Legal Developments In Construction Law: October 2023

• Law Firm: Mayer Brown
• Subject Matter: Real Estate and Construction, Construction & Planning
• Author: Mayer Brown
• Published date: 02 November 2023

1. Setting an HGCRA final date for payment - how to (and how not to)

A construction contract provided for the final date for payment to be 21 days following the later of the due date or receipt of the contractor's VAT invoice, but did that comply with s.110(1)(b) of the Housing Grants Act? If it did not, the Scheme would apply and the final date for payment would be 17 days from the due date.

The Act says, in s110(1)(a), that every construction contract shall provide an adequate mechanism for determining what payments become due under the contract, and when, while s110(1)(b) says that the parties are free to agree how long the period is to be between the date on which a sum becomes due and the final date for payment.

In ruling that the contract wording in this case was not compliant with the Act, the court noted, following the analysis in Rochford Construction Ltd v Kilhan Construction Ltd, that there is a very obvious and compelling difference between the wording used and the plain intent of s.110(1)(b), when compared with that of s.110(1)(a). On a proper analysis, that is because the only discretion intended to be, and actually given, in the former case is for the parties to agree the length of the time period between the due date for payment and the final date for payment.

If it was open to a paying party to include a provision requiring the fulfilment of some further condition between the due date for payment and the final date for payment, that would have the effect of driving a coach and horses through the wording and the clear intention of this part of the Act, which is to allow the parties:

• a wide discretion as regards when payments become due under a contract, constrained only by the requirement that it be an adequate mechanism and by the specific anti-abuse provisions of s.110(1A) and (1D);
• but, in contrast, a much narrower and more circumscribed discretion as regards the final date for payment - only as to the length of the period between the due date and the final date.

Noting that the potential for abuse in this case was not present to anything like the same extent where, as in this case and another, the only additional requirement was for the contractor to serve a VAT invoice, the judge said that, if the way in which Parliament decided to address this problem is to introduce a blanket prohibition on party autonomy as regards the ascertainment of the final date for payment, save as to the length of the period, it is not for the courts to allow parties to agree terms which go beyond that narrow limit, simply because they do not appear to have the same potential for abuse.

Lidl Great Britain Ltd v Closed Circuit Cooling Ltd (t/a 3CL) [2023] EWHC 2243

2. Payment and pay less notices - can one notice be both?

An employer served what it claimed was a Housing Grants Act payment notice, but it included a substantial deduction for liquidated damages and it appeared to the court that...