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Stick to the terms of your contract, says Technology and Construction Court

A warning message appears to have been sent out by the Technology and Construction Court about payment notices recently – if you are going to try to enforce your rights on a technicality, make sure your own legal position is squeaky clean.

The move follows the TCC’s consideration of several ‘smash and grab’ construction adjudication cases during which a contractor has tried to argue that a payment or pay less notice has not been given, either at all or in time.

Powerful weapon

In the past, the consequences of an employer failing to issue the appropriate pay less notice on time is that the amount applied for by the contractor becomes the amount payable, making the lack of a valid pay less notice a powerful weapon for a contractor.

But the recent case of Leeds City Council v Waco UK Ltd seems to shift the balance back towards the payer with a reminder to all involved that technicalities can be worked both ways.

When early is too late

The court heard that Waco UK Ltd had submitted 20 interim applications later than stipulated in the contract. Leeds City Council paid all these without dispute.

But then, Waco UK made its 21st application early. No payment or payless notice was made by Leeds City Council (LCC) and Waco UK claimed it was therefore entitled to the full amount and started summary judgement proceedings. LCC resisted and was given permission to challenge the earlier ‘smash and grab’ adjudication awarded against it to Waco UK.

The court decided that the conduct of the parties indicated that there was an implied term that interim applications could be submitted late but not early and therefore, Waco UK’s 21st application had not been made in accordance with the contract and no entitlement arose.

Proper clarity needed

In another important case, Caledonian Modular Ltd v Mar City Developments Ltd, the TCC decided that an ambiguous set of accounts sent by email on a payment date not agreed under the terms of the contract was not a valid application for interim payment.

The judge said Caledonian Ltd should not be entitled to a “wholly undeserved windfall” if its own interim application was not set out with proper clarity and in accordance with the terms of the contract. If this case was successful it would encourage contractors to issue interim payment notices every few days in the hope that the employer or contract administrator would take their eyes of the ball and be stuck having to make a disputed payment.

Implications

The message from the TCC seems clear – both parties must stick to the terms of their contract. It is crucial to make sure the submission of applications does not drift and if there is going to be a delay, to seek specific agreement to any change and always keep careful records.

For more information about this issue read ‘Payment notices – some clarity at last?’ 

Wards Solicitors’ James Murray is a specialist in this area of the law. For more information, or help in relation to any construction and engineering disputes, please contact him directly.

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