London Underground Ltd. v Pillar Broadway Ltd.

Under a contractual cost-recovery clause, the obligation to pay properly incurred costs is not generally defeated because an invoice includes other items which are unproved or incorrectly calculated. Payment is due for the sums properly falling within the primary obligation, provided they are included in an invoice issued under the contractual mechanism.

A requirement to provide a breakdown ordinarily requires an explanation of how the amount claimed was calculated, not proof positive of every underlying cost. The adequacy of a breakdown is a matter of fact and degree, assessed in its commercial context. Non-compliance may give rise to a claim for damages, but does not necessarily extinguish the underlying payment obligation.

London Underground Ltd. sought payment from Pillar Broadway Ltd. under clause 19 of a development agreement concerning the redevelopment of Fulham Broadway station. The claim related to an invoice including project management, professional fees, contractor payments and internal charges.

Pillar disputed whether the claimed sums had been properly incurred under clause 19.1. It also argued that clause 19.3 made payment conditional on delivery of a correct invoice accompanied by a sufficient breakdown and copies of relevant third-party invoices.

The issues were whether the disputed costs were properly incurred, whether the invoice and accompanying documents satisfied clause 19.3, and what consequences followed from any errors or deficiencies.

1. Costs properly incurred. The court could determine whether costs were properly incurred from contemporaneous documents and supporting explanations. Direct oral evidence from a person with personal knowledge was not essential. The court rejected the claims for LT Property salaries and external project management because discrepancies between the Summary and Analysis were unexplained. The claims for external solicitors and PFI contractors were proved. The charge represented by Inter-Company Invoice 27674 was not shown to be properly incurred, while the remaining disputed station and engineering-service costs were proved.
2. Effect of clause 19.3. Clause 19.3 qualified the obligation in clause 19.1 by requiring an invoice before payment became due, limiting invoices to specified intervals and allowing ten working days for payment. It did not make payment conditional on every item in the invoice being correct, or on the invoice total being arithmetically correct. The primary obligation remained to pay sums falling within clause 19.1.
3. Breakdown requirement. The commercial purpose of providing a breakdown and copies of invoices was to enable Pillar to understand how the amount claimed had been calculated and assess whether it was properly incurred. A breakdown was not equivalent to proof of every cost. Its required degree of analysis depended on the context. The Summary alone was insufficiently detailed, but the Summary, Analysis, invoice schedules and supporting documents together satisfied clause 19.3.
4. Disposition. London Underground Ltd. was entitled to judgment against Pillar Broadway Ltd. for a further £244,776.55, including VAT, in respect of the proved costs.