"Manifestly unjust": Analysis of the TCC's decision in JRT v TWD

The Technology & Construction Court (TCC) recently refused to enforce an adjudicator's decision against a paying party, where to do so would have been "manifestly unjust".

   
This will be treated as an extension of Mr Justice Edwards-Stuart's decision in Galliford Try Building Limited v Estura Limited [2015], in which "an unusual combination of factors" meant an adjudicator's decision could not be enforced.
 
TWD, an SPV with a loan from the Homes and Communities Agency (HCA), engaged JRT to construct 14 houses under a JCT Minor Works Contract with contractor's design, 2011 edition – which from the outset appears to have been an odd choice of contract.
 
The payment mechanisms under the contract were not followed. Instead, JRT and HCA's valuer agreed interim payments according to HCA's valuer's valuations.
 
The contract was terminated and JRT contended it was due a further £952,578.97. JRT submitted what it argued was a default payment notice and when TWD did not issue a pay less notice, JRT commenced a 'smash and grab' adjudication seeking payment of the full sum applied for.
 
The adjudicator held JRT's notice was valid and amounted to a default payment notice and, therefore, JRT was entitled to payment.
 
JRT issued proceedings seeking to enforce the adjudicator's decision in March 2020 and, in turn, TWD issued Part 8 proceedings for a declaration that the payment notice was invalid.
 
TWD also commenced Part 7 proceedings seeking a true valuation of the sum due to JRT. TWD sought to stay the enforcement proceedings relying on an argument that it would be manifestly unjust to enforce the adjudicator's decision having regard to the history of the matter.  
 
The TCC granted the stay having regard to:
 

1. The payment procedure under the contract not being followed yet the payment notice in default instigating the adjudicator's award;
2. TWD not having been able to appreciate the significance of the alleged payment notice in default;
3. The £952,578.97 sought being inflated in all likelihood with sums probably to be repaid to TWD once a true valuation is carried out in the true value proceedings; and
4. The fact TWD would be wound up if it had to pay.

 
The case demonstrates there are circumstances in which an adjudicator's award on a strict interpretation of a payment procedure under a contract can be usurped by wider circumstances when they prove to be manifestly unjust against the paying party.
 
At a time where cash flow is particularly critical, it also serves as a reminder that setting oneself up for a 'smash and grab' adjudication can be read between the lines where the TCC considers necessary.
 
This article was authored by Alex Delin, an associate in the construction team at Fieldfisher. For more information on our contentious construction expertise, please visit the relevant pages on the Fieldfisher website.