J&B Hopkins Limited (JBH) engaged A&V Building Solution Limited (A&V) to carry out mechanical and electrical engineering works at a project in Sussex. The Contract Sum was £368,000. 

A dispute arose in respect of A&V’s interim application number 14 (which showed a gross value of the works at £601,000 and a net amount due in the sum of £211,773.60) (“application 14”).  A&V sent application 14 on Monday 22 March 2021 (though it was dated 21 March 2021). JBH considered that, as at the date of application 14, no further sums were due to A&V (who on JBH’s case had been overpaid).

On 17 November 2021, A&V commenced adjudication proceedings seeking a net payment of £211,773.60 plus VAT, interest and fees, based on application 14. One of the issues which the adjudicator had to decide was whether application 14 was invalid because it was served on 22 March 2021 (not 21 March). 

In the first adjudicator’s detailed decision dated 19 January 2022, he found that application 14 was valid and identified a net sum due to A&V by way of further interim payment of £138,010.86. JBH failed to pay any part of this sum to A&V.

On 2 December 2021 (whilst the adjudication was ongoing) JBH issued Part 8 proceedings against A&V in which, amongst other things, they sought declarations as to the invalidity of application 14 and the validity of their own Payment Notice of 16 April 2021. Coulson LJ noted that it appears that the proceedings were issued as a pre-emptive strike by JBH to allow them a further vehicle to avoid enforcement if or when they lost the first adjudication. 

The judge had taken the approach that the date of 21 March for the relevant interim application set out in Appendix 6 was described as a 'condition precedent' in Subcontract Clause 9.2, so it did not matter if that day was a Sunday or Christmas Day: the date was sacrosanct. As such, the judge at first instance found that a valid payment application could only be made on the specific date sent out in Appendix 6 (and therefore application 14 was invalid).

A&V appealed the decision in the Part 8 Court proceedings (and in June 2022 it also raised a final account adjudication in which the adjudicator decided A&V owed JBH the net sum of £82,956.88).

The issues for the Court of Appeal to consider were as follows: (i) were the Part 8 Proceedings an abuse of process; and (ii) was application 14 a valid interim application.

In respect of (i) above, Coulson LJ found that the judge was right not to accede to A&V’s application to strike out the Part 8 proceedings as an abuse of process. The application (made late in the day on 7 April 2022) had no basis in law and by reference to authorities, Coulson LJ found that court proceedings remain open to parties to construction adjudication. However, Coulson LJ noted that JBH were in breach of contract because as at the hearing on 12 April 2022, they had not paid the first adjudicator’s decision and that, in light of the “pay now, argue later” mantra, that should have been the first order of business. In any event, Part 8 Proceedings were as a matter of law open to JBH and Coulson LJ dismissed this ground of appeal.

In respect of (ii) above, Coulson LJ viewed the position regarding payment as more flexible than the judge at first instance in the Part 8 Proceedings. Coulson LJ found the position to be more nuanced, referring to two paragraphs in Appendix 6 which he noted were plainly designed to allow for flexibility in the interim valuation/payment timetable. Coulson LJ noted that where there is a clash or inconsistency between different types of contract terms, specific or bespoke terms will usually outweigh the general. Applying this to the facts of the present case, Appendix 6 was a bespoke agreement between the parties relating to this particular Subcontract.

The valuation date was 31 March 2021 (7 days prior to that date was 24 March 2021). In accordance with the paragraph in Appendix 6, the interim application had to be made no later than 7 days prior (i.e., 24 March 2021) if AVB did not want to drop into the next payment cycle. Therefore application 14 was within the time limit set out in that paragraph of Appendix 6. It was on this ground that Lord Justice Coulson allowed the appeal.

This case provides useful guidance regarding general clauses versus bespoke contractual provisions, highlighting that more weight is likely to be given to bespoke clauses. It also acts as a reminder of established law regarding the “pay now, argue later” principle, which Coulson LJ referred to as “the guiding principle of construction adjudication” which had been “comprehensively ignored by both parties”.