A recent High Court decision will have significant impact on many main contractors and subcontractors that have a ‘payment schedule’ within their contracts.
In Grove Developments Limited v Balfour Beatty Regional Construction Limited [2016] EWHC 168 (TCC) the court determined that a contractor was not entitled to any further interim payments beyond those contained in the agreed payment schedule notwithstanding that the works had been delayed and extended beyond the last scheduled date.
In that case the parties had entered into an amended JCT Design and Build 2011 contract. One of the amendments was the incorporation of an agreed payment schedule setting out dates for interim applications, valuation and payment for 23 instalments, ending on the date for completion in the contract. There was no mechanism to extend the payment schedule beyond number 23.
The works did not reach practical completion by the date for completion and the contractor issued interim application number 24. The employer argued that the contractor was not entitled to any further interim payments beyond number 23.
The High Court agreed with the employer. In arriving at that decision, Mr Justice Stuart-Smith commented that:
- The payment schedule made no express provision for further interim payments;
- Notwithstanding arguments of commercial common sense, to imply a term that interim payments would continue beyond number 23 would be inconsistent with that express provision;
- The payment procedure in the Scheme for Construction Contracts could not apply as the parties had agreed the basis for interim payments to be as the Schedule.
When faced with this situation we had previously been able to rely on the Housing Grants, Construction and Regeneration Act 1996 as amended, along with the above mentioned Scheme, to imply further payment terms into the contract. It seems, following this judgment, that option is now closed.
The principles in the Grove case only apply if there is no mechanism in the contract to extend the payment schedule beyond the last date. If you have a contract with a payment schedule and no mechanism to extend it, you should seek advice immediately.