This was a Part 8 claim brought by Bouygues (UK) Ltd (“Bouygues”) for declarations concerning the proper construction of the payment provisions incorporated into a sub-contract with Febrey Structures Ltd (“Febrey”), which would determine the validity of a payment notice served pursuant to the sub-contract.
Bouygues engaged Febrey to carry out works to construct an in situ concrete frame and structural topping for a new building at the University of Bath for a sum of £626,315.79. The sub-contract incorporated Appendix 10 which set out a schedule of agreed payment dates. The October 2015 dates under the schedule were as follows:
- The valuation date was 2 November 2015;
- The due date for payment was 16 November 2015;
- The payment notice was to be served on 23 November 2015;
- The pay less notice had to be served on 20 November 2015;
- The final date for payment was 23 November 2015.
Febrey submitted its application on 23 October 2015 for the sum of £144,582.06. Bouygues responded by serving a payment notice on 23 November 2015 stating a negative sum of £2,041.27 as due. The question for Mr Jonathan Acton Davis QC (sitting as a deputy high court judge) to determine was whether the payment notice was valid on the proper construction of Appendix 10.
The schedule of dates did not comply with the HGCRA 96 in two material respects:
- The date for service of the payment notice was more than 5 days after the due date; and
- The date for service of the pay less notice fell before the date for service of the payment notice.
The Scheme would therefore be incorporated to supplant the non-compliant provisions with the equivalent Scheme dates. Applying the Scheme date for service of the payment notice (5 days after the due date) would have rendered the required date for service as 21 November 2015, but this still fell after the date for service of the pay less notice. However, applying the Scheme date for service of the pay less notice (7 days before the final date for payment) would have had the effect of rendering the date as 16 November 2015, which was yet further in advance of the date for service of the payment notice.
Counsel for Bouygues proposed two routes through which this issue could be resolved.
First, an identical scenario had arisen in the case of Manor Asset Limited v. Demolition Services where the date for service of the payment notice had been fixed at just three days before the final date for payment. In those circumstances Edwards-Stuart J had determined that the only way to make the payment schedule compliant with the HGCRA was to reduce the prescribed period for service of the pay less notice to nil, with the effect that the pay less notice could be served at any time up to and including the final date for payment. Counsel for Bouygues averred that the reasoning in Manor Asset Limited should be applied to the current case to resolve the difficulty.
Second, another way to resolve the issue would be to apply the equivalent Scheme provisions for payment notice, pay less notice and final date for payment, which would have established the following timetable:
- Payment Notice – 21st November 2015;
- Pay Less Notice – 26th November 2015;
- Final Date for Payment – 3rd December 2015.
If either line of reasoning had been followed, the notice would have been timeous.
However, Mr Jonathan Acton Davis QC was not persuaded by either line of reasoning. He considered that, rather than just being non-compliant with the HGCRA, the 23 November date for service of the payment notice had in fact been entered in “obvious error”, and the intended date had clearly been 20 November 2015. This determination was substantiated by evidence of the other agreed dates under Appendix 10 which, save for the application in March 2016, had followed an identical format which was consistent with the intended date for service being 20 November 2015.
He also rejected the argument that all three dates from the Scheme should be incorporated because such a position “fails to respect the parties' express agreement that the Final Date for Payment… would be within 21 days of the Due Date.”
Mr Jonathan Acton Davis QC therefore determined that the payment notice had been served out of time and was, accordingly, invalid.