Bexheat Ltd v Essex Services Group Ltd

Bexheat Ltd v Essex Services Group Ltd

Citation: [2022] EWHC 936 (TCC)

Background Facts

BHL was engaged by ESG under a sub-subcontract dated 8 October 2019 for plumbing works worth £1,035,000 (adjustable).
Payment disputes arose around two interim payment applications:
Application 22: true value adjudication had already taken place (first adjudication).
Application 23: BHL claimed £847,676; ESG failed to issue a valid Pay Less Notice.
First adjudication: True value of Application 22 determined; ESG paid the amount awarded.
Second adjudication: BHL sought payment of the "notified sum" from Application 23; adjudicator awarded BHL £706,029.62 plus interest and costs.
ESG resisted enforcement, arguing set-off rights, pre-existing valuation, and jurisdiction issues.

Enforcement of second adjudication award:
- Court granted summary judgment enforcing the second adjudication award in full.
- ESG’s arguments about set-off, joinder, and relying on the true value decision from the first adjudication were rejected.

Key findings:
- The first adjudication (Application 22) did not preclude BHL’s entitlement to payment under Application 23.
- ESG failed to serve a valid Pay Less Notice against Application 23. Under section 111 of the HGCRA 1996, ESG was required to pay the "notified sum" regardless of any true value dispute.
- ESG could not commence or rely on a true value adjudication until the notified sum had been paid.
- Clauses allowing set-off against an adjudicator’s award (clause 30.2) were inconsistent with statutory requirements and thus unenforceable.

Set-off arguments:
- ESG's attempt to set-off other sums (contra charges) was not permitted since no valid Pay Less Notice had been served.

Stay of execution:
- ESG requested a stay of enforcement based on BHL's alleged poor financial position and risk of dissipation.
- The court refused the stay, finding no compelling evidence that BHL would dissipate funds or be unable to repay.

Hierarchy of obligations under the 1996 Act:
- The statutory obligation to pay the notified sum (section 111) is immediate and takes precedence over any right to re-value (true value adjudication under section 108).

Timing of true value adjudication:
- A paying party must pay the notified sum before it can commence or rely on a true value adjudication to adjust sums owed.

Invalid set-off clauses:
- Clauses allowing unilateral set-off against adjudication awards are void if they undermine the statutory payment and enforcement regime.

No entitlement to join disputes unilaterally:
- Parties cannot unilaterally compel an adjudicator to hear multiple disputes together without mutual consent, despite contractual wording to that effect.

Strong support for cash flow:
- Reinforces the "pay now, argue later" principle, supporting interim payment certainty and contractor cash flow.

Severance of small jurisdictional issues:
- Even if part of an award (e.g., minor interest or statutory compensation) is arguably beyond jurisdiction, it can be severed without affecting the enforceability of the main award.