1. Can an adjudication be commenced where the contract has been assigned?

Grove Construction (London) Limited -And- Bagshot Manor Limited [2025] EWHC 591 (TCC) [Grove Construction (London) Ltd v Bagshot Manor Ltd [2025] EWHC 591 (TCC) (13 March 2025)]

Factual Background

Grove Construction (London) Limited (“Grove”) was employed by Bagshot Manor Developments Limited (“BMDL“) for the design and construction of 79 residential dwellings in a refurbished office building known as Bagshot Manor. The works reached practical completion on 11 February 2022, however prior to release of the retention, BMDL entered into Administration. BMDL assigned the contract with Grove to Bagshot Manor Limited (“Bagshot“) amongst other associated construction documents for the project.

Bagshot refused to release the retention monies (c £110k) to Grove on the basis that release of the retention was an obligation and only rights (and not obligations) under the contract were transferred to Bagshot by way of the assignment. Bagshot argued that a novation agreement would have been necessary in order to transfer the obligations under the contract and the obligation to release the retention remained with BMDL.

Grove referred to adjudication against Bagshot for the release of the retention monies. The first adjudicator declined jurisdiction, but a second adjudication was initiated the next day and accepted by a different adjudicator. The second adjudicator accepted Grove’s claim and awarded payment of the retention. Bagshot failed to make payment, and as such, Grove began Part 7 adjudication enforcement proceedings.

Following this, Bagshot also brought its own Part 8 proceedings, seeking declaration that the adjudicator’s decision was contrary to the accepted law on assignment, and that there was no liability on Bagshot to pay anything to Grove pursuant to the contract.

Judgment

His Honour District Judge Baldwin heard both the Part 7 and the Part 8 proceedings in a single hearing. The Judge held that the adjudicator lacked jurisdiction since Bagshot was not a party to the original contract, and as such Bagshot could not be subjected to adjudication under the terms of that contract.

The Judge held that the adjudicator had erred in law by finding that Bagshot had stepped into the shoes of BMDL when the obligations under the contract had not been transferred. Grove’s application to enforce the adjudicator’s decision was dismissed, and Bagshot was entitled to the declaration that it was not liable under the contract.

Takeaway points

This judgment means that to recover the retention Grove would need to claim against BMDL. However BMDL’s insolvency could limit the prospect of recovery in practice.

The Court here affirmed the well-established legal principle that only rights can be assigned, not obligations or liabilities. Release of the retention is an obligation which cannot be assigned. A novation agreement would be required in order to transfer an obligation.

Only the parties to a contract (or those to whom rights have been properly assigned) can refer disputes to adjudication.

In light of the above, if bringing or resisting adjudication proceedings when a contract has been novated or assigned, the parties should be mindful as to whether the correct parties are subject to adjudication provisions.

Care should also be taken when contracts are being assigned or novated as to whether this correctly reflects the intentions of the parties.

2. When is the use of a Part 8 claim appropriate?

IES Utilities Group Ltd v British Telecommunications Plc [2024] EWHC 3417 (TCC) 

Factual Background

British Telecommunications Plc (“BT“) had engaged IES Utilities Group Ltd (“IES“) under two separate contracts (a supply contract and a purchase contract) relating to the refurbishment of telecommunication poles for BT. These contracts were subject to an adjudication brought by IES where IES claimed damages (c.£10m) for repudiatory breach.

The adjudicator found in favour of BT and IES brought a Part 8 claim for three declarations as well as a final determination of a number of matters which had been decided by the adjudicator.  In particular IES requested a declaration that BT had repudiated the contract by not terminating in accordance with its terms and that IES was entitled to recover damages as a consequence of that repudiatory breach.

BT argued that the Part 8 proceedings were unsuitable for this claim because:

• IES had made no attempt to comply with the Cathay Pacific rules, which require a claimant to notify a defendant of a potential Part 8 claim, explain why Part 8 is more appropriate, provide a draft of the precise issue to be determined and identify agreed facts;
• there was a substantial amount of factual evidence relevant to the contractual interpretation. During the adjudication IES had relied on witness statements and documentary evidence. The Part 8 Claim included around 400 pages of contemporaneous documents;
• there was no agreed statement of facts;
• the claim was ill-formed and imprecise;
• Part 7 statements of case would be more appropriate given the circa £10m of sums in dispute; and
• The potential ramifications of deciding the meaning of a widely-used BT standard form contract in a vacuum.

Judgment

His Honour Judge Stephen Davies directed that the case proceeds as a Part 7 claim, on the basis that the court should make the determinations based on properly pleaded statements of case rather than taking the risk of making the determinations without having the relevant evidence. The point was also made that even if determination was given on the contract interpretation, the issue would still be unresolved, and the substantive claim would still have to be pleaded by way of Part 7 proceedings in any event.

Takeaway points

The court will be cautious in granting declarations in Part 8 proceedings where there is a number of relevant factual issues in dispute. When deciding whether Part 8 is appropriate the court will also consider the size of the dispute, the pre-action conduct of the parties and the overall utility of the proceedings.

3. Material breach of natural justice in adjudication proceedings

DMC Group Contractors Limited v Guy’s and St Thomas’ NHS Foundation Trust [2025] (TCC) (unreported)

Factual Background

Guy’s and St Thomas’ NHS Foundation Trust (“GSTT”) engaged DMC Group Contractors Limited (“DMC”) to remove and replace combustible cladding panels from external walls at Guy’s Cancer Centre, London Bride. GSTT engaged DMC under an NEC3 Standard Form Option A contract with bespoke amendments (the Contract). The Contract provided for monthly payments to be made to DMC based on the price for work done to date.

During the course of the Works, a company called Lexica assisted the project manager to assess DMC’s interim applications for payment.

On 27 September 2024, DMC made an interim application for payment in the form of a spreadsheet which set out the sum claimed. That same day Lexica emailed the project manager and DMC with its assessment and payment recommendations (including a spreadsheet (“the Assessment Spreadsheet”). On 30 September 2024, the project manager provided a payment notice on behalf of GSTT. There was an issue between the parties as to what documents were included in this communication by GSTT.

On 18 October 2024, DMC stated that the payment certificate was invalid as it did not specify the amount due, the due date or the basis on which the amount was calculated. Accordingly, DMC argued that their application for payment was the default payment notice and the sum applied for was therefore the notified sum due under section 110B of the Housing Grants, Construction and Regeneration Act 1996 (“the Construction Act“).

On 22 October 2024, DMC served a notice of adjudication seeking a decision (on a smash and grab basis) that GSTT’s payment notice was invalid and DMC were owed the amount claimed in their application for payment. GSTT rejected DMC’s claims and submitted that the payment notice did in fact include the requisite ingredients for a compliant notice by cross-referring to the Assessment Spreadsheet.

There was then back and forth between the parties as to whether the Assessment Spreadsheet was attached to the Payment Notice.

The Adjudicator found in favour of DMC and held that GSTT’s payment notice did attach the Assessment Spreadsheet, however the Assessment Spreadsheet did not adequately set out how the sum due had been calculated and as such the payment notice was not valid.

GSTT didn’t pay and on 22 January 2025, DMC referred the matter to the court for adjudication enforcement proceedings.  GSTT resisted the enforcement on the basis that the Adjudicator’s decision breached natural justice as the adjudicator reached his decision on the basis of the content of the Assessment Spreadsheet and GSTT said it had not been given an opportunity to address this point.

GSTT’s argument was that the adjudicator, in reaching his decision, relied on matters which had not be raised between the parties in their submissions.

Judgment

The judge noted that there had been a complex debate between the parties in their adjudication submissions about “whether the spreadsheet and if so which spreadsheet, had been attached but the spreadsheet was put forward as the basis upon which it was said sufficient information had been supplied. It was asserted on behalf of the defendant that the spreadsheet was sufficient.”

However the judge was of the view that the question of whether the Assessment Spreadsheet included an adequate explanation of how the amount due had been calculated had not been “squarely put in issue” in the adjudication.

The judge concluded that the adjudication submissions were general enough in nature to capture the content of the Assessment Spreadsheet as a potential issue, but it was never properly explored and argued by the parties. This meant that GSTT never had the opportunity to address this precise point, which ultimately formed the basis of the adjudicator’s decision. Therefore, the judge held that there had been a material breach of natural justice

Takeaway points

• This case serves as a reminder that the court can find that there has been a material breach of natural justice where a party has been denied the opportunity to make substantial arguments which could potentially change the outcome of an adjudication.
• This case illustrates the practical difficulty for an adjudicator in identifying whether a particular issue has been argued by the parties. Here both parties had made general references to the content of the Assessment Spreadsheet in their submissions however the judge found that GSST should have been specifically directed to make submissions on this point before the adjudicator issued his decision.

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