Drive (Edgware) Ltd v S & T (UK) Ltd

A contractual change to the address for payment applications must be effected in accordance with the contract and communicated in a manner that objectively implements the change. An internal email, blind-copied to a subcontractor and contemplating a later formal instruction, did not itself alter the contractual notice provisions. A general obligation of fair dealing or compliance with reasonable directions did not authorise a unilateral change to a contractual payment term. Consistent acceptance of applications made in the original manner could also support an estoppel, although that issue was reached only as an alternative.

Drive, a subcontractor, obtained an adjudicator’s decision requiring S & T, the contractor, to pay £382,936.85 plus VAT and interest, together with the adjudicator’s fees. S & T brought a Part 8 claim asserting that Drive’s payment application was invalid because a January email had changed the contractual address for applications. It also resisted enforcement of the adjudicator’s decision on that basis. The parties agreed that the Part 8 claim and enforcement application should be heard together. The central issue was whether the January email had contractually changed the method of submitting payment applications.

1. Part 8 claim dismissed; adjudicator’s decision enforced. The January email was construed objectively and commercially. It was an internal instruction to S & T personnel to issue a further site instruction to subcontractors. It did not itself constitute a direct contractual instruction to Drive. No subsequent site instruction was issued. The contractual change was therefore never implemented.
2. The email’s form supported that conclusion. Drive was blind-copied rather than directly addressed, and the email contained no direct recipient. A notice intended to bind a recipient should at least purport to be addressed directly to that recipient. This was an additional, though non-essential, reason why the email was not an effective notice.
3. The fair dealing and team-working clause did not make the email binding. On the facts, Drive had not acted unfairly or in bad faith by failing to act on an unread email sent indirectly to it without discussion or request. Even if there had been a breach of that obligation, it would not necessarily have validated the purported contractual instruction.
4. The clause requiring compliance with reasonable directions concerned the day-to-day operation of work on site. Read as a whole, it did not authorise a change to a contractual payment term. The absence of any timescale for compliance was further inconsistent with treating the email as a direction under that clause.
5. Alternatively, S & T would have been estopped from relying on the January email. Applications continued consistently to be sent to the project surveyor’s address, and S & T dealt with them without taking the point, including after the January email. The court distinguished Leeds City Council v Wakeham, where payment of a premature application did not establish an implied representation that a future irregularity would be waived.
6. The fraud allegation had been abandoned and was not relevant. The invalidity of the particular application would have been a timing issue only and would not have prevented Drive from pursuing any substantive entitlement in later proceedings.