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England and Wales High Court (Technology and Construction Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Technology and Construction Court) Decisions >> Henia Investments Inc v Beck Interiors Ltd  EWHC 2433 (TCC) (14 August 2015)
Cite as:  EWHC 2433 (TCC)
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QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Strand, London, WC2A 2LL
B e f o r e :
| HENIA INVESTMENTS INC
|- and -
|BECK INTERIORS LIMITED
Paul Darling QC and Brenna Conroy (instructed by Rosenblatt Solicitors) for the Defendant
Hearing date: 10 August 2015
Crown Copyright ©
Mr Justice Akenhead:
The Facts and the Background
"2.4 On the Date of Possession [11 November 2013] possession of the site …shall be given to the Contractor who shall thereupon begin the construction of the Works…and regularly and diligently proceed with and complete the same on or before the relevant Completion Date…
2.27.1 If, and whenever it becomes reasonably apparent that the progress of the Works or any Section is being or is likely to be delayed the Contractor shall forthwith give notice to the…Contract Administrator of the material circumstances, including the cause or causes of the delay, and shall identify in the notice any event which in his opinion is a Relevant Event.
.2 In respect of each event identified in the notice the Contractor shall, if practicable in such notice or otherwise in writing as soon as possible thereafter, give particulars of its expected effects, including an estimate of any expected delay in the completion of the Works or any Section beyond the relevant Completion Date.
.3 The Contractor shall forthwith notify the…Contract Administrator of any material change in the estimated delay or in any other particulars and supply such further information as the…Contract Administrator may at any time reasonably require.
2.28 .1 If, in the…Contract Administrator's opinion, on receiving a notice and particulars under clause 2.27:
.1 any of the events which are stated to be a cause of delay is a Relevant Event; and
.2 completion of the Works or of any Section is likely to be delayed thereby beyond the relevant Completion Date and provided the Contractor has complied with his obligations under clause 2.28.6,
then, save where these Conditions expressly provide otherwise, the…Contract Administrator shall give an extension of time by fixing such later date as the Completion Date for the Works or Section as he then estimates to be fair and reasonable.
.2 Whether or not an extension is given, the…Contract Administrator shall notify the Contractor of his decision in respect of any notice under clause 2.27 as soon as is reasonably practicable and in any event within 12 weeks of receipt of the required particulars. Where the period from receipt to the Completion Date is less than 12 weeks, he shall endeavour to do so prior to the Completion Date.
2.31 If the Contractor fails to complete the Works or a Section by the relevant Completion Date, the…Contract Administrator shall issue a certificate to that effect (a 'Non-Completion Certificate'). If a new Completion Date is fixed after the issue of such a certificate, such fixing shall cancel that certificate and the…Contract Administrator shall where necessary issue a further certificate."
.1 the…Contract Administrator has issued a Non-Completion Certificate for the Works or a Section; and
.2 the Employer has notified the Contractor before the date of the Final Certificate that he may require payment of, or may withhold or deduct, liquidated damages,
the Employer may, not later than 5 days before the final date for payment of the amount payable under clause 4.15, give notice to the Contractor in the terms set out in clause 2.32.2.
.2 a notice from the Employer under clause 2.32.1 shall state that for the period between the Completion Date and the date of practical completion of the Works or that Section:
.1 he requires the Contractor to pay liquidated damages at the rate stated in the Contract Particulars, or lesser rate stated in the notice, in which event the Employer may recover the same as a debt; and/or
.2 that he will withhold or deduct liquidated damages at the rate stated in the Contract Particulars, or at such lesser stated rate, from sums due to the Contractor.
.3 if…Contract Administrator fixes a later Completion Date for the Works…
the Employer shall pay or repay to the Contractor any amounts recovered, allowed or paid under clause 2.32 for the period up to that later Completion Date."
"4.9.1 For the period up to practical completion of the Works, the due dates for interim payments by the Employer shall be the monthly dates specified in the Contract Particulars up to either the date of practical completion or the specified date within one month thereafter…
4.9.2 Subject to any agreement between the Parties as to stage payments, the sum due as an interim payment shall be the Gross Valuation under clause 4.16 less the aggregate of [certain sums set out in sub-clauses 1 to 4].
4.10.1 The…Contract Administrator shall not later than 5 days after each due date issue an Interim Certificate, stating the sum that he considers to be or have been due at the due date to the Contractor in respect of the interim payment, calculated in accordance with clause 4.9.2, and the basis on which that sum has been calculated.
4.11.1 In relation to any interim payment the Contractor may not less than 7 days before the due date make an application to the Quantity Surveyor (an 'Interim Application'), stating the sum that the Contractor considers will become due to him at the relevant due date in accordance with clause 4.9.2 and the basis on which that sum has been calculated.
4.11.2 If an Interim Certificate is not issued in accordance with clause 4.10.1, then:
.1 where the Contractor has made an Interim Application in accordance with clause 4.11.1, that application is for the purposes of these Conditions an Interim Payment Notice; or
.2 where the Contractor has not made an Interim Application, he may at any time after the 5 day period referred to in clause 4.10.1 give an Interim Payment Notice to the Quantity Surveyor, stating the sum that the Contractor considers to be or have been due to him at the relevant due date in accordance with clause 4.9.2 and the basis on which that sum has been calculated.
4.12 .1 Subject to clause 4.12.4, the final date for payment of an interim payment shall be 28 days from its due date.
.2 Subject to any Pay Less Notice given by the Employer under clause 4.12.5, the sum to be paid by the Employer on or before the final date for payment shall be the sum stated as due in the Interim Certificate.
.3 If the Interim Certificate is not issued in accordance with clause 4.10.1, but an Interim Payment Notice has been given under clause 4.11, the sum to be paid by the Employer shall, subject to any Pay Less Notice under clause 4.12.5, be the sum stated as due in the Interim Payment Notice….
.5 If the Employer intends to pay less than the sum stated as due from him in the Interim Certificate or Interim Payment Notice, as the case may be, he shall not later than 3 days before the final date for payment give the Contractor notice of that intention in accordance with clause 4.13.1 (a 'Pay Less Notice'). Where a Pay Less Notice is given, the payment to be made on or before the final date for payment shall not be less than the amount stated as due in the notice.
4.13.1 A Pay Less Notice:
.1 (where it is to be given by the Employer) shall specify both the sum that he considers to be due to the Contractor at the date the notice is given and the basis on which that sum has been calculated, and may be given on behalf of the Employer by the…Contract Administrator, Quantity Surveyor or Employer's representative or by any other person who the Employer notifies the Contractor as being authorised to do so;…
4.13.3 Any right of the Employer to deduct or set off any amount (whether arising under any provision of this Contract or under any rule of law or equity) shall be exercisable against any monies due or to become due to the Contractor, whether or not such monies include or consist of any Retention.
4.16 The Gross Valuation shall be the total of the amounts referred to in clauses 4.16.1 and 4.16.2 less the total of the amounts referred to in clause 4.16.3, applied up to and including a date not more than 7 days before the due date of an interim payment."
Clause 4.16.1 sets out the total values which are to be included in the Gross Valuation, which are subject to Retention. These include the work properly executed by the Contractor and site materials. Clause 4.16.2 provides for the addition of certain sums that are not subject to Retention. Clause 4.16.3 provides for certain deductions to be made where appropriate.
The Issues in the Current Proceedings
1. Was the Contractor's Application No 18 issued on 28 April 2015 an effective or valid Interim Payment Notice in respect of the 29 May 2015 payment due date?
2. Was the Employer's notice dated 17 June 2015 an effective or valid Pay Less Notice?
3. Would a failure on the part of the CA to make a decision in respect of a contractually compliant application for extension of time render the CA's Non-Completion Certificate invalid or otherwise prevent the Employer from deducting and/or claiming liquidated damages?
Essentially, the Employer says that the answers are "no", "yes" and "no" and the Contractor says "yes", "no" and "yes", respectively.
Issue 1 – Application No 18
(a) The payment due dates under Clause 4.9.1 were agreed to be 29 November 2013 and thereafter the same date in each month or the nearest non-public holiday or non-weekend day in the following months. 29 April and 29 May 2015 were regular weekdays.
(b) The Contractor may but does not have to submit an "Interim Application" (stating what will become due to it at that due date) at least 7 days before that due date. Thus, by way of example, it could serve its Interim Applications on or before 22 April or 22 May 2015 in relation to the April or May due dates.
(c) Next an Interim Certificate must be issued no later than 5 days after each due date. That would be no later than 5 May (allowing for the May Day public holiday) and 3 June 2015 for the April and May due dates respectively.
(d) The final dates for payment would be 28 days counting from the due dates, namely 27 May and 26 June 2015 being 28 days after the due dates in question.
(e) Any Pay Less Notice would need to be served no later than three days before those final payment dates, namely by 23 May (allowing for Whitsun public holiday) and before 23 June 2015.
(a) The Contractor's Application for the 18th interim payment in respect of the 18th payment due date (29 April 2015), if that was what it was intended to be, was late by 6 days.
(b) Both Interim Certificates Nos. 18 and 19 were issued late, No. 18 by one day and No. 19 by 3 minutes in the middle of the night.
These failures or omissions, if they can so be classified, have given rise to the issue about payment and rights to deduct.
(a) The Interim Application can be put in at any time more than 7 days before the payment due date. In theory, a contractor could submit all its Interim Applications on Day 1 of the Contract, seeking to anticipate what work values will be achieved for each payment due date. That might give rise to financial difficulties if it falls behind or even gets ahead of itself and it could take no account of variations or delays which entitle it to related loss and expense. In practice, whilst theoretically possible, it is most unlikely that sensible contractors would do this.
(b) The Interim Application has to state "the sum that the Contractor considers will become due to him at the relevant due date in accordance with clause 4.9.2". The use of the future tense here must permit the Contractor to allow for work which it anticipates it will do between the date of the Interim Application and the payment due date; thus, if it anticipates that it will do a further 500m² of plasterwork over that period, that can be applied for. It is also clear from this wording that the Interim Application should relate to the Gross Valuation basis referred to in Clause 4.9.2 which is cross-referred to in Clause 4.11.1.
(c) It must also be clear that the Contractor must state what it considers due "at the relevant due date". The relevant due dates are spelt out in the Contract and the material ones in this case were 29 April and 29 May 2015. Whilst it is not absolutely necessary that the specific due date is expressed in the Interim Certificate, it must be clear and unambiguous that an application relating to a specific due date is being made.
(a) There was a relevant due date on 29 April 2015; that would have been the 18th relevant due date under the Contract. The use of the words "Interim Application for Payment No: 18" points to an intention that it was to relate to the 18th application for the 29 April payment due date.
(b) There is nothing, expressly, on this Interim Application which points to it relating to the 29 May 2015 payment due date; the deployment of the 30 April 2015 as the date up to which work was being valued is at best ambiguous; 30 April 2015 is not a relevant due date at all under the Contract. If this Interim Application was intended to be taken as relating to the 29 May 2015 due date, the use of the 30 April 2015 date demonstrates if anything that either the Contractor was anticipating doing absolutely no work of value between 30 April and 29 May 2015 or that it was foregoing any interim entitlement to whatever work it was anticipating doing over those 29 days; both these scenarios are unlikely.
(c) The only argument on analysis supporting the submission that the 28 April 2015 Interim Application was intended to be the Interim Application for the 29 May 2015 due date is that, because it was out of time for the 29 April 2015 due date, it must be taken as relating to the later due date as being the next in time; indeed that is what the adjudicator based his decision on in relation to this issue. In my judgment, at best the 28 April 2015 document is as consistent with error or misunderstanding as to what was required or even misguided hope that the 28 April 2015 application would be treated as an effective application for the April payment due date on the part of the Contractor as it is with it being intended to be an Interim Application for the 29 May 2015 due date.
(d) One could easily reach a different view if the application or the Contractor had said at the time that it was acknowledged that the 29 April date had been missed and the Interim Application was intended to relate to the 29 May due date. No such statement was made.
There was at the very least substantial room for confusion; it is, perhaps, unsurprising that the CA issued Certificate No. 18 within 5 days (allowing for the May Day holiday) after the 30 April 2015 valuation date referred to in Interim Application No. 18.
"110(1) Every construction contract shall—
(a) provide an adequate mechanism for determining what payments become due under the contract, and when, and
(b) provide for a final date for payment in relation to any sum which becomes due.
The parties are free to agree how long the period is to be between the date on which a sum becomes due and the final date for payment.
(2) Every construction contract shall provide for the giving of notice by a party not later than five days after the date on which a payment becomes due from him under the contract, or would have become due if—
(a) the other party had carried out his obligations under the contract, and
(b) no set-off or abatement was permitted by reference to any sum claimed to be due under one or more other contracts,
specifying the amount (if any) of the payment made or proposed to be made, and the basis on which that amount was calculated.
(3) If or to the extent that a contract does not contain such provision as is mentioned in subsection (1) or (2), the relevant provisions of the Scheme for Construction Contracts apply.
111(1) A party to a construction contract may not withhold payment after the final date for payment of a sum due under the contract unless he has given an effective notice of intention to withhold payment.
The notice mentioned in section 110(2) may suffice as a notice of intention to withhold payment if it complies with the requirements of this section.
(2) To be effective such a notice must specify—
(a) the amount proposed to be withheld and the ground for withholding payment, or
(b) if there is more than one ground, each ground and the amount attributable to it,
and must be given not later than the prescribed period before the final date for payment…"
"110A (1) A construction contract shall, in relation to every payment provided for by the contract—
(a) require the payer or a specified person to give a notice complying with subsection (2) to the payee not later than five days after the payment due date, or…
(2) A notice complies with this subsection if it specifies—
(a) in a case where the notice is given by the payer—
(i) the sum that the payer considers to be or to have been due at the payment due date in respect of the payment, and
(ii) the basis on which that sum is calculated;
(b) in a case where the notice is given by a specified person—
(i) the sum that the payer or the specified person considers to be or to have been due at the payment due date in respect of the payment, and
(ii) the basis on which that sum is calculated…
(5) If or to the extent that a contract does not comply with subsection (1), the relevant provisions of the Scheme for Construction Contracts apply…
111(1) Subject as follows, where a payment is provided for by a construction contract, the payer must pay the notified sum (to the extent not already paid) on or before the final date for payment.
(2) For the purposes of this section, the "notified sum" in relation to any payment provided for by a construction contract means—
(a) in a case where a notice complying with section 110A(2) has been given pursuant to and in accordance with a requirement of the contract, the amount specified in that notice;
(b) in a case where a notice complying with section 110A(3) has been given pursuant to and in accordance with a requirement of the contract, the amount specified in that notice;
(c) in a case where a notice complying with section 110A(3) has been given pursuant to and in accordance with section 110B(2), the amount specified in that notice.
(3) The payer or a specified person may in accordance with this section give to the payee a notice of the payer's intention to pay less than the notified sum.
(4) A notice under subsection (3) must specify—
(a) the sum that the payer considers to be due on the date the notice is served, and
(b) the basis on which that sum is calculated.
It is immaterial for the purposes of this subsection that the sum referred to in paragraph (a) or (b) may be zero.
(5) A notice under subsection (3)—
(a) must be given not later than the prescribed period before the final date for payment, and
(b) in a case referred to in subsection (2)(b) or (c), may not be given before the notice by reference to which the notified sum is determined.
(6) Where a notice is given under subsection (3), subsection (1) applies only in respect of the sum specified pursuant to subsection (4)(a).
(7) In subsection (5), "prescribed period" means—
(a) such period as the parties may agree, or
(b) in the absence of such agreement, the period provided by the Scheme for Construction Contracts…"
Section 110A replaced the old Section 110 (2) and (3) and Section 111 was a substitution for the earlier Section 111.
(a) It provides "an adequate mechanism for determining what payments become due under the contract, and when, and…for a final date for payment in relation to any sum which becomes due" within the meaning of Section 110, through Clauses 4.9 and 4.12.1.
(b) It provides for notification to be given by a "specified person" not later than 5 days after the payment due date of the sum that the specified person considers to be or to have been due at the payment due date in respect of the payment" (Clause 4.10.1), for the purposes of Section 110A (1) and (2).
(c) Clauses 4.12 and 4.13 are consistent with Section 111 because this machinery for the provision of a "notified sum" by way of the certification and Interim Payment Notice arrangements and the Pay Less Notice provisions reflect statutory provisions for "a notice of the payer's intention to pay less than the notified sum". The wording of Clauses 4.12.3, 4.12.4 and 4.12.5 are verbally reflective of the statutory language.
"(f) Breach of condition precedent by employer
The contract may provide that some condition precedent must be fulfilled before the employer can claim liquidated damages. Thus in the Standard Form of Building contract, the architect's certificate under Clause 2.32.1 is such a condition precedent. Similarly, where a contract imposes a duty on the architect to extend the time and he fails to perform that duty in accordance with the contract the employer is unable to claim liquidated damages."
No authority is quoted for the proposition in the last sentence.
1. Was the Contractor's Application No 18 issued on 28 April 2015 as an effective or valid Interim Payment Notice in respect of the 29 May 2015 payment due date? No.
2. Was the Employer's notice dated 17 June 2015 an effective or valid Pay Less Notice? Yes.
3. Would a failure on the part of the CA to make a decision in respect of a contractually compliant application for extension of time render the CA's Non-Completion Certificate invalid or otherwise prevent the Employer from deducting and/or claiming liquidated damages? No.