Advance JV (A Joint Venture Between Balfour Beatty Group Ltd v Enisca Ltd
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Joanna Smith |
| Judgment Date | 16 May 2022 |
| Neutral Citation | [2022] EWHC 1152 (TCC) |
| Docket Number | Case No: HT-2022-000018 |
| Court | Queen's Bench Division (Technology and Construction Court) |
and
[2022] EWHC 1152 (TCC)
Mrs Justice Joanna Smith DBE
Case No: HT-2022-000018
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
TECHNOLOGY & CONSTRUCTION COURT (QBD)
Rolls Building
Fetter Lane
London, EC4A 1NL
Mr Piers Stansfield QC (instructed by Pinsent Masons LLP) for the Claimant
Mr Alexander Nissen QC (instructed by Quigg Golden Solicitors) for the Defendant
Hearing date: 3 May 2022
APPROVED JUDGMENT
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
In these proceedings, the Claimant (“ Advance”) seeks declaratory relief pursuant to a Part 8 claim issued against the Defendant (“ Enisca”). The declaration sought concerns the validity of a Pay Less Notice.
By a decision dated 8 February 2022, an adjudicator decided that Advance did not issue a valid pay less notice against an interim application for payment and that, consequently, Advance was to pay Enisca the sum of £2,717,992.88. The parties have agreed that the issue raised in these proceedings is amenable to consideration by the court by way of this Part 8 claim. By consent, no separate enforcement proceedings are necessary as Advance has agreed to pay the amounts decided by the Adjudicator within 7 days if the court at this hearing concludes that its application for declaratory relief fails.
In support of the Part 8 Claim, Advance relies on a short statement from Mr Craig Morrison, a partner at Pinsent Masons LLP. In opposition to the Part 8 claim, Enisca relies upon a statement from one of its directors, Mr Rory Hampsey.
THE CONTRACT
Advance is a Joint Venture between Balfour Beatty Group Ltd and MWH Treatment Limited. It is engaged by United Utilities Water plc to design and construct a new water treatment works, hydro-electric power generation facility and other works in Cumbria (“ the Project”). By a sub-contract dated 21 October 2019 (“ the Contract”), Advance engaged Enisca as sub-contractor to design, supply and install the LV electrical installation for the Project.
The Contract is based on the NEC3 Engineering and Construction Subcontract dated April 2013, including Option A, but is subject to bespoke amendments. It includes NEC3 Option Y(UK)2, which provides payment terms intended to comply with the requirements of the Housing Grants, Construction and Regeneration Act 1996, as amended by the Local Democracy, Economic Development and Construction Act 2009 (“ the Act”).
It is common ground between the parties that the key terms of the Contract are as follows. Additions to the standard form by amendment are shown underlined:
Clause 50.1 of the Contract, amended from the NEC3 standard form, provides for assessment by the Contractor 1 of the amount due at “each assessment date”. These assessment dates dictate the timing of the various steps in the payment mechanism. The first assessment date was 27 September 2019, and subsequent assessment dates are at intervals of 28 days.
Clause 50.2 of the Contract provides that the amount due is the “Price for Work Done to Date” plus other amounts to be paid to the Subcontractor, less amounts to be paid by or retained from the Subcontractor. Clause 50.4 contemplates that
applications for payment will be made by the Subcontractor. These applications must be made on or before the assessment date so that they may be considered by the Contractor in assessing the amount dueClause 51.1, as amended, provides:
“The Contractor certifies a payment within three weeks of each assessment date. The first payment is the amount due. Other payments are the change in the amount due since the last payment certificate. A payment is made by the Subcontractor to the Contractor if the change reduces the amount due. Other payments are made by the Contractor to the Subcontractor. Payments are in the currency of this subcontract unless otherwise stated in this subcontract.”
Clause 51.2, as amended, includes the following:
“ The date upon which each payment becomes due and the final date for payment of payments becoming due are as provided in Option Y(UK)2.”
Clause Y2.2, as amended, states:
“ The date on which a payment becomes due is twenty-one days after the assessment date. The final date for payment is twenty-one days or a different period for payment if stated in the Subcontract Data after the date on which payment becomes due. The Contractor's certificate is the notice of payment to the Subcontractor specifying the amount due at the payment due date (the notified sum) and stating the basis on which the amount was calculated.”
Clause Y2.3 states:
“If either Party intends to pay less than the notified sum, he notifies the other Party not later than seven days (the prescribed period) before the final date for payment by stating the amount considered to be due and the basis on which that sum is calculated. A Party does not withhold payment of an amount due under this contract unless he has notified his intention to pay less than the notified sum as required by this subcontract.”
It is clear from Y2.3 that the requirements for notification of an intention to pay less than the notified sum are twofold; first the notice must state the amount considered to be due, and second the notice must state the basis on which that sum is calculated. There is no contractual requirement that this calculation must be correct.
In summary therefore:
i) Enisca may make an application for payment on or before the assessment date;
ii) Advance is required to assess the amount due for payment at each assessment date (the payment due date) and certify a payment by issuing a Contractor payment certificate within three weeks of the assessment date;
iii) Payment becomes due twenty-one days after the assessment date;
iv) Either party intending to pay less than the notified sum (in this case Advance) must notify the other party within the contractual window, i.e. not later than seven days before the final date for payment.
RELEVANT CHRONOLOGY OF EVENTS
Works began on or around 21 October 2019 and Enisca appears to have submitted monthly applications for payment from the early stages of the Project. Although not relevant to the issue in these proceedings, it would appear that the Project has experienced considerable delay and the date of completion of 20 May 2020 has long since passed.
The parties generally communicated via a document system known as CEMAR although Enisca's applications for payment were usually sent by email. Mr Hampsey gives evidence in his statement as to examples of the operation of the notice regime in this Contract (to which I shall return later), however, for present purposes I need only focus on the notices given by the parties in the Autumn of 2021.
In its Application 23 (the application immediately prior to the application on which the adjudication was based), the gross value applied for by Enisca in respect of its work over the previous two years was £3,686,499.80 exclusive of VAT. Payment was certified by Advance against this application in the sum of £2,270,597.38. The difference between the parties was £1,415,902.42. It is common ground that the assessment date of this application was 24 September 2021.
On 22 October 2021 (the next assessment date under the Contract), Enisca submitted Application 24 by email. The gross value applied for was £5,131,642.49, an increase of over £1.4 million or almost 40% of the entire gross valuation since the previous month. Taking account of the sum paid to date of £2,157,068.49, the net payment applied for was £2,717,992.88 against the previously certified figure of £2,270,597.38.
No payment certificate was provided by Advance to Enisca in respect of Application 24 (any such certificate being due on or before 12 November 2021) and no document was provided which expressly sought to respond to Application 24.
On 19 November 2021 (again, the next assessment date under the Contract), Enisca submitted Application 25, in the gross sum of £5,217,303.71, an increase of £85,661 compared to Application 24. Again, the previously certified figure of £2,270,597.38 was identified and the net payment applied for was £2,799,371.04.
Each of the applications for payment numbered 23, 24 and 25 was in the same form; each identified the date of the application, the application number and included the relevant figures in tabular form in three columns. It is common ground that the relevant dates pursuant to the payment provisions in the Contract for Application 24 (payment cycle 28 2) were:
i) 12 November 2021 – Contractor certifies and due date for payment. No certificate was provided;
ii) 26 November 2021 – the latest date for provision of a Pay Less Notice;
iii) 3 December 2021 – final date for payment.
On 25 November 2021 (one day before the expiry of the time window for provision of a Pay Less Notice in respect of Application 24 and within the 21 day period for certification following the assessment date in respect of Application 25), Advance uploaded to CEMAR a package of documents which included a “Certification of payment assessment” expressly said to be for the assessment date of 19 November 2021 (“ the Payment Certificate”), i.e. the assessment date referable to Application 25, payment cycle 29.
In addition to setting out an assessment in tabular form, the Payment Certificate read as follows:
“Dear Sirs,
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