Once, Twice, Three Times an Invoice?

Not a Commodores’ classic, and definitely not Easy, we look in this article at yet another failed attempt to resist paying an Adjudication. 

Disputes about whether there is a dispute, or disputes about there being too many disputes, are the kind of thing that give legal processes a bad name. But yet they’re commonplace in adjudication, both at the start of the process when trying to get an adjudicator to resign (often unsuccessfully) and at the end when trying to resist enforcement (again, mostly unsuccessfully).

A recent case in the Technology and Construction Court (TCC) is a good example – Quadro Services v. Creagh Concrete Products Limited.

Background

Quadro and Creagh entered into an oral agreement whereby Quadro were to provide labour to Creagh. The contract was a construction contract, so the Housing Grants, Construction and Regeneration Act 1996 applied. But adjudication provisions were absent from the contract, so the Scheme for Construction Contracts was implied in by the Construction Act.

There were five contracts in place between Quadro and Creagh. This case concerned one – the Woking Contract – where a dispute arose concerning Creagh’s failure to pay three outstanding invoices arose.

Quadro raised its first application (for the purposes of this case – the third overall) claiming the sum of £58,870.00, less the previous application of £43,912.00 (the applications were cumulative, with each invoice raised being for the full value of the work done, less the previous payment application). The balance due and sum claimed on this application was therefore £14,925.00.

On 3 August 2020, Creagh’s Quantity Surveyor approved that invoice, asking Quadro to “Please raise VAT invoice as per application” – which Quadro did.

Quadro then raised another application claiming the sum of £72,897.00, less the previous application of £58,897.00. The balance due for this application was therefore £14,000.00. Again, Creagh’s QS approved it and asked for an invoice, which Quadro provide.

The third relevant invoice claimed the sum of £101,007.40, less the previous application of £96,577.40. The balance due for this application was therefore £4,430.00. There was no correspondence between the parties, and particularly, no express confirmation that Creagh agreed to the sum raised. Nevertheless, Quadro raised an invoice dated 12 October 2020 in the sum of £5,316.00 inclusive of VAT.

The Adjudication

All three invoices went unpaid. No pay less notices were raised.

After long-standing non-payment, Quadro referred the dispute to Adjudication, with a Notice issued on 30 March 2021. The Notice detailed that: “the dispute concerns Quadro’s entitlement to payment of £40,026 (including VAT) in respect of agreed invoices dated 24 July 2020, 27 August 2020 and 12 October 2020”.

On 12 April 2021, Creagh’s solicitors wrote to the Adjudicator challenging jurisdiction. It was Creagh’s contention that each application and invoice should have been referred to adjudication separately, where validity could have been individually assessed. It said (as is uncontroversial under the Scheme) an adjudicator does not have jurisdiction to adjudicate more than one dispute referred in a single adjudication. Creagh took no further part in the Adjudication.

The Adjudicator continued, and on 27 April 2021 issued his decision. He found that he did have jurisdiction and that Quadro’s payment applications were valid. The invoices arose from one contract, and the dispute referred concerned a single issue (whether Quadro were entitled to the overall sum claimed) and various sub-issues (validity of each application, whether a pay less notice was issued, and the sums due). Two out of three invoices were expressly confirmed by Creagh, and an extended period had lapsed in relation to the third so it could not be challenged. Therefore, Quadro were awarded £40,026.00, interest and compensation.

The Enforcement

Creagh didn’t pay, relying on the same jurisdictional issue. Quadro sought enforcement of the Adjudicator’s decision, relying on a passage from Witney Town Council v. Beam Construction (Cheltenham) Limited [2011]:

“say there was a dispute with 100 sub-issues. The parties cannot sensibly have intended in these circumstances that each sub-issue for the purposes of adjudication…give rise to a separate adjudication…A particular dispute, somewhat like a snowball rolling downhill gathering snow as it goes, may attract more issues and nuances as time goes on”

The court said that Creagh’s argument that the validity of each application could have been decided in isolation from the other was reasonable. But this didn’t mean that those issues could not be sub-issues to the wider dispute as to whether Quadro are entitled to the sum claimed.

The court recognised the impracticalities and inconvenience of referring sub-issues to individual proceedings. It was noted that if it was required, it could undermine the fundamental basis of construction adjudication – efficient and cost-effective resolution And the overarching position was nearly summarised:

“one dispute can include numerous sub-issues which might be capable of being determined independently from each other. Whether they are sub-issues or separate disputes is a question of fact”

On these facts, it was decided that “The Adjudicator was right to conclude that he had jurisdiction because only one dispute has been referred to him. The dispute was whether the Claimant was entitled to payment of the sum of £40,026”. The decision was therefore enforced.

Lessons

A dispute can include various sub-issues. Especially in the context of a construction contract, it is possible to involve sub-issues which are relevant and fundamental to the wider dispute. This frequently comes up in relation to delay adjudications, where the adjudicator might have to decide lots of small issues to arrive at an overall decision – but this case shows the principle can be equally applicable to more ‘run of the mill’ payment disputes.

For parties, both referring and responding, it is important to look at the facts of the case and to use common sense as to whether there is one overarching dispute. And while responding parties are always likely to raise jurisdictional arguments at the outset in the hope that they might come off, at the back end they should think carefully about whether it’s worth the cost risk that comes from resisting enforcement through the courts.

We’re experts in adjudication. If you have a dispute you want to refer (whether or not it includes multiple sub-issues!), or if you’ve been on the receiving end of a Notice of Adjudication, we can help – just get in touch.