A & V Building Solutions Ltd v J & B Hopkins Ltd
J&B Hopkins Limited (“JBH”) was appointed as the Mechanical and Electrical contractor for the construction of new student accommodation at the University of Brighton’s Mouslecoomb University Campus at Lewes Road, Brighton. On 18 December 2019, through a subcontract JBH engaged A&V Building Solution Limited (“A&V”) to carry out main plumbing installation works.
Clause 9 of the JBH’s subcontract stated each of the dates by which A&V had to issue their application. These dates were calculated to be 10 days before the valuation dates that in turn were always the last date of each month.
“9.2. It is a condition precedent to payment that the Sub-Contractor shall make monthly applications (‘Interim Application’) for payment to the Contractor on the dates specified in Appendix 6. Such applications for payment must specify the sum that the Sub-Contractor considers to be due to him and the basis on which that sum has been calculated …
9.3. The payments shall be in accordance with Appendix 6.
9.4. Interim payments shall be due at regular intervals calculated from the date when the first payment was due. The final date for payment shall be in accordance with Appendix 6.”
But Appendix 6 stated an important condition precedent: the Sub-Contractor is not entitled to any payment if it does not submit an application 7 days prior to the Valuation Date:
“In the event that Interim Payments become due beyond the dates set out in the schedule above then the Due Dates shall continue to occur at the same intervals as set out above and dates for submission of applications, valuations, Payment Notices, Pay Less Notices and Final Date for Payment shall occur at the same time from the Due Date as for every month as set out above.
For the avoidance of doubt if applications are not received from the Sub-Contractor 7 days prior to the Valuation Date then the Sub-Contractor shall not be entitled to any payment, whether or not a payment notice is served by the Sub-Contractor until the procedure set out above is repeated in relation to the next Valuation Date.”
On Monday, 22 March 2021 A&V issued its payment interim application number 14 but the application was dated the previous day: Sunday, 21 March 2021- similar to the procedure it followed once before when the date for issue fell on a Sunday. JBH replied to this submission that no further sums were due and A&V had been overpaid.
On 17 November 2021, A&V commenced adjudication. JBH averred that application number 14 was not served in accordance with the contract, as it was submitted a day late. During the course of the adjudication JBH initiated Part 8 proceedings seeking various declarations, few of which related to matters that were already being considered by the adjudicator.
TCC had the following issues to decide:
The Court of Appeal noted that the Clause 9 is a general provision of JBH’s subcontract whereas Appendix 6 is a bespoke term that was specifically drafted and implemented for the subcontract with A&V.
The Court held that where there is an inconsistency between contractual provisions the bespoke clause would take precedence. The Court referred to it as “a principle of common sense”.
This meant that A&V were permitted to submit its interim payment application number 14 up to 7 days before the Valuation Date that is 24 March 2021 so the application submitted by A&V was valid.
A Part 8 claim is an alternative procedure to the usual method of bringing a legal claim (Part 7) and is aimed at disputes where a claimant is seeking the court’s decision on a question which is unlikely to involve a substantial dispute of fact.
The Judge decided that these proceedings could be initiated by parties even in an ongoing adjudication but caution should be exercised to avoid any attempts to undermine the “pay now, argue later” spirit of adjudication, The Court quoted the decision in Carillion Construction Limited v Devonport Royal Dockyard Limited2:
“The task of the adjudicator is to find an interim solution that meets the needs of the case. Parliament may be taken to a recognise that, in an interim solution, the contractor (or sub-contractor) or his sub-contractors will be driven into insolvency through a wrongful withholding of payments properly due. The statutory scheme provides a means of meeting the legitimate cash-flow requirements of contractors and their sub-contractors. The need to have the ‘right’ answer has been subordinated to the need to have an answer quickly.”
The Court decided that a single instance of JBH paying a late application by A&V is not sufficient to waive JBH’s right to refuse future late payments by A&V but the Court had a different view in relation to estoppel.
The Judge decided that since JBH treated the relevant payment application valid for over 6 months (between submission and initiation of the adjudication) JBH was estopped for claiming that the payment application was not now valid.
The decision by Lady Justice King, Lord Justice Coulson, and Lord Justice Popplewell provides important guidance on the Court’s approach towards a Part 8 claim, conflict between general clauses and bespoke contractual provisions, parties’ waiving right to raise further objections in future, and importance of raising issues over invalidity of payment applications to be raised at the earliest opportunity.
Published 27 November 2023
Published 15 November 2023
Published 14 November 2023