The recent Technology & Construction Court judgment in Grove Developments Ltd –v- Balfour Beatty Regional Construction Ltd has the potential to have far-reaching consequences for the construction industry. Although the judgment is that of an English court, the High Court in Northern Ireland frequently cites judgments of the Technology & Construction Court with approval.
Grove Developments Ltd (Grove) employed Balfour Beatty Regional Construction Ltd (Balfour Beatty) to design and build a hotel and serviced apartments adjoining the O2 Complex in London. The parties' contract was substantially in the form of the JCT Design & Build Contract 2011, with bespoke amendments. The Contract Sum, which the parties agreed would be paid by reference to a payment schedule, was £121,059,632.
The parties' payment schedule provided for 23 valuation numbers, the months for each particular valuation and various other steps leading to payment during the period from September 2013 to July 2015. The Date for Completion of the Works was 22 July 2015. However, the Works were not completed by July 2015 and, on 21 August 2015, Balfour Beatty made a 24th interim application for payment. Balfour Beatty considered that it was due to be paid in excess of £23M.
Grove's case was that Balfour Beatty was not entitled to be make a 24th interim application for payment—in essence because it had already made the 23 applications envisaged in the parties' payment schedule.
The Court was tasked with deciding whether, or not, Balfour Beatty had a contractual right to make a 24th application for payment (or any subsequent interim application) and be paid in respect of it.
The Court concluded that:
- The parties had entered into an agreement for periodic payments, to be made by reference to the agreed payment schedule.
- The parties' payment schedule was clear—it provided for 23 interim payments on the dates set out and no more.
- The payment schedule did not make any express provision for further interim payments after valuation 23, and there was no proper basis for implying a term into the parties' contract that interim payments would continue to be made after valuation 23.
- Balfour Beatty had no contractual right to make a 24th interim application for payment, and was therefore not entitled to be paid on foot of its 24th interim application.
The effect of this judgment was that Balfour Beatty was left with the prospect of financing the project from July 2015 until the Works were completed and it became entitled to a final payment under the parties' contract.
The key lesson for contractors is that delay is common on construction projects and so you should ensure that the payment provisions in your contract cater for that eventuality.