Bouygues (UK) Ltd v Febrey Structures Ltd

In construing a construction contract, the court must ascertain what reasonable parties would have understood from the language read in its commercial context. A clear and obvious drafting error may be corrected where it is clear both that something has gone wrong and what the parties meant. Statutory payment provisions are replaced only to the extent that the contract fails to comply with the Housing Grants, Construction and Regeneration Act 1996. The court should respect the parties’ express payment structure and must not imply a term which contradicts it. A notice served after the contractually construed deadline is ineffective.

The proceedings concerned a construction sub-contract for works at the University of Bath. One claim sought summary enforcement of an adjudicator’s decision; the other sought declarations concerning the interpretation of payment provisions in the sub-contract. The enforcement issues were withdrawn from the hearing.

The dispute concerned the October 2015 payment application. Appendix 10 stated 23 November 2015 as the Payment Notice date, although the Pay Less Notice date was 20 November 2015 and the parties’ usual payment pattern indicated that both notices should have been served on 20 November. The central issues were whether Appendix 10 applied, how it should be construed consistently with the 1996 Act, and whether the claimant’s notice served on 23 November was effective.

1. Applicable approach. The court adopted the agreed Part 8 procedure for deciding a short, self-contained issue without oral evidence, as described in Caledonian Modular Ltd v Mar City Developments Ltd [2015] EWHC 1855 (TCC).
2. Contractual construction. The reference in clause 21.1.1 to Appendix 8 was an obvious linguistic error. Appendix 8 concerned delivery routes, whereas Appendix 10 was the incorporated payment schedule and was expressly identified in the surrounding contractual documents. The reference was therefore construed as a reference to Appendix 10. The court applied the modern principles of construction stated in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, confirmed in Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1001, and qualified by the commercial-common-sense guidance in Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900 and Arnold v Britton [2015] UKSC 36.
3. Statutory compliance. Appendix 10 was non-compliant because its Payment Notice date was more than five days after the due date and its Pay Less Notice deadline preceded the Payment Notice deadline. Under section 110A(5) of the 1996 Act, statutory scheme provisions replace contractual provisions only to the extent of non-compliance, as explained in Grove Developments Ltd v Balfour Beatty Regional Construction Ltd [2016] EWHC 168 (TCC).
4. Correction of the October date. The consistent pattern of the other monthly applications, the agreed 60/40 payment split, and the contractual documents showed that the reference to 23 November 2015 in Appendix 10 was an obvious error. It was construed as 20 November 2015. The court rejected alteration of the final payment date and declined to apply the solution in Manor Asset Ltd v Demolition Services Ltd [2016] EWHC 222 (TCC), because that approach would contradict the express contractual provisions as properly construed.
5. The notice served on 23 November 2015 was therefore out of time. No timeous Payment Notice or Pay Less Notice had been served. The claim failed; the counterclaim for payment arising from the failure to serve a timeous notice succeeded, subject to agreement or determination of the form of order.

First instance decision. No appellate history was stated in the judgment.