Deerns UK Limited v VDC LHR11 Limited

A construction contract must provide a fixed period between the due date and the final date for payment. The due date may depend on an event, but the final date cannot vary by reference to an event other than the due date. This applies whether the relevant event occurs before or after the due date.

A statutory-compliance interpretation is preferred only where the language genuinely permits competing legitimate interpretations. It cannot justify rewriting clear contractual terms. If the contract fails to provide a compliant final date, the Scheme applies as written, including its 17-day default period.

The Claimant sought payment of £910,501.71 plus VAT under a consultancy agreement for engineering services. It argued that the agreement did not provide a compliant final date for payment under sections 110(1)(b) and 110(3) of the Housing Grants, Construction and Regeneration Act 1996 (“HGCRA”), so that the Scheme for Construction Contracts supplied a 17-day period.

The Defendant contended that the agreement, properly interpreted, provided a fixed 30-day period. It alternatively relied on estoppel by convention, a minimum-change application of the Scheme, and the Claimant’s financial position in support of a stay of execution.

1. Interpretation and statutory compliance. The Contract was to be interpreted objectively, by reading its terms as a whole and considering the relevant statutory and commercial context. The HGCRA had limited weight in that exercise. A compliant interpretation could be preferred only where it was genuinely as legitimate as the competing interpretation; the court could not adopt a strained reading.
2. The Contract fixed the interim valuation dates and due dates. Clause 7.2 postponed the final date for payment when the payment application was late, but did not postpone the due date. The final date was therefore capable of being more than 30 days after the due date and was not determined solely by reference to that due date.
3. HGCRA and the Scheme. A contract must provide a fixed period between the due date and final date for payment. The rule applies whether the event affecting the final date occurs before or after the due date. The Contract consequently failed to comply with section 110(1)(b). Paragraph 8 of the Scheme supplied a 17-day final date. The court had no power to replace that period with the parties’ intended, but non-compliant, 30-day arrangement.
4. Estoppel by convention. The Defendant’s evidence did not establish a sufficient prospect of proving a communicated shared assumption that the payment timetable would be recalculated by reference to the actual application date. The alleged arrangement was a radical departure from the express Contract, and the contemporaneous documents did not demonstrate the asserted understanding. The estoppel issue therefore did not justify further pleadings or evidence and failed.
5. Stay of execution. Applying the principles in Wimbledon Construction Company 2000 Ltd v Vago, the Claimant’s financial position and need for payment did not justify a stay. The Defendant’s cross-claims remained unestablished, and its failure to pay had materially contributed to the Claimant’s financial difficulties. Judgment was entered for the Claimant in the amounts claimed.