plaintiff's argument that a genuine dispute as to the validity of the PLN delayed the immediate payment obligation. The Court emphasized that allowing commencement of a TVA before payment risks undermining the statutory policy of prompt payment and cashflow protection, enabling a disputing party to delay payment and prematurely commence a TVA.

The Court noted that the Plaintiff’s reliance on the Harding decision, which suggested payment before launching a later true value adjudication may not be essential, does not override the clear authority in Grove and Bexheat requiring payment before commencing a TVA.

The Court distinguished scenarios where no notified sum exists (e.g., a valid PLN or invalid PA) from the present case where the notified sum was payable and unpaid before the TVA was commenced. It acknowledged that reliance on a TVA after payment of the immediate obligation may be permissible, but that does not validate a prematurely commenced TVA.

Ultimately, the Court concluded that the Plaintiff was not entitled to commence the TVA before discharging the immediate payment obligation established by the SGA decision. Therefore, the TVA adjudicator lacked jurisdiction, rendering the TVA null and void. The Court declined to enforce the TVA by summary judgment.

Holding and Implications

The Court DISMISSED the Plaintiff's application for summary judgment to enforce the true value adjudication decision.

The direct effect is that the TVA decision is treated as a nullity due to lack of jurisdiction, as the Plaintiff prematurely commenced it without satisfying the immediate payment obligation under s.111 HGCRA96. The Plaintiff must first discharge such payment obligations before commencing a true value adjudication.

The decision reinforces established legal principles regarding the sequencing of payment obligations and adjudication under the HGCRA96 and does not create new precedent. It serves as a caution against attempts to circumvent prompt payment requirements by premature adjudication.