High Court Rules on Adjudicator Appointment and Interim Payment Recovery in Construction Dispute

Citation: [2024] EWHC 269 (TCC)
Judgment on

Introduction

In the case of Bellway Homes Ltd v Surgo Construction Ltd, the Technology and Construction Court (TCC) of the High Court of Justice in London addressed a set of legal principles relevant to adjudication and interim payments within the context of construction contracts. His Honour Judge Stephen Davies, sitting as a High Court Judge, delivered the judgment, focusing on two main areas: whether an adjudicator was validly appointed and the legality of enforcing a decision to require repayment of an interim payment previously adjudicated as a notified sum.

Key Facts

Bellway Homes Limited (Bellway) and Surgo Construction Limited (Surgo) entered into a construction contract with bespoke amendments to the JCT Intermediate Building Contract with Contractor’s Design 2016 (JCT ICD). Disputes arose around the validity of an adjudicator’s appointment, and whether Surgo was liable to repay Bellway for overpayments made during a previous interim payment cycle.

Surgo questioned the validity of the adjudicator’s appointment, arguing that the contractual adjudication terms contravened the Housing Grants, Construction and Regeneration Act 1996 (HGCRA) and therefore the appointment process should follow the Scheme for Construction Contracts (England and Wales) Regulations 1998 (the Scheme).

Regarding repayment of overpayments, the dispute centered on whether Bellway was legally entitled to a true value recalculation of interim payments prior to the final account stage and whether it could receive repayment at the interim stage.

Several legal principles were key in resolving the issues presented:

  1. Validity of Contractual Adjudication Terms: The court examined whether the contractual terms for appointing an adjudicator from Bellway’s panel contravened the HGCRA. The analysis considered Section 108 of HGCRA regarding the timing and impartiality of adjudicator appointment.

  2. Contractual Interpretation: The construction of clauses within the contract, including bespoke amendments pertaining to interim payments and the employer’s right to recover overpayments, was critical. The court applied general principles of contractual interpretation as established in cases such as Arnold v Britton and Wood v Capita Insurance Services Ltd.

  3. Enforceability of Adjudicator’s Decision: The application of the principle established in Grove Developments Ltd v S&T (UK) Ltd, which allows for a dispositive remedy as a result of an adjudicator’s revaluation of works at the interim stage, was a pivotal part of the court’s analysis.

  4. Restitutionary Basis for Recovery: The possibility of recovering overpayments via restitution, applying an apportionment approach as discussed in cases like Aspect Contracts (Asbestos) Ltd v Higgins Construction plc and ICI Ltd v Merit Merrell Technology Ltd, was considered.

Outcomes

The key findings of the TCC in this case were:

  1. The contractual provisions for the appointment of an adjudicator from the employer’s panel did not contravene the HGCRA.

  2. Bellway was entitled to enforce the adjudicator’s decision for Surgo to repay the overpayment identified in the revaluation.

  3. The contractual terms, particularly clause 4.9A, allowed Bellway to recover overpayments at any time, including at an interim payment stage.

  4. Both a validly appointed adjudicator and a court can order repayment of an interim overpayment as determined by a true value assessment and/or a restitutionary claim.

Conclusion

The High Court’s judgment in Bellway Homes Ltd v Surgo Construction Ltd confirms that bespoke adjudication clauses allowing a party to pick an adjudicator from its own panel are not necessarily contrary to the HGCRA, providing a broader interpretation of impartiality and timing requirements. Further, the judgment elucidates that the adjudicator has the authority to order repayment of overpayments resulting from interim payments assessed in a ‘true value’ adjudication. This decision reinforces contractual rights to such repayment and further underscores the adjudicator’s role in resolving disputes effectively and according to party’s agreed terms or statutory rights under the HGCRA. Overall, the ruling enhances the clarity surrounding interim payment disputes and adjudication practices within the UK’s construction industry.

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