Leeds City Council v Waco UK Ltd

Under a construction contract, an agreement to alter interim-payment dates may implement an express contractual flexibility rather than vary the contract. An agent authorised to act for the employer under the conditions may therefore agree different dates where the contract permits this. A different position applies where the contract contains no mechanism for changing dates: variation then requires specific authority.

A course of dealing may waive strict compliance with payment dates, but its scope depends on the conduct established. A single payment of an irregular application does not ordinarily establish a continuing waiver or estoppel. Where an application is missed, the entitlement to apply revives at the next contractual valuation date; an application made before that date is premature.

Leeds City Council engaged Waco UK Ltd under a JCT Design and Build Contract for modular classroom buildings. Following Practical Completion, Waco made interim-payment applications at irregular dates. Leeds had generally paid earlier applications but refused Application 21, made on 22 September 2014 rather than the relevant contractual date of 28 September.

An adjudicator ordered Leeds to pay £484,759.50 plus VAT because the requisite notices had not been served. Leeds paid pursuant to an order granting leave to defend and sought declarations that Application 21 was invalid and that no sum was due under an identical Application 22 made on 28 November 2014. The central issues were the contractual application dates, the effect of the parties’ course of dealing, and whether the contract administrator had waived or varied the relevant requirements.

1. The court granted both declarations. Application 21 was invalid, the adjudicator’s decision of 20 February 2015 could not stand, and Waco was required to repay the sums paid pursuant to the court order, with interest. Waco remained free to pursue the value of its final account.

2. After Practical Completion, clause 4.9.2 permitted applications at two-month intervals unless otherwise agreed. That wording allowed the parties to agree different intervals or dates for particular applications. Such agreement implemented a contractual mechanism and did not vary the contract. Under Article 3, Jacobs had actual and ostensible authority to make that agreement on Leeds’s behalf.

3. Before Practical Completion, the contract contained no comparable mechanism. Changing the specified application dates would therefore require a person specifically authorised to vary the contract. No evidence established Jacobs’s actual authority, and Jacobs lacked ostensible authority for that purpose.

4. An interim-payment application had to be made on the relevant valuation date and state the financial position at that date. Although the contract did not prescribe a separate service date, Waco had an implied obligation to submit the application within a reasonable period, ordinarily a few days, so that the employer could respond within the contractual notice period.

5. The parties’ conduct established an agreement or waiver under which applications made three or four business days after the valuation date would be accepted. That course of dealing did not extend to the separate one-month provision following Practical Completion. Waco’s failure to apply on the March and May 2014 valuation dates meant that its right revived at the next date. Applications made on 18 July and 22 September were consequently premature, not late applications for earlier dates.

6. Payment of the July application waived that irregularity but did not represent that Leeds would waive future irregularities. The 6 October email did not validate Application 21, vary its date, or create an estoppel. It was at most an invitation to submit a revised application, which Waco did not accept or rely upon.

First-instance decision. No prior appellate decision is stated in the judgment.