Leeds City Council v Waco UK Ltd (TCC - 22.5.2015)

The adjudicator’s award of the sum applied for by way of interim payment due to the local authority’s failure to serve a payment or pay less notice should not be enforced because of the payment application’s invalidity by being made before the due date.
 

LEEDS CITY COUNCIL v WACO UK LTD

Technology and Construction Court

Edwards-Stuart J

22nd May 2015

The contract incorporated the JCT Design and Build 2005 as amended. It was common ground that the dates specified in the contract as the dates on which interim payment applications were to be made were the dates on which the work was to be valued. Whilst many of the contractor’s applications were regularly submitted a few days after the valuation dates for submission both before and after practical completion, the local authority's agent and contract administrator ignored these irregularities and treated the applications as if they had been made on the correct dates. Whilst the local authority did object to payment application 20 after practical completion which was submitted two days before the specified valuation date, it nevertheless made payment in respect of the application after it was re-submitted. The contractor subsequently submitted payment application 21 six days before the specified valuation date. The local authority did not serve any payment or pay less notice in respect of application 21 or make any payment in respect of it. The adjudicator awarded the contractor the sum applied for in respect of application 21 on the basis that the local authority failed to serve any payment or pay less notice.

 

Edwards-Stuart J held that application 21 was not valid and that the adjudicator’s award should not be enforced. The additional words "unless otherwise agreed" in clause 4.9.2 (as to when payment applications were to be made) meant that the parties could agree to vary interim payment valuation dates post practical completion. The local authority’s agent was authorised to agree different valuation dates for interim payment applications post practical completion in the light of those additional words because such an agreement did not amount to varying the contract and was implementing a mechanism that the contract permitted. In the absence of any such agreement, the contractor was under an implied obligation to submit interim payment applications within a reasonable time.

 

In the event the parties established a course of dealing by which the local authority’s agent and contract administrator accepted valuations submitted by the contractor three to four business days later than the valuation date each month. However, the local authority’s payment of application 20 did not amount to an implied representation that it would waive a similar irregularity in relation to application 21 or a waiver or estoppel which operated in respect of that application.

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