The Claimant Henry Construction Projects (“HCP”) was the main contractor for a boutique hotel development in central London. HCP employed Alu-Fix (UK) Limited (“AFL”), the Defendant, as a sub-contractor under a JCT standard building sub-contract dated 14 June 2021. 

Following a dispute between the parties AFL terminated the sub-contract pursuant to clause 7.12 (termination at will) which in turn triggered the payment mechanism clause at 7.11. This required AFL to submit an application for payment which HCP would then respond to by paying the sum properly owed to AFL within 28 days. 

AFL submitted their payment application on 15 November 2022 to the sum of £257,004.50 plus VAT as such requiring payment by 13 December 2022. This payment deadline was not met and as such the matter was referred for the smash and grab adjudication (“First Adjudication”) on 15 December 2022.

HCP was content that it had submitted two valid pay-less notices on 25 November and 12 December 2022. Whilst the First adjudication was ongoing HCP decided to launch a true value adjudication (“Second Adjudication”) on the basis of the disputed payment application.  AFL requested that the adjudicator for the Second Adjudication (Mr Molloy) should resign due to the fact that HCP had not discharged a payment obligation, therefore, Mr Molloy had no jurisdiction. Mr Molloy dismissed this request as he believed that since there had been no decision in the First Adjudication, he still maintained jurisdiction.  

AFL ended up winning the First Adjudication which ordered that HCP paid the sums owed by 2 February 2023. Mr Molloy then stayed the Second Adjudication until payment had been made. HCP paid the sums, and the stay was lifted, the result of the Second Adjudication was that HCP was that AFL had indeed been overpaid and they now owed HCP £191,753.88. AFL refused to pay and as such HCP commenced these enforcement proceedings. 

The Court held that Mr Molloy did not have jurisdiction and as such refused enforcement. District Judge Baldwin applied the well-established principle of S&T (UK) Ltd v Grove Developments Ltd [2018] EWCA Civ 2448 (the Grove case), that a party could not commence a true-value adjudication until it had discharged its immediate payment obligation. 

The key issue here was when the obligation to pay arose. HCP tried to argue that the First Adjudication was concerned with the payment obligation so the Second Adjudication could not be barred. 

The Court held that the final date for payment fell on 13 December 2022 (the original date 28 days later per the contract) which meant that HCP had not discharged their obligation and as such Mr Molloy did not have jurisdiction. It was also noted that this decision was in line with the HGCRA96 intent of securing cashflow for contractors and that if HCP had issued its PLNs in time the issue could have been avoided. 

Overall, this case highlights the already well stablished principle that TVAs should not be commenced until a party is certain that they have dismissed their payment obligations. If not, parties may find themselves in a similar situation to HCP, holding an unenforceable decision. The case also illustrates the more recent change in which the TCC is transferring out cases it considers suitable to be dealt with by a District Judge.