The importance of good service when deciding jurisdiction

Laura Lintott is of counsel and Sam Goodwill is an associate at Watson Farley & Williams

The recent judgment in AM Construction v The Darul Amaan Trust [2022] EWHC 1478 (TCC) has clarified some issues around service of notices under construction contracts. The case involved a payment dispute between contractor AM Construction (AMC) and charitable trust the Darul Amaan Trust (DAT) about the construction of a three-storey mosque.

AMC and DAT had entered into a construction contract (to which the Housing Grants, Construction and Regeneration Act 1996 applied) in July 2015 where AMC agreed to build a mosque for £2.3m. While the date for completion was set for 14 October 2016, at the time of the judgment, the works were still not complete.

“The distinguishing feature of AMC’s case is that there was no ‘smash and grab’ adjudication decision concluding that a notified sum was due and unpaid”

DAT intended to start an adjudication against AMC on true valuation. So on 4 October 2021, DAT instructed a process server who placed an envelope through the letterbox at AMC’s registered address, which was meant to contain a notice of adjudication. An adjudicator issued their decision on 19 November 2021.

AMC then applied to the Technology and Construction Court (TCC) seeking declarations that: the adjudicator’s decision was unenforceable because it was made without jurisdiction; the notified sum or alternative notified sum (as defined in the contract) remained due; whatever the true valuation, DAT  was obliged to pay that sum; and AMC was entitled to continue to suspend its works.

Are you being served?

The first issue the court considered was whether the adjudication notice had been served correctly on AMC. According to AMC, the envelope did not contain the adjudication notice or a cover letter. It also argued that even if the two documents were included in the envelope, the adjudication notice had not been validly served in accordance with the contract.

DAT’s solicitor had emailed a number of documents (including the adjudication notice) to a process server to print and deliver. The process server confirmed that the documents had been posted through the letterbox and provided a certificate of service. He was adamant that he served the documents correctly. However, AMC maintained that the envelope did not contain the adjudication notice.

The issue ultimately came down to the evidence. The court preferred the account of AMC’s witness and data from AMC’s doorbell camera over the account of an “immensely experienced” process server. It concluded that the process server’s memory of the events was unreliable as he said he had tried to see if anyone was in but that was contradicted by the evidence of the doorbell camera footage. The conclusion was that the process server had inadvertently failed to print or enclose the notice of adjudication in the hand-delivered envelope.

The contract provided that any notice may be served by “any effective means and shall be duly given or served if delivered by hand or sent by pre-paid post”. The court held that emailing the documents to the process server did not equal “pre-paid post” and that the adjudication notice was not delivered by hand, meaning it had not been properly served. As a result, the adjudicator had no jurisdiction to make his decision, which therefore was unenforceable.

Taking note of pay less notices

AMC’s alternative argument was that DAT failed to serve a valid pay less notice. AMC had served two default-payment notices. The court held that while the first payment notice was not valid, this did not prevent the second payment notice from being valid. As DAT did not serve a pay less notice, it was obliged to pay the sum notified by AMC in the second default-payment notice, confirming the principle in S&T (UK) Limited v Grove Developments Limited that an employer can only bring a true valuation adjudication once it complies with its obligation to pay a notified sum.

The distinguishing feature of AMC’s case compared to all other TCC cases is that there was no ‘smash and grab’ adjudication decision concluding that a notified sum was due and unpaid.

The court decided that DAT had no right to commence a true value adjudication until it had paid the notified sum. This was the case even though the notified sum had not been confirmed by an adjudicator in a ‘smash and grab’ adjudication first. This has clarified and widened the scope of the S&T principle. The court also held that since DAT failed to pay AMC the notified sum, AMC was within its right to suspend works.

This judgment carries two core messages. First, it confirms that it is essential for an adjudication notice to be served correctly for the adjudicator to have jurisdiction to issue their decision. Second, it clarifies the S&T principle in that an employer will be barred from starting a true valuation adjudication if a notified sum is due. This is irrespective of whether the notified sum has been confirmed by an adjudicator in a ‘smash and grab’ adjudication first or not.