The judgment focuses on the validity of a payment application and provides clarity as to what is meant by a "calendar day".
It is worth highlighting that the parties in dispute had settled the matter after the TCC had issued its draft judgment.
However, Constable J of the TCC thought it appropriate to proceed in handing down the judgment as the dispute concerned "an important element of a JCT standard form widely used in the construction industry".
FK Building Ltd ("FK"), as the main contractor, entered into a sub-contract with Elements (Europe) Ltd ("Elements") which incorporated the JCT Standard Building Sub-Contract Conditions SBCSub/C 2016 Edition with bespoke amendments ("the Sub-Contract").
Under the terms of the Sub-Contract, Elements were engaged by FK to carry out remediation works to 312 residential apartments at Uptown Riverside, Springfield Lane, and Salford.
A dispute arose concerning Elements' entitlement to an interim payment regarding its Payment Application No16 ("PA16"). The payment terms of the sub-contract were as follows:
- “4.6.1. During the period up to the due date for the final payment fixed under Clause 4.22.1… the monthly due dates for interim payments shall in each case be the date 12 days after the relevant Interim Valuation Date…"
- “4.6.3. Where Clause 4.6.2 does not apply, the Subcontractor may make a payment application in respect of an interim payment to the contractor either:
- "18.104.22.168. so as to be received not later than four days before the Interim Valuation date for the relevant payment…"
The Sub-Contract Particulars stated that the first Interim Valuation Date was to be the 25 June 2021 and the same date every fortnight [sic] after that for a period of two months, following which, the date would remain the same in each month or the nearest business day in that month.
Elements' Interim Payment Application
Elements emailed a copy of PA16 to FK's representatives at 10:07 pm on 21 October 2022. It claimed £3,950,190.53.
FK failed to respond to the payment application and failed to serve a pay-less notice.
The sum claimed was not paid by FK; thus, Elements served a notice of intention to suspend the Sub-Contract works if the payment was not received within seven days.
Elements subsequently referred the dispute to adjudication.
The Adjudicator's Decision
During the adjudication, FK disputed that the sums were due for several reasons, including that PA16 was issued late and, therefore, no pay less notice was required.
On 17 January 2023, the adjudicator determined that Elements was entitled to be paid by FK:
- The full sum of £3,950,190.53 (ex. VAT).
- Interest until the decision date of £44,155.55 (ex. VAT).
- Interest thereafter at a daily rate of £865.80 until payment (ex. VAT).
- The adjudicator's fees of £11,074.50 (inc. VAT), and if Elements paid first, FK would reimburse Elements for those fees.
FK raised Part 8 court proceedings to challenge the validity of PA16.
They argued that for the payment application to be valid, it needed to have been received on or before the end of the site working hours on 20 October 2022 on the basis that if the application had been received some time on 21 October 2022, this would not be four days before 25 October 2022 but would instead be between three and four days.
In the alternative, FK argued that PA16 should have been received on or before the end of the site working hours on 21 October 2022.
Per the Sub-Contract specification, the site was to be open until 6 pm Monday-Friday and until 1 pm on Saturdays.
At the same time, Elements issued Part 7 proceedings to enforce the adjudicator's decision and apply for summary judgment against FK.
They also served evidence in response to the FK's Part 8 claim, which argued that Clause 4.6.3 of the Sub-Contract does not specify whether the notice needs to be served in 4 "clear" days or 4 "full" days.
They relied on the rule in English law that when interpreting contracts, a day is to be treated as an indivisible whole, and fractions of a day are ignored and that Sub-Contract did not specify any restrictions as to the time of day by which an application would be deemed validly served.
Elements also relied on the fact that previous applications had been received after working hours and that it was typical for members of the Quantity Surveying team and senior management to work long hours, including evenings and weekends, and receive emails during those times.
The TCC's Judgement
The Part 7 enforcement proceedings and the Part 8 proceedings were listed together.
Constable J concluded the following:
- PA16 was valid as the meaning of "day" is a calendar day, from midnight to midnight, not fractions of days. This was to be distinguished from the well-known concept of "clear days". Subsequently, for the application to be validly served, FK needed to have received it by no later than 23:59:59 hours on 21 October 2022. The Court considered that stating the site opening hours in the Specification did not restrict the term "days" and that it must be expressly stated if a party requires a specific time limit.
- PA16 was "received" when it was received by FK's server. The Court noted that using the word "receive" within a contract "describes an act which needs to be established as having occurred".
Whilst the judgement is somewhat expected, it serves to remind parties that should they wish to set timescales for notices by reference to clear days or that notices should only be deemed validly served during business hours, for example, they must expressly set out these provisions within their construction contracts.
Whilst the facts of this case centre around timescales for payment applications under the JCT Standard Building Sub-Contract Conditions (SBCsub/C) 2016, the Court's reasoning is largely based on common law principles, meaning that it could be applied more widely.
It, therefore, seems likely that if any contractual provision specifies for a notice to be issued or received within a certain number of "days", a Court is unlikely to accept that "days" means "clear days" or that there is any restriction on the time of the day in which the notice is deemed validly served.
Finally, this judgment demonstrates the importance of issuing pay less notices, where the sum claimed within the payment application is not accepted.