Grants Construction and Regeneration Act 1996. BB argued that the payment provisions of the Scheme for Construction Contracts 1998 should "fill the gap".
The court disagreed with BB’s position and noted that s.109 sets a very low bar in terms of the amount and frequency of stage payments required under a construction contract. In this respect, the court approved of the following passage from Keating on Construction Contracts: "… there is no requirement as to when such payments are to be made; any arrangement which satisfies the definition will be sufficient. Thus a contract prescribing one periodic payment, even of an insignificant amount, would it seems, meet the requirements."
Conclusions and implications
This is a strict approach to a situation which is not uncommon in construction projects. An appeal has been lodged by BB and will be heard by the Court of Appeal in the middle of this year. In the meantime, the court’s decision may result in parties refusing to agree extended payment schedules in circumstances where they would not have otherwise taken the point.
The decision highlights once again the importance of fully anticipating all circumstances that may affect a project and ensuring that appropriate protection is in place. Projects are often delayed with completion dates being missed, yet works will still need to be carried out and contractors (and their sub-contractors and supply chain) will still want to be paid. To avoid potentially serious cashflow issues, if a bespoke schedule of fixed payment dates is being negotiated, parties should ensure that adequate consideration is given to what happens in the event that works continue beyond the last date noted in the schedule. A simple formula such as naming the date of the month for payments would suffice.
References: Grove Developments Ltd v Balfour Beatty Regional Construction Ltd [2016] EWHC 168 (TCC)
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