Background to the Quadro v Creagh dispute 

The parties entered into an oral agreement for the provision of labour to Creagh Concrete. It was agreed that the contract was a construction contract for the purposes of the Housing Grants, Construction and Regeneration Act 1996. The contract did not contain any adjudication provisions, and therefore the Scheme for Construction Contracts (England and Wales) Regulations 1998 (as amended) applied.

The works were carried out by Quadro and they made applications for payment and raised invoices. Creagh did not pay three invoices. Two of the invoices had been ‘approved’ by Creagh, with Creagh confirming an invoice could be raised in line with the relevant payment application. Creagh failed to respond to the third payment application, or issue a payment notice or pay less notice in response. Given this failure, Quadro proceeded to issue an invoice in line with its payment application.

Adjudication

Quadro issued adjudication proceedings in relation to the three outstanding invoices. Quadro’s position in adjudication was that there was no defence to its claim for payment for all three invoices, given Creagh’s acceptance of the first two payment applications, and Creagh’s failure to respond to the third payment application. 

Creagh raised a jurisdictional challenge in the adjudication, arguing that the matter referred to adjudication contained three disputes, as opposed to one. The general position is that only one dispute can be referred to adjudication, unless both parties agree otherwise. Quadro argued that only one dispute had been referred, as to what were the outstanding sums owed to Quadro by Creagh under one contract; it classified the three invoices as “sub issues”. 

The Adjudicator agreed with Quadro that the dispute referred was only one dispute, and issued his decision. He awarded Quadro its full claim, together with interest and compensation under the Late Payment of Commercial Debts (Interest) Act 1998. 

Creagh failed to pay.

TCC enforcement action

Quadro raised adjudication enforcement proceedings given Creagh’s failure to pay. Creagh resisted enforcement on the basis that the adjudication covered multiple disputes. Creagh presented four reasons to support its argument:

1. If claims can be individually decided, it “strongly points” to the conclusion that there are multiple disputes (this is the “rule of thumb” line of reasoning from prior case-law).
2. The claims could be decided separately without reference to each other. 
3. The only time the relevant invoices had been ‘grouped’ together, was in a demand letter which also referred to four other projects.
4. The three applications are distinguishable, as the first two were expressly agreed, but the third was not.

The TCC held:

• Previous authorities do not state that if issues can be decided independently then they are automatically separate disputes, as opposed to sub-issues of a wider dispute. 
• Whether matters are sub-issues or separate issues is a question of fact.
• The dispute referred to adjudication was the failure to pay £40,026, the total of the three outstanding invoices.
• If Creagh was right, the result would be that parties would be put to the “very significant cost and inconvenience” of numerous adjudications to recover a single claimed balance under one contract. The TCC further stated this would be “contrary to the policy underlying the adjudication process of efficient, swift and cost-effective resolution of disputes on an interim basis”.
• The fact that the payment applications were cumulative meant there was a clear link between them. 

The TCC therefore enforced the Adjudicator’s decision. 

Points to take away

The practical points to take away from this case for parties adjudicating are:

• for Referring Parties: When framing a notice to refer to adjudication, consider carefully whether you are referring one dispute (potentially with sub-issues), or multiple disputes. Establishing a “clear link” between any sub-issues will assist in future arguments, and the drafting will also be very important.
• for Respondents: When considering whether or not to raise a jurisdictional challenge, consider whether the issues are truly separate disputes, or whether there are “clear links” between them which may mean that they are sub-issues as opposed to separate disputes.
• for all: The fact that multiple payment applications/payment cycles are referred together will not automatically result in a court determining that multiple disputes have been referred, and the facts of the particular case will be analysed.

It is also of interest that the TCC commented on the policy behind the adjudication process; this shows again the courts’ support for the Adjudication process. The decision further demonstrates that the courts will look to enforce an Adjudicator’s Decision, unless there is a very good reason not to.

For more information, please contact Iain Drummond, Partner in our property and infrastructure team, at iain.drummond@shepwedd.com.