Manor Asset Ltd v Demolition Services Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Edwards-Stuart |
| Judgment Date | 10 February 2016 |
| Neutral Citation | [2016] EWHC 222 (TCC) |
| Docket Number | Case No: HT-2015-000428 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 10 February 2016 |
[2016] EWHC 222 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Edwards-Stuart
Case No: HT-2015-000428
Mr Jonathan Lewis (instructed by Brecher) for the Claimant
Mr Martin Hirst (instructed by Bates Solicitors) for the Defendant
Hearing date: 26 th January 2016
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.
On 8 December 2015 an adjudicator made a decision in which he ordered Manor Asset Ltd ("MAL") to pay £72,500 plus VAT to Demolition Services Ltd ("DSL"), together with certain other sums in relation to interest and his fees and expenses. In Part 8 proceedings brought on 18 December 2015 MAL seeks a declaration that the Decision is unenforceable on the grounds of breaches of natural justice and, in addition, a declaration as to the final date for payment of DSL's invoice dated 23 October 2015.
DSL has responded by seeking summary judgment to enforce the Decision.
The parties entered into a contract for demolition works at a site known as Manor Mill in Hull. The contract was in the form of the JCT Minor Works Building Contract with Contractor's Design 2011 with certain bespoke amendments. The contract was made on 13 April 2015.
By an amendment made on 13 August 2015, Section 4 of the contract, which dealt with the provisions for payment, was amended so as to provide for payment of a percentage of the contract value on the achievement of certain milestones. The true construction of that amendment is at the heart of the dispute. The terms of the amendment are set out at paragraph 13 below.
On 23 October 2015 DSL issued an invoice for 60% of the price asserting that it had achieved the first milestone in accordance with the terms of the amendment. That invoice was sent by both e-mail (timed at 13:30) and post.
On 28 October 2015 MAL issued what it contends was a valid pay less notice in which the amount stated to be due was £1,500. The pay less notice contained the following statement by MAL:
"Our assessment of the works undertaken for financial purposes is as follows: Demolition completed … 60%"
On 6 November 2015 DSL referred a dispute to adjudication. The dispute was about the non-payment of DSL's invoice of 23 October 2015. DSL claimed that it should have been paid within 72 hours of receipt of that invoice, namely on or by 26 October 2015. It contended that the pay less notice issued by MAL was invalid.
Following examination of some photographs which had been taken on site during a visit made by one of MAL's directors on 27 October 2015, MAL asserted in the adjudication that DSL had not achieved the first milestone on 23 October 2015 after all. The adjudicator decided that DSL had achieved the milestone, but MAL contends that his decision is flawed and invalid because he did not take its evidence into account. That, it contends, was a breach of natural justice.
At the hearing MAL was represented by Mr Jonathan Lewis, instructed by Brecher Solicitors (who did not act for MAL in the adjudication), and DSL was represented by Mr Martin Hirst, instructed by Bates Solicitors. Having reflected briefly on the issues after the hearing, the following day I invited counsel to address me on one point in relation to the construction of the amendment, which they both did.
The provisions of the contract (as originally made)
Before turning to what the adjudicator decided, I will set out the relevant provisions of the contract — as it was originally made and then as it was amended — and then the relevant statutory provisions.
In its original form, Section 4, headed "payment", contained the following provisions:
" Interim payments to completion
4.3 The due dates for interim payments to the Contractor shall be the dates occurring at intervals of 4 weeks calculated from the Date for Commencement of the Works. Not later than 5 days after the due date the Architect/Contract administrator shall issue an interim certificate for a sum equal to the percentage stated in the Contract particulars of what he considers to be the total value as at the due date of:
…
less the total of sums stated as due to the Contractor previous interim certificates … The final date for payment of the certified sum shall be 21 days from the due date. 1
Interim payments on and after practical completion
4.4 …
Payment — amount and notices
4.5.1 Subject to any notice given by the Employer under clause 4.5.4, the sum to be paid by the Employer on or before the final date for payment under clause 4. 3 or 4.4 shall be the sum stated as due in the interim certificate.
.2 If an interim certificate is not issued in accordance with clause 4.3 4.4, the Contractor may at any time after the 5 day period referred to in those clauses give a payment notice to the Employer, with a copy to the 2 Architect/Contract Administrator stating the sum that the Contractor considers to be or have been due to him at the due date on the basis on which that sum has been calculated. In that event, the sum to be paid by the Employer shall, subject to notice subsequently given by him under clause 5.4, be the sum stated as due in the Contractor's payment notice.
…
.4 If the Employer intends to pay less than the sum stated as due from him in the interim certificate or, where applicable, the Contractor's payment notice, he shall not later than 5 days before the final date for payment give the contractor that notice of intention stating the sum that he considers to be due to the Contractor at the data gives notice under this clause 4.5 and the basis on which that sum has been calculated. Where the Employer gives that notice, the payment to be made on or before the final date for payment shall not be less than the amount stated as due in his notice.
…
Failure to pay amount due
4.6 If the Employer fails to pay a sum, or any part of it, due to the Contractor under clause 4.5 3 by the final date for its payment, the Employer shall, in addition to any unpaid amount that should probably have been paid, basic Contractor simple interest on that amount …"
I now turn to the amendment.
The amendment
This was made by a one page document signed on behalf of both parties on 13 August 2015. As I have already mentioned, by the amendment the parties agreed to change the basis on which interim payments were to be made by substituting percentage payments on achievement of a series of milestones in place of interim payments at four week intervals. The amendment was in the following terms:
CONTRACT AMENDMENTS
Section 4 Payment
Interim payments up to practical completion
Shall be amended as follows:
Payment Milestones
60% of contract value paid when demolition passes the black line as illustrated on image below, less the 20% paid to date. Payment to be made within 72 hours of receipt of invoice, issued when the milestone is achieved.
75% of contract value paid when demolition reaches slab top, less the amount paid by this milestone.
90% of contract value paid when crashing is complete, less the amount paid by this milestone.
100% of contract value paid at PC, less payments made.
Below this text there was a photograph of the site with a black line running more or less horizontally across the photograph. Below that image the document was signed by two directors on behalf of each party.
Although this amendment referred to the Part of Section 4 entitled "Interim payments to practical completion", for the reasons that I give later in this judgment it will be apparent that it must also have consequential effects on some of the other payment provisions in the contract, together with the provisions in relation to payment notices.
The provisions of the Housing Grants, Construction and Regeneration Act 1996 (as amended) ("the Act")
The effect of the relevant provisions of the Act is crucial to the interpretation of the amendment. It is therefore necessary to set out the relevant provisions of the Act in full. They are as follows:
" 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 in the final date for payment.
A 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,...
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