Layngross
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Dr Derek Ross is a Past Master of the Worshipful Company of Arbitrators.  He is listed on to the FIDIC President’s List of Adjudicators, and more recently on the Irish Minister of State for Business and Employment's newly formed Panel of Construction Contract Adjudicators.  He is a Chartered Arbitrator, Accredited Mediator, Conciliator, Adjudicator and Dispute Board Member, who accepts UK domestic and international appointments as the neutral person in each of these construction dispute resolution disciplines.  Being also a Chartered Civil Engineer, he also accepts appointments as a Civil Engineering Expert Witness.  

If you feel Dr Ross can assist you, please call him for a no obligation discussion on +44 1932 856463, or simply reply to this email with your details.

Below is an article he has written, which he hopes you will find of interest. 


BEWARE THE ILL-CONSIDERED PAYMENT SCHEDULE
 

In the recent case of Grove Developments Limited v. Balfour Beatty Regional Construction Limited [2016] EWHC 168 (TCC), the judge came to a conclusion that I imagine will come as a surprise to many.  The case concerned a Payment Schedule that covered the intended construction period, but did not deal expressly with interim payment during any period of prolongation that might occur.

During the period of prolongation that did occur, the Contractor thought the interim payment regime of the Payment Schedule ought to be extended into the period of prolongation, and discussions in that vein took place.  However, the Parties became side-tracked by a disagreement as to what the valuation dates and final dates for payment would be, and thus failed to agree an extension of the original Payment Schedule.  Thus, when the Developer largely ceased to make interim payments during the period of prolongation, the Contractor commenced an adjudication, in which it was awarded £2 million, and the Developer commenced Part 8 proceedings in the TCC seeking declaratory relief in respect of the proper construction of the Contract.

The essence of the Contractor’s argument was that as the contract period exceeded 45 days, it was entitled to interim payments during the whole of the construction period pursuant to section 109(1) of the Housing Grants Construction and Regeneration Act 1996, which, subject to that 45 days exception, states that 'a party to a construction contract is entitled to payment by instalments, stage payments or other periodic payment for any work under the contract.....'.  Further, pursuant to section 109(3) of the Act, the Contractor contended that, in the absence of such agreement in respect of a period of prolongation, the relevant provisions of the Scheme for Construction Contracts should apply during any period of prolongation.

The judge disagreed with the Contractor.  He took the view that the agreed Payment Schedule was intended to cover the entire construction period, which means the Contractor is not entitled to any interim payments during the period of prolongation, and is thus obliged to fund the remaining works until it becomes entitled to its final payment.  One has to doubt that this is the answer the Parties would have given if asked at contract formation 'and what about interim payments in a period of prolongation?'  Nevertheless, that is how the judge construed the contract.  Thus it is now important for contractors to ensure that payment schedules within their construction contracts are capable of being extended into any period of prolongation that may occur, as otherwise they may be in for costly periods of seriously negative cash flow in periods of prolongation, possibly arising from delays that are not their fault.  Thus it might be better for contractors to avoid payment schedules altogether.

Dr Derek Ross

29 February 2016

Please Note: The foregoing article has been prepared by Dr Derek Ross for the general interest and benefit of readers.  It is not intended to be a definitive analysis of the law or of other matters discussed.  Neither does it create a client relationship between the recipient and Dr Ross.  Thus no liability is accepted in respect of any reliance placed on any statements made in the foregoing article.  Proper advice ought always to be taken before deciding to take, or not to take, action in respect of a specific issue. 

© 2016 Dr Derek Ross & Layng Ross Construction Disputes Resolution.

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