Rochford Construction Ltd v Kilhan Construction Ltd

Payment provisions in a construction contract must be construed with the contractual terms and supplemented by the Scheme for Construction Contracts only to the extent necessary to satisfy the Housing Grants, Construction and Regeneration Act 1996. A provision said to operate as a condition precedent to payment must be clear and workable. Wording referring to applications at the end of the month did not clearly require service on the final calendar day or exclude a claim if served later. Where the contract’s final-date mechanism depended on an absent payment schedule and an uncertain payment certificate, it was unworkable. The Scheme therefore supplied the necessary payment timetable. A final date for payment must be sufficiently certain and is properly expressed as a fixed period following the due date, rather than by reference to an uncertain event.

The claimant contractor sought declarations concerning the validity of an adjudicator’s decision on Interim Payment Application 9 under a subcontract for reinforced concrete frame works. The adjudicator had found that the payment became due when the application was served on 20 May 2019 and that the claimant had failed to serve the required payment notices. The claimant contended that the subcontract required applications to be made on the last day of each month and that the final date for payment was 30 days from service of an invoice. The central issues were the construction of those provisions and the extent to which the Scheme for Construction Contracts 1998 supplied terms where the subcontract was non-compliant or incomplete.

1. Claim dismissed. The claimant was not entitled to declarations reversing the adjudicator’s conclusion or to repayment of the sums paid pursuant to it. The court did not need to determine the proposed amendment, although it indicated that permission would have been granted in principle.
2. The payment provisions of the subcontract were partly incomplete. Consistently with Bennett (Construction) Ltd v CMC MBS Limited [2019] EWCA Civ 1515, payment provisions in Part II of the Scheme could be incorporated piecemeal, but only so far as necessary to achieve compliance with the Act. Existing contractual arrangements were to remain operative where they could form a coherent payment regime.
3. The words “application date end of month” did not clearly impose a condition precedent requiring an application to be served on the final day of the calendar month. The wording could refer to the end of the relevant valuation period. The proposed construction was commercially impractical, especially because the accounting period ended when the claim would have to be prepared and served, and because the payment schedule referred to in the subcontract was absent. The submission date was therefore left at large.
4. Since the subcontract did not provide an adequate mechanism for determining when monthly payments became due, paragraph 4 of the Scheme applied. The payment became due on the later of seven days after the relevant period or the making of the claim. On the facts, the due date was 20 May 2019, when the claim was issued.
5. The provision for payment 30 days from invoice was intended to address the final date for payment. However, the absent payment schedule and the requirement that a payment certificate accompany the invoice made that mechanism unworkable and uncertain. The Scheme accordingly supplied the final-date regime. This conclusion was reinforced by the statutory objective of certainty and regular cash flow identified in Bennett (Construction) Ltd v CMC MBS Limited [2019] EWCA Civ 1515.
6. In an alternative analysis, the judge accepted that section 110 required the final date to be fixed by reference to a period between the due date and final payment, rather than by an uncertain event. Alstom Signalling Limited v Jarvis Facilities Limited [2004] EWHC 1285 (TCC) was distinguishable and of questionable relevance following the statutory amendments.