E & TL Jones (Civils) Ltd v Vale of Glamorgan Council

A subcontractor cannot enforce a project-bank-account payment clause under the Contracts (Rights of Third Parties) Act 1999 merely because it is a supplier or because the alleged breach prevented formal joinder. The contract must identify it within the beneficiary class required by section 1(3). Under an NEC4 clause making payments into a project bank account, the relevant class was Named Suppliers—not all suppliers. A non-party cannot use an alleged breach of the term it seeks to enforce to bypass section 1. The judge further observed, obiter, that the clause imposed a positive obligation to pay into an existing project bank account, not a general prohibition on direct payment where the account and Named Suppliers did not exist. The claim was dismissed.

The claimant, a groundworks subcontractor to ISG Construction Ltd, sought damages from a local authority under section 1 of the Contracts (Rights of Third Parties) Act 1999. The Main Contract contained NEC4 project-bank-account provisions. The project bank account was never established, the claimant was never added as a Named Supplier or party to the trust deed, and ISG entered administration without paying sums certified under the subcontract.

The claim alleged that the defendant breached Clause Y1.8 by paying ISG directly. The court had to decide whether the claimant was an identified beneficiary, whether direct payment was a breach, whether the breach caused the loss, and whether statutory defences were available under section 3.

Disposition. The claim was dismissed.

1. The claimant relied on sections 1(1)(b) and 1(3) of the Contracts (Rights of Third Parties) Act 1999. Clause Y1.8 formed part of an interlocking project-bank-account scheme. The court construed its beneficiary class as Named Suppliers, not every Supplier. The claimant was a Supplier but never became a Named Supplier because the proposal, acceptance and Joining Deed process was never completed. It therefore failed the statutory identification requirement. An alleged breach which supposedly caused that failure could not allow it to circumvent section 1.
2. The judge made an alternative, non-essential observation on section 1(2). Where the gateway requirements are met, there is a strong rebuttable presumption of enforceability. Rebuttal requires an objectively construed positive common intention that the term should not be enforceable. The judge relied on Prudential Assurance Co Ltd v Ayres [2007] EWHC 775 (Ch) and Public and Commercial Services Union v Secretary of State for the Department for Environment, Food and Rural Affairs [2024] UKSC 41, [2025] AC 1392. Direct rights under the Trust Deed did not by themselves exclude enforceability under the Main Contract. The judge also expressed a caution about the Supreme Court’s treatment of contractual interpretation and implication.
3. On the further alternative breach issue, Clause Y1.8 imposed a positive obligation to pay into an existing project bank account. It did not create a general prohibition on direct payment where no account or Named Suppliers existed. Clause 51.2 and commercial sense supported the conclusion that direct payments were obligatory or, at least, permissible. The court distinguished Chudley v Clydesdale Bank Plc [2019] EWCA Civ 344, which did not permit the claimant to avoid the statutory gateway.
4. Even assuming an enforceable right and breach, causation was not proved. The evidence attributed the delay to Santander’s internal processes, KYC requirements and the proposed sale of ISG, not to the Direct Payments. There was no evidence that another bank would have established the account. Finally, ISG’s request for and acceptance of the Direct Payments waived any breach and gave the defendant a defence under section 3(2) of the 1999 Act.