High Court Upholds £3.3m Adjudication Ruling Against Farrans Construction

The High Court has ruled in favour of United Utilities Water (UU) in a major construction payment dispute, enforcing an adjudicator’s decision requiring Farrans Construction to pay approximately £3.3 million.

Farrans, operating under Northstone (NI), attempted to challenge the adjudication award by arguing that a payment notice issued by UU was unclear and legally defective. The contractor claimed that inconsistencies within the project’s shared digital contract management platform, CEMAR, created ambiguity regarding the amount allegedly owed.

Despite these arguments, the court declined to examine the validity of the payment notice itself and instead granted summary judgment in favour of the water company.

Background to the Dispute

The disagreement stemmed from the West Cumbria Supply Project, a major infrastructure scheme valued at £131.6 million. Originally worth £85 million when awarded in 2017, the contract later increased to £95 million before eventually rising substantially again in 2021.

To deliver the project, Farrans formed a joint venture with the UK arm of Irish civil engineering contractor Roadbridge, which later collapsed in 2022. The works, procured under an NEC3 contract, involved constructing 32 kilometres of raw water aqueducts alongside 24 kilometres of water mains pipelines across Cumbria.

As the project progressed, tensions emerged between UU and the joint venture over escalating costs and repeated claims for additional payments. The widening gap between the approved budget and projected final expenditure reportedly worsened the contractors’ “pain share” position, contributing to deteriorating site behaviour and increasing concerns over delays affecting associated schemes.

Contract Changes and Payment Issues

In response to growing difficulties, the parties amended the contract structure by introducing a milestone-based payment schedule. This revised arrangement enabled the joint venture to submit payment applications immediately after completing designated milestones, significantly accelerating the valuation and payment process.

However, a fresh dispute arose in October 2024 after the JV submitted applications for payment relating to two milestones through the CEMAR platform.

While the project manager accepted that one milestone had been completed successfully, the second was rejected on the basis that completion had not yet been achieved.

Subsequently, the project manager issued a payment notice through the same system stating that the amount due was a negative valuation of approximately £3.3 million.

UU interpreted this as meaning the joint venture owed repayment of the overpaid amount. Farrans disagreed and challenged the notice.

Adjudication and Court Proceedings

The matter proceeded to adjudication, where the adjudicator ruled in favour of United Utilities. Farrans was directed to pay the £3.3 million sum, together with VAT, within seven days.

When payment was not made, UU commenced enforcement proceedings in the High Court. The claim was later revised so that Farrans became the sole defendant.

Although Farrans initially alleged that the adjudicator had breached principles of natural justice, the contractor later withdrew that argument and instead contended that the adjudicator had made an error of law.

Central to Farrans’ case was the argument that the payment notice itself was fundamentally defective. The contractor maintained that discrepancies in dates within the CEMAR system, combined with the wording of the negative payment figure, meant there was no valid obligation requiring the service of a pay-less notice.

Representing Farrans, barrister William Webb argued that a negative valuation could not automatically be interpreted as a repayment demand.

He submitted that, in ordinary language, stating someone is owed “minus £3 million” is not equivalent to expressly saying that the other party must repay £3 million.

Court Decision

Judge Kelly declined to make a definitive ruling on whether the payment notice itself was legally valid. She stated that there was insufficient evidence before the court concerning the parties’ shared understanding of how the CEMAR system operated and how the contract had been administered historically.

Nevertheless, the judge concluded that the procedural points raised by Farrans were insufficient to prevent enforcement of the adjudicator’s decision at this stage.

As a result, the court ordered Farrans to pay the principal adjudication sum together with interest and legal costs, reinforcing the judiciary’s longstanding approach of enforcing adjudication awards swiftly unless there are clear jurisdictional or procedural failures.