TCC Decides Third Party Claim about NEC4 Project Bank Account Clause

On 4 August, the High Court (HHJ Keyser QC) handed down a decision about the meaning of Clause Y(UK)1 in the NEC4 Engineering and Construction Contract (“ECC”). This was a rare decision on the application of the Contracts (Rights of Third Parties) Act 1999, which allows non-parties to sue for breach of contract, and on the meaning of Clause 51 and Clause Y(UK)1 of the ECC.

The Judge decided that reading Clause 51 and Clause Y(UK)1 together, in the applicable version of the NEC ECC, meant that in the period pending establishment of a project bank account (“PBA”), the Client must – and in any case could, if it wished – make direct payments to the Contractor, even if the establishment of the PBA (by the Contractor) was overdue. In particular, the Client was not required to withhold payment until it could make payment into the contractually-mandated PBA.

The Court further rejected the subcontractor claimant’s arguments that – as a Supplier or possible future Named Supplier, which never ultimately became a Named Supplier – the claimant had the standing required under s.1 of the 1999 Act to bring a third party claim for breach of Clause Y(UK)1 by reason of the direct payments.

39 Essex Chambers’ barrister Jess Connors was instructed by Hugh James solicitors on behalf of the successful defendant (the Client), acting from the initial pre-action stages through to trial and judgment.

The full judgment can be found: here