TCC confirms adjudicator’s power to award payment to responding party in VMA v Project One
A short judgment was handed down by the TCC recently in VMA Services Ltd v Project One London Ltd [2025] EWHC 1815 (TCC) which is well worth a read. In October 2023, Project One London Ltd (‘POL’), as main contractor, engaged VMA Services Ltd (‘VMA’), as their M&E subcontractor, under a JCT Design and Build Sub-Contract Agreement (2016 Edition) whereby VMA were to carry out mechanical and electrical works on one of POL’s London projects.
Per the standard provisions for interim payments, VMA submitted Payment Application 8 (‘Payment Application’) on 21 June 2024 in which VMA applied for payment of £106,434.88, which became the ‘Notified Sum’ given POL served neither a payment nor pay less notice.
Presumably realising that omission, in December 2024 POL commenced a true value adjudication (‘TVA’) over the value of the Payment Application to thwart being on the receiving end of a ‘smash and grab’. VMA argued as a matter of jurisdiction that the TVA could not proceed given POL’s failure to pay the Notified Sum and that the adjudicator should order the Notified Sum to be paid instead before determining the TVA.
The adjudicator agreed with VMA, stating:
‘Where a party has failed to comply with its immediate payment obligation in respect of a notified sum, it is not entitled to adjudicate on the true value dispute under the contract or otherwise. Having found that VMA are entitled to the notified sum as a defence, I find that it would be futile for me address the true value dispute in this adjudication’.
As POL had not issued a payment notice nor payless notice, the adjudicator found that the Notified Sum was due and therefore he did not need to address the true value dispute. This is unsurprising given the decision in S&T (UK) Limited v Grove Developments Limited [2018] EWCA Civ 2448. However, the adjudicator also went on to order POL to pay VMA the Notified Sum.
VMA sought summary judgement in the TCC to enforce the adjudicator’s decision. The main point of contention the TCC had to consider was whether the adjudicator had jurisdiction to make the monetary award in favour of VMA, the responding party in the adjudication. Adrian Williamson KC upheld the decision:
‘I agree with VMA that this adjudicator did have the jurisdiction to order payment of the sums awarded’.
In reaching the decision, consideration was applied to the provisions of the Housing Grants, Construction and Regeneration Act 1996 as amended (‘Act’) and its central aim to improve cash flow in the construction industry by requiring prompt payment of notified sums. The TCC cited Bexheat Ltd v Essex Services Group Ltd [2022] EWHC 936 (TCC) establishing the principle the right to commence a TVA is subjugated to payers complying with their immediate payment obligations pursuant to section 111 of the Act, whether or not a contractor first obtained an adjudication award in its favour (as per AM Construction v The Darul Amaan Trust [2022] EWHC 1478 (TCC)), and WRW Construction Limited v Datblygau Davies Developments Limited [2020] EWHC 1965 (TCC) where an award was made to a responding party in circumstances in which the referring party sought determination of the final account in its own favour.
While a short judgment, it is a helpful reminder of the extent of defences responding parties are entitled to raise, as Mrs Justice O'Farrell DBE considered in Global Switch Estates 1 Limited v Sudlows Limited [2020] EWHC 3314 (TCC), with set-off available not to the extent to which a responding party can make a monetary recovery as an independent claim without reference to the scope of the dispute referred. In other words, a responding party may recover a monetary award in its favour if that award flows from the scope of the dispute set out in the notice of adjudication, whichever party commenced it.
Practically speaking, it’s another reminder of the importance of timely issuing valid payment and payless notices because in their absence there will be an enforceable obligation to pay the notified sum which cannot be circumvented by commencing TVAs. Legally speaking, payer’s in such situations should be careful what they wish for when trying such tactics.
