Leeds City Council v Waco UK Ltd
| Jurisdiction | England & Wales |
| Judge | Mr. Justice Edwards-Stuart |
| Judgment Date | 22 May 2015 |
| Neutral Citation | [2015] EWHC 1400 (TCC) |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 22 May 2015 |
| Docket Number | Case No: HT-2015-000172 |
[2015] EWHC 1400 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Rolls Building, 7 Rolls Buildings,
London EC4A 1NL
Mr. Justice Edwards-Stuart
Case No: HT-2015-000172
Alexander Hickey Esq (instructed by Pinsent Masons LLP) for the Claimant
Luke Wygas Esq (instructed by Contract & Construction Consultants Ltd) for the Defendant
Hearing dates: 12 th May 2015
Introduction
On 20 February 2015 an adjudicator made a decision in favour of the defendant Waco UK Ltd ("Waco") by which he ordered the claimant Leeds City Council ("LCC") to pay £484,759.50 plus VAT in respect of an application for an interim payment (Application 21) on the ground that LCC had failed to serve the relevant notices in response to it. LCC did not pay and so Waco made an application for summary judgment in order to enforce the decision.
Summary judgment was not given; instead LCC was given leave to defend. However, this came at a price because a condition of obtaining leave was that LCC should pay, by 7 April 2015, the sum awarded to Waco by the adjudicator. LCC complied with this order. It then brought proceedings under Part 8 for a declaration that Application 21 was not a valid application and that the adjudicator's decision was therefore wrong. This is the judgment on that application.
The basis for LCC's claim is that Application 21 was issued prematurely on 22 September 2014, when it should have been issued on 28 September 2014. LCC submits that there is no entitlement under the contract made between LCC and Waco for applications for interim payments to be made on any dates other than those stipulated by the contract.
In fact, for reasons which are in dispute, Waco issued a further application for interim payment, Application 22, on the next valuation date, namely 28 November 2014, for precisely the same sum. LCC submits that Waco did this because it recognised that Application 21 was an invalid application. Waco denies this. It says that because no work had been carried out between 22 September and 28 November 2014, and because it had not been paid anything in the meantime, it considered that it was appropriate to submit Application 22 in identical form to Application 21 and so that is what it did. That application is the subject of a further declaration.
LCC was represented by Mr. Alexander Hickey, instructed by Pinsent Masons, and Waco was represented by Mr. Luke Wygas, instructed by Contract & Construction Consultants Ltd.
The facts in more detail
On about 16 March 2012 LCC entered into a contract with Waco in the form of a JCT Design and Build Contract, 2005 Edition, Revision 2 2009 as amended (the "contract"). By the contract Waco agreed to carry out the design, manufacture and installation of new factory assembled modular Classroom Buildings at Roundhay Primary School, Wetherby Road, Leeds.
The contract contained detailed provisions governing the contractor's entitlement to make applications for interim payment. Between about April 2012 and Practical Completion, which occurred on 28 March 2013, Waco made applications for interim payments at approximately monthly intervals which were duly paid by LCC. As I explain in more detail later in this judgment, those applications were not made strictly in accordance with the terms of the contract. Nevertheless, Jacobs, LCC's agent and contract administrator, ignored these irregularities and treated the applications as if they had been made on the correct dates.
The contract provided that after Practical Completion applications for interim payment should be made at intervals of two months rather than monthly. Waco made applications in April, July and September 2013, although these applications were, again, not made on the correct dates. However, initially Jacobs took no point on this. But they did object when Waco made an application on 26 November 2013, instead of 28 November. Waco thereafter re-submitted that application on 11 December 2013 and it was subsequently paid. The next application date was 28 January 2014, but Waco did not make its application until 11 February 2014 and submitted it the following day. Nevertheless, Jacobs certified that payment was due and LCC duly paid it.
Thereafter nothing happened until 18 July 2014 when Waco made a further application. Jacobs recommended that this application too should be paid (by a certificate dated 23 July 2014). On 22 September 2014 Waco made a further application, Application 21, but this time LCC did not pay it. That application was for £484,759.50. It was the subject of the successful referral to adjudication by Waco.
In the meantime, Application 21 having not been paid, Waco issued a further application, Application 22, for precisely the same sum on 28 November 2014, which was the correct application date. However, this time Jacobs issued a certificate constituting a payment notice dated 2 December 2014 stating that the amount due from LCC was nil.
LCC seeks a further declaration that this certificate was correct and that no money is due under Application 22.
The terms of the contract
Article 3, which concerned the Employer's Agent, provided that the agent was to be Jacobs UK Ltd, who was to have:
"… full authority to receive and issue applications, consents, instructions, notices, requests or statements and otherwise to act for the Employer under any of the Conditions."
Clause 4.7 provided as follows:
"Interim Payments shall be made by the Employer to the Contractor in accordance with section 4 and whichever of Alternatives A (clause 4.13) or B (clause 4.14) is stated in the Contract Particulars to apply."
Clause 4.8 provided as follows:
"The amount due as an Interim Payment shall be an amount equal to the Gross Valuation pursuant to clause 4.13 or clause 4.14, whichever is applicable, 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 amount paid in previous Interim Payments."
Clause 4.9.2 provided as follows:
"… where Alternative B applies, Applications for Interim Payment shall be made on the dates provided for in the Contract Particulars for Alternative B up to the date named in the Employer's Practical Completion Statement or the date within one month thereafter. Applications for Interim Payment shall thereafter be made at intervals of 2 months (unless otherwise agreed) and upon whichever is the later of the expiry of the Rectification Period or the issue of the Notice of Completion of Making Good (or where there are Sections the last such period or notice)."
The relevant parts of clause 4.10, as amended, provided as follows:
"1. The final date for payment of an Interim Payment shall be 19 days from the date of receipt by the Employer of the Application for Interim Payment.
2. …
3. Not later than 5 days after the receipt of an Application for Interim Payment the Employer shall give a [payment] notice to the Contractor which shall, in respect of that application, specify the amount of the payment proposed to be made, to what the amount relates and the basis on which the amount has been calculated."
The date of possession was 26 March 2012, and the following additions were made to clause 4.7. First, Alternative B was to apply. Second, the dates for Applications for Interim Payments up to Practical Completion were stated to be: "The first date is one month after the possession date and thereafter the same date in each month or the nearest Business Day in that month". Business Days excluded Saturdays, Sundays and bank holidays.
It will be apparent from these conditions that there is a significant difference between the Interim Payment regime prior to Practical Completion and that which takes effect thereafter. It is common ground that the dates on which applications "shall be made" are the dates on which the work which is the subject of the application is to be valued. Since the date for possession was 26 March 2012, all subsequent applications prior to Practical Completion were to be made on the 26 th of each month (or nearest Business Day). There was no provision enabling the parties to substitute alternative dates.
However, after Practical Completion the valuation dates were specified as being at intervals of two months from the date of Practical Completion, unless there had been a further interim application within one month of Practical Completion. The other significant difference is the addition of the words "(unless otherwise agreed)".
Mr. Hickey submitted that this entitled the parties to vary the interval between applications, but nothing else. Mr. Wygas submitted that it was not so limited and that it enabled the parties to agree the date for any particular application.
This is a very short point. I prefer the submissions of Mr. Wygas. The purpose must have been to achieve a degree of flexibility during the period post Practical Completion, and it is to my mind self evident that this would be better achieved if the parties were able to agree different valuation dates on an application by application basis, rather than just to vary the interval. But even if Mr. Hickey's submission is correct, it seems to me that the relevant interval could be changed whenever and as often as the parties wished, thereby achieving much the same result.
The scope of Jacobs' authority
Mr. Hickey submitted that Jacobs had no authority, either actual or ostensible, to vary the...
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