When two become one: Bellway Homes Ltd v Surgo Construction Ltd [2024] EWHC 10 (TCC)

Construction professionals, lawyers and adjudication aficionados will be aware of paragraph 1(1) of Part I of the Scheme for Construction Contract (England and Wales) Regulations 1998 (as amended) (the “Scheme”), which provides that a party may refer “a [single] dispute” to adjudication.

The conventional view among the majority of those listed above was that “smash and grab” (being a procedural defect arising from a paying party’s failure to issue the correct notices on time) and “true value” (being the substantive valuation of the works) disputes were two separate disputes which could not be referred to a single adjudication. The point has not been directly addressed in case law previously and recent cases have defined “a dispute” broadly (see, for example, Quadro Services Ltd v Creagh Concrete Products Ltd [2021] EWHC 2637 (TCC), where the court decided that a dispute about three notified sums could be decided in one adjudication).

In Bellway Homes Ltd v Surgo Construction Ltd [2024] EWHC 10 (TCC), the court decided whether a party could refer a smash and grab and true value dispute regarding the same payment application to one adjudication. A summary of the case and practical points arising from the judgment are below.

Background

In October 2019, Roundel Manufacturing Ltd (“Roundel”) and Surgo Construction Ltd (“Surgo”) entered into a sub-contract, under which Roundel would supply and fit kitchens in a residential development project.

In December 2019, Roundel issued a payment application for around £152,000 (the “Application”). Surgo failed to issue a payment or pay less notice in relation to the Application and did not pay the Application sum.

Roundel then referred to a dispute regarding the Application to adjudication.  The notice of adjudication (the “Notice”) (being the document which frames the adjudication and defines the adjudicator’s jurisdiction) defined the dispute as Surgo’s failure to pay the Application sum and sought a decision on a smash and grab or true value basis. Put another way, according to the conventional view above, Roundel had referred two separate disputes to adjudication.

The adjudicator declined to decide the dispute on a smash and grab basis (they said that the Application was “no more than a number of accountancy summaries that do not seem to correlate with each other”) but decided that Roundel was due around £146,000 on a true value basis.

Roundel then assigned its rights in the sums awarded by the adjudicator to Bellway Homes Ltd (“Bellway”) and Bellway applied to enforce the adjudicator’s decision. Surgo resisted enforcement, primarily on the basis that Roundel had referred two separate disputes and that the adjudicator therefore had no jurisdiction.

Decision

The judge firstly stated that “a dispute” should be defined broadly and that a robust and common-sense approach should be adopted when considering whether there is one or more disputes.

The judge decided that Roundel had only referred one dispute to adjudication because:

  • the Notice was worded such that the adjudicator could decide the same issue – being Roundel’s entitlement to payment of the Application – on two alternate bases;

  • defining the dispute referred to adjudication as two separate disputes would be adopting too legalistic an approach (in contrast with the approach advocated for above);

  • the background to the adjudication was regarding payment of the Application and did not indicate that there were two separate disputes; and

  • the true value claim could not be decided without first deciding the smash and grab claim, which established a “clear link” between the two.

The judge therefore enforced the adjudicator’s decision.

 Summary and practical tips

The decision in Bellway v Surgo continues the recent trend in adjudication enforcement to define a “dispute” broadly and to support the adjudication process generally. 

Whether the principle in Bellway v Surgo applies depends on the factual background and how the dispute is framed in the notice of adjudication. Referring parties wishing to refer smash and grab and true value claims in one adjudication might therefore look to adopt the approach taken and wording used by Roundel in the Notice.

Whether a referring party chooses to refer on both bases depends on how confident it is regarding its smash and grab claim, which is arguably the path of least resistance if applicable. A referring party should ensure that its notice of adjudication is clear if it wants to refer on a smash and grab basis only and avoid a true value dispute. If there are uncertainties in its smash and grab claim (for example, an email from the responding party might be interpreted as a valid pay less notice), a referring party might choose to add its true value claim as an alternative basis for a decision.

Responding parties should analyse the notice of adjudication against the factual background and make a jurisdictional challenge if applicable. 

Responding parties might also want to consider whether to use Bellway v Surgo to advance a true value claim where the responding party has purported to refer on a smash-and-grab basis only. That strategy should, however, be adopted with caution: paragraph 9(2) of the Scheme provides that the same dispute cannot be referred to adjudication twice where a decision regarding that dispute has been made. If a true value dispute is referred (expressly or otherwise) and decided, the responding party will therefore not be able to refer to it again.

Expert
Liam Hendry
Solicitor