Surrey and Sussex Healthcare NHS Trust v Logan Construction (South East) Ltd

JurisdictionEngland & Wales
JudgeMr Alexander Nissen
Judgment Date13 January 2017
Neutral Citation[2017] EWHC 17 (TCC)
Docket NumberCase No: HT-2016-000306
CourtQueen's Bench Division (Technology and Construction Court)
Date13 January 2017

[2017] EWHC 17 (TCC)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

TECHNOLOGY AND CONSTRUCTION COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Mr Alexander Nissen QC

(sitting as a Deputy High Court Judge)

Case No: HT-2016-000306

Between:
Surrey and Sussex Healthcare NHS Trust
Claimant
and
Logan Construction (South East) Limited
Defendant

Gideon Scott Holland (instructed by Capsticks) for the Claimant

Alexander Hickey QC (instructed by Berwin Leighton Paisner) for the Defendant

Hearing date: 20 December 2016

Judgment (Approved)

Mr Alexander Nissen QC:

Introduction

1

By these proceedings, Surrey and Sussex Healthcare NHS Trust ("the Trust") seeks declaratory relief pursuant to a Part 8 claim issued against Logan Construction (South East) Limited ("Logan"). The two declarations sought relate respectively to the invalidity of an alleged Interim Payment Notice and the validity of an alleged Pay Less Notice. The Trust failed in its respective contentions before an adjudicator who decided that, as the Interim Payment Notice was valid but that the Pay Less Notice was not, the Trust was liable to pay Logan the sum of £1,015,557.95 plus interest. The parties are agreed that the questions raised by these proceedings are amenable to consideration by the Court by way of a Part 8 claim. By consent, no separate enforcement proceedings were necessary as the Trust has agreed to respect the adjudicator's decision within 7 days if the Court concluded that its applications for both heads of declaratory relief should fail.

The Contract

2

The Trust owns and operates the East Surrey Hospital near Redhill in Surrey. Logan is a building contractor. Pursuant to a Building Contract ("the Contract") in the form of a JCT Intermediate Building Contract with Contractor's Design 2011 the Trust employed Logan to refurbish various operating theatres, a recovery ward and associated works for the sum of £4,388,000.

3

The following were express provisions of the Contract:

" 4.7 Interim Payments – due dates and certificates

.1 Subject to any agreement between the Parties as to stage payments, the due dates for interim payments by the Employer are:

.1 for the period up to the date of practical completion of the Works, the monthly dates specified in the Contract Particulars;

.2 a date not later than 14 days after the date of practical completion;

.3 thereafter, the specified dates at intervals of 2 months; and

.4 the date of expiry of the Rectification Period or, if later, the date of issue of the certificate of making good (or, where there are Sections, the last such period or certificate).

.2 The Architect/Contract Administrator shall not later than 5 days after each due date issue an Interim Certificate, stating the sum that he considers to be or have been due at the due date to the Contractor in respect of the interim payment, calculated in accordance with clause 4.8, and the basis on which that sum has been calculated."

"4.10 Contractor's Interim Applications and Payment Notices

.1 In relation to any interim payment the Contractor may not less than 7 days before the due date make an application to the Quantity Surveyor (an 'Interim Application'), stating the sum that the Contractor considers will become due to him at the relevant due date in accordance with clause 4.8 and the basis on which that sum has been calculated.

.2 If an Interim Certificate is not issued in accordance with clause 4.7.2, then:

.1 where the Contractor has made an Interim Application in accordance with clause 4.10.1, that application is for the purposes of these Conditions an Interim Payment Notice; or

.2 where the Contractor has not made an Interim Application, he may at any time after the 5 day period referred to in clause 4.7.2 give an Interim Payment Notice to the Quantity Surveyor, stating the sum that the Contractor considers to be or have been due to him at the relevant due date in accordance with clause 4.8 and the basis on which that sum has been calculated."

"4.11 Interim Payments – final date and amount

.1 Subject to clause 4.11.4, the final date for payment of an interim payment shall be 14 days from its due date.

.3 If the Interim Certificate is not issued in accordance with clause 4.7.2, but an Interim Payment Notice has been given under clause 4.10, the sum to be paid by the Employer shall, subject to any Pay Less Notice under clause 4.11.5, be the sum stated as due in the Interim Payment Notice.

.4 Where an Interim Payment Notice is given under clause 4.10.2.2, the final date for payment of the sum specified in it shall for all purposes be regarded as postponed by the same number of days as the number of days after expiry of the 5 day period referred to in clause 4.7.2 that the Interim Payment Notice is given.

.5 If the Employer intends to pay less than the sum stated as due from him in the Interim Certificate or Interim Payment Notice, 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 4.12.1 (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."

"4.12 Pay Less Notices and general provisions

.1 A Pay Less Notice:

.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, and may be given on behalf of the Employer by the Architect/Contract Administrator or Quantity Surveyor or by any other person who the Employer notifies the Contractor as being authorised to do so;"

" 4.14 Final Certificate and final payment

.1 The Architect/Contract Administrator shall issue the Final Certificate not later than 28 days after whichever of the following occurs last:

.1 the end of the Rectification Period in respect of the Works or (where there are Sections) the last such period to expire;

.2 the date of issue of the certificate of making good under clause 2.31 or (where there are Sections) the last such certificate to be issued; or

.3 the date on which the Architect/Contract Administrator sends to the Contractor copies of the statement and computations of the adjusted Contract Sum under clause 4.3.2.

.2 The Final Certificate shall state:

.1 the Contract Sum as adjusted in accordance with clause 4.3.1; and

.2 the sum of amounts already stated as due in Interim Certificates plus the amount of any advance payment paid pursuant to clause 4.6 and (where relevant) any sums paid in respect of any such Interim Payment Notice as is referred to in clause 4.8,

and (without affecting the rights of the Contractor in respect of any interim payment not paid in full by the Employer by its final date for payment) the final payment shall be the difference (if any) between the two sums, which shall be shown in the Final Certificate as a balance due to the Contractor from the Employer or to the Employer from the Contractor, as the case may be. The Final Certificate shall state the basis on which that amount has been calculated.

.3 The due date for the final payment shall be the date of issue of the Final Certificate or, if that certificate is not issued within the 28 day period referred to in clause 4.14.1, the last day of that period and, subject to clause 4.14.6, the final date for payment shall be 28 days from its due date".

4

The well known background to the interim payment provisions set out above is that they were introduced in order to comply with the mandatory requirements of the Housing Grants, Construction and Regeneration Act 1996 as amended by the Local Democracy etc. Act 2009. It is agreed that the contractual provisions are statutorily compliant. In operation, they have the following agreed effect:

(a) At the times prescribed by the Contract, the Contractor is entitled to make periodic Interim Applications for payment and the Employer is entitled to issue Interim Certificates for payment.

(b) If the Contractor does not make a valid Interim Application and the Employer does not issue an Interim Certificate, the Contractor can issue an Interim Payment Notice after the fifth day after a due date for an interim payment.

(c) If no Interim Certificate is issued, the sum stated as due in a valid Interim Payment Notice becomes the sum due to be paid to the Contractor, unless a valid Pay Less Notice is given stating a different sum.

(d) A valid Pay Less Notice must be issued by the fifth day before the final date for payment, namely 28 days from the due date. That date is postponed by the number of days that an Interim Payment Notice is made after the fifth day after the due date. A Pay Less Notice must state the sum considered to be due to the Contractor at the date of the notice and the basis upon which that sum has been calculated.

5

This dispute arises because Logan contends that it issued a valid Interim Payment Notice pursuant to Clause 4.10.2.2 in respect of which it says the Trust failed to serve a valid Pay Less Notice. The Trust challenges both of these contentions. The Trust does not dispute the fact that Logan had an accrued contractual right to issue an Interim Payment Notice when it did on 20 September 2016. Equally, Logan does not dispute the fact that the document now relied on as a Pay Less Notice dated 21 September 2016 was served in time if it was in fact a valid Pay Less Notice. Thus, the dispute centres on the content of each document rather that the timing of its issue.

6

If Logan is right, the sum identified in the Interim Payment Notice, namely £1,015,557.95, automatically became the sum due to it under Clause 4.11.3. The final date for payment of this amount was 29 September 2016. By contrast, if the Trust...

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5 cases
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    ...Less Notice. So too did the deputy high court judge in Surrey and Sussex Healthcare NHS Trust v Logan Construction (Southeast) Limited [2017] EWHC 17 (TCC). 26 In my judgment, all of these authorities point the same way. A pay less notice will be construed by reference to its background, in......
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    ...due date and it must be free from ambiguity." (e) Surrey and Sussex Healthcare NHS Trust v Logan Construction (Southeast) Limited [2017] EWHC 17 (TCC), in which Mr Alexander Nissen QC (sitting as a Deputy High Court Judge) set out a number of the above passages and concluded: "37. The princ......
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1 firm's commentaries
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    • United Kingdom
    • Mondaq UK
    • 30 November 2017
    ...TCC Guide 8. [2017] EWHC 1066 (TCC) 9. Marsh argued that the adjudicator's failure to consider the arguments must have been a slip 10. [2017] EWHC 17 (TCC) 11. This case was noted in by the Judge in Hutton as an example of the parties adopting a consensual process This article is taken from......
2 books & journal articles
  • Table of cases
    • United Kingdom
    • Construction Law. Volume I - Third Edition
    • 13 April 2020
    ...Morgan Consulting Engineers Pty Ltd [2015] QSC 322 I.3.210 Surrey & Sussex Healthcare NHS Trust v Logan Construction (South East) Ltd [2017] EWHC 17 (TCC) II.6.61, II.6.234, II.6.237 Surrey Heath Borough Council v Lovell Construction Ltd (1990) 48 BLR 108 II.8.23 Sutclife v Chippendale and ......
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    • Construction Law. Volume II - Third Edition
    • 13 April 2020
    ...Co Pty Ltd [2009] nSWca 53 at [38], per Giles Ja. 210 See Surrey & Sussex Healthcare NHS Trust v Logan Construction (South East) Ltd [2017] eWHc 17 (tcc) at [32]–[46], per dHcJ nissen Qc (considering a Jct intermediate Building contract Wcd 2011 form). 211 it has been said, with some exagge......

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