A Victory for the Adjudicator?
Victory House General Partner Limited –v- RGB P&C Limited  EWHC 102 (TCC)
This case arose from the development and conversion of an office building into a hotel at Leicester Square, London. Victory House General Partner Limited (“VH”) was the employer and RGB P&C Limited (“RGB”) the contractor.
RGB was seeking to enforce an adjudicator’s decision against VH providing for payment under the contract, whilst VH submitted the argument that the terms of a Memorandum of Understanding (“MOU”) entered into after the date of the building contract superseded those of the building contract.
The adjudicator held that payment was due as the MOU did not preclude such a payment. He also held that VH had made neither a valid Payment Notice nor valid Pay-Less Notice as they had wrongly relied on their opinion that the MOU was not legally binding. Following the decision, VH commenced CPR Part 8 proceedings including a request for a declaration that the adjudicator’s decision was invalid for a breach of natural justice.
Smith J rejected VH’s submissions, giving RGB summary judgement in respect of the payment. The adjudicator was entitled to make his decision as he had asked questions regarding the purpose, scope and effect of Recital D in the MOU, and the parties were both aware that a central question would be the true and proper construction of the MOU.
1. The importance of serving valid notices relating to payment under construction contracts. Here, the adjudicator found that if a valid Pay-Less Notice had been served, the amount could have been properly reduced. If in doubt, employers should serve Pay-Less Notices.
2. It is important to engage fully with adjudication and use any processes available. VH could have sought permission to make further submissions as to the operation of the MOU. The Judge stated that it was for VH to decide whether to seek permission, had they done so a different decision may well have been made.
3. The Part 8 procedure was used incorrectly here, and should only be used where a decision is sought which is unlikely to involve a dispute of fact. It would be unsatisfactory to proceed with assumed facts, which could be challenged in later proceedings.
Author: David Kingsford, Trainee Solicitor. 9 February 2018
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