In Elements (Europe) Ltd v FK Building Ltd, the Technology and Construction Court (TCC) has provided useful guidance concerning the proper construction of timescales for payment in a Joint Contract Tribunal (JCT) standard form contract – something which does not appear to have been specifically considered by the courts before.
Background
Elements, a sub-contractor, was instructed by FK Building, the main contractor in relation to a modular contraction project in Salford under a JCT Standard Buildings Conditions SBCSub/C 2016 Edition with bespoke amendments (the ‘Sub-Contract’). The Sub-Contract made provision for interim valuation dates on the 25th of each month and required payment applications to be received no later than 4 days before the interim valuation date.
JCT Payment Timescales - The Meaning of ‘Days’ in JCT Terms in Dispute
At 22.07 on 21 October 2022, Element emailed a payment application to FK for an amount exceeding £3.9 million but FK refused to pay on the basis that the 4-day notice period for a pay application had not been complied with owing to the timing of Elements’ email.
Elements commenced and won an adjudication against FK for the sum applied for.
FK then initiated a ‘Part 8’ court proceedings in the TCC, arguing that the payment application was invalid due to the relevant clause in the Sub-Contract was drafted to mean ‘full days’ and that as a result, the application was late as it needed to be received no later than 20 October 2022. FK further contended that the application could only be received for the purposes of the Sub-Contract within site/business hours.
Although the parties settled the dispute following the draft judgement, the TCC nevertheless handed down the judgement as it dealt with an important aspect of the JCT Standard Form Building Contract that had not previously been examined by the courts.
The Case was Suitable for Part 8 Proceedings
The TCC began by considering whether FK’s claim was suitable for a Part 8 determination.
Usually, an unsuccessful party to an adjudication cannot oppose adjudication enforcement based on the argument that the adjudicator was mistaken. However, the Court noted that the case of Hutton Construction v Wilson Properties provided certain circumstances in which a party can oppose adjudication enforcement using a Part 8 claim. These can now be found in the TCC Guide and are as follows:
- there was a short and self-contained issue that arose in the adjudication, and which the defendant continued to contest
- that issue required no oral evidence, nor any elaboration beyond that which was provided at the enforcement hearing
- the issue was one which, on a summary judgment application, it would be unconscionable for the court to ignore
The TCC concluded that these criteria had been met in this particular case. While the court in Hutton made reference to cases where the adjudicator’s approach was ‘obviously wrong,’ this was not a further requirement but simply an example of the type of scenario in which the key criteria may be met.
Payment Application Had Been Served in Time
The court, however, went on to dismiss FK’s argument that the payment application was invalid as it had not been served in time. It held that the meaning of ‘day’ in the Sub-Contract could not be interpreted as clear or full days. The payment application just needed to be received ‘no later than 4 days prior’ to the valuation date. Therefore, applying a full 24-hour period was unnecessary, and any part of the day was sufficient for service.
Furthermore, the court found that, based on the wording of the Sub-Contract, there was no restriction on the time a party can serve or receive a payment notice. Accordingly, since the date of receipt of the pay application was 21 October 2022, a notice could be served or received at any time until 23:59:59 on that date. As a result, the payment application had been served on time and was valid.
Our Comments
As this case highlights, when drafting construction contracts and accommodating any payment deadlines, if the parties wish to set timescales for notices by reference to clear days or restrict the hours of the day within which service/receipt will be deemed effective, they need to specifically express this in their contracts. For more news, follow our blog.
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