Grove Developments Ltd v Balfour Beatty Regional Construction Ltd

Where parties to a construction contract agree the amounts and intervals of interim payments, that agreement governs the payment regime. The payment provisions of the Scheme for Construction Contracts supplement only matters left unprovided for; they do not automatically replace or extend the parties’ agreement.

Section 109 does not require interim payments covering all work throughout the contract. Parties may agree irregular stages, variable amounts, or a limited number of interim payments. A further payment regime will not be implied merely because its absence may operate commercially to a contractor’s disadvantage.

The claimant developer sought declarations concerning interim payments under a JCT Design and Build Contract 2011, as amended. The parties had agreed a schedule providing for 23 interim valuations and payments up to July 2015. After that schedule ended, the defendant contractor submitted a further application, IA24, and claimed payment.

The central issues were whether the contractor had a contractual right to make or receive payment for IA24 and subsequent applications, and, alternatively, what the final date for payment was and whether the claimant’s Pay Less Notice was valid.

1. Issue 1. The claimant was entitled to a declaration that the defendant had no contractual right to make or be paid in respect of IA24 or any subsequent application. The agreed schedule operated as a specific amendment to the contract. It replaced the contemplated stage-payment arrangement with an agreed regime of 23 interim payments and identified the relevant payment mechanism. The contractual payment provisions survived except to the extent amended by the schedule.
2. Sections 109 and 110 of the Housing Grants, Construction and Regeneration Act 1996 did not require the Scheme’s payment provisions to be imported in full. Consistently with Hills Electrical & Mechanical v Dawn Construction Ltd [2004] SLT 477, the Scheme supplied only provisions needed to fill omissions or inadequacies. Existing contractual arrangements could operate with relevant Scheme provisions as a coherent whole.
3. Section 109(1) did not compel interim payments covering the whole period of the works. Section 109(2) permitted the parties to agree the amounts and intervals of payment, including irregular stages, variable amounts, or a limited payment regime. No term requiring payments after valuation 23 could be implied. The express agreement was inconsistent with such a term, and commercial common sense did not justify implying it.
4. The subsequent correspondence did not create a binding variation. Although parties may contract in stages, as explained in RTS Flexible Systems Ltd v Molkerei Alois Müller GmbH [2010] BLR 337 at [45], agreement on the terms governing further payments was a precondition to a concluded agreement. No such agreement was reached. The estoppel argument also failed because it sought to use estoppel as a sword and the payment certificates were equivocal.
5. Issue 2. The court considered the alternative issue on the assumption that a contractual right existed. If the agreed schedule continued, the final date for payment would have been 25 September 2015. If the original clause 4.9.1 applied, it would have been 18 September 2015. In either event, the Pay Less Notice served on 15 September 2015 was in time on the latter analysis. The court made no declaration on whether the Payment Certificate itself constituted a Pay Less Notice.

This was a first-instance Part 8 claim. The judgment records related adjudication proceedings, in which the adjudicator decided on 11 January 2016 that the claimant should pay a further £2 million, but the present proceedings were intended to determine the underlying contractual questions.