Court issued claim within limitation period despite wrongness of fee

In a case where a Claimant innocently fails to pay the correct court fee close to the end of a limitation period the question may arise whether that action was “brought” within the limitation period. Much will turn on which of the following two periods the problem arises in:

A) The period between:
(i) when the Claimant submits the claim form and puts forward the insufficient fee and
(ii) the Court issuing proceedings.

Here the failure to tender the correct fee will prevent any finding that the action has been “brought” for the purposes of the Limitation Act 1980 unless the Court actually issues the proceedings notwithstanding the fee being inappropriate; and

B) The period after the Court issues the proceedings.

Here the mere fact that the fee proffered by the Claimant and accepted by the Court:
(i) is less than should have been tendered and accepted for the claim identified in the Claim Form or
(ii) becomes so because of a subsequent increase in the quantum of the actual claim(s) advanced in the proceedings prior to the end of limitation period

does not prevent the action from being “brought” for the purposes of the Limitation Act 1980 when it is issued by the Court.

In Dixon & Anor v Radley House Partnership (A Firm) & Ors [2016] the High Court Judge said “where (a) abusive conduct is not present and (b) the court sets the wheels of justice in motion by issuing proceedings but (c) the Claimant has not paid and the Court has not required the correct fee, I reject the submission that an action is not brought for the purposes of the Limitation Act 1980 at the moment of issue.”

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Construction: Failure to serve notices did not preclude further adjudication

In Kilker Projects Ltd v Purton (t/a Richwood Interiors) [2016] the High Court had to decide whether failure to serve a ‘payment notice’ or ‘pay less notice’ as required by the Housing Grants, Construction and Regeneration Act 1996 (as amended) (“the 1996 Act”), prevented the paying party from challenging the payee’s contractual entitlement to that payment meaning that the ‘notified sum’ in section 111 of the 1996 Act became “final and conclusive” as to the sum due under the contract.

The claimant submitted that the 1996 Act and the Scheme for Construction Contracts (England and Wales) Regulations 1998 (amendment) (England) Regulations 2011 regulated payment and cash flow. They did not decide the true substantive entitlement to payment under the contract and they did not conclusively determine entitlement to payment. A party who had failed to give the requisite payment and/or pay less notices must pay the amount stated in the payee’s payment notice by the final date for payment. However, having paid, that party was then entitled to seek a determination of any dispute about the valuation of the contractual entitlement of the contractor for the works, and it could do so in adjudication.

The defendant said the effect of a failure by a party to issue a payment notice and/or a pay less notice was that the payer agreed the payee’s valuation for that payment and must pay the application sum in full. In an application for final payment, a failure by a party to issue a payment notice and/or a pay less notice meant that the final account was agreed. It remained open to the payer to challenge the valuation in litigation or arbitration, for instance by proceedings for restitution, but the agreed valuation could not be re-opened in a subsequent adjudication.

The court agreed with the claimant:

“In Matthew Harding t/a MJ Harding Contractors v Paice [2015] the Court of Appeal determined that the employer could refer to adjudication the question of the true valuation of a final account following termination, despite an earlier adjudication ordering payment of the contractor’s application for final payment in full on the basis of a failure to serve a valid pay less notice. In upholding the decision of Mr Justice Edwards-Stuart at first instance, Jackson LJ, with whom the other judges agreed stated:

……. [78] In my view the employer’s failure to serve a Pay Less notice (as held by the previous adjudicator) had limited consequences. It meant that the employer had to pay the full amount shown on the contractor’s account and argue about the figures later. The employer duly paid that sum, as ordered by the previous adjudicator. The employer is now entitled to proceed to adjudication in order to determine the correct value of the contractor’s claims and the employer’s counter-claims.””

Therefore, the claimant had been entitled to refer the final account valuation to the adjudicator and was now entitled to have the amount awarded in that adjudication enforced.

This blog is posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Construction Scheme would not fill shortfall in Scheduled Payments

Sections 109(1) and 110 of the Housing Grants, Construction and Regeneration Act 1996 (“the Act”) require instalment payments to be made for all work under a construction contract lasting 45 days or more.

The parties are free to agree the amounts of the payments and the intervals at which, or circumstances in which, they become due. In the absence of such agreement, the relevant provisions of the Scheme for Construction Contracts (“the Scheme”) apply.

In Grove Developments Ltd v Balfour Beatty Regional Construction Ltd [2016] the defendant contractor said:
– it was entitled to serve an application for a further interim payment and
– that the claimant had failed to serve either a Payment Notice or a Pay Less Notice within the applicable time limits and that in consequence,
– the claimant was liable to pay the defendant £23,166,425.92.

The claimant countered that:

– the defendant had no contractual right to issue or be paid in respect of the application for a further interim payment and, so, the notice regime was irrelevant OR
– that on a true interpetation of the Contract the final date for payment was 18 September 2015 which would mean that the Pay Less Notice which it issued on 15 September 2015 was issued in time and effective.

The defendant contended that Section 109(1) of the Act requires instalment payments to be made for all work under a construction contract lasting 45 days or more. Here the Schedule of Payments only covered interim payments up to and including 22 July 2015. Since the construction contract failed to cover a further interim payment invoiced on 21 August 2015, the relevant timing provisions of the Scheme would apply to it.

The High Court said where sections 109 or 110 of the Act were engaged, the payment provisions of the Scheme would only be imported and apply to the parties to the extent that they have not already concluded binding contractual arrangements that can remain operative.

Those payment provisions would not automatically or necessarily be imported in their entirety.

The arrangements under a contract may be incapable of forming part of a payment scheme when read against the Scheme. Here it may be necessary to import the whole of the Scheme’s Payment provisions.

“But that is not a necessary or correct outcome if the existing contractual arrangements are capable of co-existing with some of the Payment provisions of the Scheme to form a coherent whole.”

There was no requirement as to when such payments are to be made: any arrangement which involved one or more instalment payments would be sufficient. Thus a contract prescribing one periodic payment, even of an insignificant amount, would seem to meet the requirements.

It followed that if the parties enter into an agreement about the amounts of the payments and the intervals at which, or circumstances in which, they become due, the mere fact that the agreement does not provide for interim payments covering all of the work under the contract is no reason to import the provisions of the Scheme to supplement their agreement so as to generate interim payments covering the work not covered by their agreement.

Under Section 109(2), the parties could agree stage payments by reference to stages at highly irregular intervals and for the payment of highly variable amounts. So, it would have been open to the parties to agree the front loading of payments in advance of the value of the work done or to agree that payments would be withheld until very late on. Indeed nothing in section 109(2) prevented the parties from agreeing that the amount of a payment shall be nil.

The parties’ agreement was clear and provided for 23 interim payments on the dates set out in the agreed Schedule and no more.

In Balfour Beatty Regional Construction Ltd v Grove Developments Ltd [2016] the Court of Appeal upheld this decision by a majority of 2:1.

The lead judge said:

” ….the express words used make it clear that the parties were only agreeing a regime of interim payments up to the contractual date for practical completion…….this is a classic case of one party making a bad bargain. The court will not, indeed cannot, use the canons of construction to rescue one party from the consequences of what that party has clearly agreed.”

To exclude the Scheme, the parties must draw up a system of interim payments in good faith. A “cynical device” to exclude the operation of the Scheme by prescribing one interim payment “of an insignificant amount” would be unlikely to be enough. Section 109(2) gives contracting parties a wide scope as to the nature of the regime they may agree.

Here the parties agreed a regime of twenty three interim payments right up to the date specified for practical completion. What had been agreed satisfied the requirements of section 109 of the Act.

Clause 4.14 of the contract provided an adequate mechanism for quantifying interim payments. So, however unusual the contract, it satisfied the requirements of section 110 of the Act.

Accordingly the Scheme did not apply and the appellant could not rely upon the Act and the Scheme to recover interim payments after July 2015.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Covenant for indemnity did not extend to own legal or surveyor’s fees

Where the only relevant tenant’s covenant (clause 4.1) is an obligation “to indemnify the Lessor against all actions proceedings costs claims and demands in respect of any breach non-observance or non-performance” of the tenant’s obligations under the lease and a tenant fails to pay a £50 instalment of ground rent is the landlord entitled to charge a further £50 for a letter demanding payment of the arrears?

In Fairhold Freeholds No.2 Ltd v Moody [2016] the Upper Tribunal (Lands Chamber) said “no”:

“The essence of a contract or covenant of indemnity is that it is a promise by A to protect B from B’s liability to C. For a liability to arise under a covenant of indemnity the party to be indemnified must have come under an obligation to a third party, to meet a claim or demand or to answer some action or proceedings or incur some costs. The question in any case where it is sought to rely on such a covenant is whether the lessor has come under an obligation to make a payment to someone else “in respect of’ some breach of obligation owed to the lessor by the lessee: has A’s breach given rise to B’s liability to C? If the lessor has come under such an obligation the covenant requires the lessee to indemnify the lessor against the cost it has incurred in meeting that obligation.

…………..The “costs” in question are of the same type i.e. the costs of a third party as a result of the lessee’s breach, for which the third party is entitled to look to the lessor for reimbursement. A covenant of indemnity is not the same as a covenant to reimburse the lessor’s own costs incurred in taking steps to enforce the lessee’s obligations……..

I am therefore satisfied that clause 4.1 does not enable the appellant to levy a £50 administration charge or to recoup the costs of its own solicitors in preparing to enforce the respondent’s obligation to pay the ground rent. To the extent that the appellant was under any obligation to make payments to its agent or solicitor as a result of those steps being taken such obligations were not the result of the respondent’s failure to pay the ground rent, but of the appellant’s own instructions.”

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Very short term lettings breached “private residence” covenant

A long lease contains a covenant “not to use the leased property (or permit it to be used) for any purpose whatsoever other than as a private residence.”

If the long leaseholder advertises the property (a flat) for short term lets and grants a sequence of such lettings, is the leaseholder in breach of the covenant?

In Nemcova v Fairfield Rents Ltd [2016] the United Kingdom Upper Tribunal (Lands Chamber) said to avoid breaching the covenant, there must be a connection between the occupier and the residence such that the occupier would think of it as his or her residence albeit not for ever. “The occupier for the time being must be using it as his or her private residence.”

If the occupier is in the property for a matter of days (rather than weeks or months or years) that is a material pointer to the fact that the occupier is not using the property as a private residence.

To be used as the occupier’s private residence, there must be a degree of permanence extending beyond “being there for a weekend or a few nights in the week.”

Where a person occupies for a matter of days and then leaves the property it cannot be said that whilst occupying they were using the property as their private residence.

The occupation there would so transient that the occupier would not consider the property they were staying in as being their private residence even for the time being.

Each case is depends on it’s facts, relying upon the interpretation of the particular covenant against it’s factual background.

Based on the context in which this lease was granted, and the nature of the proposed relationship between the long lessor and long lessee and taking account the obligations entered into, the appellant had inevitably breached the private residence covenant by granting very short term lettings (days and weeks rather than months).

The tribunal said it was not possible to give a definitive answer to the question posed at the beginning of this piece save to say that ‘It all depends’.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Contribution towards element of composite development was lawful planning consideration

Planning law recognises the possibility that an application for planning permission may be for a development which includes a number of elements, a composite development. Here, the advantages of one element can be balanced against the disadvantages of another.

In Campaign To Protect Rural England (CPRE), R (On the Application Of) v Dover District Council [2015] China Gateway International (CGI) Limited (“CGI”) applied for planning permission for an extensive development on two sites on the western fringe of Dover. Namely:

(a) outline planning permission for:

(i) a very large residential development at Farthingloe;
(ii) a much smaller residential with hotel and conference centre development at Western Heights; and
(iii) pedestrian access and landscaping work between the two sites;

(b) full planning permission for:

(i) the conversion of existing buildings on both sites for a variety of purposes; and
(ii) the conversion of the Drop Redoubt at Western Heights into a visitor centre and museum.

Landowners agreed in a Section 106 Agreement to make a total payment of £8,132,499 towards a variety of purposes.

Objectors challenged a £5 million “heritage contribution” to be expended on the refurbishment of the Drop Redoubt and it’s conversion to a visitor centre and museum. It would not cover the whole costs.

Payments of £825,000, to assist making a countryside access area between the two sites, and £27,000, to afford a paved footpath between them, were also agreed.

CPRE said the heritage contribution of £5 million was unlawful and so should have been disregarded by the planning committee when determining CGI’s application for planning permission.

At all times material to this case the lawfulness of a planning obligation under section 106 fell to be determined by regulation 122 of the Community Infrastructure Levy Regulations 2010 which provided:

“(2) This regulation applies where a relevant determination is made which results in planning permission being granted for development.

(3) A planning obligation may only constitute a reason for granting planning permission for the development if the obligation is —

(a) necessary to make the development acceptable in planning terms;

(b) directly related to the development; and

(c) fairly and reasonably related in scale and kind to the development…..”

CPRE said where the planning obligation under a section 106 agreement was to make a payment of money for a specified purpose, “development” in regulation 122(2) meant that part of the development, for which planning permission is sought, which funds the contribution. Here it was the development of the Farthingloe site which would fund the heritage contribution for the Western Heights site. So it was unlawful and should have been disregarded.

Disagreeing with CPRE the High Court said “development” in regulation 122(2) meant the development in respect of which a “relevant determination”, namely the grant of planning permission under section 70 of the Town and Country Planning Act 1990, is made.

Planning permission here was granted for a composite development of the Farthingloe and Western Heights sites, and access land in between.

The lawfulness of the planning obligation to fund the heritage contribution must therefore be judged by reference to the development for which planning permission was granted; in other words the whole development, not solely or principally the Farthingloe site.

“Treated as a composite development, the questions posed by regulation 122 answer themselves. The heritage contribution was necessary to make the development acceptable in planning terms. Without it, the advantage which went a considerable way to balancing the disadvantage of development on an area of outstanding natural beauty could not be achieved. It was directly related to the development. It was to be expended on a part of the development for which planning permission was given, the restoration of the Drop Redoubt and the creation of a visitor centre and museum. It was fairly and reasonably related in scale and kind to that part of the development — at least that sum was required to fund it — and also to the development as a whole, which was understood, rightly, by all to be a major scheme.”

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Retrospective planning consent too late for DIY Builder VAT refund

Section 35 of the Value Added Tax Act 1994 (“VATA”) says a person constructing a building designed as a dwelling can claim a refund of VAT from HMRC provided that the work undertaken is “lawful and otherwise than in the course or furtherance of any business”. To be “lawful” the work must have been carried out in accordance with “statutory planning consent” that has been granted in respect of that dwelling (note (2)(d) Group 5 schedule 8 VATA).

The refund claim must conform to regulation 201 of the Value Added Tax Regulations 1995 (“VAT Regulations”) which, insofar as relevant to the case that follows, provides:

“A claimant shall make his claim in respect of a relevant building by—

(a) furnishing to the Commissioners no later than 3 months after the completion of the building [the relevant form for the purposes of the claim] containing the full particulars required therein, and

(b) at the same time furnishing to them—


(iv) documentary evidence that planning permission for the building had been granted”.

In the First-tier Tribunal (Tax) case of Reynolds v Revenue and Customs [2016] a proposed dwelling with only planning permission for an extension and extra storey was in fact required by the building inspectors to be demolished and restarted from scratch because the foundations would not be adequate.

The tribunal said the legislation had to be construed strictly and:

– the demolition and rebuilding of the property was not in accordance with the planning permission then in force and

– the retrospective planning permission for the more extensive works which actually occurred, was not provided to HMRC within three months of completion of the property as specified by regulation 201 of the VAT Regulations.

“…..the legislative requirements for claiming a VAT refund are strict and HMRC are allowed no discretion to accept something less than the prescribed documentation, neither can they extend the time limit. Equally it is not open to us to waive or modify these requirements, even if they lead to what appears to be an unfair result. As a Tribunal created by statute the FTT, unlike the High Court does not have an inherent jurisdiction, rather its jurisdiction is defined and limited by legislation and it does not extend to the power to override a statute (or supervise the conduct of HMRC).”

This blog has been posted out of general interest and does not replace the need to get bespoke legal advice in individual cases.

Landlord Development permitted despite conflict with RTM Company’s Functions

Can a landlord develop an additional flat on an apartment block roof where the management of that roof has been transferred to a “right to manage company” (“RTM Company”)?

In a recent county court case the court found that the proposed development would conflict with the RTM Company’s management functions under Part II, Chapter I of the Commonhold and Leasehold Reform Act 2002 but said that the proposed development was permissible so long as the landlord took all reasonable steps to minimise that disturbance both during and after the development.

The RTM Company has been allowed to appeal to the Court of Appeal.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Planning: Failure to identify development as inappropriate to area

In Lensbury Ltd, R (On the Application Of) v Richmond-Upon-Thames London Borough Council [2016] a development at Teddington Weir, Teddington Lock, Teddington was in an area designated as Metropolitan Open Land (“MOL”).

The London Plan 2015 applied – in particular policy 7.17 which provided as follows:

“Policy 7.17 Metropolitan Open Land


A. The Mayor strongly supports the current extent of Metropolitan Open Land (MOL), its extension in appropriate circumstances and its protection from development having an adverse impact on the openness of MOL.

Planning decisions

B. The strongest protection should be given to London’s Metropolitan Open Land and inappropriate development refused, except in very special circumstances, giving the same level of protection as in the Green Belt. Essential ancillary facilities for appropriate uses will only be acceptable where they maintain the openness of MOL.”

On appeal the Court of Appeal said in granting planning permission the Council had:

“gone badly wrong in its consideration of the planning merits of the application for development in this case. It failed to identify the development as inappropriate development in an area of MOL requiring the strongest protection against such development. It failed to consider whether, notwithstanding the inappropriateness of the development, “very special circumstances” exist to justify the grant of planning permission, and it is far from obvious that they do. On the materials available before the court.”

Policy 7.17 said without “very special circumstances”, planning permission should be refused:

“to safeguard important open areas from “death by a thousand cuts”, by a series of planning permissions being granted for developments each apparently reasonable in itself but having a serious cumulative detrimental effect on the important public interest in the continuing openness of MOL and the Green Belt.”

Accordingly, “the Council failed to appreciate that the planning application was for development which was inappropriate in the context of MOL and therefore failed to ask itself the critical question, whether very special circumstances existed which justified the grant of planning permission.”

Nor was it appropriate for the court to execise its discretion not to quash the decision:

“In light of the strictness of the policy in policy 7.17 and the importance of the public interest it protects, I do not think that it can be said that it is highly likely that the outcome for the Appellant would not have been substantially different if the conduct complained of (i.e. failure to understand and apply policy 7.17 correctly) had not occurred.”

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Unremoved minor tenant’s works frustrated break notice

Where a break clause is conditional on the tenant providing vacant possession to the landlord on the break date the property must be returned without any chattels left there by the tenant which might substantially interfere with the beneficial occupation of the property.

The rule applies with equal force to fixtures and fittings that have become part of the property itself, where they formed part of alterations or additions and the tenant is obliged to the landlord, whether by licence for alterations or otherwise to remove them, in time for the break date.

So in the recent Leeds High Court case of Riverside Park Ltd v NHS Property Services Limited [2016] at the break date there were left:

A large amount of partitioning

Kitchen units

Floor coverings

Window blinds

An intruder alarm and

Water stand pipes within a large meeting room.

These were not there when the Lease was granted and had been brought into the property by the tenant under a Licence for Alterations made between the landlord and the tenant and dated the same day as the Lease.

Also a number of key fobs issued to the tenant at the start of the Lease had not been returned by the tenant and that the intruder alarm had not been deactivated by the break date.

The court said:

“an alarm and kitchen units have been held to be fixtures but in each case it is a question of fact. The kitchen base units are free standing and are easily removed. The wall units are fixed only by screws to the perimeter wall. In both cases the degree of annexation is negligible. I am persuaded that these are chattels ….. my view is not changed by the fact that the kitchen units are served by a water supply. That presumably emanates from pipe work under the raised floor. The expert makes it clear that the base units are easily removed, I believe that I am entitled to conclude from that that the water supply will therefore be capable of being capped without injury to the Premises. If it were otherwise it is difficult to see how the base units could be easily removed. As for the stand pipe in the meeting room, this too is seen by the expert as a free standing arrangement removable without difficulty.

As for the alarm, it is apparently a second alarm installed by the Defendant to supplement one actually installed by the Claimant. It is difficult to see such an alarm as affording a lasting improvement to the Premises. It seems to me to be an instalment for the specific convenience of the Defendant……….

on the assumption that the Works do not form part of the Premises, the Claimant has established that vacant possession was not given and that accordingly the break clause was ineffective………

…..even if I had found that the Works and particularly the partitions were not chattels but fixtures or otherwise formed part of the Premises, I would have found that there was an obligation to remove them arising out of the fact that the licence to erect them had ceased to have effect and that their presence in the Premises on the date of purported termination of the Lease meant that vacant possession of the Premises was not given.”

Many large retailer tenants will not accept the words “vacant possession” in a break clause. We can see why.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice individual cases.