Payment under construction contracts and the (ir)relevance of invoices

The recent decision in Rochford Construction Limited v Kilhan Construction Limited [2020] EWHC 941 (TCC) confirms that the final date for payment cannot be linked to an event or mechanism as such  additional requirements would fall foul of the Housing Grants, Construction and Regeneration Act 1996 (as amended) (the "Act").

The facts

Rochford engaged Kilhan as a subcontractor for a project with Richmond upon Thames College. In May 2019, Kilhan made an interim payment application. Rochford subsequently issued a pay less notice in October 2019.

The parties adjudicated on the validity of the payment notice and the sums payable to Kilhan. The Adjudicator decided that Rochford's payment notice was invalid and that elements of the Scheme for Construction Contracts (England and Wales) Regulations 1998 (the "Scheme") had to be implied. The Adjudicator awarded Kilhan payment of the sum it applied for in its application.

Rochford refused to pay in accordance with the Adjudicator's decision and so Kilhan commenced enforcement proceedings.

Rochford separately commenced Part 8 proceedings and sought various declarations, including a declaration that "Under the express terms of the Subcontract, the Final Date for Payment of any sum that has become due is 30 days from the date of service of a relevant invoice."

Kilhan's position was that this provision was contrary to the Act. The TCC decided in favour of Kilhan and confirmed that "the final date has to be pegged to the due date, and be a set period of time, and not an event or a mechanism."

Implications

The decision confirms that payment terms in construction contracts must adhere with the Act. Additional requirements, such as the provision of invoices (which some employer's will no doubt require for internal reasons and be used to) will not be an obstacle to payment.

If you have any questions or would like advice on the above, please do get in touch with Tris or another member of the team at Foot Anstey.