Aqua Leisure International Ltd v Benchma

Aqua Leisure International Ltd v Benchmark Leisure Ltd

Citation: [2020] EWHC 3511 (TCC)

Background Facts

Aqua was engaged under a JCT Design and Build Contract dated 13 July 2015.
Practical completion was achieved on 18 August 2016.
Aqua submitted a final interim payment application on 7 September 2016 for £160,077.80 plus VAT.
Benchmark failed to serve a valid Pay Less Notice and paid only £20,000.
Aqua commenced adjudication in June 2017; the adjudicator ordered Benchmark to pay £143,411.13 plus VAT, plus interest, legal costs under the Late Payment of Commercial Debts (Interest) Act 1998, and his own fees.
Parties met and discussed a settlement agreement, but all communications were “subject to contract”.
Partial payments were made, but the final settlement document was never signed.
In 2019, Aqua issued proceedings to enforce the adjudicator’s decision.

Main ruling:
- The court granted summary judgment enforcing the adjudicator’s decision for the unpaid sums except for the part awarded as legal costs under the Late Payment of Commercial Debts (Interest) Act 1998.

Key findings:
- The parties’ settlement discussions and partial payments did not create a binding compromise because they were “subject to contract” and no final document was signed.
- Payments made and works performed during negotiations did not amount to waiving the "subject to contract" condition.
- The adjudicator’s award of legal costs under the 1998 Act was made without jurisdiction and was not enforceable.
- No waiver of jurisdictional objections arose even though Benchmark did not expressly reserve its position during the adjudication.

Outcome:
- Aqua awarded judgment for the principal adjudication sum and interest but not for the legal costs and fixed fee under the 1998 Act.

"Subject to contract" rule:
- Where parties label discussions or agreements as “subject to contract,” there is no binding contract until formal execution, even if payments are made and work is done in the interim.
- Courts will not lightly find that this condition has been waived.

Adjudication enforcement approach:
- The court strictly enforces adjudication awards to uphold cash flow (“pay now, argue later”), but it will not enforce parts of an award that exceed the adjudicator’s jurisdiction.

Jurisdictional limitations on adjudicator powers:
- Adjudicators cannot award costs or sums under the Late Payment of Commercial Debts (Interest) Act 1998 unless explicitly permitted by the construction contract in compliance with statutory requirements.
- The statutory bar in s.108A(1)-(2) Housing Grants, Construction and Regeneration Act 1996 prevents parties from relying on implied terms regarding costs.

No waiver by participation:
- Participation in an adjudication without reservation does not waive the right to challenge a fundamental lack of jurisdiction if the issue was not known or reasonably discoverable at the time (here, the costs power under the 1998 Act).