Lidl Great Britain Limited v Closed Circuit Cooling Limited t/a 3CL

In adjudication-enforcement proceedings, the starting point is summary enforcement unless a genuine and material jurisdictional or natural-justice defence is established. A contractual requirement is a condition precedent only where the contract, construed in context, uses sufficiently clear language to produce that consequence. Requirements expressed as mandatory may nevertheless be ordinary contractual obligations where invalidity would create uncertainty or disproportionate consequences.

Under section 110(1)(b) of the Housing Grants, Construction and Regeneration Act 1996, parties may agree the length of the period between the due date and final date for payment, but may not make the final date dependent on a further event such as receipt of an invoice. A payment notice containing liquidated-damages deductions was properly treated as a pay less notice, not a valid payment notice.

The parties operated under a framework agreement and works order containing provisions for interim payment applications, payment notices, pay less notices and final dates for payment. 3CL referred a dispute concerning its nineteenth application for payment, AFP19, to adjudication. The adjudicator ordered Lidl to pay the amount claimed with interest.

Lidl issued Part 8 proceedings seeking declarations that AFP19 was invalid or improperly served, that its own notice was valid, that the contractual payment provisions complied with the statutory regime, and that the adjudicator’s decision was unenforceable for breach of natural justice. 3CL issued Part 7 proceedings seeking summary judgment to enforce the decision. The central issues were whether the contractual requirements were conditions precedent, whether the notice was valid, and whether the final-date provisions complied with section 110 of the Housing Grants, Construction and Regeneration Act 1996.

1. Procedure and enforcement. The Part 7 claim succeeded. The court should consider any genuine substantive defence to enforcement first, then decide whether other Part 8 issues can fairly be determined summarily. There was no material breach of natural justice. The adjudicator was entitled to consider clause 7.4.2 because the issue whether liquidated damages had been deducted in a payment notice had been raised in the adjudication. In any event, Lidl had not shown that the point was properly arguable or that any procedural breach could have affected the result.
2. PAY-7. A notice must be construed objectively by reference to the reasonable recipient. PAY-7 was, in substance and in its express description, a pay less notice. Its deductions for liquidated damages were contrary to the contractual distinction between amounts due and deductions made by pay less notice. It was therefore not a valid payment notice.
3. Conditions precedent. The requirements in clause 7.4.3(a), including milestone identification, photographs and insurance evidence, were not conditions precedent to the validity of a payment application. The contract lacked sufficiently clear words producing that consequence, and the requirements were imprecise and capable of creating uncertainty. AFP19 was therefore not invalid on those grounds. Cumulative applications were permitted by the payment schedule.
4. Compliance with clause 1.3.1 was not a condition precedent to validity. The court would not construe an application for payment as a “notice” requiring hand, mail or courier service where the contract did not clearly say so. The alternative argument that clause 7.4.3(c) was unenforceable under section 110(1)(a) would also have failed; the clause could be construed as requiring notification of the inspection date.
5. Final date for payment. Following Rochford Construction Limited v Kilhan Construction Limited, the court held that section 110(1)(b) permits agreement only as to the length of the period between the due date and final date. A term making the final date depend on receipt of a VAT invoice was non-compliant. The Scheme therefore applied, and Lidl could not rely on absence of a compliant invoice. In any event, attaching AFP19 to the invoice was not a condition precedent because the contract did not use sufficiently clear language.
6. Lidl was not entitled to any of the declarations sought. Summary judgment was entered for 3CL enforcing the adjudicator’s decision.