Rochford Construction Ltd v Kilhan Construction Ltd
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Cockerill |
| Judgment Date | 12 March 2020 |
| Neutral Citation | [2020] EWHC 941 (TCC) |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Docket Number | No. HT-2020-000023 |
| Date | 12 March 2020 |
Mrs Justice Cockerill
No. HT-2020-000023
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY & CONSTRUCTION COURT (QBD)
The Rolls Building
7 Rolls Buildings
Fetter Lane
Holborn
London, EC4A 1NL
Ms H. White (instructed by Goodman Derrick) appeared on behalf of the Claimant.
Ms R. Drake (instructed by Fieldfisher) appeared on behalf of the Defendant.
Please note: Transcript produced from poor quality audio
This is a hearing of the Part 8 claim brought by the claimant Rochford against the Defendant Kilhan, in respect of Interim Payment Application 9, “IPA 9”, which Rochford disputes was ever properly due and owing to Kilhan.
On 3 August 2018 the subcontract, which is the subject of the application, was entered into between Rochford and Kilhan. It concerns the construction of a reinforced concrete frame on a project known as “Richmond upon Thames College”.
The dispute then arises out of an adjudication dated 24 December 2019 by Mr G P Kitt in relation to the dispute between the parties over IPA9. The original application for payment was for just shy of £1.4 million, was dated 20 May 2019, and concerned the period ending 30 April 2019. The Interim Payment Notice, IPN 9, was issued on 23 October 2019, and certified a sum of just over £1.2 million.
The dispute then, as now, concerned the validity of that payment notice, whether it was issued late, and failed to specify how the sum sought was calculated. The adjudicator defined the issues before him at paragraph 16 of the adjudication as:
“Are the payment provisions in the contract compliant with the Act? If not, what terms are to be implied? Was Kilhan's Application For Payment 9, AFP 9, a valid application for payment, and / or a valid default payment notice? Was Rochford's IPN 9 a valid payment notice in accordance with the Act?”
The adjudicator concluded that the due date of IPA 9 was 20 May 2019, being the date on which the notice was served, and that the final date for payment was thirty days from that due date, being 19 June 2019. He concluded that the Claimant had neither served a Payment Notice within five days of the due date nor a Pay Less Notice no less than seven days prior to the final date for payment. On that basis, the adjudicator found that the sum claimed was owing in default.
I note that the second issue, which has been before me today, is one which was not really in issue in the adjudication, and contrary-wise the second issue in the adjudication as to the contents of the notice has not played much part.
In any event, Rochford refused to pay the sums due under the adjudication, Kilhan brought Part adjudication proceedings to recover the payment, and that payment was satisfied by Rochford shortly before the hearing date for the Part application, so the hearing date was vacated. Rochford, who originally hoped to have these Part 8 proceedings heard at the same time as the Part proceedings, have brought Part 8 proceedings because it does not concur with the decision, and seeks the court to decide a fresh issue in relation to the due date and the final date for payment.
As part of the process, it seeks to obtain various declarations in respect of the validity of the Payment Notice, and also to obtain the payment of the sums previously paid over to Kilhan. In particular, Rochford seeks the following declarations, as set out in the amended details of claim.
“In respect of the due date:
a. Under the express terms of the Subcontract, the Defendant is obliged to serve any interim application for payment on the last day of each calendar month.
b. As a result, no payment became due under the Subcontract in respect of the April 2019 payment cycle.
In respect of the Final Date of Payment:
c. Under the express terms of the Subcontract, the Final Date for Payment of any sum that has become due in 30 days from the date of service of a relevant invoice.
d. Without prejudice to the fact that no sums had in fact become due, the Defendant did not serve an invoice until 7 January 2020.
e. Insofar as the Claimant has served a payless notice more than 7 days prior to the Final Date of Payment, the Claimant is not obliged to pay the sums now claimed by the Defendant.
Generally:
f. As a consequence of the above matters, the Claimant does not owe the Defendant the sums ordered be paid by the Adjudicator in his Decision.
g. The Defendant must pay the Adjudicator's fees and expenses.
h. The Defendant must pay to the Claimant the principal sum, together with VAT, interest and Adjudicator's fees and expenses, which the Claimant paid to, or on behalf of, the Defendant pursuant to the Adjudicator's Decision.
i. The Defendant claims interest pursuant to Section 35A of the Supreme Court Act 1981 for such period and at such a rate as the court thinks fit.”
The latter two grounds are grounds which were sought to be introduced by amendment. Their introduction was the subject of dispute to which I shall return.
On the substance of the Part 8 claim, in essence Rochford says that the adjudicator's decision was clearly wrong, even on the basis of a brief inspection of the terms of the subcontract, because he failed to give effect to two key expressed clauses of the subcontract: As to the date for making a claim, and as to the requirements for a final date for payment. In other words, instead of implying in the terms set out in the Scheme only insofar as was required, and construing those together with any express terms that did not directly fall foul of the Act, he simply ignored the express terms.
The subcontract, which is the subject of this dispute, states as follows, insofar as relevant:
“ The brief description of subcontractor works to be carried out Works are lump sum … RCL will issue activity schedule to KCL, application date end of month … commercial … valuations monthly as per attached payment schedule end of month. Payment terms thirty days from invoice as per attached payment schedule. S/C payment cert must be issued with invoice.”
A point to be noted here is that there was no payment schedule. Had there been, it seems far less likely that this dispute would have arisen.
The legal framework:
The HGCRA 1996: It is agreed between the parties that the subcontract is subject to the Housing Grant Construction & Regeneration Act 1996 (“the HGCRA”), and the Scheme for Construction Contracts 1998 (“the Scheme”). The relevant sections of the HGCRA state as follows:
“[109] Entitlement to stage payments.
(1) A party to a construction contract is entitled to payment by instalments, stage payments or other periodic payments for any work under the contract unless—
(a) it is specified in the contract that the duration of the work is to be less than 45 days, or
(b) it is agreed between the parties that the duration of the work is estimated to be less than 45 days.
(2) The parties are free to agree the amounts of the payments and the intervals at which, or circumstances in which, they become due.
(3) In the absence of such agreement, the relevant provisions of the Scheme for Construction Contracts apply.
(4) References in the following sections to a payment [provided for by the contract] include a payment by virtue of this section.”
“[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 and the final date for payment. (1A) The requirement in subsection (1)(a) to provide an adequate mechanism for determining what payments become due under the contract, or when, is not satisfied where a construction contract makes payment conditional on—
(a) the performance of obligations under another contract, or
(b) a decision by any person as to whether obligations under another contract have been performed.
(1B) In subsection (1A)(a) and (b) the references to obligations do not include obligations to make payments (but see section 113). (1C) Subsection (1A) does not apply where—
(a) the construction contract is an agreement between the parties for the carrying out of construction operations by another person, whether under sub-contract or otherwise, and
(b) the obligations referred to in that subsection are obligations on that other person to carry out those operations.
(1D) The requirement in subsection (1)(a) to provide an adequate mechanism for determining when payments become due under the contract is not satisfied where a construction contract provides for the date on which a payment becomes due to be determined by reference to the giving to the person to whom the payment is due of a notice which...
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