In an important decision for the construction industry, Rebecca Drake successfully defeated a Part 8 claim in the TCC in a judgment which stated that under the Housing Grants, Construction and Regeneration Act 1996 (the “Act”) the final date for payment must be a fixed period of time from the due date, and cannot be linked to the provision of invoices.
The Claimant, Rochford, sought various declarations including 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 denied this was the correct interpretation and suggested that such a clause would not be compliant with the Act.
Whilst in the event, Mrs Justice Cockerill dismissed the claim on a different basis, she went on to consider the legal position in relation to the final date for payment under section 110 of the Act.
The question arose as to the distinction between subparagraph (1A), which allows an “adequate mechanism” for the determining of the due date, and subparagraph (1B), which refers to a “period… between the date on which a sum becomes due and a final date for payment”.
Mrs Justice Cockerill accepted that, unlike a due date, which can be fixed by reference to, for example, an invoice or a notice, the final date has to be pegged to the due date, and be a set period of time, rather than an event or a mechanism. She reached her conclusion based on the following:
First, it is important for the payer to be certain exactly how much time he or she has in which to serve a payless notice, the final date for payment being the date which is critical to that step.
Secondly, there is a difference in drafting between section 110 and section 109(2), which refers to circumstances in which payments become due. Against that background the drafting of section 110(1B) appears pointed.
Thirdly, there were additions to section 110 in the form of subsections (1A) and (1D) which were designed to put limits on the circumstances in which a payment can be due so as not to give the payer an unfair ability to control the process. It would make no sense if such a limitation were intended in relation to subsection (1A) but not in relation to subsection (1B). The inference is that the possibility to peg the final date of payment to an event rather than a fixed period was never considered acceptable under the Act.
Although the decision on the final date for payment was technically obiter, it is of particular importance given that it is the first case to consider this issue.
The judgment can be found viewed here