Parties to a JCT contract must precisely follow the contractual requirements in relation to payment and avoid any ambiguity. In this post we consider a recent case where this did not happen: Henia Investments v Beck Interiors.
This case examined the payment provisions under the JCT contract, and confirmed what a contractor needs to include in a payment notice. It also confirmed that an employer can issue a pay less notice in relation to a Contract Administrator’s valuation and that it is not necessary for the Contract Administrator to have operated the extension of time provisions to entitle the employer to deduct LADs.
The facts:
Henia had engaged Beck under the JCT Standard Building Contract (SBC). The works were delayed and the Contract Administrator issued a Non-Completion Certificate. Communications followed that Beck claimed were sufficient to trigger the extension of time provisions under the JCT.
The contract included the usual JCT requirements for payments and provided for due dates of the 29th of each month. This particular dispute concerned payment applications 18 and 19:
28 April 2015— Beck submitted Interim Application No 18 for payment of £2,943,098.95 for works valued up to 30 April 2015 (six days late)
6 May 2015— the Contract Administrator issued Interim Certificate No 18 for a sum payable of £226,248.95 (one day late)
Beck did not submit Interim Application No 19 in May 2015
4 June 2015—the Contract Administrator issued its Interim Certificate No 19 for a payable sum of £18,893.53 (three minutes after midnight so three minutes late)
17 June 2015—Henia issued a ‘Pay Less Notice’ of ‘£0’ based on Interim Certificate No 19 and its deductions of liquidated damages that far exceeded £18,893.53
The three questions for the TCC were:
Was Beck’s Interim Application No 18 an effective or valid Interim Payment Notice for the 29 May 2015 payment due date?
Was Henia’s notice of 17 June 2015 an effective or valid Pay Less Notice?
Would a failure of the Contract Administrator to make a decision on a contractually compliant application for extension of time render the Contract Administrator’s Non-Completion Certificate invalid, or otherwise prevent Henia from deducting and/or claiming liquidated damages?
The decision:
The interim application
Akenhead J noted that neither party had precisely followed the contractual requirements on payment. He emphasised that it must be clear and unambiguous in content, form and intent that an application relating to a specific due date is being made. Beck’s Interim Application No 18 (issued on 28 April 2015) was six days late for the April due date of 29 April 2015 and, on the facts, was held not to be intended to be the interim application for the May due date.
As a result, Beck’s Interim Application No 18 was held to be invalid.
The case is a stern lesson that payment notice applications must be free from any ambiguity. The judge also stressed that a contractor must also be clear and unambiguous when it states the amount it considers to be due ‘at the relevant due date’. So, the parties under a construction contract must adhere strictly to the provisions on payment notices, and the same will apply to anyone involved in administering the payment terms.
The pay less notice
Akenhead J held that the Pay Less Notice could validly challenge either the Contract Administrator’s certification or any contractor’s Interim Payment Notice. As the contractual payment provisions reflected HGCRA 1996, he concluded the Pay Less Notice could therefore raise not only deductions specifically permitted by the contract and legitimate set-offs, but could also include Henia’s Contract Administrator’s own valuation of the works.
The Pay Less Notice in question was also served in time, and this would have provided an adequate basis for an adjudication to determine the true value of the works and the validity of Henia’s claim for liquidated damages for delay.
Liquidated damages
Although obiter, this part of the decision is worth noting. The judge held that a contract administrator’s failure to operate the JCT SBC extension of time provisions does not prevent the employer from deducting liquidated damages. In doing so, he noted that proper operation of the extension of time provisions was not an express prerequisite condition to the employer’s right to claim liquidated damages.
Comment:
This case is yet another reminder of the importance of the parties sticking to the payment timetable set out in their contract. Employers and contractors would be well advised to diarise the relevant due dates and final dates for payment at the start of a project, as well as the date that the various notices required by the JCT contracts (and/or HGCRA 1996) must be served.
This case also provides helpful judicial confirmation that a pay less notice can be used to challenge a Contract Administrator’s valuation or an Interim Payment Notice under the JCT forms, as well as to deduct or set-off other amounts permitted by the contract.
It also confirms that failure by the Contract Administrator to make a decision regarding a contractually compliant claim for an extension of time under the JCT forms does not prohibit the employer from deducting liquidated damages. Although it may seem unfair to deduct liquidated damages where the extension of time provisions have not been operated, it remains open to the contractor to adjudicate in the short term.
A new Planning Court has now been operating for just over a year, with the aim of speeding up the planning system, particularly in the instance of judicial review (JR). David Brammer, partner at Lanyon Bowdler, examines what changes have already taken place and explores what may come next.
What is the background to the changes?
The Royal Town Planning Institute (RTPI) assisted the Department of Communities and Local Government (CLG) when they were exploring the impact of JR on planning a couple of years ago. Preliminary scoping work on how to minimise the impact of JR and statutory reviews on planning decisions is now ongoing again.
There does not seem to be any immediate government commitment to introduce further reforms, but they do wish to keep this issue under constant review.
How does the court make the planning process more effective?
Various measures have been introduced to speed up the consideration of challenges and to weed out ‘unmeritorious’ challenges, such as:
reducing the period in which a planning JR can be submitted (from three months to six weeks);
introducing a new Planning Court and specialist planning judges drawn from the planning bar with target timetables for ‘significant planning cases’; and
introducing a ‘permission filter’—a requirement for the court’s permission to be obtained—to bring a planning statutory review (to be implemented in the autumn).
What priorities does the new court now face?
CLG does acknowledge concerns remain over the impact of challenges on the implementation of planning decisions and is keen to understand these better.
The key issues have been summarised by the RTPI as follows:
assessing the problems—looking at the impacts of challenges on the implementation of planning decisions;
the government’s response—exploring views on government reforms to judicial review and statutory challenges over the past two years; and
future actions—examining suggestions for further measures to minimise the impact of challenges.
What is the basis for the decision to institute the new Planning Court?
The government announced the new Planning Court early in 2014 and established it in the summer to ‘support the government’s long term plan for economic recovery’. They estimated 400 planning cases a year would be resolved quicker by being fast-tracked for hearings with specialist judges, instead of ‘clogging the main Administrative Court’.
This was in response to growth in the number of judicial review applications in recent years, causing the whole system to slow down despite the fact that published statistics demonstrate that only a small proportion succeed.
Applications to the High Court more than doubled from 4,300 in 2000 to 12,600 in 2012. Of the 440 that went on to a final hearing without being refused permission, withdrawn or settled in 2011, just 170 went in favour of the applicant. In 2012, the vast majority of applications, more than 10,000, were for immigration and asylum cases—and almost 200 were on planning issues.
Interviewed by Julian Sayarer.
The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.
It is increasingly common for retirees to unlock cash by using their property, since this is usually their main asset and means of doing so. However, they should bear in mind “TANSTAAFL”. No, this is not an acronym for a fancy finance product or regulatory body, but for “There ain’t no such thing as a free lunch.”
Joanna Bhatia (LexisPSL Property) looks at some of the schemes for unlocking cash from homes - and sounds a note of caution for those thinking about entering into one.
Equity Release Schemes: the options
Older homeowners want to benefit from the value of their homes without having to move out of them. The ‘Equity release scheme’ is designed to achieve this.
There are two types of scheme:
lifetime mortgages (the most popular) where there is a mortgage with the compound interest rolled up and repaid on death or the sale of the property; and
home reversion plans where the owner transfers the property to the funder in return for an income and/or capital and a share in the final sale price. There will be a lifetime lease to the owner.
However, there are risks involved with both.
Equity Release Schemes: the risks
The main issue with lifetime mortgages is that interest on the release is compounded each year so that the debt escalates rapidly. This can create problems for those inheriting from the property owner.
Home reversion plans also have downsides including the fact that the homeowner receives considerably less than the full market value for the property and if the homeowner ends the plan early, he or she would need to buy back the share sold at full market value, which could be a lot more than it was sold for.
Sale and Rentback Schemes or “SRB”s
In addition to retirement products, there are others on the market aimed at helping people realise capital from their homes. A sale and rentback scheme (SRB) involves people selling their home, usually at a discount, in exchange for the right to remain in the property.
SRBs were all but outlawed a few years ago due to the potential for abuse, deception and exploitation and are now subject to strict financial controls (as are the equity release products) following reforms which came into force in 2014 as a result of the Mortgage Market Review.
The take home for homeowners? Take advice!
Homeowners should think carefully and seek financial advice before entering into any such schemes.
In Larkfleet v South Kesteven District Council, [2015] All ER (D) 51 (Aug), the Court of Appeal dismissed an appeal relating to a grant of planning permission for the construction of a link road.
Although the road and housing development were linked, the two projects were “separate” for Environmental Impact Assessment (EIA) purposes.
Background
A competing developer, Larkfleet Ltd, sought to quash planning permission for a relief road to the south of Grantham that, as well as alleviating traffic impact, had the advantage of assisting the development of residential land, allocated in the local plan. Larkfleet argued that the relief road and the residential development were so interconnected that they were one project and should have been assessed together for the purposes of compliance with the Environmental Impact Assessment Directive 2011/92/EU (EIA Directive). Because they were not dealt with together as one project, the application for the relief road failed to adequately assess the environmental impact of the combined development.
Key Issue
Whether, for EIA purposes, two neighbouring and otherwise interrelated developments amounted to one single project or two separate projects.
Held
The Court of Appeal upheld the High Court’s dismissal of the claim for judicial review of the planning permission. It confirmed that the decision to assess what amounted to a project for EIA purposes was for the planning authority to make. It agreed that the two developments, while connected, were sufficiently independent that they were not one project.
Reasoning
The court considered the principle, established in Ecologistas en Accion-CODA v Ayuntamiento de Madrid: C-142/07 [2008] All ER (D) 328 (Jul) that, what is in substance and reality a single project, cannot be salami-sliced into a series of smaller projects, each falling below the threshold criteria that EIA scrutiny is required.
The court rejected the appellant’s argument that this principle meant that two developments interrelated to each other, could not be assessed separately, on the basis that it was clear from the terms of the EIA Directive that just because two sets of proposed works may have a cumulative effect on the environment, this does not make them a single project for the purposes of the Directive. Instead the EIA Directive contemplates that where there are two interrelated projects, cumulative effects will need to be assessed for each project. In this case the relief road was subject to EIA and had considered the impact of the residential development as far as it could.
The court also noted that as these proposals were present in the local plan policy, that they would have been further underwritten by the fact that alternatives will have been assessed at the strategic level through scrutiny under the Strategic Environmental Assessment Directive 2001/42/EC.
An important feature of the case was found to be that there was a strong planning imperative for the construction of the link road as part of a bypass, which had nothing to do with the development of the residential site. Although it was clear from evidence that the residential site could not be granted planning permission unless the link road was constructed, the converse was not true, ie there was a strong independent planning need for the construction of the link road (to complete the bypass), whether or not the residential site was developed.
Comment and analysis
This case does not substantively change the current legal position concerning the application of the EIA Directive where two or more EIA threshold projects are neighbouring each other. However, it does demonstrate that the EIA Directive remains open to review and its interpretation is often steered by the specific facts of the case.
While not advancing the law on the interpretation of the EIA Directive, the case will be of interest to developers proposing to carry out an EIA development which neighbours other proposed EIA developments. A similar circumstance may exist where local planning policy has identified a piece of infrastructure work which is needed to unlock commercial or residential development, such as a major road or rail connection.
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Welcome to this month’s update by Lexis®PSL Property! Highlights include:
1) Relief from forfeiture
Freifeld v West Kensington Court Ltd 2015 in which the Court of Appeal exercised its discretion to grant relief from forfeiture.
2) Assured tenancies
We consider the case of Spielplatz v Pearson 2015 in which the Court of Appeal had to decide whether a tenancy of a chalet was an assured tenancy.
3) Collective Enfranchisement
We look at the case of Trustees of the Alice Ellen Cooper-Dean Charitable Foundation v Greensleeves Owners Limited 2015, which emphasizes the dangers to the freeholder of ‘two-stage’ enfranchisement.
4) Business Rates
The case of Woolway v Mazars 2015 rendered obsolete a ruling that had been regarded as the lading case for the past 59 years. We look at the facts and findings…
5) Service charge consultation
We consider the case of Royal Borough of Kensington and Chelsea v Lessees of 1–124 Pond House and ors 2015 which makes it clear that framework agreements can be ‘qualifying long term agreements’ and that costs can be ‘incurred under’ them.
6) Costs recovery
We look at the Court of Appeal’s decision in Chaplair Limited v Kumari 2015 which concerned cost recovery for unpaid rent and service charge.
7) Flood Re regulatons
Finally, we look at the draft Flood Reinsurance (Scheme Funding, Administration and Amendment) Regulations 2015. These contain the details of how the Flood Re scheme will operate. Provision is made for the establishment, funding and administration of a reinsurance scheme intended to facilitate the provision of affordable flood insurance for domestic properties at high risk of flooding.
If you are a Client and we have made a contract with you by electronic means you may be entitled to use an EU online dispute resolution service to assist with any contractual dispute you may have with us.
This service can be found at ec.europa/consumers/odr
Our email address is glg@hardwicklegal.com.
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In Larkfleet v South Kesteven District Council, [2015] All ER (D) 51 (Aug), the Court of Appeal dismissed an appeal relating to a grant of planning permission for the construction of a link road.