The four defendant contractors worked together in a joint venture known as CAMBBA. The secretary of state granted a PFI concession agreement in February 1992 for Midland Expressway Ltd to design, construct and operate the Birmingham Northern Relief Road, known as the M6 Toll Road. Midland and CAMBBA entered into a design and construct contract in September 2000.
CAMBBA contended that a dispute had arisen in connection with payment arising from change No. 11 to the design and construct contract. CAMBBA wished to refer the dispute to adjudication. Midland sought a declaration and injunction to prevent the building contractors from referring the claim to adjudication.
Midland contended that on the true interpretation of the contract, the adjudicator did not have any jurisdiction. The proper dispute was between the secretary of state and Midland and CAMBBA, where Midland was simply a conduit between CAMBBA and the secretary of state. Further, clause 7.1.3(a) stated that the contractor would only be entitled to payment if it followed the conditions precedent set out in the design and construct contract. Clause 7.1.4 required a determination of the price adjustment to the concession agreement, and further that the money had been certified and paid to Midland under the concession agreement.
Was there a dispute between Midland and CAMBBA that was capable of being referred to adjudication?
Reference
Mr Justice Jackson noted that the parties had conceded that the design and construct contract was a construction contract under the Construction Act. CAMBBA's request for payment had been rejected. As a result there was a dispute between the parties that could be referred to adjudication. The condition precedent requiring a resolution under a separate contract for payment before making payment under the design and construct contract was exactly the sort of thing that Section 113 of the Act guarded against. The pay-when-paid provision was therefore ineffective. CAMBBA did not have to wait until any issue in respect of its payment had been resolved under the dispute resolution procedure in the concession agreement.
In conclusion, the declaration and injunction sought by Midland was not granted. CAMBBA was entitled to proceed with the adjudication.
*Full case details
Midland Expressway Ltd vs Carillion Construction Ltd and Others (No. 2), 24 November 2005, [2005] EWHC 2963, TCC, Mr Justice Jackson QC
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Postscript
The court continues to give little credence to arguments that seek to avoid the payment of adjudicators' decisions. If the parties cannot agree how much is to be paid then there is a dispute. Where the Construction Act applies, a clause that requires the amount to be determined by reference to another contract will be treated as a pay-when-paid provision, and so will not be enforced.
