Bouygues (UK) Ltd v Febrey Structures Ltd [2016] EWHC 1333 (TCC)
The latest case on payment considered by the Technology and Construction Court under the Housing Grants Construction and Regeneration Act (the Construction Act) is a Part 8 claim brought by Bouygues (UK) Ltd (Bouygues). Bouygues sought a declaration concerning the proper construction of the payment provisions incorporated into a sub-contract with Febrey Structures Ltd (Febrey). The purpose was to determine the validity of a payment notice served pursuant to the sub-contract.
Clause 21 of the sub-contract provided for Febrey to apply to Bouygues for interim payments. A payment schedule was contained in an Appendix which detailed each stage of the monthly payment process. For March 2015, the payment process was:
- Febrey's Application: 23 March 2015;
- Valuation Date: 2 April 2015;
- Due Date for Payment: 16 April 2015 (ie 14 days from the Valuation Date)
- Bouygues' Payment Notice: 21 April 2015 (ie within five days of the Due Date)
- Bouygues' Pay Less Notice: 21 April 2015 (ie within five days of the Due Date, being the same day as the Payment Notice)
- Final Date for Payment: 23 April 2015.
The process was slightly complicated as the dates for Bouygues' Payment Notice and Pay Less Notices related to just 60% of the sum due; the remaining 40% had different, later, dates. However, these later dates were not relevant to the dispute.
This pattern was repeated for all interim applications listed in the Appendix except October 2015 and March 2016. The October 2015 application was the subject of these proceedings. For October 2015 the Appendix stated:
- Febrey's Application: 23 October 2015
- Valuation Date: 2 November 2015
- Due Date for Payment: 16 November 2015
- Bouygues' Payment Notice: 23 November 2015
- Bouygues' Pay Less Notice: 20 November 2015
- Final Date for Payment: 23 November 2015.
The key difference is the date for Bouygues' Payment Notice, which is stated as 23 November 2015. Using the payment process outlined above, it would have been 21 November 2015 (5 days after the Due Date) or 20 November (the same day as the Pay Less Notice and 2-3 days before the Final Date for Payment).
Febrey submitted its Application on 23 October. Bouygues issued its Payment Notice on 23 November (in accordance with the payment schedule). Febrey complained that the notice was late as s110A(1)(a) of the Construction Act states that the date for a Payment Notice must not be more than 5 days after the due date. So Febrey argued it was invalid.
Bouygues for its part stated that its notice was valid as it complied with clause 21 and it also constituted a valid Pay Less Notice served in time under the payment schedule.
The decision
The Court found in favour of Febrey, but without recourse to the Construction Act. The Court held that the agreed format for application, notice and payment were clear from the dates for the first application for interim payment in March 2015 and the pattern that followed. The dates showed that the Payment Notice and Pay Less Notice had the same deadline in each month and fell within five days of the due date. There was no reason why the parties would intend for that consistent format to be varied for the October 2015 application. There was therefore an “obvious error” in the payment schedule for October 2015 in that the Payment Notice date was given as 23 November instead of 20 November (being the same date as the Pay Less Notice date and within five days of the Due Date).
The Court therefore determined that Bouygues' Payment Notice had been served out of time and was, accordingly, invalid.
It is a tough decision for Bouygues, who complied with the dates in the payment schedule, but is an important reminder to those administering payment processes to complete payment schedules carefully and to double (and triple) check dates when issuing notices.
As an aside, Bouygues' Part 8 proceedings were brought alongside Febrey's application for summary judgment to enforce an adjudicator's decision on this very point. Although the tactic did not work for Bouygues, this is a good example of how Part 8 proceedings can be used to essentially resist enforcement of an adjudicator's decision.
Note: The case of Grove Developments Limited v Balfour Beatty Regional Construction Limited [2016] EWHC 168 (TCC) considered similar issues to those in this case. Balfour Beatty has appealed the decision to the Court of Appeal, with a hearing scheduled for 26 or 27 July 2016.
