Summary: In a recent case the TCC underlined the need to take particular care when drafting schedules of payments. In this case, because the schedule of payments did not comply with the HGCRA, the court found that a payment notice served in accordance with the schedule was actually out of time!

The facts

In Bouygues v Febrey Structures [2016], Febrey was the defendant subcontractor, who was engaged by Bouygues (the claimant contractor) to build the in situ concrete frame and structural topping of a building at the University of Bath.

The parties agreed a programme of periodic payments in accordance with the HGCRA.  The final date for each interim payment was 21 days after the employer’s assessment in respect of 60% of the payment, and 35 days after that assessment in respect of the remaining 40% (clause 21 of the contract). 

The parties claimed to have recorded the dates for payment in Appendix 8, but in actual fact Appendix 8 dealt with something completely different, and Appendix 10 contained the schedule of payment dates.

The dispute centred around Febrey’s October 2015 application for payment.  The schedule at Appendix 10 recorded the following dates in respect of that application:

Application Date

Assessment Date

Due Date

Payment Notice Date

Pay Less Notice Date

Final Date for Payment

23 Oct 15

02 Nov 15

16 Nov 15

23 Nov 15

20 Nov 15

23 Nov 15

     

40% balance of payment

4 Dec 15

7 Dec 15

Bouygues served its payment notice in relation to 60% of the Employer’s Assessment on 23 November 2015, in the sum of minus £2,000.  This (it said), was the amount owed to Febrey, taking into account deductions.  Bouygues sought two declarations: (i) that its payment notice was valid; and (ii) that it was served on time.

The Decision

The judge found that the contract was not compliant with the HGCRA in the following two respects:

  • it provided for the payment notice to be served more than 5 days after the due date(section 110A(1)(a)); and
  • it provided for the pay less notice to be served before the payment notice (S111(5)(b)).

Bouygues suggested that the court should amend the schedule to change the date of the payment notice, the date of the pay less notice and the final date for payment, so that they were all in compliance with the HGCRA.  Alternatively, it could follow Manor Asset Ltd v Demolition Services Ltd  [2016], and find that the pay less notice could be served at any time up to the final date for payment. In either case, it argued, its payment notice dated 23 November 2015 would remain valid.

The judge held that it was necessary to construe the contract, and to adopt the maxim “validate if possible”; ie give effect to the parties’ express provisions. 

However, this was not a case where the judge could follow Manor Asset; he could not imply a term which was in contravention of an express term of the party’s contract. 

The contract included clause 21 which stated that the final date for payment of 60% would occur within 21 days of the Assessment Date. 

Looking at the schedule as a whole, it was clear that Appendix 10 included an obvious error, particularly in relation to the October 2015 dates. The schedule should have read:

Application Date

Assessment Date

Due Date

Payment Notice Date

Pay Less Notice Date

Final Date for Payment

23 Oct 15

02 Nov 15

16 Nov 15

20 Nov 15

20 Nov 15

23 Nov 15

He therefore found that the final date for payment should have been 23 November, with the payment notice served two or three days before.  Bouygues’ payment notice had been served out of time. In the circumstances, it did not fall to be decided whether or not it was valid in form.

What does this mean for parties drafting payment schedules?

The only clear lesson that emerges is that it is vital to get your dates right!  Those drafting contracts should aim as a starting point to ensure that the contract provisions comply with the requirements of the Act.

What if you do get your dates wrong? That depends. The courts must construe the agreement as a whole and so there are no hard and fast rules. In Grove Developments Ltd v Balfour Beatty [2016]  the court declined to add additional dates for interim payments to the end of the schedule.  In Manor Asset, the court attempted to give effect to the parties’ bargain by implying a term that the pay less notice could be served at any time up to the final date for payment.  In Bouygues, the court tried to give effect to the parties’ bargain but found that it simply couldn’t imply a term that contravened the other express terms of the contract.