Adam Architecture Ltd (Claimant / Appellant) v Halsbury Homes Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Jackson,Lord Justice Lindblom,Lady Justice Thirlwall |
| Judgment Date | 02 November 2017 |
| Neutral Citation | [2017] EWCA Civ 1735 |
| Docket Number | Case No: A1/2016/2893 |
| Court | Court of Appeal (Civil Division) |
| Date | 02 November 2017 |
[2017] EWCA Civ 1735
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM Queen's Bench Division, Technology & Construction Court
Mr Justice Edwards-Stuart
HT-2016-000089 & HT-2016-000096
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Jackson
Lord Justice Lindblom
and
Lady Justice Thirlwall
Case No: A1/2016/2893
Justin Mort QC (instructed by BLM) for the Appellant
David Sears QC (instructed by Myers Fletcher & Gordon Solicitors) for the Respondent
Hearing date: Wednesday 11th October 2017
This judgment is in seven parts, namely:
Part 1 – Introduction
| Part 1 – Introduction | Paragraphs 2 – 13 |
| Part 2 – The facts | Paragraphs 14 – 26 |
| Part 3 – The present proceedings | Paragraphs 27 – 33 |
| Part 4 – The appeal to the Court of Appeal | Paragraphs 34 – 41 |
| Part 5 – Ground 1: The effect of Section 111 of the 1996 Act | Paragraphs 42 – 65 |
| Part 6 – Ground 2: Repudiation | Paragraphs 66 – 74 |
| Part 7 – Conclusion | Paragraphs 75 – 76 |
This is an appeal by a firm of architects in litigation concerning its entitlement to recover fees following termination of its engagement. The principal issue in this appeal is whether Section 111 of the Housing Grants, Construction and Regeneration Act 1996 ("the 1996 Act") applies only to interim payments or whether it also applies to payments due following completion of the works or termination of the contract.
Section 111 applies to every construction contract within the scope of the 1996 Act. Therefore the question of statutory interpretation at the heart of this appeal is of wide importance to the construction industry.
The firm of architects which is seeking to recover outstanding fees is Adam Architecture Limited. That firm is claimant in proceedings under Part 7 of the Civil Procedure Rules ("CPR") to enforce an adjudicator's award, defendant in related proceedings brought by the employer under Part 8 of the CPR, and appellant in this court. I shall refer to it as "Adam".
The employer is Halsbury Homes Limited. That company is defendant in the Part 7 proceedings, claimant in the Part 8 proceedings and respondent in this court. I shall refer to it as "Halsbury".
Sections 109 to 111 of the 1996 Act, as amended with effect from 1 st October 2011, provide as follows:
" 109.—Entitlement to stage payments.
(1) A party to a construction contract is entitled to payment by instalments, stage payments or other periodic payments for any work under the contract unless –
(a) it is specified in the contract that the duration of the work is to be less than 45 days, or
(b) it is agreed between the parties that the duration of the work is estimated to be less than 45 days.
(2) The parties are free to agree the amounts of the payments and the intervals at which, or circumstances in which, they become due.
(3) In the absence of such agreement, the relevant provisions of the Scheme for Construction Contracts apply.
(4) References in the following sections to a payment include a payment by virtue of this section.
110.—Dates for payment.
(1) Every construction contract shall –
(a) provide an adequate mechanism for determining what payments become due under the contract, and when, and
(b) provide for a final date for payment in relation to any sum which becomes due.
The parties are free to agree how long the period is to be between the date on which a sum becomes due and the final date for payment.
(1A) The requirement in subsection (1)(a) to provide an adequate mechanism for determining what payments become due under the contract, or when, is not satisfied where a construction contract makes payment conditional on –
(a) the performance of obligations under another contract, or
(b) a decision by any person as to whether obligations under another contract have been performed.
(1B) In subsection (1A)(a) and (b) the references to obligations do not include obligations to make payments (but see section 113).
(1C) Subsection (1A) does not apply where –
(a) the construction contract is an agreement between the parties for the carrying out of construction operations by another person, whether under sub-contract or otherwise, and
(b) the obligations referred to in that subsection are obligations on that other person to carry out those operations.
(1D) The requirement in subsection (1)(a) to provide an adequate mechanism for determining when payments become due under the contract is not satisfied where a construction contract provides for the date on which a payment becomes due to be determined by reference to the giving to the person to whom the payment is due of a notice which relates to what payments are due under the contract.
(2) …
(3) If or to the extent that a contract does not contain such provision as is mentioned in subsection (1), the relevant provisions of the Scheme for Construction Contracts apply.
110A Payment notices: contractual requirements
(1) A construction contract shall, in relation to every payment provided for by the contract—
(a) require the payer or a specified person to give a notice complying with subsection (2) to the payee not later than five days after the payment due date, or
(b) require the payee to give a notice complying with subsection (3) to the payer or a specified person not later than five days after the payment due date.
(2) A notice complies with this subsection if it specifies—
(a) in a case where the notice is given by the payer—
(i) the sum that the payer considers to be or to have been due at the payment due date in respect of the payment, and
(ii) the basis on which that sum is calculated;
(b) in a case where the notice is given by a specified person—
(i) the sum that the payer or the specified person considers to be or to have been due at the payment due date in respect of the payment, and
(ii) the basis on which that sum is calculated.
(3) A notice complies with this subsection if it specifies—
(a) the sum that the payee considers to be or to have been due at the payment due date in respect of the payment, and
(b) the basis on which that sum is calculated.
(4) For the purposes of this section, it is immaterial that the sum referred to in subsection (2)(a) or (b) or (3)(a) may be zero.
(5) If or to the extent that a contract does not comply with subsection (1), the relevant provisions of the Scheme for Construction Contracts apply.
(6) In this and the following sections, in relation any payment provided for by a construction contract—
"payee means the person to whom the payment is due;
"payer" means the person from whom the payment is due;
"payment due date" means the date provided for by the contract as the date on which the payment is due;
"specified person" means a person specified in or determined in accordance with the provisions of the contract.
110B Payments notices: payee's notice in default of payer's notice
(1) This section applies in a case where, in relation to any payment provided for by a construction contract—
(a) the contract requires the payer or a specified person to give the payee a notice complying with section 110A(2) not later than five days after the payment due date, but
(b) notice is not given as so required.
(2) Subject to subsection (4), the payee may give to the payer a notice complying with section 110A(3) at any time after the date on which the notice referred to in subsection (1)(a) was required by the contract to be given.
(3) Where pursuant to subsection (2) the payee gives a notice complying with section 110A(3), the final date for payment of the sum specified in the notice shall for all purposes be regarded as postponed by the same number of days as the number of days after the date referred to in subsection (2) that the notice was given.
(4) If –
(a) the contract permits or requires the payee, before the date on which the notice referred to in subsection (1)(a) is required by the contract to be given, to notify the payer of a specified person of –
(i) the sum that the payee considers will become due on the payment due date in respect of the payment, and
(ii) the basis on which that sum is calculated, and
(b) the payee gives such notification in accordance with the contract,
that notification is to be regarded as a notice complying with section 110A(3) given pursuant to subsection (2) (and the payee may not give another such notice pursuant to that subsection).
111 Requirement to pay notified sum
(1) Subject as follows, where a payment is provided for by a construction contract, the payer must pay the notified sum (to the extent not already paid) on or before the final date for payment.
(2) For the purposes of this section, the "notified sum" in relation to any payment provided for by a construction contract means –
(a) in a case where a notice complying with section 110A(2) has been given pursuant to and in accordance with a requirement of the contract, the amount specified in that notice;
(b) in a case where a notice complying with section 110A(3) has been given pursuant to and in accordance with a requirement of the contract, the amount specified in that notice;
(c) in a case where a notice complying with section 110A(3) has been given pursuant to and in accordance with section 110B(2), the amount specified in that notice.
(3) The payer of a specified person may in accordance with this section give to the payee a notice of the payer's intention to pay less than the notified sum.
(4) A notice under subsection (3) must specify—
(a) the sum that the payer considers to be due on the date the notice is served, and
(b) the basis on which that sum is calculated.
It is immaterial for the purposes of this subsection that the sum referred to in paragraph (a) or (b) may be zero.
(5) A notice under subsection (3)—
(a) must be given...
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