In Battersea Project Phase 2 Development Co Ltd v QFS Scaffolding Ltd [2024] EWHC 591 the Court rejected the contractor's Part 8 application seeking a declaration that its Final Payment Notice was conclusive evidence of the sums due between the parties. This in turn allowed the sub-contractor to enforce an adjudicator's decision determining the final sub-contract sum.
Facts
By way of a JCT D&B Sub-Contract (2011) ("the Sub-Contract"), Battersea Project Phase 2 Development Co Ltd ("BPS") appointed QFS Scaffolding Ltd ("QFS") as the scaffolding and asbestos sub-contractor as part of the redevelopment of Battersea Power Station. Following practical completion in January 2022, a dispute arose between the parties in relation to the statement for the final account.
QFS subsequently issued three adjudications on 25 November, 15 and 16 December 2022. A further Notice of Intention was issued on 19 December 2022 for a true valuation of the final sub-contract sum ("Adjudication 11"). Shortly thereafter, the contract manager, Mace, issued a Final Payment Notice in the amount of £30,607,869. QFS valued the works at £71,587,425.
Under clause 1.8.1 of the Sub-Contract, the Final Payment Notice is considered to be conclusive of various matters unless the saving provision under clause 1.8.2 is engaged i.e. if adjudication proceedings have been commenced prior to or within 10 days of the Final Payment Notice. Adjudication 11 was issued just before the Final Payment Notice.
BPS alleged that QFS had failed to file a Referral Notice within the time agreed by the parties following the commencement of the four adjudications. As a result, Adjudication 11 was concluded and there was no decision to impact on the Final Payment Notice.
QFS asserted that the saving provision in the Sub-Contract did not require a decision in the adjudication proceedings to be reached in order for it to be effective, and proceedings only reached a conclusion once a decision was reached. When that happened, the Final Payment Notice would be conclusive and subject to the terms of any decision.
Judgment
The Judge concluded that in order for Adjudication 11 to be properly commenced, the Referral Notice must have been issued within the time agreed by the parties.
He further concluded that, on a proper construction of 1.8.2, an adjudication is concluded by a decision, award or judgment, it did not include the ending of an adjudication which had become a nullity.
In other words, the commencement of an adjudication within the required time under clause 1.8.2 to challenge the Final Payment Notice would trigger the first element of the saving provision, and that would apply until the adjudication proceedings had concluded. Once concluded, the second element of the saving provision as to the conclusiveness of the Final Payment Notice would apply unless the adjudication proceedings had been abandoned in the meantime.
In this case, whilst QFS had failed to issue a Referral Notice within the agreed timeframe, that was irrelevant to the question of whether the adjudication had reached a conclusion. BPS knew the Final Payment Notice was in dispute, and it had been challenged in time for the saving provision to apply. From that point, the true value of the account would be undertaken by the adjudicator.
The judge found that the adjudication proceedings had not been abandoned because QFS did not serve its Referral in time. It did not matter that a second notice of adjudication had to be issued in order for the adjudication proceedings to reach a conclusion. As the adjudicator had subsequently reached a decision in September 2023, that valuation applied to the final account and was subsequently enforced by the Court, resulting in an award of £3.2 million to QFS.
