Severfield (UK) Ltd v Duro Felguera UK Ltd

In a hybrid construction contract, the Housing Grants (Construction and Regeneration) Act 1996 applies only to the construction operations within its scope. Contractual payment provisions continue to govern excluded operations. Separate payment regimes may therefore operate under one contract.

A contractor cannot rely on a broad payment application to claim a later, refined sum under the Act’s notified-sum regime. The notice must identify the sum due, explain its calculation and do so clearly and unambiguously. A materially revised claim cannot retrospectively rely on an earlier notice. A potential set-off and counterclaim may also justify defending a claim arising under the contractual regime.

The claimant contracted to design, supply and erect steel structures for power-generation plants. The works included both construction operations within s 105(1) of the Housing Grants (Construction and Regeneration) Act 1996 and excluded operations under s 105(2).

The claimant submitted an interim payment application for approximately £3.8 million. The defendant served no timely payment or payless notice. After an adjudication and unsuccessful enforcement proceedings, the claimant discontinued those proceedings and brought a new claim for approximately £1.4 million, said to represent only included construction operations.

The issues were whether the new claim could rely on the earlier notified sum, whether it was a revised claim requiring a fresh notice, whether set-off was available, and whether the new proceedings were an abuse of process.

1. Summary judgment refused. The claimant could not rely on the December 2014 application to obtain summary judgment on the revised claim.
2. Under s 104(5) of the Housing Grants (Construction and Regeneration) Act 1996, the Act applies to a hybrid contract only so far as it relates to construction operations. Contractual payment provisions therefore govern excluded operations, while the Act’s payment regime governs included operations. This produces two regimes under the same contract.
3. A payment notice must identify the sum due, state the basis on which it was calculated, and be clear and unambiguous. The December application claimed one undivided sum for all work. It neither identified the later £1.4 million figure nor explained that figure as the amount claimed for included construction operations. The claimant could not convert the notified sum by refining the claim later.
4. The July 2015 claim was at least arguable as a genuinely revised claim. It involved changed valuation methods, new variations analysis and a different allocation of the work. It therefore could not piggyback on the earlier notice. A fresh payment notice would have been required.
5. The judge further held, as an alternative and unresolved point, that where a hybrid contract produces a sum due under the Act alongside an arguable contractual set-off and counterclaim, the defendant should arguably be permitted to deploy the set-off in full.
6. The fresh proceedings were not an abuse of process. The discontinued adjudication-enforcement proceedings raised jurisdictional issues and might have produced an all-or-nothing result, whereas the new proceedings could determine the underlying contractual valuation. The claimant had not sought an unjust collateral advantage. The parties were urged to agree a timetable to trial.