Henia Investments Inc v Beck Interiors Ltd

An interim application under a construction contract must be clear, unambiguous and identifiable in substance, form and intent as an application for a particular payment due date. A late or ambiguous document will not become an effective interim payment notice merely because it is the next document in time. A valid pay less notice may challenge the valuation stated in an interim certificate or payment notice and may include contractual deductions and legitimate set-offs. Failure by a contract administrator to operate an extension-of-time procedure does not, without express contractual wording, prevent liquidated damages being deducted where the stated conditions for doing so are satisfied.

These Part 8 proceedings concerned declarations arising from a JCT Standard Building Contract without Quantities 2011, as amended, for fitting-out and construction works. The Contractor had submitted an interim application after the relevant deadline, the contract administrator had issued certificates late, and the Employer had served a pay less notice relying on a different valuation and liquidated damages.

The court determined three issues: whether the Contractor’s application was an effective notice for the later payment due date; whether the Employer’s pay less notice was valid; and whether failure to determine a compliant extension-of-time application invalidated the non-completion certificate or prevented liquidated damages being deducted.

1. Interim application. The Contractor’s application No 18 was not an effective interim application for the 29 May 2015 payment due date. Clause 4.11.1 required a document stating the sum considered due at the relevant due date. The document had been numbered as application No 18, referred to valuation to 30 April, and did not identify the 29 May due date. It was therefore ambiguous and could not operate as an interim payment notice under clauses 4.11.2 and 4.12.3.
2. Pay less notice. The Employer’s notice of 17 June 2015 was valid. On its proper construction, clauses 4.12 and 4.13 permitted the Employer to challenge the amount certified by the contract administrator or stated in an interim payment notice. The notice could also rely on deductions and set-offs permitted by the Contract. The amended Housing Grants, Construction and Regeneration Act 1996 did not require a different result. Its payment regime was materially reflected in the Contract, including the notified-sum and pay-less-notice machinery.
3. Extension of time and liquidated damages. The court’s determination of this issue was expressly obiter because the adjudicator had found that no effective extension-of-time application had been made. Assuming a compliant notice and a failure by the contract administrator to decide it, that failure would not itself make time at large or constitute prevention. Nor did clause 2.32 make proper operation of the extension-of-time machinery a condition precedent to liquidated damages. The express conditions in clause 2.32.1 were sufficient where satisfied.
4. The three answers were respectively No, Yes and No. The parties were directed to agree the wording of appropriate declarations.