Grove Developments Ltd v Balfour Beatty Regional Construction Ltd

Grove Developments Ltd v Balfour Beatty Regional Construction Ltd [2016] EWHC 168 (TCC)

In Grove Developments Ltd v Balfour Beatty Regional Construction, it was held that a contractor will have no contractual right to be paid for a submitted additional interim payment application where a contractually binding schedule for interim payments has been agreed.

Therefore, any project complications resulting in the expiration of the agreed payment schedule would potentially render a contractor unable to request any further interim payments until practical completion is achieved. At this point the final payment mechanism would be utilised, to allow the contractor to obtain outstanding payments.

The facts

Grove Developments Ltd (the “Employer”) and Balfour Beatty Regional Construction Ltd (the “Contractor”) entered into a JCT Design and Build Contract, 2011 with bespoke amendments, to a value of approximately ￡121 million. The Contract incorporated amendments which had been made to the standard form payment provisions which resulted in the parties opting for staged payments resulting in agreement of a payment schedule comprising of 23 interim payment applications, to be made between September 2013 and July 2015, the expected contract life.

The Contractor did not reach practical completion on the completion date within the contract and although the parties had tried to reach agreement on a revised schedule in advance of the expiry of the payment schedule , they failed to do so in time.

In August 2015 the Contractor issued an interim payment application no 24 for the sum of approximately ￡23.16 million. This application was made despite no agreement having been made as to the mechanism for making future payments beyond the 23 interim payment applications provided for under the Contract.

The Employer argued that the Contractor was not entitled to issue any interim applications beyond no 23 under the contract payment schedule.

The Contractor, anticipating the validity of their 24th payment application consequently contended that the Employer had not served a payment notice or a payless notice within the required time frames and therefore as a result, it was owed the amount referred to under interim payment application 24.

The decision

In a Part 8 declaratory relief proceedings, the court held that the Contractor had no contractual right to make or be paid for any interim payment application beyond the 23rd application provided for under the Contract, concluding that:

• such a future payment provision could not be implied into the Contract, because the possibility of providing for further interim payments as a consequence of a delay in reaching practical completion, was something which the parties could have negotiated prior to agreeing to the original payment schedule; and
• the payment procedures as set out in the Scheme for Construction Contracts 1998 could not apply to future payments due to the parties having already agreed a schedule pursuant to which payments would be made. Further interim payments to the Contractor was subject to the parties agreeing the terms upon which they would be made, which they had already been unable to do.

Comments

This decision is interesting in that those contractors who have already agreed a set of payment terms that include the provision of a fixed payment schedule should have this decision in consideration. If the contract does not adequately foresee the possibility of project overruns or delays, then additional negotiation will be required to ensure adequate payment protection in the future. Those Contractors who are in negotiation should ensure that all scenarios in regards to payment are considered

• https://www.bailii.org/ew/cases/EWHC/TCC/2016/168.html
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