At first glance, 'interim payment' appears to mean 'interim payment'. A final account should produce the exact total figure payable and identify any balancing payment needed. Further, money paid under a mistake of fact or law can be recovered, subject to certain defences. But what if a developer makes a payment to a builder, knowing that it may be more than it owes, but chooses not to ascertain the correct amount? Can any overpayment be recovered?
A developer and builder carried out a number of developments under an oral 'framework agreement'.(1) The builder was to receive its build costs (although these were never identified) and, on completion, the profits were to be shared. A costs budget was agreed for each site and, as works proceeded, the builder requested interim payments. These were round sums, unsupported by any details or evidence of costs incurred. The developer made the payments because they were within budget and appeared reasonable, and he trusted the builder. On completion of each project, the parties agreed what sum was due to the builder in respect of the build costs and profit share; however, the developer did not require, and the builder did not provide, any schedule of the build costs. They proceeded on the basis that these were the same as the budget costs and the developer was content with this arrangement. However, after the parties' collaboration came to an end, the developer claimed repayment of sums overpaid.
The claim failed. The Court of Appeal noted that where someone voluntarily makes a payment knowing that it may be more than is owed, but chooses not to ascertain the correct amount due, that person cannot ordinarily recover the overpayment unless, for instance, there has been fraud or misrepresentation.
For further information on this topic please contact Chris Fellowes at Mayer Brown International LLP by telephone (+44 20 3130 3000) or email (firstname.lastname@example.org). The Mayer Brown International LLP website can be accessed at www.mayerbrown.com.
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