A & V Building Solutions Ltd v J & B Hopkins Ltd

[2023] EWCA Civ 54  

JBH were the main M&E contractors on a university project in Sussex, and engaged AVB to carry out certain M&E works at the site. Clause 9 of JHB’s standard form included as follows:

“9.2. It is a condition precedent to payment that the Sub-Contractor shall make monthly applications (‘Interim Application’) for payment to the Contractor on the dates specified in Appendix 6. Such applications for payment must specify the sum that the Sub-Contractor considers to be due to him and the basis on which that sum has been calculated …

9.3. The payments shall be in accordance with Appendix 6.

9.4. Interim payments shall be due at regular intervals calculated from the date when the first payment was due. The final date for payment shall be in accordance with Appendix 6.”

Coulson LJ said that it was clear that each of the dates  by which A&V were to issue their application were mechanically calculated, in that they were always 10 days before the valuation dates, which were, in turn, always the last day of each month. Appendix 6 went on to provide as follows:

“In the event that Interim Payments become due beyond the dates set out in the schedule above then the Due Dates shall continue to occur at the same intervals as set out above and dates for submission of applications, valuations, Payment Notices, Pay Less Notices and Final Date for Payment shall occur at the same time from the Due Date as for every month as set out above.

For the avoidance of doubt if applications are not received from the Sub-Contractor 7 days prior to the Valuation Date then the Sub-Contractor shall not be entitled to any payment, whether or not a payment notice is served by the Sub-Contractor until the procedure set out above is repeated in relation to the next Valuation Date.”

On 22 March 2022, AVB sent interim application number 14. The application was dated the previous day, 21 March 2022, a Sunday. JBH replied on 1 April 2021, saying no further sums were due and that AVB had been overpaid. Discussions and correspondence between the parties followed during which JBH apparently treated application 14 as having been validly made: the dispute was on the detail. On 12 October 2021, AVB said that, if the sum due was not paid, they would adjudicate. In their reply, JBH’s solicitors asserted, for the first time, that application 14 was not served in accordance with the provisions of the Sub-Contract. The letter did not explain why that was the case. At no time prior to the commencement of the adjudication did JBH expressly take the point that application 14 was invalid because it was issued one day late.

On 17 November 2021, AVB commenced adjudication proceedings. JBH replied that application 14 was invalid because it was served on Monday 22 March, not Sunday 21 March. The adjudicator found that interim application 14 was valid. 

JBH brought Part 8 proceedings against AVB seeking a declaration as to the invalidity of application 14. At first instance, the Judge agreed, holding that a valid payment application could only be made on the specific date set out in Appendix 6. Therefore, AVB’s application 14 was one day late and invalid.  The Judge also rejected AVB’s secondary submission that there had been a variation or a waiver of the date of 21 March 2021 for a number of reasons including the parties’ contemporaneous treatment of application 14. 

Coulson LJ noted that the Judge’s approach was simple: the date of 21 March for the relevant interim application set out in Appendix 6 was described as a “condition precedent” in clause 9.2, so it did not matter if that day was a Sunday or Christmas Day: the date was sacrosanct. If that date was missed, the entire application was invalid and AVB had no entitlement to make any claim for that monthly cycle. However, Coulson LJ  thought that the position was more “nuanced” than that.

The reference to interim payments in clause 9.4 being “at regular intervals calculated from the date when the first payment was due” suggested a certain flexibility. If all the dates in Appendix 6 were rigidly fixed, then the interim payments would only be due on those specified dates, not (as clause 9.4 provided) “calculated from the date when the first payment was due”. Appendix 6 was plainly designed to allow for flexibility in the interim valuation/payment timetable. Appendix 6 expressly talked about payments becoming due “beyond the dates set out in the schedule” and allowed for (different) due dates continuing to occur “at the same intervals” set out in the table. That was contrary to the general suggestion that the dates for valuation and payment were inflexibly set in stone as per the table in Appendix 6.

The position was this: the valuation date was 31 March 2021. Seven days prior to that was 24 March 2021. In accordance with the paragraph in Appendix 6, the interim application had to be made no later than 24 March 2021 if AVB did not want to drop into the next payment cycle. It was an agreed fact that the application was sent and received on 22 March 2021. On that basis, therefore, application 14 was within the time limit set out in that paragraph of Appendix 6. The primary dates which AVB had to meet were those set out in column A of the table in Appendix 6, namely 10 days prior to the valuation date. But, there was some leeway, as provided by the second paragraph in the Appendix, such that it was only applications made less than seven days before the valuation date that would be invalid. 

That was, according to Coulson LJ: “a sensible commercial arrangement.”

This meant that it was strictly unnecessary to reach a concluded view on AVB’s alternative case that, even if the date of 21 March 2021 was set in stone, the Judge should have found that that provision was varied and/or waived and/or that JBH were estopped from relying on the alleged invalidity. However, Coulson LJ noted that the necessary ingredients of a simple estoppel appeared to have been made out here. JBH said in their email of 1 April 2021 that they would deal with application 14 as a valid application and then proceeded to do just that. They considered the detail of application 14 and issued with their 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, JBH unequivocally affirmed the validity of application 14.

Throughout the period between March and November 2021, both parties were operating on the basis that application 14 was a valid application. AVB relied on that common assumption to make application 14 the focus of their Adjudication Notice. If, at any point prior to that time, JBH had indicated that they considered application 14 to have been served one day late, then AVB could have taken the necessary steps to resolve that debate by repeating the claim for the next monthly cycle (or for any month prior to the commencement of the adjudication). AVB did not do so because JBH had not taken the point. It was only after the adjudication had started that JBH said that the application had been served one day late. Therefore, if this had been a live issue, Coulson LJ would not have permitted JBH to conduct themselves in this way and that they had unequivocally represented that application 14 was valid.

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