Building contract – Amendment – Construction – Claimant seeking declarations as to interpretation of sub-contract for construction of university building – Defendant counterclaiming for payment of money arising out of claimant’s failure to serve timeous notice – Whether, on proper construction of contract, claimant required to serve payment notice or pay less notice with respect to defendant’s payment application on final date for payment or earlier – Claim dismissed – Counterclaim allowed
The claimant company brought proceedings for declarations as to the interpretation of the contract between the claimant and the defendant. The claim arose out of a construction contract whereby the claimant sub-contracted to the defendant works to construct an in situ concrete frame and structural topping for a new building at the University of Bath for a sum of £626,315.79. The sub-contract order incorporated the terms of the GC/Works Sub-Contract, although the key terms were the subject of deletion and full replacement by way of amendments. Appendix 10 was a payment schedule which the parties incorporated into the sub-contract as a named document in the sub-contract order.
A dispute arose between the parties relating to the payment terms of the sub-contract with respect to the defendant’s payment application. The claimant brought proceedings for declarations as to the interpretation of the sub-contract. The defendant counterclaimed for payment of money arising out of the failure by the claimant to serve a timeous notice.
In particular, the dispute centres on whether, under the sub-contract, the claimant was entitled to serve a payment notice or pay less notice with respect to the defendant’s October 2015 payment application on 23 November 2015 (as the claimant contended) or whether the claimant was required to serve any such notice prior to that date (as the defendant contended).
Held: The claim was dismissed. The counterclaim was allowed.
(1) This case was an illustration of the practice of parties seeking to upset an adjudicator’s decision by way of the swift final determination of the dispute. If the issue was a short and self-contained point, which required no oral evidence or any other elaboration than that which was capable of being provided during a relatively short interlocutory hearing, the defendant might be entitled to have the point decided by way of a claim for a declaration. That was the approach agreed by the parties to be applicable in the present proceedings: Caledonian Modular Ltd v Mar City Developments Ltd [2015] EWHC 1855 (TCC); [2015] PLSCS 203 applied.
(2) The court’s task was to interpret the language of the contract. Appendix 10 was a payment schedule which the parties incorporated into the sub-contract as a named document in Appendix 1 to the sub-contract order. The schedule did not comply with the Housing Grants, Construction and Regeneration Act 1996 in that the payment notice date was more than five days after the due date (section 110A(1)(a)); and the pay less notice deadline was before the payment notice deadline (section 111(5)(b)). Section 110A(5) of the 1996 Act provided that, where the payment provisions were not compliant, the relevant provisions were replaced by the equivalent provisions of the Scheme for Construction Contracts. That was not a wholesale replacement but occurred to the extent only that the contract did not comply with the Act.
(3) The consequence of changing the payment notice date to five days, in line with the Scheme because it was not permissible for the deadline for a pay less notice to be prior to the deadline for a payment notice: see section 111(5)(b) of the 1996 Act. Moreover, replacing the pay less notice deadline with the Scheme equivalent made the situation more difficult because it resulted in a revised deadline of 16 November 2015 (being seven days before the final date for payment) which was yet further in advance of the payment notice: see Grove Developments Ltd v Balfour Beatty Regional Construction Ltd [2016] EWHC 168 (TCC); [2016] PLSCS 37.
(4) In Manor Asset Ltd v Demolition Services Ltd [2016] EWHC 222 (TCC); [2016] PLSCS 58 where, even after intervention of the Scheme, the date for a pay less notice was before the date for a payment notice, the court decided that the correct solution was to leave the final date for payment as it was but to treat the prescribed period for the pay less notice as “nil”, i.e. it could be served at any time up until the final date for payment. The context for the construction of Appendix 10 was the dates agreed by the parties. The scheme for application, notice and payment could be seen from the dates for the March 2015 application which was the first application by the defendant.
(5) This was not a case in which the court could follow the guidance given in Manor Asset v Demolition Services because it was led by the Schedule of Dates within Appendix 10 to construe the contract in a particular way. Further, in the light of that construction, it was impermissible to imply a term because to do so would be contrary to the express provisions of the contract. The consequence was that no timeous payment notice or pay less notice had been served. The issue whether the form of the notice was itself valid thus fell away. The claim failed. Insofar as the counterclaim sought the payment of money arising out of the failure by the claimant to serve a timeous notice, it succeeded.
William Webb (instructed by Clarke Willmott) appeared for the claimant; Adam Robb (instructed by Fenwick Elliott) appeared for the defendant.
Eileen O’Grady, barrister
Click here to read transcript: Bouygues (UK) Ltd v Febrey Structures Ltd
