Downs Road Development LLP v Laxmanbhai Construction (U.K.) Ltd

JurisdictionEngland & Wales
JudgeEyre
Judgment Date07 September 2021
Neutral Citation[2021] EWHC 2441 (TCC)
Docket NumberCase No: HT-2021-000245
Year2021
CourtQueen's Bench Division (Technology and Construction Court)

[2021] EWHC 2441 (TCC)

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS

TECHNOLOGY AND CONSTRUCTION COURT (QBD)

Royal Courts of Justice

7 Rolls Building, Fetter Lane,

London, EC4A 1NL

Before:

HH JUDGE Eyre QC

Case No: HT-2021-000245

Between:
Downs Road Development LLP
Claimant
and
Laxmanbhai Construction (U.K.) Limited
Defendant

Luke Wygas (instructed by Nicholas & Co Solicitors Ltd) for the Claimant

Justin Mort QC (instructed by Edwin Coe LLP) for the Defendant

Hearing dates: 11 th August 2021

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.

HH Judge Eyre QC:

Introduction .

1

The parties' dispute arises out of the Claimant (“the Employer”)'s engagement of the Defendant (“the Contractor”) to perform construction works on the terms of the standard JCT Design and Build Contract (2011 edition) with amendments which are immaterial for present purposes. The parties' dealings were governed by the Housing Grants, Construction and Regeneration Act 1996 (“the HGCRA”).

2

A dispute arose as to the operation of the payment regime for the works and this led to a reference to adjudication in respect of payment cycle 34. The adjudicator's decision (“the Decision”) determined the sum due in respect of the Contractor's Interim Application 34.

3

The Employer commenced Part 8 proceedings challenging the enforceability of the Decision on the footing that the adjudicator had failed to address a line of defence asserted by the Employer. The Employer contends that the Decision is nonetheless binding as to the proper figure for the gross value of Interim Application 34 and so as to the net sum due pursuant to that application before account is taken of the potential defence. The Contractor seeks a declaration as to the invalidity of the Employer's payment notices. It contends that the Decision is enforceable but also says that notwithstanding the adjudication decision it is entitled to payment of the sum set out in the Interim Application.

The Factual Background .

4

By a contract dated 24 th September 2018 (“the Contract”) the Employer engaged the Contractor to undertake construction works in connexion with the development of land at 1A Downs Road, London E5. The works involved the demolition of the existing buildings on the land and the construction of four buildings containing a total of seventy-nine residential units and associated works. The original contract sum was £27,390,000.

5

The Contract was an amended form of the standard JCT Design and Build Contract (2011 edition). For current purposes the payment regime set out at clause 4 is relevant.

6

The Contract Particulars had provided that Alternative B (the periodic payments regime) was to apply and clause 4.7 stated that:

“.1 Interim Payments shall be made by the Employer to the Contractor in accordance with section 4 and whichever of Alternative A (Stage Payments) or Alternative B (Periodic Payments) is stated in the Contract Particulars to apply.

.2 The sum due as an Interim Payment shall be an amount equal to the Gross Valuation under clause 4.13 where Alternative A applies, or clause 4.14 where Alternative B applies, In either case less the aggregate of:

.1 any amount which may be deducted and retained by the Employer as provided in clauses 4.16 and 4.18 (‘the Retention’);

.2 the cumulative total of the amounts of any advance payment that have then become due for reimbursement to the Employer in accordance with the terms stated in the Contract Particulars for clause 4.6; and

.3 the amounts paid in previous Interim Payments.”

7

Interim applications and due dates were governed by clause 4.8 in these terms:

“.1 In relation to each Interim Payment, the Contractor shall make an application to the Employer (an ‘Interim Application’) in accordance with the following provisions of this clause 4.8, stating the sum that the Contractor considers to be due to him and the basis on which that sum has been calculated.

“.2 …

“.3 Where Alternative B applies for the period up to practical completion of the Works, Interim Applications shall be made as at the monthly dates specified in the Contract Particulars for Alternative B up to the date of practical completion or the specified date within one month thereafter. Subsequent Interim Applications shall be made at intervals of 2 months (unless otherwise agreed), the last such application being made upon the expiry of the Rectification Period or, if later, the issue of the Notice of Completion of Making Good (or, where there are Sections, the last such period or notice). The due date in each case shall be the later of the specified date and the date of receipt by the Employer of the Interim Application.

“.4 Interim Applications may be made before, on or after completion of the relevant stage or the monthly date and shall be accompanied by such further information as may be specified in the Employer's Requirements.”

8

At clause 4.9 the Contract set out the terms as to the date and amount of interim payments in these terms:

“.1 The final date for payment of an Interim Payment shall be 28 days from its due date.

“.2 Not later than 5 days after the due date the Employer shall give a notice (a ‘Payment Notice’) to the Contractor in accordance with clause 4.10.1 and, subject to any Pay Less Notice given by the Employer under clause 4.9.4, the amount of the Interim Payment to be made by the Employer on or before the final date for payment shall be the sum stated as due in the Payment Notice.

“.3 If the Payment Notice is not given in accordance with clause 4.9.2, the amount of the Interim Payment to be made by the Employer shall, subject to any Pay Less Notice under clause 4.9.4, be the sum stated as due in the Interim Application.

“.4 If the Employer intends to pay less than the sum stated as due from him in the Payment Notice or Interim Application, as the case may be, he shall not later than 5 days before the final date for payment give the Contractor notice of that intention in accordance with clause 4.10.2 (a ‘Pay Less Notice’). Where a Pay Less Notice is given, the payment to be made on or before the final date for payment shall not be less than the amount stated as due in the notice.

“.5 If the Employer fails to pay a sum, or any part of it, due to the Contractor under these Conditions by the final date for its payment, the Employer shall in addition to any unpaid amount that should properly have been paid, pay the Contractor simple interest on that amount at the Interest Rate for the period from the final date for payment until payment is made. Interest under this clause 4.9.5 shall be a debt due to the Contractor from the Employer.

“.6 Acceptance of a payment of interest under clause 4.9.5 shall not in any circumstances be construed as a waiver of the Contractor's right to proper payment of the principal amount due, to suspend performance under clause 4.11 or to terminate his employment under section 8.”

9

Clause 4.10.1 set out the requirements for a valid payment notice thus:

“Each Payment Notice under this Contract shall specify the sum that the Party giving the notice considers to be or have been due at the due date in respect of the relevant payment and the basis on which that sum has been calculated.”

10

Clause 4.10.2 then proceeded to make provision for service of a pay less notice.

11

Finally, for current purposes clause 4.14 set out the mechanism for the calculation of the Gross Valuation.

12

The Employer adopted an approach of sending two payment notices (or purported payment notices) in each payment cycle. Thus in cycle 31 a payment notice was sent stating that the net amount for payment was £1. That figure resulted from the gross valuation less retention being put at a sum £1 greater than the total amounts previously certified. That notice had been sent under cover of an email dated 5 th December 2020 stating “we confirm that a further Payment Notice will be issued to you in due course, most likely on Monday, 8 th December 2020, and this will not affect your payment date.” In due course a payment notice in a larger amount was sent. That approach was repeated in payment cycles 32 and 33 save that in those cases the net amount for payment stated to be £0.97 as a result of applying the retention of 3% to the figure of £1.

13

The current dispute relates to payment cycle 34.

14

On 26 th February 2021 the Contractor sent Interim Application 34 with supporting documents. This identified the sum due as £1,888,660.70 (I will use VAT exclusive figures throughout) on the footing of a gross valuation of £22,398,182.73 less retention of £671,945.48 and the sum previously certified of £19,837,576.55.

15

On 3 rd March 2021 the Employer's Agent sent Payment Notice 34. The covering email said “we confirm that a further Payment Notice will be issued to you in due course and will not affect your payment date.” The email went on to say that assessment of the Contractor's applications over the preceding four months had been taking longer than anticipated. It attributed this to the way in which the applications were set out and the consequent difficulty of reviewing the figures to ascertain what was properly due in respect of variations. The email also noted that in the past the Contractor had provided the application several days before the due date which had given time for the Employer's Agent to review the figures but it said that in the preceding months the application had been issued “late in the afternoon of the due date”. That combined with...

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