Adjudication Payments Must Be Made First

Payments under building contracts can be a touchy issue and have led to numerous disputes. Adjudication proceedings are intended to make the process of resolving building disputes simpler, but they themselves are replete with legal challenges on a whole variety of issues, normally instigated when one party is unhappy with the adjudicator's decision.

Often such proceedings are accompanied by an unwillingness of the paying party to make the payment due while the legal proceedings are ongoing.

A recent decision of the Technology and Construction Court (TCC) has provided valuable guidance on this issue.

The case involved a dispute between a couple and a firm of builders that required two adjudications. The first decision of the adjudicator was that the firm appointed to carry out the building works should be paid a sum of a little over £100,000 plus interest. The couple who had employed the builder had failed to issue a 'pay less' notice as required under the contract. Such awards are payable immediately, but no such payment was forthcoming.

The second adjudication concerned the final value of the contract. This adjudication was opposed by the builder, who claimed the final value adjudication could not be commenced when the payment ordered under the first adjudication had not been made. The couple wished to set off that sum against the final account.

The TCC would have none of it: the second adjudication could not yet proceed. The judge commented that 'an employer who is subject to an immediate obligation to discharge the order of an adjudicator based upon the failure of the employer to serve either a Payment Notice or a Pay Less Notice must discharge that immediate obligation before he will be entitled to rely upon a subsequent decision in a true value adjudication'.

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