Building contract – Interim payment – Adjudication – Claimant local authority entering into contract with defendant – Contract providing for applications for interim payments – Defendant making application before date stipulated in contract – Claimants failing to pay – Adjudicator making award in favour of defendant – Court refusing defendant’s application for summary judgment – Claimants paying sum awarded but applying for declarations that application not valid and adjudicator’s decision wrong – Application granted
The claimant local authority entered into a contract with the defendant in the form of a JCT Design and Build Contract, 2005 Edition, Revision 2 2009, as amended, under which the defendant agreed to carry out the design, manufacture and installation of new factory assembled modular Classroom Buildings at Roundhay Primary School, Wetherby Road, Leeds. The contract contained detailed provisions governing the contractor’s entitlement to make applications for interim payment. The contract provided that, after practical completion, applications for interim payment should be made at intervals of two months, rather than monthly.
In February 2015 an adjudicator made a decision in favour of the defendant by which he ordered the claimants to pay £484,759.50 plus VAT in respect of an application for an interim payment (application 21) on the ground that the claimants had failed to serve the relevant notices in response to it. The claimants did not pay and so the defendant applied for summary judgment in order to enforce the decision.
Summary judgment was not given and the claimants were given leave to defend on condition that they paid the sum awarded to the defendant by the adjudicator. The claimants complied with that order and then brought proceedings under Part 8 for a declaration that application 21 was not a valid application and that the adjudicator’s decision was therefore wrong. The claimants contended that application 21 had been issued prematurely and there was no entitlement under the contract made between the parties for applications for interim payments to be made on any dates other than those stipulated by the contract.
The main issue was whether the claimants, by actually accepting applications for and paying earlier interim payments after the specified dates, had either agreed to vary the dates for the making of interim applications post practical completion or, alternatively, waived their right to challenge an application made on a different date.
Held: The application was granted.
(1) A party could represent that he would not enforce a specific legal right by express words or by adopting a course of conduct which was inconsistent with the exercise of that right. Such conduct would only constitute a representation that he would not exercise a right if the circumstances were such as to suggest either that he was aware of the right when he embarked on the course of conduct inconsistent with it or that he was content to abandon any rights that he might enjoy which were inconsistent with that course of conduct. If one party led the other to believe that he would not insist on the stipulation as to time, and that, if they carried out the work, he would accept it, and they did it, he could not afterwards set up the stipulation as to the time against them. By his conduct he evinced an intention to affect their legal relations, in effect making a promise not to insist on his strict legal rights: Charles Rickards Ltd v Oppenheim [1950] 1KB 623 and Youell v Bland Welch and Co (“Superhulls Cover”) [1990] 2 Lloyd’s Rep 431 applied.
(2) In the context of the present case, if the claimants’ representative had embarked on a course of conduct that led the defendant to believe that applications for interim payment would be accepted, even if not made on the contractual valuation date but on some other date a few days later, it would be unconscionable to permit the claimants to resile from that understanding. The right to submit an application for an interim payment revived at each application date. However, on the evidence, the claimants had done nothing to indicate to the defendant that, after practical completion, they were prepared to accept an application irrespective of whether or not it was made on any valuation date, or a date within three to four days of it.
Accordingly, application 21 was not a valid application and the adjudicator’s decision could not stand. In the circumstances, the claimants were entitled to the declaration they sought. The defendant had to pay back the sums paid by the claimants, together with interest. It remained open to the defendant to seek a determination of the value of its final account, following which it might or might not become entitled to further payment.
Alexander Hickey (instructed by Pinsent Masons LLP) appeared for the claimants; Luke Wygas (instructed by Contract & Construction Consultants Ltd) appeared for the defendant.
Eileen O’Grady, barrister
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