Monthly Archives: October 2016

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.