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Out of time! What happens after the last date in a payment schedule has passed?

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13/01/2017

Update on the Court of Appeal judgment of – Balfour Beatty Regional Construction Ltd v Grove Developments Ltd [2016] EWCA Civ 990

Building Contracts often include an agreed schedule of dates for interim applications for payment. In this case, the Court of Appeal has considered whether an interim application for payment could be made by a Main Contractor after the dates set out in such a schedule had passed.

We reported on the first instance judgment on this case in a previous edition of Adjudication Matters here.

Background

Grove Developments employed Balfour Beatty to design and build a hotel and serviced apartments under a JCT Design and Build 2011 contract. The contract works were scheduled to commence in July 2013 and complete by July 2015. The parties agreed to a schedule of 23 interim applications ending on the planned date of practical completion in July 2015.

The project overran and Balfour Beatty issued a 24th interim payment application in August 2015. Grove Developments argued that Balfour Beatty was not entitled to any further interim payments as the last date set out in the schedule had passed. Balfour Beatty obtained an adjudicator’s decision in its favour which directed that Grove Developments make payment. Grove Developments did not comply with the adjudicator’s decision and Balfour Beatty commenced adjudication enforcement proceedings in the TCC. The TCC agreed with Grove Developments and held that Balfour Beatty was not entitled to issue any further interim applications under the building contract past the dates set out in the schedule.

Balfour Beatty appealed this decision.

The Court of Appeal

By a 2 to 1 majority, the Court dismissed the appeal. They considered that the timetable for interim payments had ended on the contractual completion date in July 2015 and that the parties had made no agreement as to interim payments after this date. In the Court’s view, there was no clear intention for payments to continue past the scheduled end date. It was not practical to imply into the contract that the interim payments would continue because the parties would need to know with certainty the applicable due dates for valuations, Payment Notices, Pay Less Notices and final dates for payment after the planned completion date had passed. As drafted, the schedule did not provide a mechanism for identifying these dates.

The Court considered that if the parties had intended that there be a right to further interim payments, then they would have included provision for this in the schedule of dates. Whilst Lord Justice Vos dissenting, foresaw that such a position would create an “uncommercial construction” and potentially leave contractors without payment for a significant period of time, the Court held that the payment schedule as agreed was sufficiently clear and certain.

Balfour Beatty had simply made a bad bargain which the Court could not alter.

Comment

This decision confirms that when using agreed schedules of dates for interim payments, the parties should ensure that they account for the possibility of a project overrun or delay.

This can be achieved by including a general ‘saving provision’ at the end of a schedule of dates confirming the applicable deadlines for all subsequent months. Failure to do so could expose a contractor to a real financial risk, particularly where there is a liability to pay-subcontractors.

Parties to existing contracts which includes schedules of interim payment dates may wish to consider agreeing further dates, if there is a real risk of the project being delayed.

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