Introduction and Procedure
The Court of Appeal case A & V Building Solutions Limited v J & B Hopkins Limited serves to highlight the difficulties parties can face when their contract does not contain a clear and unambiguous payment mechanism which here led to multiple sets of proceedings. Parties were "lamented" for incurring expenses for procedure which was ultimately "academic from a financial point of view".
J&B were the main mechanical and electrical contractors on the Moulsecoomb University project. In turn. A&V were J&B's mechanical and electrical sub-contractor.
The first step to the eventual appeal, was a true value adjudication in November 2021. In that adjudication, A&V were awarded £138,010.86 in respect of its Interim Application 14 ("IA14").
Whilst the true value adjudication was ongoing, in December 2021 J&B raised Part 8 Court proceedings seeking a declarator that IA14 was invalid as it was issued one day late, and that A&V were not therefore entitled to payment. The judge found that A&V’s IA14 was one day late and thus invalid.
In March 2022 A&V raised enforcement proceedings which it then abandoned. Instead, it appealed the decision in the Part 8 Court proceedings. In June 2022 it also raised a Final Account ("FA") adjudication. In the FA adjudication the Adjudicator decided that A&V owed J&B the net sum of £82,956.88.
Whilst the financial consequences of IA14 had now been overtaken, there were two issues left for the Court of Appeal, those being (i) were the Part 8 Proceedings an abuse of process; and (ii) was IA14 a valid interim application.
Issue 1
In regard to the first issue, whilst the court noted that it was a costly decision for J&B to set up two competing sets of proceedings, with the Part 8 claim only being relevant if it lost the adjudication, it was an approach that, as a matter of law, was open to them.
Issue 2
In turning to the second issue, the key contractual provisions were:
- "9.2. It is a condition precedent to payment that the Sub-Contractor shall make monthly applications
- 9.3. The payments shall be in accordance with Appendix 6."
Appendix 6 contained a payment schedule. Column A was headed "Date which Sub-Sub Contractors to Issue Application to J&BH". The dates in column A were always 10 days before the valuation dates in column B - the last date in each calendar month. Appendix 6 went on to provide that:
"For the avoidance of doubt if applications are not received from the Sub-Contractor 7 days prior to the Valuation Date then the Sub-Contractor shall not be entitled to any payment….”
IA14 was dated 21 March 2022 (a Sunday) and issued the following day, which was one day out with the Column A date in the Payment Schedule.
The Court of Appeal noted that Clause 9 is a general provision of J&B's sub-contracts whereas Appendix 6 was a bespoke term which was specifically implemented for the sub-contract with A&V. Resultantly, if there is inconsistency between contractual provisions, even where a clause is a condition precedent - the bespoke or specific provision is likely to prevail. This was described by the court as "a principle of common sense".
In this case the specific provision in Appendix 6 permitted applications to be submitted up to 7 days before the Valuation Date, as such IA14 could have been validly issued until 24 March 2021.
Key Takeaways:
- Parties should ensure that the whole contractual payment mechanism in contracts are consistent and do not conflict.
- If a conflict exists between general clauses and bespoke contractual provisions, the latter is likely to be more persuasive to a court.
- Where there are parallel Part 8 and enforcement proceedings, the judge should endeavour to resolve the enforcement proceedings as "first order of business". In this instance, J&B's failure to make payment following the first Adjudicator's decision was a continuing breach of contract.
