Grove Developments Ltd v S&T(UK) Ltd

JurisdictionEngland & Wales
JudgeMr Justice Coulson
Judgment Date27 February 2018
Neutral Citation[2018] EWHC 123 (TCC)
CourtQueen's Bench Division (Technology and Construction Court)
Docket NumberCase Nos: HT-2017-000336
Date27 February 2018

[2018] EWHC 123 (TCC)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES

TECHNOLOGY AND CONSTRUCTION COURT

Royal Courts of Justice

Rolls Building, Fetter Lane, London, EC4A 1NL

Before:

The Hon Mr Justice Coulson

Case Nos: HT-2017-000336

HT-2017-000381

Between:
Grove Developments Limited
Claimant
and
S&T(UK) Limited
Defendant

Mr Alexander Nissen QC (instructed by Macfarlanes LLP) for the Claimant

Mr Anthony Speaight QC and Mr Matthew Thorne (instructed by Trowers and Hamlins LLP) for the Defendant

Hearing dates: 19 and 25 January 2018

Judgment Approved

Mr Justice Coulson

The Hon.

1

INTRODUCTION

1

By a construction contract dated 26 March 2015, the claimant (“Grove”) engaged the defendant (“S&T”) to design and build a new Premier Inn Hotel at Heathrow Terminal 4. The hotel was to include 613 bedrooms and a pedestrian link bridge. The contract sum was £26,393,730.04. The contract incorporated the JCT Design and Build Contract 2011. The contractual completion date was 10 October 2016. Practical completion was not achieved until 24 March 2017.

2

Since then, there have been three adjudications between the parties: the first decided that the Schedule of Amendments was part of the contract; the second adjudication decided that S&T were not entitled to a full extension of time, but were entitled to an extension of time down to 9 January 2017; and the third adjudication decided that Grove's Pay Less Notice of 18 April 2017 was invalid. This last decision meant that, on the face of it, S&T were entitled to be paid in excess of £14 million pursuant to their interim application no. 22. Grove had already anticipated a potentially adverse result in the third adjudication by the issue of their CPR Part 8 proceedings.

3

Between them, those Part 8 proceedings, together with S&T's counterclaim and S&T's separate enforcement action in respect of the decision in the third adjudication, raise four issues for the court's determination:

(a) Issue A: whether or not Grove's Pay Less Notice complied with the requirements of the contract;

(b) Issue B: whether, even if the Pay Less Notice did comply with the contract, the result in the third adjudication in S&T's favour should still be enforced;

(c) Issue C: whether in principle, at this stage, Grove is entitled to commence a separate adjudication seeking a decision as to the ‘true’ value of interim application 22;

(d) Issue D: whether Grove's notices in respect of liquidated damages were properly issued. This is a separate and discrete issue from the previous three.

4

I deal with those issues in this way. In Section 2 I set out the relevant contract terms. In Section 3 I identify the relevant events. In Sections 4, 5, 6 and 7 I deal in detail with each of Issues A-D in turn. I am aware that Section 6, which deals with Issue C (whether an employer has the right to adjudicate the ‘true’ value of an interim application, in circumstances where their payment notice and/or pay less notice is deficient or non-existent) will be of particular interest to the construction industry, so I make no apologies for its length. There is a short summary of my conclusions in Section 8.

2

THE CONTRACT TERMS

5

The terms of the contract relevant to Issues A-D are set out in paragraph 6 below. The amendments to the standard form, which are taken from the Schedule of Amendments, are shown as underlined.

6

The terms were as follows:

“Article 10

This Contract shall incorporate all the provisions of the Joint Contracts Tribunal Design & Build Contract 2011 (DB 2011), as amended by the Schedule of Amendments attached to the Conditions.

Clause 2.28

2.28 If the Contractor fails to complete the Works or a Section by the relevant Completion Date, the Employer shall issue a notice to that effect (a ‘Non-Completion Notice’). If a new Completion Date is fixed after the issue of such a notice, such fixing shall cancel that notice and the Employer shall where necessary issue a further notice.

Clause 2.29

2.29.1 Provided

2.29.1.1 The Employer has issued a Non-Completion Notice for the Works or a Section; and

2.29.1.2 the Employer has notified the Contractor before the due date for the final payment under clause 4.12.5 that he may require payment of, or may withhold or deduct, liquidated damages,

the Employer may, not later than the day beforethe final date for payment of the amount payable under clause 4.12, give notice to the Contractor in the terms set out in clause 2.29.2.

2.29.2 A notice from the Employer under clause 2.29.1 shall state that for the period between the Completion Date and the date of practical completion of the Works or that Section:

2.29.2.1 he requires the Contractor to pay liquidated damages at the rate stated in the Contract Particulars, or lesser rate stated in the notice, in which event the Employer may recover the same as a debt; and/or

2.29.2.2 that he will withhold or deduct liquidated damages at the rate stated in the Contract Particulars, or at such lesser stated rate, from sums due to the Contractor. 1

2.29.2.3 If the Employer fixes a later Completion Date for the Works or a Section, the Employer shall pay or repay to the Contractor any amounts recovered, allowed or paid under clause 2.29 for the period up to that later Completion Date.

2.29.2.4 If the Employer in relation to the Works or a Section has notified the Contractor in accordance with clause 2.29.1.2 that he may require payment of, or may withhold or deduct, liquidated damages, then, unless the Employer states otherwise in writing, clause 2.29.1.2 shall remain satisfied in relation to the Works or Section, notwithstanding the cancellation of the relevant Non-Completion

Notice and issue of any further Non-Completion Notice.

Clause 4.7.1

4.7.1 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.

Clause 4.7.2

4.7.2 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:

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

4.7.2.2 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

4.7.2.3 the amounts paid in previous Interim Payments.

Clause 4.8.3

4.8.3 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.

Clauses 4.9.1, 4.9.2, 4.9.3, 4.9.4

4.9.1 The final date for payment of an Interim Payment shall be 21 days from its due date.

4.9.2 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.

4.9.3 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.

4.9.4 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 3 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 Pay Less Notice.

Clause 4.10.2

4.10.2 A Pay Less Notice:

4.10.2.1 (where it is to be given by the Employer) shall specify both the sum that he considers to be due to the Contractor at the date the notice is given and the basis on which that sum has been calculated;

4.10.2.2 (where it is to be given by the Contractor) shall specify both the sum that he considers to be due to the Employer at the date the notice is given and the basis on which that sum has been calculated.

Clause 4.14

4.14 The Gross Valuation shall be the total of the amounts referred to in clauses 4.14.1 and 4.14.2 less the total of the amounts referred to in clause 4.14.3, calculated as at the date for making an Interim Application under clause 4.8.3.

Clause 9.2.1

9.2 If a dispute or difference arises under this Contract which either Party wishes to refer to adjudication, the Scheme shall apply, subject to the following:

9.2.1 for the purposes of the Scheme the Adjudicator shall be the person (if any) and the nominating body shall be that stated in the Contract Particulars;

3

THE RELEVANT EVENTS

7

In July 2017, S&T commenced the first adjudication. The dispute arose out of their contention that, as a matter of construction, the...

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