The nature of interim payment disputes continues to evolve. Most recently, in a case before the Technology and Construction Court (TCC), Bellway Homes Ltd v Surgo Construction Ltd, the Court considered whether Bellway as the employer was entitled to be paid sums by the contractor, Surgo, following an adjudicator’s decision that Bellway had overpaid Surgo in an interim assessment.
Surgo had been successful in a “smash and grab” adjudication. Following that, a negative interim valuation was issued indicating Bellway had overpaid by c.£3m. The contract made clear that the contractor may issue a payless notice where a final certificate shows a balance due to the employer but was silent on the position in respect of negative interim certificates. Though Surgo disputed the valuation, it did not issue a payless notice. Bellway referred this dispute to adjudication on both a “smash and grab” and “true value” basis. In his decision, the adjudicator rejected Bellway’s “smash and grab” claim but went on to decide, in Bellway’s favour, the “true value” of the assessment. Bellway sought to enforce this decision by way of proceedings.
The essence of Surgo’s challenges to Bellway’s claim was that Bellway had no contractual or legal right to recover overpayments at an interim stage from earlier interim payment cycles.
The Court rejected Surgo’s challenges. The Court found that as a matter of construction of this amended JCT form, Bellway has an entitlement to recover overpayments it had made because the contract (i) did not expressly state that no interim payment may show a balance due to the employer and (ii) given the language used in the contract, it was unlikely that the employer’s right to recover overpayments was intended to apply only to the final account stage.
Comment
When considering a “true value” dispute, an adjudicator can re-assess earlier interim valuations (unless these have been determined by way of previous adjudication proceedings) and on this basis, decide that one party has made an overpayment. This decision can serve as sufficient grounds for a negative interim valuation to be issued in order to recover any such overpayment, and it is important that a pay less notice is issued where a negative valuation is disputed. In circumstances where the relevant contractual provisions are unclear as to whether alleged overpayments can be recovered at interim stages, it is always best to er on the side of caution and issue a payless notice in order for a party to properly protect its position.
