2015 Wall Calendar

We recently blogged about a Technology and Construction Court (TCC) decision [1] in which it was found that an email which (amongst other things) did not explicitly state that it was an application for payment was invalid.

The same point was considered in a recent case determined by the TCC [2]. In this case, the works were delayed and due to complete 11 months later than originally scheduled. The contract administrator issued a non-completion certificate in September 2014, the original end date, but not an extension of time (this was applied for by the contractor, but not decided upon by the administrator).

The contractor issued an interim application for payment on 28 April 2015. It was too late in respect of payment date 18, 28 April 2015 (since, under the contract, an application was required to be submitted at least seven days prior to the proposed due date). The Court was therefore asked to consider whether the application was valid in respect of the next payment date, on 29 May 2015.

The employer subsequently issued a payless notice which specified that £0 was due to the contractor, on the basis that the employer had a 40 week claim for Liquidated Damages.

In the meantime, the contract administrator had issued interim certificates 18 and 19 (on 6 May and 4 June respectively).

The court held that the interim application was NOT a valid interim payment application for either the April or May payment date.

Mr Justice Akenhead stated that an application for payment must be ‘free from ambiguity’ and that Beck Interiors’ application was not. He also set out what would make a valid application under the parties’ contract, and stated that:

  • It could be issued at any time more than seven days before the payment due date. He suggested this meant a contractor could submit all its interim applications on day one of the contract, ‘seeking to anticipate what work values will be achieved for each payment due date’, but that a sensible contractor was unlikely to do this. This is in contrast to a previous case decided by the TCC [1], in which it was suggested that an interim application could not be validly made outside the 28 day cycle that the parties had agreed and followed.
  • The application must state ‘the sum that the Contractor considers will become due to him’. This permits the contractor to allow for work it anticipates doing (but has not yet done) before the payment due date.
  • It must state what the contractor considers due ‘at the relevant due date’. Although he said it wasn’t absolutely necessary that the specific date was included in the application, ‘it must be clear and unambiguous that an application relating to a specific due date is being made’.

He concluded that the application was clearly intended to refer to the April payment date and not the May payment date (because it only valued work done up to the end of April and referred to payment date 18, which should have been in April).

This case further highlights the need for parties to ensure strict compliance with their contract in light of the strict payment regime, and for applications for payment to be sure to ‘do what they say on the tin’.

For more information, email blogs@gateleyplc.com.

[1] Caledonian Modular Limited v Mar City Developments Limited [2015] EWHC 1855 (TCC)

[2] Henia Investments Inc v Beck Interiors Ltd [2015] EWHC 2433 (TCC)

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This blog is intended only as a synopsis of certain recent developments. If any matter referred to in this blog is sought to be relied upon, further advice should be obtained.