BEWARE OF THE PAYMENT AND TIME RELATED PROVISIONS IN THE JCT STANDARD BUILDING CONTRACT 2011: RECENT GUIDANCE FROM THE HIGH COURT (TCC)
“…’cash flow’ in the building trade. It is the very lifeblood of the enterprise… ” (As per Lord Denning M.R. in (1973) 71 L.G.R. 162, 167)
Charles Edwards, Barrister and TECBAR Adjudicator reviews a recent case in the High Court (TCC) provides very useful guidance on the payment and time related provisions in the JCT Standard Building Contract 2011 (as amended) and set outs the dangers for Contractors who fail to follow the guidance set out therein, with regard to when an Interim Application will be considered effective under the Contract or as a valid Payment Notice under the Contract. The judgment also addresses whether the failure on the part of a Contract Administrator to make a decision in respect of a contractually compliant extension of time application by the Contractor would render the Contract Administrator’s Non-Completion Certificate invalid or otherwise prevent the Employer from deducting and/or claiming liquidated damages from the Contractor: Henia Investments Inc v Beck Interiors Ltd [2015] EWHC 2433 (TCC).
The Claimant (“the Employer”) and the Defendant (“the Contractor”) entered into an agreement for extensive fitting out works, which included some new construction works. The Claimant brought an application under Part 8 of the CPR seeking declarations relating to the building contract in connection with the Defendant’s application for an interim payment. This application by the Claimant in the High Court raised a number of important issues which included the interpretation of:
The payment provisions of the JCT Standard Building Contract without Quantities 2011 (as amended).
The Housing Grants, Construction and Regeneration Act 1996 as amended (“HGCRA”).
The liquidated damages provisions of the JCT Standard Building Contract without Quantities 2011 as amended in the context of the administration of extension of time processes under the Contract by the Contract Administrator.
The Works being carried out by the Defendant were delayed and at the time of the proceedings were expected to be completed some 11 months later than originally agreed. Furthermore, the Defendant’s entitlement to an extension of time had not been finally determined under the Contract.
Notwithstanding the above, the Contract Administrator issued a Non-Completion Certificate to the Defendant, purportedly pursuant to Clause 2.31 of the Contract to the effect that the Works had not been completed in accordance with the Contract, whilst listing various works which were stated as not completed.
On 28 April 2015, the Contractor submitted to the Contract Administrator its interim application for payment No. 18 which identified a balance of £2,943,098.95 against a gross value of £6,518,953.63 which included an amount for preliminaries in respect of an extension of time which was yet to be applied. On 6 May 2015, the Contract Administrator issued Certificate 18 in the gross sum of £3,988,108.69 showing a net sum payable of £226,248.95.
The Contractor did not issue an application for payment in May 2015, however, in June 2015 the Contract Administrator issued an interim certificate no 19 in the gross sum of £4,007,586.56 showing a net sum payable of £18,893.53. On 17 June 2015, the Employer issued a Pay Less Notice stating that there was £0 due to the Contractor, this being based on the previous valuation and Certificate No 19 (£18,893.53) and that the Employer was entitled to liquidated damages for 40 weeks delay at the weekly rate of £15,000 (£373,751.05, over and above £226,248.95 previously withheld against earlier certificates).
In light of the above, the Contractor issued adjudication proceedings against the Employer. The Adjudicator issued his decision on 3 August 2015 which was in overall favour of the Employer with the exception of one issue which was in favour of the Contractor. In the interim, the Employer issued Part 8 proceedings in the High Court (TCC) seeking various declarations in connection with the Contract.
The Contract between the parties included amongst other things, the following in respect of the time related provisions:
“2.4 On the Date of Possession [11 November 2013] possession of the site …shall be given to the Contractor who shall thereupon begin the construction of the Works…and regularly and diligently proceed with and complete the same on or before the relevant Completion Date…
2.27.1 If, and whenever it becomes reasonably apparent that the progress of the Works or any Section is being or is likely to be delayed the Contractor shall forthwith give notice to the…Contract Administrator of the material circumstances, including the cause or causes of the delay, and shall identify in the notice any event which in his opinion is a Relevant Event.
.2 In respect of each event identified in the notice the Contractor shall, if practicable in such notice or otherwise in writing as soon as possible thereafter, give particulars of its expected effects, including an estimate of any expected delay in the completion of the Works or any Section beyond the relevant Completion Date.
.3 The Contractor shall forthwith notify the…Contract Administrator of any material change in the estimated delay or in any other particulars and supply such further information as the…Contract Administrator may at any time reasonably require.
2.28 .1 If, in the…Contract Administrator’s opinion, on receiving a notice and particulars under clause 2.27:
.1 any of the events which are stated to be a cause of delay is a Relevant Event; and
.2 completion of the Works or of any Section is likely to be delayed thereby beyond the relevant Completion Date and provided the Contractor has complied with his obligations under clause 2.28.6,
then, save where these Conditions expressly provide otherwise, the…Contract Administrator shall give an extension of time by fixing such later date as the Completion Date for the Works or Section as he then estimates to be fair and reasonable.
.2 Whether or not an extension is given, the…Contract Administrator shall notify the Contractor of his decision in respect of any notice under clause 2.27 as soon as is reasonably practicable and in any event within 12 weeks of receipt of the required particulars. Where the period from receipt to the Completion Date is less than 12 weeks, he shall endeavour to do so prior to the Completion Date.
2.31 If the Contractor fails to complete the Works or a Section by the relevant Completion Date, the…Contract Administrator shall issue a certificate to that effect (a ‘Non-Completion Certificate’). If a new Completion Date is fixed after the issue of such a certificate, such fixing shall cancel that certificate and the…Contract Administrator shall where necessary issue a further certificate.”
2.32.1 Provided:
.1 the…Contract Administrator has issued a Non-Completion Certificate for the Works or a Section; and
.2 the Employer has notified the Contractor before the date of the Final Certificate that he may require payment of, or may withhold or deduct, liquidated damages,
the Employer may, not later than 5 days before the final date for payment of the amount payable under clause 4.15, give notice to the Contractor in the terms set out in clause 2.32.2.
.2 a notice from the Employer under clause 2.32.1 shall state that for the period between the Completion Date and the date of practical completion of the Works or that Section:
.1 he requires the Contractor to pay liquidated damages at the rate stated in the Contract Particulars, or lesser rate stated in the notice, in which event the Employer may recover the same as a debt; and/or
.2 that he will withhold or deduct liquidated damages at the rate stated in the Contract Particulars, or at such lesser stated rate, from sums due to the Contractor.
.3 if…Contract Administrator fixes a later Completion Date for the Works…
the Employer shall pay or repay to the Contractor any amounts recovered, allowed or paid under clause 2.32 for the period up to that later Completion Date.”
The payment related provisions (as amended) in the Contract, included amongst other things the following:
“4.9.1 For the period up to practical completion of the Works, the due dates for interim payments by the Employer shall be the monthly dates specified in the Contract Particulars up to either the date of practical completion or the specified date within one month thereafter…
4.9.2 Subject to any agreement between the Parties as to stage payments, the sum due as an interim payment shall be the Gross Valuation under clause 4.16 less the aggregate of [certain sums set out in sub-clauses 1 to 4].
4.10.1 The…Contract Administrator shall not later than 5 days after each due date issue an Interim Certificate, stating the sum that he considers to be or have been due at the due date to the Contractor in respect of the interim payment, calculated in accordance with clause 4.9.2, and the basis on which that sum has been calculated.
4.11.1 In relation to any interim payment the Contractor may not less than 7 days before the due date make an application to the Quantity Surveyor (an ‘Interim Application’), stating the sum that the Contractor considers will become due to him at the relevant due date in accordance with clause 4.9.2 and the basis on which that sum has been calculated.
4.11.2 If an Interim Certificate is not issued in accordance with clause 4.10.1, then:
.1 where the Contractor has made an Interim Application in accordance with clause 4.11.1, that application is for the purposes of these Conditions an Interim Payment Notice; or
.2 where the Contractor has not made an Interim Application, he may at any time after the 5 day period referred to in clause 4.10.1 give an Interim Payment Notice to the Quantity Surveyor, stating the sum that the Contractor considers to be or have been due to him at the relevant due date in accordance with clause 4.9.2 and the basis on which that sum has been calculated.
4.12 .1 Subject to clause 4.12.4, the final date for payment of an interim payment shall be 28 days from its due date.
.2 Subject to any Pay Less Notice given by the Employer under clause 4.12.5, the sum to be paid by the Employer on or before the final date for payment shall be the sum stated as due in the Interim Certificate.
.3 If the Interim Certificate is not issued in accordance with clause 4.10.1, but an Interim Payment Notice has been given under clause 4.11, the sum to be paid by the Employer shall, subject to any Pay Less Notice under clause 4.12.5, be the sum stated as due in the Interim Payment Notice….
.5 If the Employer intends to pay less than the sum stated as due from him in the Interim Certificate or Interim Payment Notice, as the case may be, he shall not later than 3 days before the final date for payment give the Contractor notice of that intention in accordance with clause 4.13.1 (a ‘Pay Less Notice’). Where a Pay Less Notice is given, the payment to be made on or before the final date for payment shall not be less than the amount stated as due in the notice.
4.13.1 A Pay Less Notice:
.1 (where it is to be given by the Employer) shall specify both the sum that he considers to be due to the Contractor at the date the notice is given and the basis on which that sum has been calculated, and may be given on behalf of the Employer by the…Contract Administrator, Quantity Surveyor or Employer’s representative or by any other person who the Employer notifies the Contractor as being authorised to do so;…
4.13.3 Any right of the Employer to deduct or set off any amount (whether arising under any provision of this Contract or under any rule of law or equity) shall be exercisable against any monies due or to become due to the Contractor, whether or not such monies include or consist of any Retention.
4.16 The Gross Valuation shall be the total of the amounts referred to in clauses 4.16.1 and 4.16.2 less the total of the amounts referred to in clause 4.16.3, applied up to and including a date not more than 7 days before the due date of an interim payment.”
Clause 4.16.1 sets out the total values which are to be included in the Gross Valuation, which are subject to Retention. These include the work properly executed by the Contractor and site materials. Clause 4.16.2 provides for the addition of certain sums that are not subject to Retention. Clause 4.16.3 provides for certain deductions to be made where appropriate…”.
The Court summarised the issues between the parties as follows:
1. Whether the Contractor’s Application No. 18 which was issued on 28 April 2015 was an effective or valid Interim Payment Notice in respect of the 29 May 2015 payment due date?
2. Whether the Employer’s notice dated 17 June 2015 was an effective or valid Pay Less Notice under the Contract?
3. Whether a failure on the part of the Contract Administrator to make a decision in respect of a contractually compliant application for an extension of time rendered the Contract Administrator’s Non-Completion Certificate invalid or otherwise prevented the Employer from deducting and/or claiming liquidated damages from the Contractor?
Submissions to the Court on behalf of the Employer were essentially that the answers to issues numbered 1 to 3 above were, “no”, “yes” and “no”, whereas submissions to the Court on behalf of Contractor were that the answers to the above issues were “yes”, “no” and “yes”, respectively.
The Court was of the view that the complex payment provisions in Clause 4 of the Contract were intended to reflect the terms of the HGCRA (as amended by the Local Democracy, Economic Development and Construction Act 2009), in particular Sections 110, 110A and 111 and that these statutory requirements had led to unnecessarily complex provisions, not least those dealing with the consequences of failures to comply with the timing provisions. The statutory provisions which cannot be excluded by the terms of any Contract need to be looked at in the context of the purposes of the HGCRA as amended which include not only the need to encourage cash flow to Contractor parties to construction contracts but also the need to establish an agenda for (speedy) adjudication arising out of disputes between the parties in relation to interim payment entitlements. The Court was also of the view that there was no doubt that the failure on the part of the Contract Administrator to issue an Interim Certificate on time, which leads to the sum due for that period being effectively deemed to be that which was applied for by the Contractor, has spawned a large amount of litigation both on adjudication enforcement claims as well as in Part 8 proceedings in the High Court and this was yet another example. The parties to the Contract and their representatives in this matter had not followed with any precision the contractual requirements which they were obliged to do. In particular, (a) The Contractor’s Application for the 18th interim payment in respect of the 18th payment due date (29 April 2015), if that was what it was intended to be, was late by 6 days and (b) Both Interim Certificates Nos. 18 and 19 were issued late, No. 18 by one day and No. 19 by 3 minutes in the middle of the night. The Court was of the view that these failures or omissions, if they could so be classified, had given rise to the issue about payment and the rights to deduct.
The Court emphasised the fact that it was of real importance in being able to ascertain whether a document filed by the Contractor is an Interim Application under Clause 4.11.1 of the Contract and whether it stands as an Interim Payment Notice pursuant to Clause 4.11.2.1 of the Contract if no Interim Certificate is issued in accordance with Clause 4.10.1 (for instance, issued more than 5 days after the payment due date) and the “sum to be paid by the Employer shall, subject to any Pay Less Notice under clause 4.12.5, be the sum stated as due” in that Interim Application pursuant to Clause 4.12.3 of the Contract. This in essence, could be in excess of what the Contract Administrator would otherwise have certified under the Contract or what is actually due to the Contractor under the Contract. In construing or understanding whether a particular document is intended to be an Interim Application pursuant to Clause 4.11.1 under the Contract, the following features need to be considered:
“… (a) The Interim Application can be put in at any time more than 7 days before the payment due date. In theory, a contractor could submit all its Interim Applications on Day 1 of the Contract, seeking to anticipate what work values will be achieved for each payment due date. That might give rise to financial difficulties if it falls behind or even gets ahead of itself and it could take no account of variations or delays which entitle it to related loss and expense. In practice, whilst theoretically possible, it is most unlikely that sensible contractors would do this.
(b) The Interim Application has to state “the sum that the Contractor considers will become due to him at the relevant due date in accordance with clause 4.9.2”. The use of the future tense here must permit the Contractor to allow for work which it anticipates it will do between the date of the Interim Application and the payment due date; thus, if it anticipates that it will do a further 500m² of plasterwork over that period, that can be applied for. It is also clear from this wording that the Interim Application should relate to the Gross Valuation basis referred to in Clause 4.9.2 which is cross-referred to in Clause 4.11.1.
(c) It must also be clear that the Contractor must state what it considers due “at the relevant due date”. The relevant due dates are spelt out in the Contract and the material ones in this case were 29 April and 29 May 2015. Whilst it is not absolutely necessary that the specific due date is expressed in the Interim Certificate, it must be clear and unambiguous that an application relating to a specific due date is being made…”
The Court was of the view that although it was not apt to talk in terms of conditions precedent, the document relied upon as an Interim Application under Clause 4.11.1 of the Contract must be in substance, form and intent an Interim Application stating the sum considered by the Contractor as due at the relevant due date and it must be free from ambiguity and therefore in this context, the Interim Application should be considered in the same light as Certificate. This was important because if there were to be potentially serious consequences flowing from it being an Interim Application, it must be clear that it is what it purports to be, i.e. an Interim Application under the Contract so that the parties know exactly what to do about it and when. The Court was of the view that:
“…(a) The Interim Application can be put in at any time more than 7 days before the payment due date. In theory, a contractor could submit all its Interim Applications on Day 1 of the Contract, seeking to anticipate what work values will be achieved for each payment due date. That might give rise to financial difficulties if it falls behind or even gets ahead of itself and it could take no account of variations or delays which entitle it to related loss and expense. In practice, whilst theoretically possible, it is most unlikely that sensible contractors would do this.
(b) The Interim Application has to state “the sum that the Contractor considers will become due to him at the relevant due date in accordance with clause 4.9.2”. The use of the future tense here must permit the Contractor to allow for work which it anticipates it will do between the date of the Interim Application and the payment due date; thus, if it anticipates that it will do a further 500m² of plasterwork over that period, that can be applied for. It is also clear from this wording that the Interim Application should relate to the Gross Valuation basis referred to in Clause 4.9.2 which is cross-referred to in Clause 4.11.1.
(c) It must also be clear that the Contractor must state what it considers due “at the relevant due date”. The relevant due dates are spelt out in the Contract and the material ones in this case were 29 April and 29 May 2015. Whilst it is not absolutely necessary that the specific due date is expressed in the Interim Certificate, it must be clear and unambiguous that an application relating to a specific due date is being made…”.
The Court concluded on the first issue between the parties that the Contractor’s Interim Application No. 18 could not be considered as an Interim Application in relation to the 29 May 2015 payment due date. Furthermore, the Court took the view that it was not and could not be readily demonstrated to be an Interim Application stating the sum that the Contractor considered would become due to it at that “relevant due date”, as envisaged by Clause 4.11.1 of the Contract. The Court was of the view that at best, the Contractor’s Interim Application No. 18 was some sort of hybrid document and it certainly was not in substance, form and intent an Interim Application in relation to the payment due date or 29 May 2015 and also it could not be said to be free from substantial ambiguity.
The second issue between the parties in proceedings related to whether the Pay Less Notice dated 17 June 2015 and issued under the Contract was an effective or valid Pay Less Notice. In some respects this issue was superfluous because, if the Interim Application No. 18 document did not relate to the 29 May 2015 payment due date, it could not stand as an Interim Payment Notice for the purposes of Clauses 4.11.2 and 4.12.3 of the Contract. Notwithstanding the Court’s conclusion with respect to issue number one in the proceedings, the Court concluded in respect of issue number two in the proceedings that the payment regime in the Contract was not materially at odds with or inconsistent with the amended HGCRA in so far as the Contract provisions provided as follows:
“…(a) It provides “an adequate mechanism for determining what payments become due under the contract, and when, and…for a final date for payment in relation to any sum which becomes due” within the meaning of Section 110, through Clauses 4.9 and 4.12.1.
(b) It provides for notification to be given by a “specified person” not later than 5 days after the payment due date of the sum that the specified person considers to be or to have been due at the payment due date in respect of the payment” (Clause 4.10.1), for the purposes of Section 110A (1) and (2).
(c) Clauses 4.12 and 4.13 are consistent with Section 111 because this machinery for the provision of a “notified sum” by way of the certification and Interim Payment Notice arrangements and the Pay Less Notice provisions reflect statutory provisions for “a notice of the payer’s intention to pay less than the notified sum”. The wording of Clauses 4.12.3, 4.12.4 and 4.12.5 are verbally reflective of the statutory language…”
Furthermore, the Court’s view was that, since the HGCRA as amended was consistent with and effectively reflected in and by the Contract payment provisions, the Pay Less Notice cannot only raise deductions specifically permitted by the Contract and legitimate set-offs but also deploy the Employer’s own valuation of the Works. In this matter, all the Employer did was to challenge the Contractor’s most recent application for payment (Interim Application No. 18) by way of putting forward the Contract Administrator’s most recent evaluation, albeit that the Certificate in question, Certificate No. 19 was issued late. The Court was of the view that there was no suggestion in this matter that the Employer was acting in anything other than a bona fide way. The Pay Less Notice of 17 June 2015 (clearly served within time for the 29 May payment due date and the final payment date 28 days later) would have provided an adequate agenda for an adjudication as to the true value of the Works and the validity of the alleged entitlement to liquidated damages for delay.
The third issue between the parties which the Court addressed concerned whether a failure on the part of the Contract Administrator to make a decision in respect of a contractually compliant application for an extension of time from the Contractor would render the Contract Administrator’s Non-Completion Certificate invalid or otherwise prevent the Employer from deducting and/or claiming liquidated damages from the Contractor. The Court accepted that the Court’s decision on this point would not be determinative, given that the adjudicator decided that no application for an extension of time had been made by the Contractor and therefore liquidated damages running from the original Completion Date would stand at least for the time being and therefore the Court’s determination of this issue was therefore obiter. However, to consider it, the Court had to proceed on the assumption that the Contractor did submit an effective and particularised notice of delay compliant with Clause 2.27 and that the Contract Administrator failed to reach a decision on such notice in accordance with Clause 2.28.2 of the Contract. The Court acknowledged that there was no authority in the form of decided cases on the third issue before the Court and therefore the Court’s guidance on this point is most welcome. The Court was of the view that the language of the principal liquidated damages provision in the Contract, Clause 2.32 was not cast in a way that suggests that the obligation on the part of the Contract Administration was to operate the extension of time provisions as a condition precedent to an entitlement for the Employer to deduct liquidated damages. However, Clause 2.32.1 of the Contract did expressly purport to impose two other conditions precedent before the deduction of liquidated damages, namely the need for the Contract Administrator to have issued a Non-Completion Certificate for the Works and for the Employer to have notified the Contractor before the date of the Final Certificate that he may require payment of, or may withhold or deduct, liquidated damages. The Court further stated that it seems odd that, if there was to be a condition precedent that no liquidated damages should be payable or allowable unless the extension of time clauses had been operated properly, then this had not been spelt out as such in the Contract. This however could be explained commercially by the fact that there could be serious arguments between the Contractor and the Contract Administrator (as there were here) not only as to whether delays had occurred by reason of which extensions of time could be granted but also as so as to whether the Contractor had properly complied with the notification and particularisation requirements called for in Clause 2.27 of the Contract. One needed to bear in mind that an tension of time application may range from being wholly good to a hopeless one or it may relate to the whole of the delay or only a very small part; put another way, there may turn out to be no or only a limited entitlement to an extension of time, thus justifying all or most of the Employer’s liquidated damages entitlement. The Court stated amongst other things that:
“…One also has to bear in mind that the Contractor is not left without a remedy both in the short term through adjudication and in the long-term final dispute resolution processes; it can challenge the refusal to grant an extension and/or the deduction of liquidated damages and, in the case of adjudication, secure relief if it can convince the adjudicator that it is right and that the Employer and the CA are wrong in whole or in part.
One can of course argue that it is unfair on the Contractor to have liquidated damages deducted at a time when the CA has failed to deliver the process of considering extension of time claims. The two answers to that are the ready availability of short and long-term remedies and the fact that there are numerous potential defaults on the part of both Employer and Contractor which can give rise to serious financial consequences to the other and merely because unfairness can happen in the short term does not necessarily or obviously lead to the need to construe clauses as conditions precedent to the ability of one party to secure such financial advantage in that short term…”
The Court concluded on the third issue between the parties that the failure on the part of the Contract Administrator to operate the extension of time provisions in the Contract did not debar the Employer from deducting liquidated damages where the expressed conditions precedent in Clause 2.32.1.1 and 2.32.1.2 had been complied with.
In summary, on the three issues between the parties, the Court decided as follows:
Whether the Contractor’s Application No. 18 which was issued on 28 April 2015 was an effective or valid Interim Payment Notice in respect of the 29 May 2015 payment due date? The Court concluded in the circumstances that the answer to issue one was no.
Whether the Employer’s notice dated 17 June 2015 was an effective or valid Pay Less Notice? The Court concluded in the circumstances that the answer to issue two was yes.
Whether a failure on the part of the Contract Administrator to make a decision in respect of a contractually compliant application for an extension of time render the Contract Administrator’s Non-Completion Certificate invalid or otherwise prevent the Employer from deducting and/or claiming liquidated damages from the Contractor? The Court concluded that the answer in the circumstances to issue three was no.
This judgment in the Technology and Construction Court is most welcome and provides the construction industry with very useful guidance on the payment and time related provisions in the JCT Standard Building Contract 2011 (as amended), in particular:
Whether the Contractor’s Interim Application for Payment will be considered as an effective Interim Application under the Contract pursuant to Clause 4.11.1 or a valid Interim Payment Notice in respect of a particular payment due date pursuant to Clause 4.11.2.1 of the Contract if no Interim Certificate is issued in accordance with Clause 4.10.1. Contractors who fail to follow the guidance will find that their Application for Payment will not be considered as an effective Interim Application or a valid Interim Payment Notice under the Contract.
Any document relied upon by a Contractor as an Interim Application for Payment under Clause 4.11.1 of the Contract must be in substance, form and intent an Interim Application stating the sum considered by the Contractor as due at the relevant due date (i.e. state clearly which due date it relates to) and it must be free from ambiguity.
Interim Applications should be considered in the same light as a Certificate as it is important because if there were to be potentially serious consequences flowing from it being an Interim Application, it must be clear that it is what it purports to be, i.e. an Interim Application so that the parties (the Employer and his advisors with regards to payment) know exactly what to do about it and when.
Since the HGCRA as amended is consistent with and effectively reflected in and by the Contract payment provisions, the Pay Less Notice issued under the Contract cannot only raise deductions specifically permitted by the Contract and legitimate set-offs but also deploy the Employer’s own valuation of the Works and therefore the Pay Less Notice issued under the Contract was valid. In the circumstances, the Pay Less Notice of 17 June 2015 (clearly served within time for the 29 May payment due date and the final payment date 28 days later) would have provided an adequate agenda for an adjudication as to the true value of the Works and the validity of the alleged entitlement to liquidated damages for delay.
The Court concluded on third issue between the parties with regards to the Employer’s claim/deduction of liquidated damages where there had been a failure on the part of the Contract Administrator to operate the extension of time provisions in the Contract that, that did not debar the Employer from deducting liquidated damages where the expressed conditions precedent in Clause 2.32.1.1 and 2.32.1.2 had been complied with. The Court acknowledged that there were no decided cases on this issue and therefore this is of significant importance to those involved with the administration of the payment and time related provisions of the Contract.
In conclusion, those involved with payment and time related issues under the JCT Standard Building Contract 2011 (as amended) in the construction industry should note the guidance set out in the judgment, as a failure to follow this guidance could lead to very serious consequences with regard to a Contractor’s cash flow. To quote from the House of Lords (as it was then known) in Gilbert Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1974] A.C. 689, who quoted Lord Denning:
“…Lord Denning M.R. put the matter thus (1973) 71 L.G.R. 162, 167
…’cash flow’ in the building trade. It is the very lifeblood of the enterprise…”
For further information with regard to the resolution of payment or time related issues as set out above, please do not hesitate to contact chambers on: [email protected] to see how chambers can assist you or your organisation.
The above is for general information only and to encourage discussion and does not constitute legal advice. The author does not assume any responsibility for the accuracy of any statements made and appropriate legal advice should be taken in each instance and relied upon before taking or omitting to take any action in respect of any specific matter.
Charles Edwin Edwards MSt(Cantab) MSc(Lond) FCInstCES Barrister
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