Expert Witness Journal Dec 24 - Journal - Page 86
An (almost) Fatal Assignment:
When to Novate or Assign!
by Jake Wright, Associate, www.stevens-bolton.com
The significance of novation and assignment
The case Shaylor Group Ltd v Valescure Property Ltd
[2024] EWHC 750 (TCC), reported earlier this year,
demonstrates the importance between the differences
of novation and assignment (and in this case, whether
a contract had been novated or assigned at all). The
significance of novation and assignment arose because
the court had to assess whether the adjudiator had
erred in his decision and if the contractor was entitled
to a £11m payment, due to niche circumstances
concerning the calculation of a post-termination
statement of accounts.
Works were completed to an anticipated value of
£20m without any expenditure beyond the £9m that
had been paid to [SGL] before it ceased work".[2] Nor
was he willing to "assume that the total amount
payable would in fact have been £20m".[3] The adjudicator reasoned that, on the balance of probabilities,
the amount due from one party to the other would be
"significantly less than £11m"[4] (the difference). Ultimately the adjudicator decided that due to a lack of
evidence to support the sums SGL had claimed, he
could not say what was owed and consequently
awarded a nil payment to SGL.
Background
The defendant, Valescure Property Ltd (VPL) (as
employer), entered a building contract with the
claimant, Shaylor Group Limited (SGL) (as contractor) in November 2017 for £19m (with further variations) to build 157 apartments in the Jewellery
Quarter of Birmingham (the contract). The wording
of the contract was similar to the JCT suite of
construction contracts.
Second adjudication
SGL then commenced a second adjudication to
determine the sum properly due to it under the contract. The second adjudicator accepted he was bound
by the decision of the first adjudicator as to breach,
but decided he could determine the sum consequentially due to SGL.
VPL took part in the second adjudication despite
claiming the second adjudicator did not have jurisdiction. For the first time VPL submitted, that due to
the assignment of the contract, it was no longer the
employer at the relevant time the statement of account
should have been produced. Furthermore, VPL argued that it was the losses of Grainger (as the new employer) that should have been used when calculating
the post-termination statement of account.
During the works, the parties fell into dispute over the
correct value of the work done by SGL. In June 2019
SGL alleged it was owed £750,000 and VPL maintained it had overpaid by £850,000. The works at this
stage were not close to being completed. SGL subsequently went into administration triggering the
contract’s termination provisions for insolvency.
VPL decided to press on with the works until April
2020 when it purported to assign its rights and obligations to Grainger Plc (Grainger). It was unclear if
the notice of assignment had been provided to SGL,
or if SGL’s consent was required. Meanwhile, SGL (in
administration) continued to dispute the amounts
owed under the contract and subsequently commenced adjudication proceedings against VPL.
The second adjudicator identified five issues that had
to be determined in order to decide whether either
party was entitled to a payment and, if so, how much.
These five issues were:
1. The effect, if any, of the assignment
2. The date of completion of the works within the
meaning of the contract:
3. The amount of direct loss or damage suffered by
VPL.
4. The amount that had been paid to SGL at the time
of termination.
First adjudication
SGL claimed that VPL:
1. had breached the contract by failing to provide a
statement of account post-termination; and
5. The value of the works at the time of termination.
2. owed SGL a total of £11,264,544.57 as the figure
due under the contract.
On the first four points above, the second adjudicator
confirmed he was bound by the decision in the first
adjudication. On the question of the value of the work
done by SGL up to the date of termination, the second
adjudicator was, unlike his predecessor, able to make
a determination. Accordingly, he decided to base his
decision upon VPL’s last payment notice (as the value
of the works done and accepted by VPL’s agent). By
comparison between the first adjudicator’s decision
(the sums that had been paid to SGL) and the second
adjudicator’s decision (on the value of the works), the
second adjudicator found he was able to award SGL
the difference, £356,008.
The first adjudicator decided that VPL had both
breached its obligation to draw up a statement of account and failed to provide evidence of the loss and
damage it claimed by way of set-off against SGL. However, the adjudicator decided they “cannot assume
that [VPL] did not incur any such cost”.[1] It was
noted SGL had been paid £9m by the last interim application, whilst claiming it was owed the “Forecast
Final Account” figure of £20m, as included on its
interim application. This was not accepted by the first
adjudicator, who was unwilling to accept that "the
EXPERT WITNESS JOURNAL
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DECEMBER 2024
