Where there is more than one dispute, parties are prevented from referring the disputes to adjudication unless they come to an agreement. Section 108(1) of the Housing Grants, Construction and Regeneration Act 1996 (“Construction Act”) states “a party to a construction contract has the right to refer a dispute arising under the contract for adjudication….”

In the case of Quadro Services Ltd v Creagh Concrete Products Ltd [2021] EWHC 2637 (TCC), the court was asked to determine whether failure to pay three payment applications was one dispute or multiple disputes.

Facts

The parties entered into an oral agreement for Quadro Services Limited (“the Contractor”) to provide works for Creagh Concrete Product Limited (“the Employer”). This was a construction contract (“the Contract”) under the provisions of the Construction Act, and it did not contain any written adjudication provisions so the Scheme for Construction Contracts (England and Wales) Regulations 1998 applied. In the absence of express adjudication wording, the adjudicator cannot determine more than one ‘dispute’ at a time without the parties’ agreement. 

The Contractor raised three payment applications between July and October 2020, two of which were approved by the Employer; the total value of the three applications was £40,026. Each payment application showed the total value of the work done minus the previous payment applications. The payment applications were cumulative.

The Employer had not raised any substantive dispute about its liability to pay the applications or issued any pay less notices.

The Employer failed to pay three applications raised by the Contractor; therefore, the Contractor referred the dispute to adjudication seeking £40,026 plus interest.

Adjudication

The Employer argued that the adjudicator did not have jurisdiction as he was not entitled to decide on more than one dispute. As the matter concerned three payment applications, these were three separate disputes.  

The adjudicator dismissed the jurisdictional challenge and awarded the Contractor the total sum claimed. When the Employer refused to pay, the Contractor issued proceedings to enforce the adjudicator’s decision.

TCC

The court had to determine whether the Employer’s defence had any real prospect of success.

The Contractor argued that “there were sub-issues as to the validity of the individual invoices, and that there is no principle of law that each payment application gives rise to a separate dispute.¹

The Contractor relied on Witney Town Council v Beam Construction (Cheltenham) Ltd² case, which provided some guidance on the definition of ‘a dispute’. The case provided that “a useful if not invariable rule of thumb is that, if disputed claim No 1 cannot be decided without deciding all or parts of disputed claim No 2, that establishes such a clear link and points to there being only one dispute." ³

 The Employer presented four arguments:

1. The Employer also relied on the ‘rule of thumb’ and argued that “if claims can be individually decided, whilst it does not definitively mean they cannot form part of a single dispute, it strongly points to the conclusion that there are multiple disputes.” ⁴
2. There were multiple disputes as there were three disputes that could be decided without reference to each other. “The questions of whether there was a valid payment application, the due date, the final date of payment, whether a pay less notice was served, and whether the final date for payment has passed, have to be considered separately for each claim.” ⁵
3. The only evidence the payment applications were considered together was a demand letter, which demanded sums for four other projects.
4. The first two payment applications were expressly approved, but with regards to the third, there was no express approval; therefore, there were differences between the applications.

Held

The court found that there was a single dispute, and the dispute was the failure to pay £40,026, and the redress sought was the payment of this sum or such other sum the Adjudicator considered appropriate.

The court noted the decision from Prater Limited v John Sisk & Son (Holdings) Limited [2021] EWHC 1113(TCC), which provided that “one needs to look at the facts of each case to use some common sense” ⁶ when determining whether there are several distinct issues.

The Court acknowledged that it was possible to determine each application due without deciding whether the other applications are due does not mean that those issues cannot be sub-issues to a broader dispute.

However, if the Employer’s arguments were allowed, there would have been a significant cost and inconvenience of numerous separate adjudications to recover a single sum. This would be contrary “contrary to the policy underlying the adjudication process of efficient, swift and cost-effective resolution of disputes on an interim basis.” ⁷

In addition, the way the payment applications were set out, being for the total value of the work minus the previous payment applications, there was a link between them as “each payment claim built on the previous one.” ⁸

The court noted that out of three applications, only two applications were expressly approved. This did not mean that the applications were distinguishable to make them independent issues. From looking at the facts, no pay less notice was issued for the third application, and the applications were not disputed on substantive procedural or grounds. These were sub-issues to the broader dispute about whether the Contractor was entitled to payment.

For the reasons above, the court found that the Employer did not have a real prospect of successfully defending the claim on the basis that the Adjudicator lacked jurisdiction. Therefore, the court enforced the adjudicator’s decision in favour of the Contractor.

What does this mean in practice?

• This case reminds us that one dispute can include multiple sub-issues, which can be independently determined. To determine this, the court will look at the facts and will tend towards common sense.
• If there is a clear link between the sub-issues, it will be more challenging to put forward a jurisdictional challenge.
• The Court will give weight to the principles of adjudication to promote efficient and cost-effective dispute resolution when determining the scope of a dispute.

References

¹ Quadro Services Ltd v Creagh Concrete Products Ltd [2021] EWHC 2637 (TCC) [32]
² [2011] EWHC 2332 (TCC)
³ Witney Town Council v Beam Construction (Cheltenham) Limited [2011] EWHC 2332 (TCC) [33] [Akenhead J]
⁴ Quadro Services Ltd v Creagh Concrete Products Ltd [2021] EWHC 2637 (TCC) [33]
⁵ Quadro Services Ltd v Creagh Concrete Products Ltd [2021] EWHC 2637 (TCC) [33]
⁶ Prater Limited v John Sisk & Son (Holdings) Limited [2021] EWHC 1113(TCC) [33]
⁷ Quadro Services Ltd v Creagh Concrete Products Ltd [2021] EWHC 2637 (TCC) [47]
⁸ Quadro Services Ltd v Creagh Concrete Products Ltd [2021] EWHC 2637 (TCC) [48]