This was an adjudication enforcement decision concerning payment provisions and a novel argument about contractual interpretation and implied terms. The key issue in this case arose as a result of a bespoke amendment the parties had agreed upon which provided that the contractor’s invoice (which would stand as payment notice) had to be served immediately after reaching the corresponding milestone, and the final date for payment was just 72 hours after the invoice was served.
The point proved to be divisive because the wording of the contract required service of the payless notice up to 5 days before the final date for payment, which would have been before the invoice was served and was therefore prohibited by the HGCRA. However, if the Scheme applied then the payless notice would have to be served 7 days before the final date for payment, which was similarly contrary to the requirements of the HGCRA.
Edwards-Stuart J considered that there was only one interpretation which would save the amendment and give it contractual effect – an implied term that the relevant period had been reduced to nil and that the payless notice had to be served within those 72 hours between interim application and the final date for payment. After considering Belize Telecom and Marks & Spencer PLC on implied terms, Edwards-Stuart J determined that:
“Faced with a stark choice between rendering the amendment wholly ineffective or enabling it to work, the parties must surely have intended the latter (a proposition which, as I have said, is one for which Mr Lewis contends). The only way in which it can be made to work, whether by so construing the contract or implying a term, is to say that the prescribed period was to be nil - thus enabling MAL to serve a pay less notice at any time within 72 hours after receipt of the invoice. In my judgment such an agreement is necessary and it is not inequitable: if DSL wanted prompt payment within 72 hours of its invoice, it could not reasonably object to a corresponding reduction in the prescribed period.”
The adjudicator had therefore reached the correct decision based on the wrong reasoning and accordingly the breach of natural justice had not had a material effect on the outcome of the adjudication. DSL was entitled to summary judgment.