By Sam Dorne
The English Court of Appeal case of A & V Building Solutions Limited v J & B Hopkins Limited has highlighted issues parties face when there is ambiguity in relation to dates for requesting interim payment in construction contracts. The case also examined whether the parties’ actions could amount to a waiver of certain terms, or an estoppel.
J & B Hopkins Limited (J&B) was the main mechanical and electrical contractor on the University of Brighton Moulsecoomb project in Sussex. J&B engaged A & V Building Solutions Limited (A&V) to carry out certain project work.
The sub-contract stated that A&V was entitled to make monthly applications for payments by way of instalments on dates specified in the sub-contract. The sub-contract stated that if the application was not made on time, then A&V shall not be entitled to any payment until the correct procedure is repeated in the next monthly cycle.
On 22 March 2021, A&V raised interim application 14, one day late (this being a Monday rather than the Sunday on which the rightful date fell).
An issue arose, with J&B arguing that it would not pay any further sums and that, in fact, J&B had been overpaid. No mention of improper service had been raised at this point.
Once A&V stated that it would adjudicate the matter, J&B argued that the application was not served in accordance with the provisions of the sub-contract. However, J&B did not explicitly raise the issue of late service at this point.
A&V commenced adjudication, and at the adjudication J&B raised the issue that interim application 14 was made one day late. However, the adjudicator found that the application was valid.
J&B decided to appeal this, and commenced court proceedings. The first instance court agreed that the application was invalid because it was a day late.
The Court of Appeal decision
The matter was appealed to the Court of Appeal and ultimately overturned, with the Court finding that the dates specified in the sub-contract were not strict and that there was wiggle room for interpretation in how the dates were drafted in the sub-contract. The Court of Appeal found that the application had been made in time and therefore the sums were due.
Although A&V was successful in its first ground of appeal, the Court did, in obiter comments, reflect on A&V’s two other grounds of appeal.
The first of these amounted to whether J&B had waived the right to disputing application 14 on the grounds that it was served one day late, on a Monday, when a year earlier an interim application was paid when the application fell due on a Sunday, whereas the application was also not actually made until the following Monday. The Court rejected this argument, saying one instance of paying a late payment application is not generally sufficient to amount to a waiver.
However, the Court did note that an estoppel had arisen in the case. This is because J&B said in an email of 1 April 2021 that it would deal with application 14 as a valid application. It went on and considered the detail of application 14 and issued its own valuation and Payment Notice. These documents assumed throughout the validity of application 14, and no attempt was made to reserve the position in respect of validity. In this way, J&B unequivocally affirmed the validity of the application and continued to do so until after the adjudication had started, which is when it first raised the issue of service being a day late.
Therefore, between March and November 2021, both parties were operating on the basis that application 14 was a valid application. A&V relied on that common assumption to make application 14 the focus of its adjudication. If, at any point before that time, J&B had indicated that it considered application 14 to have been served one day late, then A&V could have taken the necessary steps to resolve the dispute by repeating the claim for the next monthly cycle, or any other month before the commencement of the adjudication. Only after the adjudication had started did J&B argue that the application had been served late.
The Court of Appeal therefore felt it warranted a comment that the Court would not have permitted J&B to conduct itself in this way, and that J&B had unequivocally represented that application 14 was valid and would therefore have been estopped from arguing this issue.
The case shows the value of parties acting in good faith in disputes. In its obiter comments on the estoppel issue, it was fairly clear that the Court of Appeal took a dim view where one party sought to raise issues later in the dispute, where a simple resolution would have been available had the issue been raised from the outset. There was clearly some prejudice to the subcontractor here, by arguing about service being a day late several months after the issue arose. The Court of Appeal clearly thought it inappropriate for a party to benefit from its own sluggishness. Simply put, if there are questions as to the validity of any interim payment application, then both parties should be honest and forthright from the outset.