Lidl Great Britain Ltd v Closed Circuit

Lidl Great Britain Ltd v Closed Circuit Cooling Ltd (t/a 3CL)

Citation: [2023] EWHC 2243 (TCC)

Background Facts

3CL submitted its 19th interim payment application ("AFP19") for £781,986.22 under the framework agreement.
Lidl argued AFP19 was invalid due to procedural defects (e.g., inadequate milestone identification, missing photos and insurance evidence, and incorrect service).
Lidl issued a payment notice (PAY-7) valuing the work at £0, including a large deduction for liquidated damages.
3CL commenced adjudication and won; the adjudicator awarded payment of the AFP19 sum plus interest.
Lidl issued a Part 8 claim seeking declarations that the adjudicator’s decision was wrong and unenforceable.
3CL sought summary judgment to enforce the adjudicator’s award (Part 7 claim).

Outcome:
- The court granted summary judgment enforcing the adjudicator’s decision in favour of 3CL.
- Lidl's Part 8 claims for declarations were dismissed.

Key findings:
- AFP19 was a valid payment application; failures in documentary support (photos, insurance) were not conditions precedent to validity.
- PAY-7 was not a valid payment notice; it was treated as a pay less notice and thus ineffective since no proper prior payment notice had been served.
- The alleged procedural breach (adjudicator referring to a clause Lidl argued had not been discussed) was not a material breach of natural justice and did not invalidate the decision.
- Even if there had been a breach, it would not have been material because Lidl had no substantive argument against the correct interpretation.

Estoppel by convention:
- The court held Lidl was estopped from arguing that AFP19 was invalid due to the cumulative approach to milestone claims, as Lidl had accepted and paid on the same basis in earlier applications.

Nature of payment application conditions:
- Non-compliance with supporting document requirements (e.g., photos, insurance) does not necessarily render an interim application invalid, unless explicitly drafted as a condition precedent.

Validity of notices:
- Payment notices and pay less notices must be clear and comply strictly with contract and statutory requirements; hybrid notices risk invalidity.
- Deductions for liquidated damages belong in pay less notices, not payment notices.

Estoppel by convention in payment practices:
- Where a practice (like cumulative milestone billing) is consistently accepted, parties may be estopped from later challenging it.

Natural justice in adjudication:
- An adjudicator may refer to contractual clauses not expressly cited if parties raised related substantive issues, provided there is no surprise that affects fairness materially.

Approach to enforcement:
- Courts strongly support enforcement of adjudicators’ decisions to preserve cash flow, even when parties seek to challenge legal correctness under Part 8.