Birmingham City Council v Amey Birmingham Highways Ltd

Where a payment is made expressly on condition that it will be repaid if the payer succeeds on appeal, objective assessment of the circumstances may establish a binding repayment agreement. Silence, coupled with retention of the money and no indication that the condition is rejected, may amount to acceptance.

Under a contract linking payment to certification, a milestone takes effect from the contractual milestone completion date. Where that date is defined by the issue of a certificate, the milestone cannot be applied retrospectively by reference to when the underlying performance might have been achieved. The court will not imply a retrospective certification mechanism absent contractual provision.

The claimant council and the defendant highways contractor were parties to a long-term PFI contract under which monthly payments depended on certified milestones. Certificates for Milestones 6 to 9 had been set aside for manifest error following earlier adjudication and Court of Appeal proceedings.

The claimant sought summary judgment on two remaining issues. First, it claimed repayment of approximately £20.6 million paid under protest after the first-instance decision, on terms that the money would be repaid if the appeal succeeded. Secondly, it sought a declaration that milestone-related payment increases operated only from the date of valid certification and could not be retrospectively recalculated.

1. Repayment agreement. The claimant’s correspondence clearly stated that payment was made under protest and on condition that the money would be repaid if the appeal succeeded. The defendant knew that the claimant would not consent to retention of the money except on that condition.

2. In the context of the parties’ continuing correspondence, the defendant’s failure to respond, combined with its retention of the money without indicating that the condition was unacceptable, objectively amounted to acceptance. Payment by electronic transfer made no material difference. The court endorsed the approach in Nurdin and Peacock Plc v DB Ramsden and Co Ltd [1999] 1 WLR 1249, while observing that the authority did not itself determine the result.

3. The arrangement did not alter or waive a contractual term. It was a payment made without contractual entitlement on an express condition of repayment if the payer succeeded. The claimant was therefore entitled to repayment of approximately £20.6 million plus interest.

4. Contractual payment mechanism. Under clause 9.2 and clauses 13.4.1 and 13.5.1, read with Part 1 of Schedule 4, a milestone is taken into account from its Milestone Completion Date. That date is the date on which the Certificate of Completion is issued, subject to the express provision concerning issue before the planned completion date.

5. The contract contained no provision for treating a certificate as having been issued on an earlier date merely because the relevant performance might in fact have been achieved earlier. The final and binding effect of the certifier’s decision, absent fraud or manifest error, reinforced that conclusion. The court granted the declaration sought: milestone step-ups could operate from certification, but not before and not retrospectively.

The judgment records that an earlier first-instance decision concerning the milestone certificates was reversed by the Court of Appeal in [2018] EWCA Civ 264. The Court of Appeal set aside the Certificates of Completion for Milestones 6 to 9. This judgment determined the claimant’s remaining repayment and contractual-construction issues by summary judgment.