In Grove Developments Ltd v Balfour Beatty Regional Construction Ltd, Grove employed Balfour Beatty under an amended JCT 2011 DB contract to design and construct a hotel and serviced apartments for a contract sum of £121m. The date of completion was set for 22 July 2015, and the parties agreed a schedule of 23 valuation and interim payment dates covering the period from September 2013 to July 2015.
The works were not completed by the date for completion and, in August 2015, Balfour Beatty issued a further interim application for payment (“Interim Application 24”).
Grove purported to serve a Payment Notice and a Pay Less Notice. However, Balfour Beatty argued that such notices were not served within the applicable time limits, and so Interim Application 24 was payable.
Balfour Beatty commenced adjudication proceedings. Grove issued Part 8 Court proceedings seeking a declaration as to whether Balfour Beatty had a contractual right to make Interim Application 24 (or any subsequent application), and its right to receive further payments.
The Court held that Balfour Beatty did not have a contractual right to make Interim Application 24 (or any subsequent application) because the parties’ agreement was clear and provided for 23 interim payments on the dates set out in the agreed schedule and no more. The agreed schedule did not make any express provision for further interim payments after valuation 23.
The Court pointed out that if the Scheme provisions for payment applied, then the entitlement to interim payments continued throughout the construction phase. However, the Court also made it clear that this did not affect the ability of the parties to contract on a different basis if they chose to do so.
Therefore, if parties enter into an agreement in relation to the amount of payments and the intervals at which they become due, the fact that the agreement does not provide for interim payments covering all of the work under the contract is no reason to import the provisions of the Scheme to supplement their agreement so as to generate interim payments covering the work that their agreement does not cover.
The Court therefore refused to imply a term that interim payments would continue to be made after valuation 23.
The decision is being appealed.
COMMENT: This is another case which demonstrates how careful the parties to a building contract should be when drafting their contractual provisions, particularly in relation to payment.
