Bouygues (UK) Ltd v Febrey Structures Ltd [2016] EWHC 1333 (TCC)

Background

In March 2015, Bouygues employed Febrey to construct a concrete frame for a new building at the University of Bath. The provision allowing Febrey to apply for monthly payments was set out in Clause 21 of the contract. The dates for payment were then set out in a separate payment schedule which was an appendix to the contract.

Bouygues was required to assess Febrey’s applications and 14 days later, payment became due. Within five days of the due date, Bouygues was required to issue a payment notice or a pay less notice to confirm the amount to be paid.

Under the payment schedule and the minutes of the parties’ pre-let meeting (which also formed part of the contract) 60% of the payment became payable within 21 days of Bouygues’ assessment with the balance being paid within 35 days.

The dispute

For October 2015, the payment schedule contained the following dates:

  • Assessment date: 2 November.
  • Due date for payment: 16 November.
  • Payment notice deadline: 23 November.
  • Final date for payment: 23 November
  • Pay less notice deadline: 20 November.

Febrey applied for £144,562 and Bouygues issued its payment notice on 23 November. It did not issue a pay less notice.

Adjudication

As Bouygues would not pay, Febrey referred the dispute to adjudication. The adjudicator agreed that the Bougues’ payment notice was invalid as, contrary to the Construction Act, it was issued more than five days of the due date. The sums applied for by Febrey were therefore due.

Court proceedings

Bouygues’ referred the matter to the TCC. Its arguments were as follows:

  • Clause 21 should be preferred to the procedure in the payment schedule as it was compliant with the Act, thereby rendering the payment notice valid; and
  • If the court found that the payment schedule applied instead, it should be construed and adjusted to make it compliant with the Act.

The court found as follows:

  • The payment schedule applied.
  • The payment schedule was not compliant with the Act because (a) the deadline for the payment notice was more than 5 days after the due date and (b) the deadline for the pay less notice was before the deadline for the payment notice.
  • There was a clear and obvious error in the payment schedule dates for October 2015. The court noted that for all other months, the payment notice and pay less notice had the same deadline and fell within 5 days of the due date. There was no good reason why the parties would intend for that consistent pattern to be amended for October. The deadline for the payment notice was given as 23 November when it should have stated 20 November.
  • The references to 23 November should therefore be construed as 20 November.
  • Having served the notice on 23 November, Bouygues’ payment notice was out of time and Febrey was entitled to the sums it has applied for. 

Practical implications/comment

This is the second time this year that the TCC has reviewed payment schedules (in Grove Developments Ltd v Balfour Beatty Regional Construction Ltd [2016] EWHC 168 (TCC), the court found that the contractor had no contractual right to make or be paid for an interim application made while the works were ongoing but after an agreed payment schedule had expired.

This recent case law demonstrates:

  • when you are preparing a payment schedule for inclusion in a construction contract, not only do you need to ensure that you have provided for contract overruns in that schedule, but that you have also included the correct dates for each and every monthly payment cycle.
  • The court will take a pragmatic approach to interpreting the dates given in payment schedules, especially where there is a "clear and obvious error".

PM Project Services Ltd v Dairy Crest Ltd [2016] EWHC 1235 (TCC)

Background

Dairy Crest appointed PM to provide project management services for the construction of two new production facilities. The development ran into delay and the parties entered into a deed of variation entitling PM to additional payment in the sum of £784,661 for the services set out in the deed. Payment was to be made on the earlier of (a) the date of completion or (b) October 2015.

During a meeting in September 2015, the parties agreed that the payment would be deferred.  PM believed that payment was deferred until completion but Dairy Crest believed that the deferral was until three months after completion.

On completion in December 2015, PM issued its invoice. Dairy Crest argued the invoice was premature as completion had not in fact been achieved.

PM applied for summary judgment for the full £784,661. Dairy Crest argued that it had a counterclaim and that there were triable issues relating to whether completion had in fact taken place under the terms of the agreement. 

The decision

PM’s application for summary judgment was refused on the basis that issues of fact had been raised which could not have been determined fairly on an application for summary judgment.

Practical implications/Comments

The case demonstrates that applications for summary judgment will generally be rejected where the defendant has a genuine prospect of resisting the claim and where issues of fact have been raised which can only be determined at trial. 

Perenco UK Ltd & Anor v Bond [2016] EWHC 1235 (TCC)

The case of Perenco UK Ltd & Anor v Bond [2016] EWHC 1235 (TCC) considered implied terms in agreements which have amended and incorporated statute.

The key facts

This an appeal from an arbitrators decision. A Deed dated 1 June 1994 made between British Gas plc (“BG”), whom Southern Gas Networks plc (“SGN”) were the successor and the landowner, Mr Bond (“Bond”) granted an easement to allow a subsurface pipeline to run across Bond’s land. On 23 September 1994 BP Operating Company Ltd (“BP”), whom Perenco UK Ltd (“Perenco”) were successors entered into a lease with Bond giving them the right to run also run a pipeline. Both run side by side.

The surrounding land is exploited for the extraction of ball clay and other minerals and the purpose of the pipelines was to “sterilise” the extraction of minerals from that area of land.

On 12 October 2011, Bond obtained planning permission to extract the minerals from land which included the pipeline, but was prevented from doing so due to the BG and BP pipelines. Bond served the required notice on SGN informing them of his intention. 30 days’ notice was required under sections 77 – 85 of the Railways Clauses Consolidation Act 1845, which was amended and incorporated directly into the Deed but not the lease,  a clause was included to avoid double compensation. If a counter notice was served by SGN and Perenco then they would be liable for compensation.

Perenco served a counter notice advising they did not want to divert the pipeline and paid the compensation, SGN did nothing as serving a counter notice would be a trigger for the obligation to pay compensation.

Bond claimed compensation from both SGN and Perenco. The issue was whether there was an implied term in the lease that a counter notice had been served by SGN as the counter notice served by Perenco prevented Bond from extracting from the land.

The decision

The Court held that there was no implied term where an agreement has been extensively negotiated and considered, as express wording could have been incorporated, especially when statutory provisions have been considered and amended:

“it does seem to me that the fact that the Deed was professionally drafted and that the implied term itself then passed through a number of iterations adds weight to the argument that it does not “go without saying”. The fact that the implied term also contradicts the express provision under s. 78 that BG may serve a counter-notice “at any time” might have been sufficient reason alone not to imply such a term and it certainly gives further support to my conclusion that the term does not go without saying.”

Further, SGN failed to meet the conditions which must be satisfied for a term to be implied (BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 52 ALJR 20) stating that “the implied term does not seem to me to be one which is either necessary to give the BG Deed business efficacy or one that goes without saying”.

Practical implications/comment

The decision emphasizes the strict stance the courts are applying to implied terms in agreements. Without statutory guidance, it will therefore be difficult to imply a term into an agreement that was subject to extensive negotiation between legally advised parties and where statute has been given careful consideration.

The case further highlights that a cautious approach needs to be taken when considering how both easements (or rights which need to co-exist on land) and compensation should be incorporated into agreements between different parties in the context of adjacent apparatus on a property, ideally insuring they are expressly dealt with.

The courts are therefore taking the stance that parties will have considered all relevant issues and expressly deal with them in agreements.