Construction: paperwork not clear enough to amount to interim payment applications

In the High Court case of Caledonian Modular Ltd v Mar City Developments Ltd [2015], the defendant denied liability for any part of the amount awarded by an adjudicator. The adjudicator’s decision turned on the date on which the claimant had notified the defendant of the sum due under the letter of intent for the construction project.

On the claimant’s view, the relevant interim payment application was made on 13 February 2015. If that was right, it was common ground that the defendant’s payless notice of 25 March 2015 was out of time and invalid.

But the defendant said that the documents of 13 February were not a claim for or notice of the sum due for payment, and that the claimant’s claim was not made until 19 March 2015. If that view were correct, it was common ground that the defendant’s payless notice of 25 March would be within time and would have provided a complete defence to the claimant’s claim.

If the documents of 13 February did not constitute a fresh application for an interim payment, or a valid payee’s notice no further sums were due from the defendant to the claimant and the adjudicator had been wrong to conclude to the contrary.

The court said:

1. Neither the covering email of 13 February 2015, nor the three documents enclosed with it, stated that they were a new application for an interim payment. The documents said variously that they were a ‘final account application summary’ and an ‘updated account’.

2. A later invoice of 19 March 2015 did not say that it was in any way a default payment notice or that the payee’s notice had originally been provided on 13 February 2015. If that had been the claimant’s position, they would have said so in clear terms.

3. In between the email of 13 February and the invoice of 19 March, the defendant expressly asked the claimant what the 13 February documents were. Unsurprisingly, the defendant was confused as to what, if anything, they were supposed to do with those documents. The claimant’s explanation did not even begin to suggest that the documents of 13 February were in fact an entirely new interim application, or that a fresh claim had been made less than a fortnight after the last, in the middle of the month and not at the month’s end.

In all three documents that the claimant relied on as being applications for interim payment, the claimant had had the opportunity to say clearly that those documents were what they now said they were, namely a new application for an interim payment and/or a payee’s notice, but the claimant failed to do so.

This omission was significant. It suggested that the claimant’s case now, that the documents were in fact a fresh claim, was “something of an afterthought.”

The only other alternative explanation was that the claimant believed that it was in its best interests to be “studiedly vague” about the nature of the documents, so as to set up precisely the argument they advanced successfully in winning the adjudication.

On any view, if they intended to serve a valid payee’s notice on 13 February, they could and should have said that that was what they were doing.

They were even asked a question which, if that had indeed been their intention, required only that simple answer. It was not provided.

Accordingly, the court granted a declaration that the documents of 13 February 2015 were not a valid application for an interim payment, or a valid payee’s notice and that no sums were due in consequence of the adjudication.

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