ISG Retail Limited v FK Construction Limited

A construction contract may treat a late payment application as valid for calculating a postponed due date, but that does not make the application one submitted in accordance with the contract for the purposes of section 110B(4) of the Housing Grants Construction and Regeneration Act 1996.

An estoppel requires a clear and unequivocal representation, convention or promise. Mere acceptance or processing of a late application is insufficient.

Payment notices are construed objectively in their contractual and factual context. They must communicate clearly the sum said to be due and the basis of calculation, but need only provide a sufficient outline agenda for adjudication. A notice need not bear a particular label.

These two Part 8 claims concerned materially identical payment provisions in sub-contracts for the Barberry and Triathlon projects.

In the Barberry proceedings, FK submitted an application for payment one day after the contractual deadline. ISG gave no payment notice and its Pay Less Notice was late. The issue was whether the late application qualified under section 110B(4) of the Housing Grants Construction and Regeneration Act 1996.

In the Triathlon proceedings, ISG issued a payment notice recording a negative amount described as due to the sub-contractor. ISG argued that the notice made FK liable to pay ISG. The central issues were whether the notice communicated that consequence and whether its supporting calculations satisfied the contractual requirements.

1. Barberry project. The court held that the late application was not submitted in accordance with the contract for the purposes of section 110B(4)(b) of the Housing Grants Construction and Regeneration Act 1996. Clause 2(6) allowed the late application to be treated as valid and postponed the due date, but expressly recognised that it was late and had been submitted after the required date. It therefore did not satisfy the statutory condition.
2. FK’s alternative estoppel case failed. The necessary first step was a clear and unequivocal representation, convention or promise that the late application would be treated as contract-compliant. No such statement had been made. It was unnecessary to decide whether a party could be estopped from relying on statutory rights.
3. Triathlon project. The 6 October 2022 document did not objectively communicate that FK was required to pay approximately £3.3 million to ISG. Its heading referred to a sub-contractor payment, it referred to future payment, described the balance as an amount due to the sub-contractor, and contemplated an invoice from the sub-contractor. The document was confused and confusing in context.
4. Payment notices are construed objectively, by reference to the relevant contractual and factual context and the notice’s purpose. They must comply in substance and form with statutory and contractual requirements, clearly stating the sum due or deducted and the basis of calculation. Validity is a question of fact and degree, and no particular label or contractual clause reference is required.
5. The court rejected the criticism that the supporting calculations lacked sufficient detail. A payment notice need provide only an outline agenda for adjudication, not the level of analysis required at trial. The issue of whether a tax invoice was a condition precedent was left open, although clause 2(8) appeared to contemplate notification, invoice and payment as distinct steps.

ISG was entitled to the relevant Barberry declarations. It was not entitled to the relief claimed in the Triathlon proceedings.