Manor Asset Ltd v Demolition Services Ltd (Rev 1)

A construction payment amendment must be construed, where reasonably possible, so that it complies with the Housing Grants, Construction and Regeneration Act 1996 and remains effective. The due date for a milestone payment was the date on which the milestone was achieved. The final date for payment was 72 hours after receipt of the invoice. Because the amendment made no express provision for the prescribed period for a pay less notice, the parties were taken by necessary implication to have agreed that the period was nil. A pay less notice could therefore be served at any time between receipt of the invoice and expiry of the 72-hour period. An adjudicator’s failure to mention evidence does not establish a breach of natural justice where the decision and reasons show that the issue was considered. Any procedural breach must also be material to the outcome.

The claimant, Manor Asset Ltd, engaged the defendant, Demolition Services Ltd, under a JCT Minor Works Building Contract with Contractor’s Design 2011 for demolition works. An amendment substituted milestone payments for the original interim payment regime. Following achievement of the first milestone, DSL issued an invoice for 60% of the contract value. MAL later served a pay less notice stating that only £1,500 was due.

An adjudicator decided that the milestone had been achieved and that the pay less notice was out of time. MAL brought Part 8 proceedings challenging enforcement on natural justice grounds and seeking a declaration concerning the final date for payment. DSL applied for summary judgment. The central issues were whether the adjudicator had failed to consider evidence or give the parties a fair opportunity to address the payment analysis, and how the amendment should be construed consistently with the statutory payment regime.

1. Natural justice. The adjudicator’s failure expressly to mention MAL’s photographic evidence did not demonstrate that it had been ignored. The adjudicator decided the milestone issue and gave reasons which showed that he had considered the evidence. MAL had also had a proper opportunity to make submissions on the timing of any pay less notice. The natural justice challenges therefore failed.
2. Construction of the payment amendment. The words requiring payment within 72 hours of receipt of the invoice identified the final date for payment. The payment became due when the relevant milestone was achieved, because the invoice was to be issued when that event occurred. The amendment was to be read consistently with the statutory scheme and in a manner which avoided making it unlawful or wholly ineffective.
3. Implied agreement on prescribed period. The amendment did not expressly state the prescribed period for a pay less notice. Applying the principles concerning implication of terms, the court held that the parties must be taken to have agreed that the prescribed period was nil. Otherwise the default seven-day period would require a pay less notice before the invoice, contrary to section 111(5)(b) of the Housing Grants, Construction and Regeneration Act 1996. MAL could therefore serve a pay less notice within the 72 hours following receipt of the invoice.
4. Effect on the adjudication. The adjudicator was wrong to state that the pay less notice should have been served before the invoice. Nevertheless, the conclusion that MAL’s notice of 28 October 2015 was invalid was correct. Any procedural deficiency was therefore immaterial, particularly because the court had been asked to determine the final date for payment.
5. MAL’s challenges failed. DSL was entitled to summary judgment. The court declared that the final date for payment was 72 hours after receipt by MAL of DSL’s invoice following achievement of a milestone, that the due date was achievement of the milestone, and that the prescribed period for a pay less notice was nil.

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