Second Chances: Determining the Value of the Contract Sum

23 December, 2016
by: Cripps Pemberton Greenish

A recent case1 has confirmed that even if an earlier adjudication has determined that an employer must pay the full amount in a contractor’s final account application, due to the employer or its agents failing to provide a payment notice or pay less notice, that does not prevent an employer from bringing a second adjudication to seek a declaration of the true final account figure.

Case law2 has previously confirmed that in relation to interim valuations once an adjudicator has determined that an employer must pay the full amount in a contractor’s interim payment application, due to the employer or its agents failing to provide a payment notice or pay less notice, then the employer is prevented from bringing a second adjudication to determine the true value of the interim application. 

In the present case, the contractor put in a final account application and due to the employer failing to provide a payment notice or pay less notice the claimant was ordered by an adjudicator to pay the full amount claimed by the contractor, which amounted to a payment of £147,223.  A second adjudicator was later appointed, following a failed attempt by the employer to resist the enforcement of the first adjudicator’s decision, to determine the true final account figure and that adjudicator ordered that the contractor should repay £55,676.84 plus VAT.  The contractor attempted to resist the enforcement of the second adjudicator’s decision, saying that the second adjudicator did not have jurisdiction as the final account could not be re-adjudicated.

The key issue was whether the first adjudication decision was determinative of the valuation issue referred to the second adjudicator – i.e. was the notified sum final and conclusive.  It was not.  The payment scheme set out in the Construction Act 1996 established a regime for improving cash-flow for contractors but not determining the ultimate value of the contract sum and so not providing a pay less notice should not be fatal (unless the contract expressly say otherwise) to the issue of determining the true value of the works.  In situations where an adjudicator has already determined that a contractor should be paid the notified sum in relation to a final account application, the non-provision of a pay less notice by the employer may not be fatal as it ultimately should have a right to seek a determination of the issue of valuing the true sum payable to adjudication (or litigation).

If you would like to know more please visit our construction team page or email James Blyth at james.blyth@crippspg.co.uk

1Kilker Projects Limited v Rob Purton [2016] EWHC 2616 (TCC)2ISG Construction Ltd v Seevic College [2014] EWHC 4007 (TCC)